AURORA INNOVATION, INC. The following discussion and analysis of the financial condition and results of operations of Aurora should be read together with Aurora's audited financial statements as of and for the years endedDecember 31, 2021 , 2020, and 2019 together with related notes thereto, included elsewhere in this Annual Report. The discussion and analysis should also be read together with the section entitled "Information about Aurora". The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of Aurora's control. Aurora's actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in the sections entitled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" included elsewhere in this Annual Report. Percentage amounts included in this Annual Report have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Annual Report may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Annual Report. Certain other amounts that appear in this Annual Report may not sum due to rounding. Unless otherwise indicated or the context otherwise requires, references in this Management's Discussion and Analysis of Financial Condition and Results of Operations section to "Aurora," "we," "us," "our" and other similar terms refer to Legacy Aurora prior to the Business Combination and to Aurora and its consolidated subsidiaries after giving effect to the Business Combination.
Aurora's Business
Aurora is developing the Aurora Driver based on what it believes to be the most advanced and scalable suite of self-driving hardware, software, and data services in the world to fundamentally transform the over$9 trillion global transportation market. The Aurora Driver is designed as a platform to adapt and interoperate amongst vehicle types and applications. To date, it has been successfully integrated into eight different vehicle platforms: from passenger vehicles to light commercial vehicles to Class 8 trucks. By creating one driver system for multiple vehicle types and use cases, Aurora's capabilities in one market reinforce and strengthen its competitive advantages in others. For example, highway driving capabilities developed for trucking will carry to highway segments driven by passenger vehicles in ride hailing applications. We believe this approach will enable us to target and transform multiple massive markets, including the$4 trillion global trucking market, the$5 trillion global passenger mobility market, and the$400 billion U.S. local goods delivery market. We expect that the Aurora Driver will ultimately be commercialized in a Driver as a Service ("DaaS") business model, in which we will supply self-driving technology. We do not intend to own nor operate a large number of vehicles ourselves. Throughout commercialization, we expect to earn revenue on a fee per mile basis. We intend to partner with OEMs, fleet operators, and other third parties to commercialize and support Aurora-powered vehicles. We expect that these strategic partners will support activities such as vehicle manufacturing, financing and leasing, service and maintenance, parts replacement, facility ownership and operation, and other commercial and operational services as needed. We expect this DaaS model to enable an asset-light and high margin revenue stream for Aurora, while allowing us to scale more rapidly through partnerships. During the start of commercialization, though, we expect to briefly operate our own logistics and mobility services, where we own and operate a small fleet of vehicles equipped with ourAurora Driver . This level of control is useful during early commercialization as we will define operational processes and playbooks for our partners. We plan to first launch Aurora Horizon, our driverless trucking product, as we believe that is where we can make the largest impact the fastest, given the massive industry demand, attractive unit economics, and the ability to deploy on high volume highway-focused routes. Future success will be dependent on our ability to execute against our product roadmap to launch Aurora Horizon. From there, we plan to leverage the extensibility of the Aurora Driver to deploy and scale into the passenger mobility market with Aurora Connect, our driverless ride hailing product, and longer-term the local goods delivery market. 5
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Our Business Model
The Aurora Driver will be delivered as a service. We intend to partner with our ecosystem of OEMs, fleet operators, and mobility and logistics services, and other third parties to commercialize and support Aurora-powered vehicles. Our business model is for fleet owners to purchaseAurora Driver -powered vehicles from our OEM partners, subscribe to the Aurora Driver, and utilize Aurora-certified fleet service partners to operate autonomous mobility and logistics services. In many instances, the same party may play multiple roles: for example, our OEM partners will in certain cases also provide maintenance services and act as a fleet operator. We expect this DaaS model to enable an asset-light and high margin revenue stream for Aurora, while allowing us to scale more rapidly through partnerships.
Significant Events and Transactions
RTPY Business Combination
OnNovember 3, 2021 (the "Closing Date"),Aurora Innovation Holdings, Inc. merged with and into Merger Sub, a wholly owned subsidiary of RTPY pursuant to the terms of Agreement and Plan of Merger datedJuly 14, 2021 , with RTPY, now known asAurora Innovation Inc. , (the "Business Combination"). Aurora was deemed the accounting predecessor and the post-combination company will be the successorSEC registrant, which means that Aurora's financial statements for previous periods will be disclosed in our future periodic reports filed with theSEC . The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, RTPY was treated as the acquired company for financial statement reporting purposes. The most significant impact of the Business Combination on our reported financial position was an increase in cash and cash equivalents of$1.1 billion including$1.0 billion in proceeds from the PIPE investment that was consummated with the closing of the Business Combination. Transaction costs incurred by both parties to the Business Combination totaled$88.2 million . As a consequence of the Business Combination, we became the successor to aSEC -registered and Nasdaq-listed company which requires us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors' and officers' liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
Apparate Business Combination
OnJanuary 19, 2021 , Aurora acquired 100% of the voting interests ofApparate USA LLC ("Apparate"), the self-driving technology division of Uber. The acquisition date fair value of the consideration transferred was approximately$1.9 billion , which consisted of both preferred and common stock issued to the shareholders of Apparate. Aurora accounted for the acquisition as a business combination and recognized the assets acquired and liabilities assumed at fair value on the date of acquisition. The excess of purchase consideration over the fair value of the assets acquired was recorded as goodwill.
COVID-19 Impact
The spread of COVID-19 caused us to modify our business practices (including
reducing employee travel, recommending that all non-essential personnel work
from home and cancelling or reducing physical participation in activities,
meetings, events and conferences), and we may take further actions as may be
required by government authorities or that we determine are in the best
interests of our employees, suppliers, and business partners. Aurora has
implemented a voluntary return to office policy for its employees.
All of our products and services are in a research phase of development and do
not involve physical customer interaction. Therefore, our ability to meet our
business expectations and customers' needs has not been materially impaired due
to this COVID-19 pandemic. Even though the global economic implications remain
uncertain, this pandemic has not yet had any measurable material impact on our
operating results. At the same time, we will continue to actively monitor the
pandemic situation and may take further actions to modify our business practices
as may be required by federal, state, or local authorities or that we determine
are in the best interests of our employees and customers.
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Key Factors Affecting Our Results
Our financial position and results of operations depend to a significant extent on the following factors:
Development of Our Technology Since Aurora's inception, we have focused on attracting and retaining best-in-class talent to solve self-driving's most difficult challenges. We continue to invest heavily in employee recruitment and retention to advance our technology. Additionally, our team has made purposeful and foundational technological investments in key aspects of self-driving hardware and software. We believe these early investments in our technology will enable us to move toward commercialization more safely and quickly than would otherwise be possible. When we have deemed it to be beneficial, we have entered into strategic acquisitions to expand and accelerate our technology development. We believe that our developmental approach provides us with meaningful technological advantages in areas such as our lidar technology, fusion of machine learning and engineered approaches, common driver platform, virtual testing, and high definition maps. The successful execution of these details of self-driving technology is what we believe will allow us to differentiate ourselves by developing leading self-driving technology that can safely and reliably navigate its environment. By developing a substantial part of this technology in-house, we ensure that the various inputs and components of our autonomy stack integrate successfully and reduce our reliance on third parties for key aspects of our commercial product offering. While we believe we are best positioned to address advanced autonomous solutions in trucking and passenger mobility, potential competition may exist from other autonomous technology providers using other approaches.
Commercialization and Strategic Partnerships
We anticipate robust demand for the Aurora Driver. We intend to launch first in trucking, a$700 billion industry in theU.S. . Further, we have multiple levers for sustained growth and adjacent market opportunities, with a core strategy to focus on attractive markets with significant growth and profitability potential. We expect to penetrate into other verticals such as the ride hailing market,$35 billion in theU.S. , and local goods delivery market,$100 billion in theU.S , both of which have significant growth potential. Each such market also has a potentially significant global opportunity that we intend to address over time. Key customers in trucking include for-hire carriers and private fleets. To meet these customers' needs, we have formed strategic partnerships with two leading truck OEMs who together represent approximately 50% of theU.S. Class 8 truck sales. Aurora's strategic partnerships with truck OEMs include PACCAR (representingPeterbilt & Kenworth brands) andVolvo Trucks . Our OEM partnerships represent an ability to deploy self-driving trucks at scale, allowing the Aurora Driver to expand quickly. Currently, there is a significant driver shortage and we expect to provide access to safe, efficient, and consistent operation at an attractive total cost of ownership ("TCO"). We see our existing partner base as a substantial competitive advantage. Our second commercial use case will be passenger mobility. In this space, we have formed strategic partnerships with Uber andToyota , which will be key enablers to our growth in this segment. Currently, our ten-year agreement with Uber provides us access to Uber network data to refine market selection, to enable better roadmap prioritization, and to optimize commercial fleet operations in an effort to further develop and monetize ourAurora Driver for passenger mobility. We are collaborating withToyota to integrate the Aurora Driver into driverless-capable Toyota Sienna minivans. Over time, we anticipate the Aurora Driver will allow ride hailing to be offered at price points that are more cost-competitive with personal vehicle ownership.
Economies of Scale, Sales and Marketing, & Competition
We believe that our DaaS model will give us the opportunity to establish high
margin unit economics when operating at scale. Our future performance will
depend on our ability to deliver on these economies of scale with higher volume.
We believe our business model is positioned for scalability by leveraging third
party partnerships so that Aurora can focus its efforts on core technology
development. We expect revenue will be based on miles traveled for each truck
equipped with the Aurora Driver. For the first two years of commercial
operations we expect our product will primarily consist of our own fleet that we
own and operate. Over those two years, we plan to transition to our DaaS model
wherein we will provide the Aurora Driver to external fleet owners on a per mile
subscription basis. Once we have transitioned to DaaS, we plan to operate in a
capital light model and do not expect that we will require significant capital
expenditures as revenues grow.
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While we expect to achieve and maintain high margins on the Aurora Driver technology for trucking and passenger mobility, emergence of competition in advanced autonomous driving technologies may negatively impact pricing, margins, and market share. As we operate on a fee per mile basis, it is possible that competition may lead to pricing pressure and lower margins that negatively impact operating results. However, we believe our unique technology provides a compelling value proposition for favorable margins and unit economics in industries with increasing demand for driver supply. If we do not generate the margins we expect upon commercialization of our DaaS model, we may be required to raise additional debt or equity capital, which may not be available or may only be available on terms that are onerous to our stockholders.
Key Components of Sales and Expenses
Basis of Presentation
Currently, we conduct business through one operating segment. Substantially all our property and equipment are maintained in, and our losses are attributable to,the United States . The consolidated financial statements include the accounts ofAurora Innovation, Inc. , and its wholly owned subsidiaries. See Note 2 to Aurora's financial statements for more information on the basis of presentation and operating segments.
Revenue
In 2019, Aurora recognized development services revenue based on contracts in force at the time. Development services revenue was derived from revenue earned on non-recurring development service agreements to research, design, and implement the Aurora Driver. Development services are recognized over time as we perform the underlying services and satisfy the performance obligations. Revenue allocable to hardware design and development services are recognized over time based on the hours incurred. InJanuary 2021 , we entered into a collaboration framework agreement with Toyota Motor Corporation with the intention of deploying the Aurora Driver into a fleet of Toyota Sienna vehicles, subject to further agreement of a collaboration project plan that was agreed and signed inAugust 2021 . The agreement includes$150 million of total payments of which we had received$50 million as ofDecember 31, 2021 and expect to receive the remaining payments in 2022. Revenue recognition is measured by applying an input measure of hours expended as a percentage of total estimated hours to complete the project against total consideration.$82.5 million was recognized in the twelve months endedDecember 31, 2021 . Once we reach commercialization, our DaaS business model will become our primary revenue source. We expect to derive recurring revenue from per-mile fees charged to users of the Aurora Driver. Recognition of this future revenue will be subject to the terms of any arrangements with our partners or users, which have not yet been negotiated. To date, we have not recorded any revenue under this model. Cost of Revenue Cost of revenue consists of costs related to development services revenue, which is comprised of costs associated with delivering customer hardware design and development services for operating a customer's vehicle platform with the Aurora Driver. These costs consist primarily of payroll, payroll-related expense, stock-based compensation and allocated overhead incurred as the Company performs the underlying services related to satisfying the performance obligations under the development services agreements. As we transition towards commercialization, we expect cost of revenue to increasingly be comprised of costs needed to support the Aurora Driver. We expect these costs may include, but not be limited to, insurance, teleassistance service, telecom connectivity, cloud services, hardware, and OEM licensing fees. In early commercialization, where we will operate a fleet, we expect we will incur additional cost of revenue, for example fuel costs, that we do not expect to continue significantly as we transition to our DaaS model. As this represents a new offering, we will evolve the specifics of our service bundle in partnership with our customers.
Research and Development
Research and development costs are expensed as incurred. Research and
development costs consist of payroll, hardware and electrical engineering
prototyping, cloud computing, data labeling, and third-party development
services, as well as costs associated with vehicle operations for our test fleet
of vehicles. These costs are included within research and development within the
statement of operations. We expect our research and development expenses to
increase in absolute dollars as we increase our investment in scaling our
proprietary technologies.
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Selling, General and Administrative
Selling, general and administrative costs consist primarily of personnel-related expenses such as salaries, wages and benefits as well as stock-based compensation. Selling, general and administrative also includes professional service fees, marketing and other general corporate expenses. Following the closing of the Business Combination, we expect to incur additional selling, general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of theSEC and stock exchange listing standards, additional insurance expenses, investor relations activities, and other administrative and professional services. We also expect to increase the size of our selling, general and administrative function to support the growth of our business. As a result, we expect that our selling, general and administrative expenses will increase in absolute dollars. Interest and Other Income Aurora earns interest income through investments in money market securities, which are classified as cash and cash equivalents on the statement of financial position.
Change in Fair Value of Derivative Liabilities
Concurrent with the Closing of the Business Combination, we assumed and effectively issued for financial reporting purposes public warrants, private placement warrants, and Earnout Shares (as defined below). These financial instruments are liability classified and measured at fair value at each reporting period with the resulting change in fair value recognized as other income (expense). Transaction Costs Transaction costs incurred in connection with the Business Combination consisting of banking, legal and other professional fees are allocated on a relative fair value basis between the equity and liability classified issued financial instruments. Costs allocated to the liability classified financial instruments are recognized as other expense in the consolidated statement of operations.
Income Tax Expense (Benefit)
Provision for income taxes consists ofU.S. federal and state income taxes and income taxes. Since inception, we have incurred operating losses. We have a valuation allowance for net deferred tax assets, including federal and state net operating loss carryforwards and research and development credit carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized by way of expected future taxable income. 9
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Results of Operations
Comparison of Year Ended
The following table sets forth a summary of our consolidated results of operations for the years indicated, and the changes between periods.
Year Ended December 31,
2021 2020 $ Change % Change
(in thousands, except for percentages)
Collaboration revenue $ 82,538 $ - $ 82,538 n/m(1)
Operating expenses:
Research and development 697,276 179,426 517,850 288.61 %
Selling, general, and administrative 115,925 38,693 77,232 199.60 %
Loss from operations (730,663) (218,119) (512,544) 234.98 %
Other income (expense):
Interest and other income 525 3,717 (3,192) (85.88 %)
Change in fair value of derivative liabilities (20,116) - (20,116) n/m(1)
Transaction costs (4,516) - (4,516) n/m(1)
Other expense (5,184) (45) (5,139) n/m(1)
Loss before income taxes (759,954) (214,447) (545,507) 254.38 %
Income tax expense (benefit) (4,501) 2 (4,503) n/m(1)
Net loss $ (755,453) $ (214,449) $ (541,004) 252.28 %
(1) Not meaningful
Collaboration Revenue
Collaboration revenue increased by
Research and Development Research and development increased by$517.9 million in 2021, or 288.61%, to$697.3 million in 2021 from$179.4 million in 2020, primarily driven by an increase in headcount from continued hiring to effectively scale the growth of our business. Payroll costs related to research and development increased$246.2 million , stock-based compensation increased$195.9 million , non-payroll software development costs increased$52.2 million , and non-payroll hardware development costs increased$24.2 million .
Selling, General and Administrative
Selling, general, and administrative expense increased by$77.2 million in 2021, or 199.60%, to$115.9 million in 2021 from$38.7 million in 2020, primarily driven by an increase in headcount from both acquisitions and from continued hiring to effectively support the growth of our business. This change is primarily driven by an increase in payroll costs of$34.3 million , and an increase in professional services costs of$23.2 million .
Interest and Other Income
Interest and other income decreased by
Change in fair value of derivative liabilities
Expense recognized for the change in fair value of derivative liabilities increased by$20.1 million in 2021 due to the$12.5 million increase in the fair value of the warrant liabilities and the$7.7 million increase in the Earnout Shares liability. These liability classified financial instruments were recognized in connection with the Business Combination when the Company effectively issued public and private placement warrants as well as shares to the Sponsor of RTPY that contain price-based vesting criteria. The$98.0 million fair value of the liabilities at Closing was re-measured as ofDecember 31, 2021 to$118.1 million . 10
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Transaction costs
Expensed transaction costs increased by$4.5 million in 2021 due to amounts incurred in connection with the Business Combination. Total transaction costs incurred by Legacy Aurora were$40.6 million and$4.5 million of the total was recognized as an expense in 2021. The amount expensed was determined through an allocation based on the relative fair value of the equity and liability classified financial instruments issued or deemed issued in the Business Combination.
Other expense
Other expense increased by
Income Tax Expense (Benefit)
An income tax benefit of
Comparison of Year Ended
The following table sets forth a summary of our consolidated results of operations for the years indicated, and the changes between periods.
Year Ended December 31,
2020 2019 $ Change % Change
(in thousands, except for percentages)
Development services revenue $ - $ 19,601 $ (19,601) n/m(1)
Operating expenses:
Cost of revenue - 160 $ (160) n/m(1)
Research and development 179,426 107,368 $ 72,058 67.11 %
Selling, general, and administrative 38,693 25,591 $ 13,102 51.20 %
Loss from operations (218,119) (113,518) $ (104,601) 92.14 %
Other income (expense):
Interest income 3,717 11,701 $ (7,984) (68.23 %)
Other expense (45) (31) $ (14) 45.16 %
Loss before income taxes (214,447) (101,848) $ (112,599) 110.56 %
Income tax expense (benefit) 2 (7,771) $ 7,773 n/m(1)
Net loss $ (214,449) $ (94,077) $ (120,372) 127.95 %
(1) Not meaningful
Development Services Revenue
Development and services revenue decreased by $19.6 million in 2020 to $0 in
2020 from $19.6 million from 2019. In 2019, we had nonrecurring development and
service contracts which resulted in the generation of $19.6 million in revenue
that did not reoccur in 2020.
Research and Development
Research and development increased by $72.1 million in 2020, or 67.1%, to $179.4
million in 2020 from $107.4 million in 2019, primarily driven by an increase in
headcount from continued hiring to effectively scale the growth of our business.
Payroll costs related to research and development increased $49.2 million ,
non-payroll hardware development costs increased $12.7 million , and non-payroll
software development costs increased $7.8 million .
Selling, General and Administrative
Selling, general, and administrative expense increased by$13.1 million in 2020, or 51.2%, to$38.7 million in 2020 from$25.6 million in 2019, primarily driven by an increase in headcount from both acquisitions and from continued hiring to effectively support the growth of our business. This change is primarily driven by an increase in payroll costs of$8.5 million , and an increase in professional services costs of$4.2 million . 11
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Interest and Other Income
Interest income decreased by$8.0 million in 2020, or 68.2%, to$3.7 million in 2020 from$11.7 million in 2019, primarily driven by a decrease in the balance of short-term investments of$349.9 million .
Income Tax Expense (Benefit)
Income tax expense (benefit) changed to an insignificant income tax expense in 2020 from an income tax benefit of$7.8 million in 2019, primarily due to 2019 including the release of a deferred tax asset valuation allowance as a result of deferred tax liabilities incurred from the acquisition of Blackmore.
Liquidity and Capital Resources
We have financed our operations primarily through the issuance of equity securities, which has historically been sufficient to meet our working capital and capital expenditure requirements. As ofDecember 31, 2021 , our principal sources of liquidity were$1,610.1 million of cash and cash equivalents, exclusive of short-term restricted cash of approximately$0.3 million and long-term restricted cash of approximately$15.8 million . Cash and cash equivalents consist primarily of money market funds. In 2021, we sold Series U-2 redeemable convertible preferred stock for net proceeds of approximately$397.9 million in January. In November of 2021, we received proceeds of$1,175 million , net of RTPY's liabilities, in the Business Combination. We have incurred negative cash flows from operating activities and significant losses from operations in the past. We expect to continue to incur operating losses and that we will need to opportunistically raise additional capital to support the continued development and commercialization of the Aurora Driver. We believe our cash on hand and short-term investments will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this Annual Report.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in
thousands):
Years ended December 31,
2021 2020 2019
(in thousands)
Net cash used in operating activities $ (563,288) $ (191,879) $ (94,726)
Net cash provided by (used in) investing activities 249,885 343,289 (372,534)
Net cash provided by financing activities 1,539,822 1,446 634,702
Net increase in cash, cash equivalents, and restricted cash
$ 1,226,419
Cash Flows Used in Operating Activities
Net cash used in operating activities increased by$371.4 million from the year endedDecember 31, 2020 to the year endedDecember 31, 2021 due to increases in spending on research and development and selling, general, and administrative expenses, primarily driven by increases in payroll related expenses due to an increase in headcount. Net cash used in operating activities increased by$97.2 million from the year endedDecember 31, 2019 to the year endedDecember 31, 2020 due to a decrease in collections from contracts with customers given the completion of development service contracts and increases in spending on research and development and selling, general, and administrative expenses, primarily driven by increases in payroll related expenses due to an increase in headcount. Net cash used in operating activities was$563.3 million for the year-endedDecember 31, 2021 and was primarily comprised of normal cash operating expenses, including research and development and selling, general and administrative expenses. Changes in operating assets and liabilities decreased cash flows from operations by$104.1 million , primarily due to a$35.8 million decrease in accrued expenses and other current and non-current liabilities and a$32.5 million increase in contract asset. 12
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Net cash used in operating activities of$191.9 million for the year-endedDecember 31, 2020 was primarily comprised of normal cash operating expenses, including research and development and selling, general and administrative expenses. Changes in operating assets and liabilities decreased cash flows from operations by$11.4 million , primarily due to an increase in prepaid expenses and other current assets and in other assets of$11.7 million and$14.0 million , respectively. The decrease from changes in operating assets and liabilities was partially offset by an increase in accrued expenses and other current and non-current liabilities of$13.7 million . Net cash used in operating activities of$94.7 million for the year-endedDecember 31, 2019 , was primarily related to normal cash operating expenses, including research and development and selling, general and administrative expenses. Changes in operating assets and liabilities decreased cash flows from operations by$23.0 million , primarily due to a decrease in deferred revenue of$16.6 million , a decrease in operating lease liability of$3.5 million , and an increase in prepaid expenses and other current assets of$6.3 million . The decrease from changes in operating assets and liabilities was partially offset by a decrease in accounts receivable of$3.3 million and an increase in accrued expenses and other current and non-current liabilities of$1.4 million .
Cash Flows Provided by (Used in) Investing Activities
Net cash provided by investing activities decreased by$93.4 million from the year endedDecember 31, 2020 to the year endedDecember 31, 2021 , due to a decrease of$350.0 million in the maturities, net of purchases, of short-term investments, and an increase in purchases of property and equipment of$41.4 million , partially offset by net cash acquired in the purchase of businesses in 2021 of$294.4 million . Net cash provided by investing activities increased by$715.8 million from the year endedDecember 31, 2019 to the year endedDecember 31, 2020 , due to a decrease of$625.5 million in the purchases of short-term investments, a$70.0 million increase in the maturities of short-term investments, and a decrease in acquisition activity of$23.1 million .
Net cash provided by investing activities was
Net cash provided by investing activities was
Net cash used in investing activities is
Cash Flows Provided by Financing Activities
Net cash provided by financing activities increased by$1,538.4 million fromDecember 31, 2020 toDecember 31, 2021 , due to net proceeds from the Business Combination of$1,134.0 million and net proceeds from the issue of Series U-2 preferred stock of$397.9 million in 2021. Net cash provided by financing activities decreased by$633.3 million fromDecember 31, 2019 toDecember 31, 2020 , due to net proceeds from the issuance of Series B preferred stock of$634.0 million in 2019.
Net cash provided by financing activities was
Net cash provided by investing activities was$1.4 million for the year-endedDecember 31, 2020 , primarily due to proceeds from the issuance of common stock of$2.7 million , partially offset by payments to repurchase Series B preferred stock of$0.5 million and payments to repurchase unvested early exercised stock options of$0.8 million . Net cash provided by financing activities is$634.7 million for the year-endedDecember 31, 2019 , primarily due to net proceeds from the issuance of Series B preferred stock of$634.0 million .
Contractual Obligations, Commitments and Contingencies
We may be party to various claims within the normal course of business. Legal
fees and other costs associated with such actions are expensed as incurred. We
assess the need to record a liability for litigation and other loss
contingencies, with reserve estimates recorded if we determine that a loss
related to the matter is both probable and reasonably estimable. We did not
record any material losses for 2020 or 2021.
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Our future contractual commitments related to future minimum payments for purchase obligations atDecember 31, 2021 are$52.6 million in 2022,$62.8 million in 2023,$62.4 million in 2024,$64.0 million in 2025, and$27.1 million in 2026. Our future contractual commitments related to future minimum payments under non-cancelable operating leases atDecember 31, 2021 are$24.2 million in 2022,$24.9 million in 2023,$24.4 million in 2024,$22.7 million in 2025,$20.6 million in 2026 and$60.8 million thereafter.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance withU.S. generally accepted accounting principles, or "U.S. GAAP". Preparation of the financial statements requires our management to make judgments, estimates and assumptions that impact the reported amount of net sales and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. Our significant accounting policies are described in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report. Our critical accounting policies are described below.
Stock-Based Compensation
We measure and record the cost of stock-based awards granted to its employees and directors based on the estimated grant-date fair value of the awards. Cost for awards with only a service condition is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award. Costs for awards with a service and performance condition are recognized on a graded-vesting basis over the requisite service period. We elected to recognize the effect of forfeitures in the period they occur. We determine the fair value of stock options using the Black-Scholes-Merton option pricing model, which is impacted by the following assumptions: •Expected Term-we use the simplified method when calculating the expected term due to insufficient historical exercise data to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. •Expected Volatility-the volatility is based on the average historical stock volatilities of a peer group of comparable companies within the automotive and energy storage industries. •Expected Dividend Yield-The dividend rate used is zero as we have never paid any cash dividends on its common stock and does not anticipate doing so in the foreseeable future. •Risk-Free Interest Rate-The interest rates used are based on the implied yield available onU.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The grant date fair value of our common stock prior to the Business Combination was determined with the assistance of an independent third-party valuation specialist. The grant date fair value of our common stock was determined using valuation methodologies which utilize certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate, and an assumption for a discount for lack of marketability (Level 3 inputs). Based on Aurora's early stage of development and other relevant factors, it determined that an Option Pricing Model ("OPM") was the most appropriate method for allocating its enterprise value to determine the estimated fair value of our common stock before the Business Combination. We have historically used the OPM back solve analysis to estimate the fair value of our common stock, which derives the implied equity value for one type of equity security from a contemporaneous transaction involving another type of security, shares of our convertible preferred stock in this instance. The estimates utilized in determining the grant date fair value for new awards will not be necessary once our shares are publicly traded.
Business Combinations
We allocate the fair value of the purchase consideration to the tangible assets
acquired, liabilities assumed, and intangible assets acquired based on their
estimated fair values. The excess of the fair value of purchase consideration
over the fair values of these identifiable assets and liabilities is recorded as
goodwill. Such valuations require management to make significant estimates and
assumptions, especially with respect to intangible assets. Significant estimates
and assumptions in valuing certain intangible assets include, but are not
limited to, estimated replacement cost, profit margin, opportunity cost, useful
lives, and discount rates. Management's estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may differ from estimates. During
the measurement period, we may record adjustments to the assets acquired and
liabilities assumed, with the corresponding offset to goodwill. Upon the
conclusion of the measurement period, any subsequent adjustments are recorded to
earnings.
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Valuation of Intangible Assets
Intangible assets with indefinite lives consist of in-process research and
development ("IPR&D"). We test these assets for potential impairment annually as
of December 31 of each fiscal year. These assets are tested annually for
impairment until completion. If potential impairment is identified, the process
of evaluating the potential impairment of these assets involve significant
judgment regarding estimates of the future cash flows associated with each
asset.
No intangible asset impairments were recorded during the years ended
Valuation of Earnout Shares Liability
Shares held byReinvent Sponsor Y LLC (the "Sponsor" not forfeited under the terms of the Merger Agreement and subject to price based vesting terms (the "Earnout Shares") are accounted for as a derivative liability that is measured at fair value at Closing and remeasured in subsequent periods with changes reflected in earnings until the vesting conditions are met or the shares expire.
Recently Adopted and Issued Accounting Pronouncements
See Note 2 to our financial statements included elsewhere in this Annual Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report.
Emerging Growth Company Accounting Election
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being
required to comply with new or revised financial accounting standards until
private companies are required to comply with the new or revised financial
accounting standards. The JOBS Act provides that a company can elect not to take
advantage of the extended transition period and comply with the requirements
that apply to non-emerging growth companies, and any such election to not take
advantage of the extended transition period is irrevocable. We are an "emerging
growth company" as defined in Section 2(a) of the Securities Act of 1933, as
amended, and has elected to take advantage of the benefits of this extended
transition period. This may make it difficult to compare our financial results
with the financial results of other public companies that are either not
emerging growth companies or emerging growth companies that have chosen not to
take advantage of the extended transition period.
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