Innoviz Technologies Ltd (INVZ)

[WeTheMarket]

Innoviz Q3 Earnings Call Transcript.

Ladies and gentlemen, thank you for standing by. Our call will begin shortly. Ladies and gentlemen, thank you for standing by. Our call will begin shortly. Ladies and gentlemen, thank you for standing by. And welcome to Third Quarter 2020 Earnings Call. Our presentation today will be followed by a Q&A session, at which time, if you wish to ask a question, you will need to either raise your hand using your mobile or desktop application, or press star nine on your telephone keypad and wait for your name to be announced. I must advise you that the call is being recorded today.

I'd now like to hand over the call to our first speaker today, Ada Menaker VP of Investor Relations and Corporate Development. Ida, please go ahead. I would like to welcome you to the Innoviz Technologies Ltd third Quarter 2020 Earnings conference call. Joining us today are Omer Keilaf Chief Executive Officer, Eldar Cegla Chief Financial Officer I would like to remind everyone that this call is being recorded and will be available on the Investor Relations section of our website at IR. Before we begin, I would like to remind you that our discussion today will include forward looking statements that are subject to risks and uncertainties relating to future events in the future. Financial performance of Innovus. Actual results could differ materially from those anticipated in the forward looking statements. Forward looking statements made today speak only to our expectations as of today, and we undertake no obligation to publicly update or revise them. For discussion of some important risk factors that could cause actual results to differ materially from any forward looking statements, please see the Risk Factors section of our form 20 F filed with the SEC on March 12th, 2025.

Omer, please go ahead.

Thank you, and good morning to everyone joining us today on the call, the third quarter marked another strong period for innovation from a financial and business perspective. Since the last earnings call, we made meaningful progress. And recently we announced that a major commercial vehicle OEM selected us for future series production of level four autonomous trucks. This agreement, alongside our L3 and L4 automotive, wins and the recent ramp of the innovative smart for Non-automotive applications showcases innovations expanding momentum across all segments of the latter space.

From a financial standpoint, the quarter continued to build on the first half trajectory. We generated $15.3 million in revenues a year to date. We generated $42.4 million. Approximately 2.3 times more than in the same period of 2020. For we are. Expecting to meet all of our targets for the full year cash burn in the quarter was $14 million, and we expect this number to decline sequentially in line with our guidance for declining year over year burn.

On the production side, we are very pleased with the ramp at. In Q3, we shipped significantly more lidar units than in Q2. In line with our plans to ship an order of magnitude more leaders in the quarter. Our labs achieved key automotive standard certification for ladder testing, which drives meaningful value for our customers, and we can now avoid costly and time consuming external testing. These significant achievements. Confirm that we are well positioned to ramp Innovyze to scale our operations to meet growing demand and costs. Customer SOPs.

Critically, we see that the LiDAR market continues to consolidate the number of relevant automotive LiDAR players is declining. We believe that there are few competitors remaining that offer manufacturable technologies that meet OEM performance requirements. The winning take all scenario that we've envisioned for quite some time is emerging, as we expect to see. Even fewer companies participating in the space over time. As this competitive dynamics develop, we are gaining traction across multiple end markets and delivering on our mission to be the world's premier large scale supplier of best in class ladder solutions for autonomous driving and beyond. Our growing number of engagements across diverse segments underscores the strength and versatility of our technology.

With that, let's jump into the details. Starting with our recent tracking agreement in September, we announced that we were selected for series production of L4 autonomous trucks by a major commercial vehicle OEM under the terms of the engagement, Innoviz will provide leaders for the customers L4 class eight semi trucks. We are already shipping units to support the OEMs data collection, tracking fleet. Over the past several months, we've made significant progress on this collaboration.

With respect to meeting customers requirements and making software modifications to the platform. Next week, I'll be traveling to the US to meet with companies on the East and West Coast, and I have several sessions scheduled with the OEMs management to discuss technical and business details. We expect to be able to share the name of the customer in the coming weeks, and we are tremendously excited about this partnership. It is a validation of our technology and a milestone that reflects our ability to scale across different sectors. It demonstrates that our Innoviz two platform meets the stringent requirements of the habit trucking industry, and cements.

Our position in the autonomous tracking market. We are confident that our time of flight lidars, which can now provide a range of up to 450m, as well as short and mid range capabilities, are ideally positioned to gain additional wins in the trucking space due to the resolution, range, reliability and availability. As with many customers, we hope this is the start of a collaboration that will lead to expansion over time. The trucking agreement we just discussed. Highlights a shift in gears in the industry that we've noted over the past year. The race to roll out level four solutions is heating up significantly. Customers are rushing to bring solutions to the market, and to do this, they need a full set of validated auto grade and manufacturable leader leaders to enable true autonomy. Aside from Innoviz, we believe few of our competitors have proven to be equal. The task plans to deploy level four robotaxis around the world are accelerating, with several programs featuring the Innoviz two scheduled for SOPs around the corner.

The ramp up in our collaboration with VW and Moia in support of the rollout of the Id.buzz across multiple locations is going well and we are receiving excellent feedback from our customers on our devices. Performance in their programs. As level four plans speed up, we are also progressing on a variety of level three programs, which are targeted to SOPs. In 27 and beyond. In the third quarter, we continue to support the top five OEM with whom we announced an Sod over the summer. As part of our automotive development and validation efforts, we are gearing up for our fourth round of winter testing in Northern Europe, where our sensor will undergo another round of comprehensive validation under a variety of extreme winter conditions, such as rain, snow and fog. These testing is a critical component of enabling automation, proving that LiDAR technology provides sufficient redundancy under all conditions.

To prove you with more color on our level four collaboration with VW and the critical role that our LiDAR plays, I recently spoke with Christian Senger, the CEO of VW Autonomous Driving Mobility and Transport group. AT&T, which is spearheading the level four Id.buzz Urban autonomous driving project. Here is our conversation. The full version of which will be available on our website.

Hi Christian, it's really great to see you here in Israel. Absolutely. Christian, what would you say is Moia contribution to. The transformation happening in the urban mobility? Autonomous mobility becomes now really real and our id.buzz and driven by the turnkey solution from Moia, we enable large professional fleets to do people and goods transport for urban environments. We are combining actually this autonomous vehicle with a self-driving system here with Mobileye and the Moia AV ecosystem. Interesting.

What do you say is the Id.buzz most important component that allows you to be safe and reliable? It all starts with safety first. This vehicle is 27 sensors and nine. Leaders from Innovis three long range, as you know, and six short range. And the combination of all sensors in a strong compute platform gives the performance to understand the world. The Id.buzz. Has 27 sensors. What would you say is the role of the leader in providing reliable perception, safety and performance? Operation.

Leader is more than 350m of range, gives us the range we need for highway speed, and we have the precision to identify objects in the manner we need. The great thing about leaders is they are really good. No difference in day and night. We have a great results when it comes to rain. Even foggy conditions. It helps, especially the cameras to understand the environment better than without it. What would you say leads to a successful partnership with Innoviz?

We are creating together subsystems which haven't been there ever. And I think what is really special, what we do is not only high end performance, it's also industrial scale and fully automotive grade. And what I really love in our collaboration is the openness, fast reaction. And I think we are bringing from both sides a competency to create these new products. Christian, me and Innoviz are profoundly proud for being part of this amazing project. Thank you very much. It's a great honor. I would like to thank Christian VW, Moia and Mobileye for their partnership collaborating with such talented and committed teams. As we advance the industrialization of autonomous mobility is truly a privilege. While the automotive space is our main area of focus, let me touch on our progress with the smart, which we introduced over the summer. The Smart is based on the Innovis two platform and optimized for non-automotive use cases. We've already been able to announce several engagements with a variety of diverse customers. We've also completed our first perimeter security installation after ongoing significant testing. And we are expecting to install dozens more by the end of the year. The Innovis Smart was compared to a security solution that has been widely adopted around the world over the last several years. A team of professional auditors tested the pre-existing solution by emulating different types of intrusions four out of ten times. The team avoided detection. They were able to reach the fence and penetrate it by using several easy tricks that took advantage of the system's underlying weaknesses. Under the same conditions, the auditing team was not able to evade a solution based on innovative smart at all after such. Experiments, we have seen customer interest in replacing existing camera and radar based solutions with Innovis based one. As we expand our presence in the automotive space, we are benefiting from a shorter path to the market and lower acquisition costs for these applications that come from engaging through distributors and integrators. In all, we are continuing to broaden the scope of use cases that we are addressing, and we are in discussion with a number of companies interested in exploring our solution. The

Innovis Smart. Our traction here validates our approach of first engaging the high volume automotive end market. And after developing an auto grade production ready product, entering the established industrial market. As we talk about our business momentum, it's important to understand the advantages of our time of flight technology that underpin our success. After evaluating a variety of approaches, including taping out and testing our own Fmcw chip, we are now more confident than ever that time of flight will remain the way forward in automotive Leader for the foreseeable future. Our time of flight leader has demonstrated excellent, excellent range, resolution and field of view, as well as reliability, durability and availability, which meet the requirements of the automotive OEMs versus competitors. Using Fmcw, we offer 450m range with high pixel rate density, better performance in adverse conditions such as rain, fog and dust, and are leader uses. A mature auto grade qualified supply chain. Especially in autonomous driving, where the sensor needs to be ready to support a variety of edge cases and have proven durability and reliability. Time of flight has established its advantages versus other technologies. After many years of testing and experimenting, including OPA 1550 and Fmcw LIDARs, it's clear to us that 905 time of flight is the customer's preferred solution. This industry can only scale on the solid ground of a proven, mature technology, and 905 time of flight has the capabilities, manufacturability and cost profile that meets customer needs in mission critical applications. Some customers who had publicly committed to using Fmcw are now expressing interest in transitioning to time of flight due to what we believe are the disadvantages of fmcw. As we ramp the Innovis two at Fibernet and continue to strengthen our in-house capabilities, we are also looking ahead. We are now happy to unveil the Innovis three.

The Innovis two was revolutionary, offering a new technology and meaningful improvement in many aspects including cost range, resolution, etc. A major step forward compared to the Innovis one. The performance of the Innovis two advanced rapidly since its introduction. The platform enabled us to develop the Innovis to show to medium range, and the Innovis smart, which we were, which were evolutions of the Innovis two. We believe the Innovis three will again revolutionize the industry. It will allow us to reach a better cost structure while enabling a 60% smaller form factor for easier integration into different vehicle locations, like in the cabin and behind the windshield. Something many of our customers have requested. It will also offer better performance and power consumption Is in arrears. We are continuing to expand our production capabilities And markets. And with that, I'll turn it over to Eldar to talk about our financials. Thank you. Omer, and good morning, everybody. In the third quarter, we saw continued financial and operational momentum. Revenues were $15.3 million. Year to date. We generated $42.4 million in revenues, 2.3 times the $18.2 million in revenues we generated in the same period of 2020. For. We entered Q we ended Q3 with approximately $74.4 million in cash. Cash equivalents, short term deposit, and marketable securities on the balance sheet. And we have no long term debt. Cash used in operation and capital expenditure in the third quarter was approximately $14 million, and we expect this number to decline sequentially, consistent with our expectation for lower year over year cash burn. Our strong balance sheet and operational improvements will provide us the runway to cross customers programs into 2027. Now turning into the income statement, our Q3 revenues of $15.3 million was 238% up year over year. Supported by Nrhs as well as sales of ladders units, gross margins in the quarter was approximately 15% and approximately 26% year to date. Margins will continue to be somewhat variable going forward. Based on the timing of our product ramp and fluctuation in NRE payment based on customers milestones. Our operating expenses for Q3 were $18.1 million, a decrease of approximately 30% from $26 million in Q3 2020.

For this quarter's operating expenses included $2.4 million of share based compensation, compared to $4.2 million in Q3 of 2020. For research and development expenses for Q3 were $12.4 million, a decrease from $19.7 million in Q3 2020. For the the decrease is primarily related to allocation of cost related to sales of NRE and to the operational realignment in Q1. The quarter's R&D expenses included $1.3 million of share based compensation, compared to $3 million in Q3 of 2020. For I'm very proud of our achievements this year. To date and look forward to the opportunities ahead as we introduce the innovate three and secure additional automotive and non-automotive design wins. With that, I'll turn the call back to Omer for his closing remarks. Thank you. Eldar, before I wrap up the call and open for Q&A, I wanted to recap some of our recent developments. We reported record year to date revenues while continuing to meaningfully lower our annual cash burn. We've been selected to supply leaders for a major global trucking OEMs series production of level four autonomous trucks. Our innovative, smart is gaining traction in a variety of applications, including perimeter security, and it's testing indicates that platform based on our leader outperform leading solution. Our solution provides the safety and security required in a perimeter defense application, as in automotive.

This is yet another case where our technology can save lives. We continue to make progress with level three and level four. Automotive programs. We are invading our next generation. Revolutionary innovate three, which will enable us to meet mission critical safety requirements across a variety of new and existing end markets. It is based on industry leading time of flight technology, offering better performance and cost in a smaller form factor. Over the past quarter. We grew our shipments by an order of magnitude, demonstrating the manufacturability and production readiness of our platform. In all, we are tremendously proud of our progress as we work toward our goal of becoming the world's premier large scale provider of best in class leader solutions for autonomous driving and beyond. With that, operator, let's open it up for the Q&A. To ask a question, please raise your hand. Use your mobile or desktop application, or press star nine on your telephone keypad and wait for your name to be announced. The first question is from Mark Delaney with Goldman Sachs. Mark, please go ahead. Yes. Good afternoon. Good morning. Thank you very much for taking the questions. I was hoping you could start with an update on the L3 development program for consumer vehicles, with the top five auto OEM that you'd previously announced. And what do you think needs to happen for that to become a series Production award? Sure.

So over the last quarter, we were working on the GW based on what we've signed on previous quarter, and we delivered on several of the items which are still in discussion with the customer. And we are pending for the follow. We'll see. Following stage of the process. Generally, there are still technical commercial discussions to be completed before it turns into a series production. Any sense on timing as to how long that may take to all come to completion? I would say it's it's not a I would say it's a very developed stage trying to. Guess on how long it will further take. It's hard, but I would say it's in a very developed stage.

Okay. That's helpful. Another question was on the competitive environment. You mentioned the declining number of competitors. You're now seeing. Can you zoom in on that? Has any seen any recent changes in the competitive landscape and number of business opportunities that are available, given that one of your merchant leader competitors recently reported that it's facing financial pressure? And then also in light of the current geopolitical backdrop, thank you. Yeah, definitely. I think that in general, we see that when we are approaching programs. Our what we see in terms of competitive offers we have from others, it's obviously limited due to the, let's say, consequences of either geopolitical or the other solution. And capable of fulfilling the needs and timeline and therefore, you know, we we expect we we see that in reality, the the competitive landscape for automotive lidar solutions is, is very limited. And so this is what we are reflecting here. And saying that we expect it to continue. Thank you. I'll pass it on. Thank you.

Our next question is from Colin Rusch from Oppenheimer.
Please go ahead. Colin.

Thanks so much. Guys. You know, can you talk a little bit about, you know, the incremental investments you might need to make into sensor fusion? You know, with some of your partners as you kind of proliferate some of these applications, it seems like having some visibility into the software element of this could be useful for you. But just want to get a sense of how you're thinking about that as as a market opportunity evolves. Sure. So I think here I would I would split the market between automotive and automotive. Well, the task of sensor fusion is somehow different. And the software opportunity also is in a way, also in terms of commercialization and monetization is different types of opportunities. When when talking about integrating into a platform such as Mobileye or Nvidia, where we see in several cases where the OEM wants the platform player to take ownership on the sensor fusion. There, our work with the customer is related to obviously providing them the details and doing the test with them. There is a certain software component that we provide as a as a license for working with the, the, the overall software stack will include also a certain software. Layer coming from us, primarily in terms of doing some lighter management. Weather conditions. Range detection, degradation or things that are related to the latter itself and in some cases we provide some some, I would say higher layers of the application. And when when talking about Non-automotive application, this is where there are different layers related to. Background removal and compression. Object detection, classification. This depends on interpretation itself. We we some of this we are doing ourselves. Some of that we are doing with partners. And in this programs there the the business model is also involves a certain support and maintenance. Because some of these programs are I'd say most of these programs are 24 over seven. Operation is a different I would say operational mode of the sensor. Unlike a vehicle. Where it drives at a certain utilization. And then it means that it's a it's a longer. I would say working hours in terms of number of hours that needs to work. So there is a certain element of recurrent revenues coming from support over several years. And we we are working with different customers to understand their needs. And you know, I, I was I elaborated earlier about a specific use case, which is the security perimeter security. I was literally blown away. With how this sector is underserved. And, you know, it's not it's I would say, you know, you would expect that such a domain will have a solution that will be hermetic. We are all aware of, you know, the. In different places around the world. And seeing that even the best solutions that are used in different cases that are super expensive, you see how easily they are a. Compromised and far from being a metric. And and we see that we need to when we show our solution to different customers, they are literally really again, blown away. It's really the only way I can express it. And

I think there there's a lot of work to be done to integrate our solution to the different VMs. The video monitor systems used by the common control panels. So I think this is where we I expect to see a very nice. Development in the coming months. And adding to it also. A tolls. It's and really some other things that I hope that we'll be able to share in the coming months. So and a big part of it is related to the. You know, creating the right insights. I mean, in this applications, the KPIs, the analytics that needs to be done. to, to make use of of different than in automotive market. So this is where we are currently diving into. And I'm sure we'll find more opportunities where our. Sensors with their performance reliability can create new markets. So we'll share more. But in this bundle it will be a mix between sensors. Compute and and software. So excellent. And just as a follow up with the the next next generation product. And as you start to scale up volumes, if you you know, seeing some of the maturation of the supply chain, you know, can you talk a little bit about the potential cost reduction trajectory? That you're expecting here over the next couple of years and, and how that may impact, you know, your, your opportunity to address even larger pockets of demand.

Okay. Now I can talk about generally leaders will continue to reduce cost. It will come through. You know, revolution parts in technology where we keep doing so in the industry relies on a new technology development that allows us to benefit from further cost reduction. And we'll keep doing so. I think on top of it, I do expect that a major part of the cost reduction will come from industrialization. When you think on really the baseline of what is a leader, it's a, you know, a light source, a laser. chip and a detector. Silicon based. Processing unit. I think that what I've just kind of described can also be described by a CD drive. You know, there are. Many electronics that used to cost a lot at some point of time. And today are really priced at the tens of dollars. And there is nothing fundamentally more expensive in a leader than these kind of technologies that maybe, you know, 20 years ago. Have, you know, cost thousands of dollars and hundreds of dollars and then. Eventually there was nothing fundamentally different. And therefore, I do expect that as the technology will continue to evolve, you will do, you know, eventually you need to have investments to do the right. ROI in terms of cost reduction. I wouldn't do $10 million investment now to save $10 in the bill of material. It's not yet the time where the volume justifies. It,

But you can imagine that as the as the volume would grow. This kind of opportunities are available to us. And it's we are no longer. in a stage where we're talking about whether this technology can be enabled. We are in a I would say a industrialization stage where we need to do integration of a discrete electronics into more chips. These are primarily, I would say, execution. And. R&D, just maybe without the arm part of. It. Straightforward processes that were done in other markets. You know, before starting innovation. I was working on several other industries, such as mobile and in these areas, we've done the same. So I expect to see lighter go cheaper and cheaper and the. Eventually available even to consumer applications. Excellent. Thanks so much guys. So ask a question. Please raise your hand using your mobile or desktop application, or press star nine on your telephone keypad and wait for your name to be announced. Our next question will come from Itai Micheli. From TD Cohen, Itai, please go ahead. Great.

Thank you. Good afternoon everybody. I was hoping you can walk us through. More of what you're seeing in some of your L3 and L4. Discussions with automakers, and specifically maybe talk about what you think it will take to accelerate sourcing decisions. Kind of what automakers are looking for at this point to make those decisions. And then broadly, in the next few years, as you talk to automakers and look at the market, how you're seeing L3, maybe L4 penetration. Kind of play out in the industry. Yeah, sure. I mean, obviously, that's the question that comes up many times with investors. And the way I like to address it is, you know, when you look and on the Chinese market and you could you can look at it as kind of the crystal ball of where the automotive market is heading. And the Western OEMs are aware that the Chinese cars are becoming they're fast moving. They are equipped with more technologies, and they understand that they need to keep the differentiation going forward. I think there is a lot of evidence seeing that level four is coming to fruition. You see many players trying to move faster. Understanding that you know it's going to be a point where seats are going to be taken around the table. Eventually, cities are going to be populated with robotaxis and there will be a limit of due to congestion of how many cars could actually be allowed to operate. And the race has begun because several of these players are rolling out and therefore we do see sense of urgency coming from from others. In terms of level three, I know I can also share that some of the discussions we're having right now with customers is also looking on the opportunity related to urban level three. As you might be aware today, most of the level three applications are targeting highway. Some

OEMs are seeing the highway as a good first step, but some of the OEMs are looking to add an urban experience. Knowing that that is what their customers are really interested with. So we are in discussions with OEMs around several concepts. I mean, obviously, you know, this is a very innovative companies, and we talked about the innovate three as a as a new platform where we can. Design around the different variants. So in a way, a hint on kind of like one of, one of the things that we are working on. So definitely I expect us to see level three urban or highway. At some point of time growing very fast in the West. Level four is definitely already coming. Very helpful. As a follow up, back to the the Interface three, can you talk a little bit more about some of the performance improvement that that you're targeting? And also just remind us when the the start production is expected for for that platform? Thank you. Yeah sure. So I think the next challenge related to L3 is where we're seeing some of the customers. I can take it to into two different paths. One is the highway and the other one is the urban. Both of them are actually related to the design of the vehicle. Right.

Because when you talk about highway, then you see some OEMs, they want to to add the lidar behind the windshield. And, you know, lidar by itself is a very complex and challenging technology, even even if you don't put it behind the windshield, putting it behind the windshield adds maybe another magnitude of challenge of difficulty, because it adds restrictions. Constraints. Related to the size and. Power consumption and also the integration into the windshield, which adds its own kind of integration challenges. So, you know, this is kind of something that, as I said in the earlier in the call, you know, seeing these challenges, we are obviously working to show the customers that with three, we can overcome these additional challenges by building a product that has a certain buffer. Related to the performance, significant volume reduction, 60%, and power consumption reduction. There are several additional nice design perspective that we included in these three, which we believe will give us even additional advantages. Related to this. Specific challenge. And this is why I said, as I said earlier, there are only maybe two companies that ever got to a level three on the road. You know, there are many have announced level three. But I think Innoviz is probably provided a solution for the best level three today available. And

I believe that we will be the one. Solving this problem as well, taking into a level three urban. So again, it's a design. Discussion. It's also related to cost because it requires more than one sensor. You don't want to use nine liters. As much as we would like. Obviously. So it means that you do need to take into consideration design I think obviously we'll talk about the guidance. You know, in the next quarter and but other than that, of course, we are expecting. Growth with the deployment of vehicles. Level four vehicles, whether it's coming from Volkswagen or other customers of Mobileye that we are working with. And we expect Mobileye also to grow their customer base. Which we have already. Selling to customers that are currently in those discussions. And, you know, obviously we're waiting to see them mature to to a plug. Other than that. You know, we we are we have different customers. I this truck. That we. Were awarded that. Is going to be deployed. And the top five OEM depends on how. Of course things will develop. And I think the the smart is where we are very excited around. We see where our solution really unlocks a opportunities because when you think about the leaders that are currently available in the market, which are from also geopolitical elements are also very strong in those areas as well. And when you look on the available solutions for automotive. There are. Limited in in their capabilities. Being able to share and sell our long range high resolution automotive grade unlocks a several applications that were not available. I think security is where we see an amazing fit. Because we have an extraordinary product that solve problems that other leaders. As far as I am aware of and capable of with the geopolitical element, is giving us a big advantage. So I think we'll continue to grow. On on these markets. And there are still other OEMs that we are in discussion.

I mean, we talked about, you know, the top five or, etc., but there are actually other OEMs and level four platforms. Which, as I said, once we announce on the award we got from a truck. One of the largest truck companies in the world, obviously it's a evoked. Discussions with other truck companies and other level four pathogens. There are rfqs being drafted and I believe it's a.

Earnings Call Transcript Ended
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