Innoviz Technologies Ltd (INVZ) 2024 Q1 法說會逐字稿

Good morning. I would like to welcome you to our Q1 2024 earnings conference call. Joining us today are Omer Keilaf, Chief Executive Officer; and Eldar Cegla, Chief Financial Officer. Following their opening remarks, we will open the call to your questions. 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.innoviz.tech.

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 and the future financial performance of Innoviz. 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 a 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 12, 2024. Omer, please (technical difficulty)

Thank you, Maya, and good morning, everyone. Thank you for joining us. First quarter was a strong start for the fiscal year for Innoviz. We achieved revenues above our guidance range for the second consecutive quarter, once again, expanded our relationships with key partners and customers, made significant progress on our strategic realignment, and continued to build on our RFI and RFQ pipeline.

We had another busy quarter full of activity, with our teams traveling globally throughout Japan, China, Korea, Europe and US to meet with existing and potential new customers. Meanwhile, we've been super focused on supporting RFQs across multiple programs. The team also made significant progress in continuing to develop and test our technology in line with our commitment to provide best-in-class technology to our customers.

Beginning with our top-line performance, we delivered revenues of $7.1 million, up from $1 million in Q1 2023, and above the guidance range of $5 million to $6 million we provided last quarter. Driven by a combination of NREs, samples, and product shipments, these results demonstrate the potential power of this three-pronged approach to growing future revenue streams.

I'll now pivot to a few customer and partner updates. As we showed last quarter, the BMW i7 has launched in Germany, and we expect BMW to shares user experience feedback in the coming weeks.

While other LiDAR companies have reached SOP allowing level 2, we believe that as of today, we are the only pureplay LiDAR company to reach SOP with level 3, with vehicles already on the road using our LiDARs and perception software.

During the quarter, we continued supporting software developments specific to the deployment of InnovizOne on BMW 5 Series vehicles in China. We continue to see China as a catalyst to accelerate the use of LiDARs in the move towards level 3 autonomy. And we are working closely with the BMW and Magna teams, which are performing the on-road testing specific to the Chinese market.

We believe once China approves level 3 autonomy, the reaction will be similar to what we saw happen with EVs. In fact, at least 12 global and local brands, including BMW, have level 3 testing licenses across seven locations in China.

With Volkswagen, as you know, we secured a series production award in 2022 for CARIAD for different VW brands, which is a passenger vehicle level 3, high volume program based on Qualcomm platform. We also previously disclosed that our second program with the VW Group is the ID. Buzz, light commercial vehicle program. It will be a level 4 program with multiple long range LiDARs per vehicle planned to launch in 2026.

In previous quarters, we discussed the additional opportunities for expansions. I am pleased to share that we are working on yet another expansion through our collaboration with Mobileye and Volkswagen Group for an additional high-volume level 3 program with a similar timeline.

In parallel, we continue commercial discussions with VW Group. This progress may add significant additional volume with more development platforms and sample shipments, which will help fund our efforts toward volume ramp-up. Meanwhile, we are actively working on several exciting new opportunities within the Volkswagen Group, in addition to the three opportunities I just mentioned.

Regarding Mobileye, during the quarter, Mobileye announced another win with our mutual customer Volkswagen. Specifically, they announced that they will offer certain production-ready functions for the new level 3 chauffeur platform. Mobileye also announced that they will supply their software and hardware to Volkswagen for the implementation into the level 4 drive platform ID. Buzz. Their goal is to bring self-driving ID. Buzz vehicles for ride-hailing services to series production in '26.

We have a close relationship with both Mobileye and Volkswagen Group. Our products are already integrated into both of their platforms through the ID. Buzz program, which we believe allows us faster integration into additional opportunities such as the level 3 program mentioned earlier.

Overall, we are pleased to see one of our key partners and one of our key customers deepen their relationship. We continue to see long potential runways for growth with both Volkswagen Group and Mobileye.

And as I said earlier, we are working with the Qualcomm platform for the VW CARIAD program, and we are working with the Mobileye platform for the ID. Buzz in the additional level 3 program. We are hopeful that we will benefit from these collaborations across other programs and with additional OEMs.

And I would like also to update that we are making progress on our collaboration with NVIDIA, and we are working with OEMs on several NVIDIA-based RFQs in our pipeline. We believe that our collaboration with NVIDIA and these OEMs could present another opportunity for growth and expansions.

I'll now touch on our RFI and RFQ pipeline. Our pipeline is very active and we are continuing to mature 10 to 15 programs in the pipeline. Most of these are level 3 passenger vehicles. I'm happy to share that about 50% of our pipeline is in the RFQ stage, and we're deepening relationships with existing customers while working towards additional programs with potential new customers.

Last quarter, we showed that there were two programs for a global deployment of level 3 vehicles where the decision timelines were pushed into 2024. We continue to work closely with these OEMs and are confident in our position within these RFQs.

In addition to the level 3 opportunities, we would like to highlight two level 4 opportunities in the pipeline that progressed well during the quarter. Those opportunities are with two leading level 4 platform companies in the tracking and ride-hailing spaces who are working with various OEMs. Certainly, there is a lot to be excited about.

Importantly, for each potential program we are quoting, whether it's with a new customer or an expansion with an existing one, we are quoting with NREs. This is significant because of the cash we have on hand together with these potential new business opportunities, we feel confident in our ability to execute our strategy within the remainder of the market capture window.

I'll now share a few recent observation on the LiDAR sector. We are very optimistic as we are seeing continuous progress with various platforms and programs. As a result, we believe that a meaningful percentage of vehicles in the market will be equipped with LiDAR by 2030.

To that end, according to the S&P Global Research, in 2030, approximately 10 million LiDAR scanners across various autonomy levels are expected to be sold globally in the automotive market. They also expect the number of LIDAR scanners sold in 2035 to be more than double of that.

Now pivoting to our recent industry development. At the end of last month, the US National Highway Traffic Safety Administration, NHTSA, announced a new motor vehicle safety standard that will require all new light vehicles to have automatic emergency braking system as of September 2029. This requirement standardize a crucial safety feature. It is intended to save lives and prevent injuries by automatically breaking a vehicle when a crash with another vehicle and pedestrian or pedestrian is imminent.

What is important to highlight here about the new publication is the fact that NHTSA rule adopts testing requirements of emergency braking systems, which will include compliance in both daylight and dark conditions. As part of the commentary received by NHTSA, the Lidar Coalition stated that the Insurance Institute for Highway Safety found that in darkest conditions, camera and radar-based pedestrian emergency braking system fail in every instance to detect pedestrians.

Automatic emergency braking systems use sensors to detect objects in front of the vehicle. And we believe LiDAR could provide the technical capabilities to successfully meet this requirement in any weather and lighting conditions.

We believe that OEMs were to comply with new regulations. And as the entire automotive industry raises its standards, OEMs will move to implement new capabilities and features, many of which would probably be supported only by LiDAR. At Innoviz, we are optimistic about our ability to position ourselves to capitalize on future opportunities for LiDAR.

Now moving to the latest update from our winter testing of the InnovizTwo B sample with our second-generation custom ASIC and our computer vision AI software in Europe. As we recently announced, we reached a key milestone after our team successfully completed the winter testing for InnovizTwo. The test spent 18 days of driving across 10 countries, demonstrating the robustness and reliability of our technology in the harshest winter conditions.

InnovizTwo is reaching maturity and it's approaching its design freeze stage for automotive grade applications as supported by the results of this winter testing. We believe only the most mature and well-developed technologies are able to perform safely and effectively in such strenuous testing.

InnovizTwo showed resilience in different weather conditions and to potential blockages, including rain, snow, and dirt. We believe that this could be a distinct competitive advantage for us in the industry.

The data and insights accumulated during the testing are being used to improve Innoviz's proprietary AI-backed software and hardware solutions. With the successful completion of the advancement of testing, we've overcome a big hurdle that is challenging for any automotive component producer. We're excited to move our technology to the next stage of development.

I want to briefly touch on the progress we've made on the strategic realignment of our operations announced last quarter. Eldar will provide more color on this shortly as well.

As of today, we implemented nearly all of our initiatives of our realignment plan. In line with our plan, we have reduced our investment in the development of InnovizOne and are reallocating part of the savings toward the development of the InnovizTwo sensor and perception software platform. This includes different configurations of the InnovizTwo such the level 3 long range, short range in trucks, and as well as the implementation of our sensors at lower height and behind the windshield with the InnovizTwo Slim.

We've also integrated our hardware and software development units into a combined R&D department. Taken together, we delivered a decrease in cash burn compared to the first quarter of 2023.

Wrapping up with our guidance for the second quarter of 2024. As a reminder, we have reverted to providing quarterly revenue guidance instead of annual revenue guidance. We expect second quarter of 2024 revenue in the range of $4 million to $5 million compared to $1.5 million for Q2 2023.

We continue to expect full-year 2024 revenues to be more back half weighted based on channel fill and customer activity. We also expect there will be continued lumpiness due to the typical cadence of NREs.

Last quarter, we were also guided to two to three additional programs from both existing and new customers in $20 million to $70 million of new NRE bookings in 2024. Given our strong start to the fiscal year and the momentum we are building in our pipeline, we continue to believe that we are on track to meet those targets this year.

And with that, I'll turn the call over to Eldar to review our Q1 2024 financials.

Thank you, Omer, and good morning, everyone. Starting with cash, we ended Q1 2024 with approximately $128 million in cash and cash equivalents, bank deposit, marketable securities, and short-term restricted cash on the balance sheet.

As Omer mentioned, our continued solid revenue performance plus the efficiencies achieved from our operational realignment led to a decreased level of cash burn compared to Q1 2023, with cash used in operations and capital expenditure coming in at $23 million compared to $29 million in Q1 '23.

And with InnovizOne now in serious production, all quoting and bidding activities in our RFI and RFQ pipeline are focused on InnovizTwo platform. As we remain in this critical market capture windows, you have heard us talk about in the past, we are maintaining the appropriate level of flexibility to demonstrate we can meet customers' evolving needs. The realignment has made Innoviz a more efficient company and we are laser focused on the InnovizTwo platform.

Moving to the income statement, revenues in Q1 2024 were $7.1 million, which is approximately 18% higher than our guidance range. This is a significant increase compared to Q1 2023 revenue of $1 million, demonstrating the positive financial trajectory we are delivering.

Our operating expenses for Q1 2024 were $31.7 million, a decrease of 5% from $33.3 million in Q1 2023. This quarter's operating expenses included $5.9 million of share-based compensation compared to $5.2 million in Q1 2023.

Research and development expenses for Q1 2024 were $23.8 million, a decrease from $26.1 million in Q1 2023. The quarter's R&D expenses included $3.8 million attributable to share-based compensation compared to $3.5 million in Q1 2023. As you can see, we have maintained decreased levels of operating and R&D expenses. We expect to keep our expenses at these levels in the coming months.

To summarize, we are pleased by the continued strength of our financial performance. And moving forward, we will remain disciplined and run an efficient organization with the goal of optimizing our competitive positioning while maintaining a healthy cash position. And with that, I'll hand it back to Omer before we open up the call for Q&A.

Thank you, Eldar. Before I conclude, I'm pleased to share that Innoviz was selected by the EcoMotion Community to host the EcoMotion Assembly at the Innoviz headquarters on June 4.

The EcoMotion Assembly is an auto technology conference hosted in Israel that brings together many OEMs, auto and technology companies from across the global mobility ecosystem to learn, share knowledge and developments, and look ahead towards shaping the future of mobility.

We are honored to host this prestigious conference this year and look forward to continuing to support and strengthen the international mobility ecosystem. We encourage you to visit the EcoMotion website for additional information and hope that you will join us.

To wrap up my remarks, as you've heard, Q1 was another busy and productive quarter for Innoviz with many engagements with existing and potential customers in different regions. We are already in the middle of the second quarter, and we are continuing to advance opportunities across different programs, and we look forward to sharing more positive updates going forward.

We believe that we are well positioned with our customers and partners to win additional programs and cement our place as the leading LiDAR supplier during the market capture phase. As the market comes to appreciate this positioning and understands the growing importance of LiDAR across the various applications with tailwinds coming from new regulatory requirements, we believe that the perception of the LiDAR sector by the capital markets will increasingly reflect the sector's opportunity.

And with that, operator, time to return to the Q&A.

(Operator Instructions) Mark Delaney, Goldman Sachs.

Yes. Good morning and good afternoon. Thank you very much for taking the questions. I'm hoping for more details on how Innoviz is progressing with its RFQ opportunities. The company reiterated its goal of winning two to three more programs this year. Could you please speak to what may need to happen for this to be realized and your confidence in getting there?

Moreover, I'd like to better understand if the types of programs Innoviz expects to win this year has shifted, given the commentary on potential L4 wins, as I thought many of the key RFQ opportunities were for L2 and L3 ADAS applications. And said another way, have your opportunities for consumer ADAS awards changed at all? Or is it more about an expansion of what you could win in L4?

Okay. Actually, thank you, Mark, and thanks for joining us. Actually, I want to start with the last question. We are highlighting the level 4 opportunities because those actually made very significant progress in the last quarter. And in a way, we're expecting them to converge. And we wanted to highlight, as not to surprise, when things might happen. As we said, most of our RFQ and RFI pipeline are focused on level 3, and that's where we see most of the activity.

In terms of the two to three opportunities that we're expected to get this year, so I just talked about another opportunity within the VW program. With the Mobileye level 3, it's quite a big program that we're very happy to step into, which will provide us additional volumes. And obviously, we're very happy about that.

And we said that are actually additional opportunities with VW. It's really exciting to see how VW Group can offer so many opportunities for growth. But other than that, we talked about the two other level 3 programs that we were expected to converge by end of last year, and we are still working with those customers very closely.

What needs to happen in order to conclude this process, it's basically still in many discussions that are related to design and manufacturing. And we are supporting the customers in order to allow them to converge the process as early as they can.

That's helpful. Thank you for that. My other question was to better understand your expectations for cash use this year. And what would happen to cash flow over the next 6 to 12 months as the company had success converting on some of those NRE bookings opportunities you're guided for? Thanks.

So we have completed our realignment program and we expect to see some benefits from this cost reduction. And as I mentioned, we are expecting to see the cash or the expenditures to be similar to what we saw until now and maybe even better if we are available to show that in the next few months. So all in all, I would expect that this year, we will be very disciplined and we will be able to keep our budget as we planned. And as said before, obviously, we have enough on our hands in order to capture the market or to use the opportunity and execute on the strategic plans we have and hopefully able to secure additional wins.

By the way, maybe I can add something that you might find interesting. While some of those decisions are taking longer, some of the NREs that we're able to collect are coming from programs that we are asked to continue working on them in order not to allow any delay in our work to support those programs.

Thank you. I'll pass it on.

Andres Sheppard, Cantor.

Hey. Omer. Hey, Eldar. Good afternoon. Great to see you both again and congratulations on the quarter and thanks for taking our questions. I wanted to maybe just confirm the timeline for some of your OEM agreements, obviously both -- BMW being the maybe the more near term. Can you just remind us what is the timeline for the ramp-up in revenues in Volkswagen, the Asian OEM, and then the Robotaxi? Just wanted to -- not sure if those have changed or just wanted to maybe confirm those real quick. Thank you.

Sure. So we didn't give a definite timeline for each one separately. We gave only for those that were communicated by the customer online. Obviously, BMW launch was communicated, and we're expecting to get more insight from the -- I would say the feedback from on the ground.

We're obviously excited to see our product already out in the wild, being the only pureplay LiDAR company that already managed to get to deployment on SOP of a level 3 program. I think it's a very significant milestone for us as a company, as a leading company in this category.

In terms of VW, so we talked about a 2026 time line for the ID. Buzz, which had a similar timeline for the level 3 program. We didn't disclose additional timelines for the rest.

Got it. Okay. That's helpful. Appreciate that. And maybe a question for Eldar. How should we think about gross margins, OpEx and CapEx for this year? As it pertains to gross margins, what does the path to positive gross margins look like? I understand obviously, it's a combination of volume, but just curious if you have maybe some color that you can share.

And then on OpEx, should we expect that number to be lower now or maybe even significantly lower than last year, given the realignment? And then just lastly is just the CapEx. Looks like this quarter, it was a little bit lower than Q1 last year. Just curious how we should think about that for this year as well. Thank you.

So obviously, I am expecting the realignment impacting our OpEx expenditure. So this is definitely part of what we would project for this year. In terms of margins, a significant part of our revenues comes from NRE. And NRE at Innoviz are positively affecting our gross margins. So we are expecting to have additional NREs and additional positive contribution to our gross margins as we gain more and more NREs. And I'm not sure what was --

CapEx, CapEx the last quarter.

Yeah, CapEx will be stable. We are not expecting a huge CapEx for this year or increase from last year as we are relatively CapEx-light. We are using contract manufacturers. So this should be stable.

Our strategy related to working with contract manufacturing has been very strong for us. It allows us to be very flexible with different customers who want us to be able to serve them from different locations without making a huge investment on each one separately. Working with contract manufactures as partners with the right expertise and the existing facilities that are already automotive-grade, allowing us to save CapEx, as Eldar mentioned, but also get faster to the market.

That's helpful. Just to clarify. So you said you expect CapEx this year to be lower than last year or flat? Is that --?

No. I said similar.

Oh, similar. Okay, got it. Okay. That's helpful. Thanks, guys. Congratulations again. I'll pass it on.

Thank you.

Kevin Cassidy, Rosenblatt Securities.

Yes, thanks for taking my question. And congratulations on the results. Just for the new ruling from the National Highway Transportation Safety Administration, automatic emergency braking, would the cars that you're in today, the BMW and the VW, would those qualify?

Definitely. Obviously, with the use of LiDAR enables this functionality in different weather conditions and lighting conditions. So definitely, it should supply -- fulfill the needs.

Okay. So do you see this type of ruling moving into other countries?

I believe that that's a trend that I'll expect to see growing and also new rolling on new features. I think that the benefit of using life-saving technologies is a proof of the capabilities. And I'm sure that the desire to improve and reduce the challenges related to unnecessary accidents is something that will continue to improve.

I believe that basically that's why we're here. Now eventually, there's no need for car accidents. That could be avoided and technologies are already available. And I'm sure that those ruling would only continue.

Okay. Great, thanks. And can you break out the revenue for the $7.1 million for March from NRE to production and same with the -- for your outlook for June?

So significant product is NRE. We didn't break it down. Significant product is NRE, but it consists of three elements: A, the InnovizOne components that we provide Magna for BMW; samples that we are selling in ever-growing numbers; and NREs, which are the most significant part of our revenues. And this is our expectation going forward -- three elements with at least this year NRE leading the most part of the revenues.

Okay, great. Thank you.

(Operator Instructions) Kevin Garrigan, WestPark Capital.

Hi, Kevin.

Yeah. Hey, Omar. Hey, Eldar. Thanks for taking my questions. Let me echo my congrats on the progress. On the successful winter test, did you guys get a lot more interest from OEMs after you completed the test?

I think that the resource that we're able to show to customers is getting, I would say, applauses. We are very much aware on the challenges that might happen when you go into those extreme conditions. I think that for very a sensitive and complex system like a LiDAR, going through winter testing in these conditions is a very challenging task. And being able to show the results in such a positive way definitely get a lot of interest.

I am aware of many challenges that others have gone through, not even being able to start those tests in -- on time. I think that us being able to go -- I mean, one of the challenges of winter testing is that you actually need to meet winter. You can't do that in the summer. And if you miss winter testing, your program might be delayed by a year. And being able to meet the timeline successfully and not need to wait another year to do that again is super important.

And I think that, as I mentioned on earlier, one of the key issues with LiDARs when you go into such conditions is blockages. I emphasized that because I don't think that people are aware on that challenge.

Whenever there is a blockage that can come from snow, dirt, sometimes, even drop of water, some LiDARs might be blocked even if it's partially their field of view. And that completely invalids the availability of the system. And it means that the driver needs to take control back for anything that might happen.

If the system is highly sensitive to those situations, it means the availability of level 3 is at very low probability, very statistically. It means that the driver needs to engage too many times, and it's a very poor user experience.

Our ability to work in those conditions, even when our window is covered by almost 25% to 50% and still provide very well, very good visibility without any horrors in the field [of view] is quite remarkable. And these are things that we are very happy to show to our customers and give them the understanding that using our LiDAR will give them very high availability of the system in those conditions. I think it's something that definitely will help us going forward this year.

Yes, that makes perfect sense. And congrats again on completing that test. On a separate question, can you guys give us a sense of the breakdown between EVs and ICE platforms that are within the 10 to 15 RFIs and RFQs? Are most of those programs kind of geared more towards electric vehicles?

I don't think there is any major bucket in those programs. Of course, the system is very agnostic to which type of driving -- if it's combustion engine or EV. So you don't really care which car is used. And specifically, with the programs that we already have with our customers, some of them are combustion and some of them are EVs. And definitely, I don't think there is a very clear majority between one or another.

Yeah. Okay. Perfect. Thanks, guys.

Thank you.

Thank you. That does conclude our question-and-answer session for today. Please proceed.

Okay. Thank you very much, everyone. We look forward for the next quarter to share with you our updates. Thank you very much.

Thank you.