Innoviz Technologies Ltd (INVZ) 2023 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by our conference will begin shortly.

This is Rob Moffat, Vice President of Corporate Development and Investor Relations at Innoviz. And I want to welcome you to our earnings conference call. Joining us today our 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 9, 2023.

I will now turn the call over to Omer. Please go ahead.

Thank you, Rob and good morning, everyone, and thank you for joining us. We have a lot to talk about today. Q4 was a record quarter for us, there has been some important customer progress since the years and since the quarter has ended.

The first thing I want to highlight is the amazing revenue performance. Full year revenues of nearly $21 million were up 246% year over year. And even with raising guidance midyear, we came in above the high end of the guidance range. In addition to that, we delivered Q4 2023 revenues of nearly $15 million, an increase of nearly 850% year-over-year and also above the high end of our quarterly guidance range.

The strong revenue performance came from a combination of production revenues, robust sample shipments and NREs and it validates our three-pronged approach to growing future revenue streams. We also saw positive customer developments in the quarter with BMW and Volkswagen unveiled a new shared program with Mobileye as a product as a platform partner and unveiled a strategic realignment to maintain our cost discipline and extend our cash runway as we position the business for Rapid Transport transformational growth.

The combination of strong revenues and disciplined cost management led to an impressive cash performance with our quarterly cash burn at just $14.5 million, a record low since Innoviz became a public company, which allowed us to finish the year with approximately $150 million in cash and equivalents, leaving us with a strong runway that we expect to last through the market share capture window. I'll go through each one of these topics now.

Let's start with the news we shared toady on BMW. In this morning's earnings press release, we disclosed that we are working on a second vehicle geography for the economics one deployment. When we first announced the production awards several years ago, we said that Innoviz one was tested and certified on three vehicles. the 7 Series, the 5 Series and the iX. But to date, we've only been able to share details on the 7 Series, which is now on sale in Germany, with deliveries scheduled to begin in the upcoming weeks in March of 2020.

Today's news is that we are working on an economic bond deployment on the BMW 5 Series in China, a very important geography. BMW recently received an approval to begin levels pretesting in China, and we are working closely with the teams performing on-road testing and software development specific to the Chinese market.

If all goes well, we could see the technology deployed on the locally built five series. It is still early to share a lot of details at this point, but we expect that we'll have more to say in the coming quarters.

Moving on to Volkswagen. At CES, we unveiled the ID. Buzz light commercial vehicle program as our second program with the Volkswagen Group. This represents an important development for three reasons. First, it shows our strength of our relationship with Volkswagen. Our progress toward SOP with our first program is tracking well and they have confidence in our ability to bring a second program to the market within the same timeframe.

Second, the volumes from these programs are incremental to the award wins that we announced in 2022, supporting additional revenue growth and accelerating our path towards breakeven. And lastly, it deepens our relationship with Mobileye, who is working as an autonomy platform partner for the VW Group.

The ID. Buzz is a light commercial vehicle aimed at the mobility market. It will be a level four program with multiple either per vehicle. Attachment of vehicles is being deployed in Austin, Texas in Munich, Germany, and we expect the program to become increasingly visible to the public, as we go through 2024 and the test suite grows as it progress towards a planned 2026 commercial launch.

Additionally, developments with our first thought about going to work is progressing nicely. I flew to Germany, to deliver the first batches of our InnovizTwo B-sample with our second-generation ASIC and our partners at VW couldn't be happier.

We are gearing up for events within testing in Germany and Sweden, and we'll remain focused on the B-sample phase to the C sample D sample phase in 2025 as we progress towards SOP later in the year.

All in I'm excited with the progress we are making with this important customer, throughout 2023 we said we believe there are additional opportunities for us at Volkswagen beyond the Series production awards we secured in '22 and with the ID. Buzz announcements at CES we delivered on that promise. But we're not stopping there, we are actively working on an additional one to two programs within the Volkswagen group, encompassing multiple brands, multiple platforms and multiple vehicles.

It's too early to share any further details than that, but we hope to be able to disclose more as we go through 2024. Volkswagen is the world's second largest automotive OEM, capable of producing over 10 million vehicles per year. We believe that there's a long runway for growth with them. We also see a long runway for growth with Mobileye as an autonomy platform partner as you've heard us talk about before, there are three leading autonomous driving platforms in the automotive industry from Mobileye, Qualcomm and NVIDIA.

These partners operate the compute hardware and software that integrates the sensing and perception input from the various ADAS components such as LiDAR, radar and cameras and play an important role in the sensor fusion and driving decision layers of software. We currently have serious production awards with two of these players Mobileye and Qualcomm and we are working on several intermediate programs in our RFI and RFQ pipeline for the Hyperion platform.

For innovators integrating with these platforms establishes a meaningful competitive advantage that can reduce friction in the LiDAR selection process and increase our odds of winning additional business from OEMs. Being already integrated with the major compute platforms on existing programs can significantly reduce the time, cost, and risk that it takes for additional automakers to deploy the same system.

We're essentially becoming an off-the-shelf solution, make it increasingly easy for our OEM additional OEMs to choose Innoviz as their lack of supply. This is further enhanced by the work that we are doing ahead of our Volkswagen SOP. In order to be ready to launch on time. We are planning our Innoviz to production capacity to be prepared to ship by late 2025.

There are many OEMs targeting launches in 2026, '27, '28 and the fastest least expensive and lowest risk way to prepare for this is with an autonomy platform partner like Mobileye, Qualcomm or NVIDIA and with a lighter supplier that has already proven they can deliver on SOP milestones and with that technological capabilities, price point and SOP timeline of the Innoviz.

Next, I will provide some thoughts on the global regulatory environment and discuss some important updates both on globally and in China and how we see these developments shaping the lighter industry. As many of you know, the United States Department of Defense continues to be very active in terms of identifying companies that may have tied to the Chinese military.

To the extent that the deal deflated specific data companies on a 1260 age list, it could make it more difficult for these companies to win business with global OEMs that sell into the US market. Conversely, if similar actions were to be replicated with the Chinese regulatory environment could make it difficult for the US life companies to have to be deployed on the vehicles and the domestic Chinese market.

This is where Innoviz has another competitive advantage. As an Israeli company, we are not caught up in the politics on either side of this debate, I'd like to say that Innoviz is the Switzerland of LiDAR. We are neutral and can serve customers globally. We have plans to operate in China with both BMW and Volkswagen redacted, the quality from multiple RFIs and RFQs with global OEMs and plan to sell into the US and the Chinese market with the same technology stack.

The cost of bringing a Level 3 or level four program to the market is substantial and it will be extremely expensive for OEMs to run duplicative tech stack, in different markets with different types of vendors. They need to absorb those costs across as many units as possible with the global LiDAR platform. And with that, let's segue into what I think is some very positive news out of China.

In addition to BMW, multiple other OEMs have received permits to begin Level 3 testing in China in late 2023. Today, China has been a level 2 market. What we are seeing on the ground is a rapid pivot towards accelerating the development of Level 3 autonomy. The Chinese automotive market is moves very fast, as does the technology. If regulators there decide to embrace levels 3 autonomy, it can be done in a very short order and similar to the prior topic, this could have implications globally.

Chinese OEMs have proven themselves as very competitive manufacturers for highly capable vehicles at affordable prices, particularly when it comes to EVs and while Chinese exports have been found their way to the US market, they are starting to have an early impact in some parts of Europe and the rest of the world.

This is a topic that OEMs are paying close attention to. If China rapidly pivot towards embracing Level 3 autonomy in the same way that it rapidly pivoted towards embracing EV technology. This could add another layer to the global competitive environment. At the high-level, we foresee Western OEMs accelerating new Level 3 autonomous platform timelines in order to get ahead of incremental competitive threat from Chinese OEMs. This has the potential to accelerate levels with timeline globally. It could create the Level 3 gold rush.

Next, I want to talk a little bit about the strategic realignment we announced at the end of January. As we have talked about in the past with both the InnovizOne and InnovizTwo programs in the development stages, we had been running two parallel cost structures, but at the individual sensor and perception software shifted into serial production late last year, much of that development work was completed.

With InnovizOne work stream winding down, we initially reallocated headcount towards development projects like the LiDAR base minimum risk went over for MRM software and the Innoviz core AI compute model. In discussing these technologies with new customers, it became clear that most OEMs are hyper-focused on more mature solutions like the InnovizTwo sensor and perception software and bringing those technologies to the market as soon as possible before focusing on other products.

With that in mind, we made a decision to concentrate the majority of our go-forward investment on the InnovizTwo sensor and perception software platform and bring that to the market with the rich RFI and RFQ pipeline that we already have.

We are allocating as much of our staff as possible to Innoviz to focus projects, by the transition offer an opportunity to train some planned expenses to help reduce our burn and extend our cash runway. As a result of these changes, roughly 30% of the company headcount was reduced, along with some relaxed -- related OpEx and CapEx.

The cost of risk reduction actions are expected to be fully completed by the end of the first quarter and are expected to reduce our planned cash outlays by $22 billion to $24 billion on an annualized basis. We also used the transition as an opportunity to integrate our hardware and software development departments into one unified R&D unit, which had been running separately.

The new combined group will be led by Avishai Buscovici, who has served as our head of software reporting to make for the past several years.

As part of that transition, Oren Buzzkila, our current Chief R&D, will be moving on to pursue a new opportunity outside that other industry. We thank him for his many years of service and wish him the best of luck.

Avishai has already begun his work on integrating the two departments and reorganizing the work streams in a more efficient way that allows for better product development and simplified customer planning across both hardware and software. This is not just a reorganization of a few teams. It's about entirely different workflows and processes aimed at positioning the company for rapid transformative growth across multiple customers. It's an important reset of our organizational structure that will allow us to serve much larger number of clients in the coming years.

One example of how we are focusing our go-forward investment on the individual sensor and software platform includes a new slim design, some variants, the team developed. We had a customer that pipeline that is focused on going to the market with behind the windshield [LiDAR] solution, which would sit in the area around the rear-view mirror, a deployment like this requires a very slim profile as there are already other sensors and technology in the same part of the car. And because it's easier to be integrated into the windshields, due to the curve of the glass.

The customers is a top 10 global automaker with potential of meaningful LiDAR volumes. So the team worked hard to develop a hybrid solution that could meet their strict physical requirements without sacrificing performance for requiring a meaningful reengineering of the interior components.

This thought was critical from our perspective that we want to share as much of the Intuit engineering cost customers as possible to reduce bespoke harder work driving volume-based costs lower and incremental margins higher.

It took some time to solve for, but ultimately, there were several creative solutions that overcame the challenges. In the end, it resulted in a new exterior design that reduced the height of the sensor from 45 millimeter to potentially a smaller 25 millimeter. The customer has impressed, was impressive with our solution, and we have continued to move forward in the bidding process.

And this work is specified to just one customer, we think that can be broadly relevant to future program interested in behind the windshield or slimmer roof line deployments where the new profile could be appropriate. This is just one example of our concentrating our time focus and investment and leveraging the strengths of the InnovizTwo platform can result in solutions with a broad market fit and earlier potential payoff and likely higher overall return on investment.

And with that, I will turn the call over to Eldar to review our Q4 '23 and 2023 financials.

Thank you, Omer, and good morning, everyone. Starting with cash, we ended Q4 2023 with approximately $150 million in cash bank deposits, marketable securities and short-term restricted cash on the balance sheet. The combination of strong revenues coupled with disciplined cost management, led to the lowest quarterly cash burn in our history since becoming a public company.

Cash used in operations and capital expenditures came in at roughly $14.5 million, which compares to prior trends in the $27 million to $29 million range. Needless to say, we were excited with this outcome and it demonstrates the impact that growing revenues coupled with cost management can have on the trajectory of cash-line.

Looking to the income statement, revenues in Q4 2023 came in at $14.9 million compared to Q3 2023 revenues of $3.5 million, delivering a 328% quarter-over-quarter increase. On a year-over-year basis compared to Q4 2022 revenues of $1.6 million, delivering a growth of nearly 850% year over year. This led to a full year 2023 revenue of $20.9 million, well ahead of the high end of our guidance range. Coming in at a very strong 245% year over year growth in revenues.

On the cost side, operating expenses for Q4 2023 were $29.5 million, a decrease of 12% from $33.5 million in Q4 2022. And on a full year basis, 2023 operating expenses of $121 million came in roughly $4 million lower than the full year of 2022 for a 3% decline. This quarter's operating expenses included $5.5 million of share-based compensation compared to $5.3 million in Q4 2022.

Research and development expenses for Q4 2023 were $22.1 million, a decrease from $26.2 million in Q4 2022. The quarter's R&D expenses included $3.6 million attributable to share-based compensation compared to $3.4 million in Q4 2022.

In conclusion, the financial performance in the fourth quarter and the full year of 2023 was stellar. We exceeded our revenue target, all while controlling our costs and executing on critical milestones like the BMW-SOP, and it led to a quarter cash burn that was our lowest in history since becoming a public company. Going forward the strategic realignment shows a continued focus on a disciplined management of cost, which when coupled with continued revenue growth has the potential to extend our cash runway through the remainder of the market share capture window.

And with that, I will turn the call back to Omer.

Thank you, Eldar. Looking back at 2023, I'm proud to say that we have delivered on many accomplishments. Our most meaningful progress was on the existing customer side with BMW, we successfully managed the transition into full series production on the i7 with the InnovizOne making us the only other pure play company with Level 3 passenger color on the road.

And for the InnovizTwo, we initiated the B sample work, we announced in August, which we expect to be the foundation for an expansion of additional development work packages.

On the Volkswagen side, we disclosed the second program with the ID. Buzz, and we made meaningful progress on securing one to two additional programs that we think we can get over the finish line in 2024. As a reminder, the ID. Buzz is incremental to the Volkswagen award that we announced in 2022. And the additional one to two programs that we hope to convert soon could be meaningfully incremental to our existing Volkswagen volumes.

Growing our contracted production volumes is our number one goal. We are indifferent where the volumes come from, whether it's from an existing customer or a new customer, each brings its own benefits, additional volumes, and NRE service revenues with an existing customer can require less incremental work and relationship management, along with other synergies resulting in a stronger margin profile over time.

And volumes with new customers can offer entry points for new growth in additional vehicles and platforms down the road, in addition to locking up incremental market share. Volume from either source helps absorb our fixed costs and bring us closer to being breakeven, then ultimately free cash flow positive. 2023 was very productive in terms of growing our relationships with new customers and why we made meaningful progress, particularly on the RFQ side of our pipeline, we didn't reach signed series production awards with new customers before the end of'23, though we hope to convert them in 2024.

Out of the 10 to 15 programs in the pipeline and the roughly half that are in the more advanced RFQ stage, we had three programs in particular with new customers that were further along than others and were planned to make a decision by year end.

Two of the programs are for global deployment of Level 3 vehicles. Those programs decision timelines have been pushed into 2024, and we remain very active on the programs in advanced RFQ process, which we believe includes only start a few final players.

We remain confident that we have a strong position in these RFQs that we have. We have good odds of converting them into production. One of this three programs was targeting a global deployment of LiDAR enabled Level 2 vehicles. Very late in the year, the customer people to this program to be a China only vehicle and is now exploring a separate global Level 3 program for a different vehicle at a different date.

We were not the natural choice for a China only basic level to the problem. And the award went to a local Chinese care. But through the process, we have built a solid relationship with the customer and they appreciate and respect our technology. And we are expecting the RFI process for the new global Level 3 vehicle in the company. While the revised China only RFQ has moved out of the pipeline, we had two new RFIs from major global OEMs come in, resulting in a net positive gain of one called delivering the pipeline still in the range of 10 to 15 programs with roughly half still in the RFQ process.

As for the NRE booking, while we were able to secure only roughly $12 million of new booking having the new customer program decision to move into 2024, made it difficult for us to hit our 23,000. But similar to our new customer targets, we simply view this metric as pushed out. We have rolled this target over into 2024 outlook.

Well, we are confident that we can meet and ideally exceed. There are many deals on the table. And we believe that we are in a strong position to bring it at least several of them over the finish line.

For the cash collection target, two of the payments planned for December '23 for work completed in '23 gaming a few weeks later, they're driving equity for this late payments would have been pushed us towards the midpoint of the guidance range.

On the revenue side, when Italy was very strong, full year revenues of nearly $21 million were up 246% year over year. And even with raising guidance midyear, we came in above the high end of the guidance range. We accomplished that through a combination of production revenues, sample shipments and NRE service revenues.

And while customer decision timelines, which are outside of our control, didn't conclude before year end, I feel like the outperformance on the revenue line is a proof point of our desire to build a longer-term track record of under-promising and over-delivering based. Based on the conversations we are having with customers, OEMs are still very much focused on making autonomy a reality.

In fact, we are seeing a shift in oil priorities away from electrification and autonomy, OEMs know that consumers are increasingly buying cars based on technology, not horsepower and market share trends will be awarded to those that are on the cutting edge.

With the EV evolution installing volumes are eager to pivot to the next big mega trends and there appears to be a growing consensus that it will evolve around Level 2 plus and Level 3 autonomy. On the competitive side, we are seeing other LiDAR players struggling with their technology and SOP timelines. Meanwhile, our customers see the progress that occurring with Innoviz at BMW and Volkswagen.

As a reminder, the ID. Buzz was a competitive conquest win, looking forward to 2024 and beyond we believe there could be additional opportunities for conquest. For 2024 we are simplifying our guidance structure to three metrics, since much of the activity that we're expected to conclude in late 2023 is still ongoing and very active, where essentially rolling over those targets into '24.

If the scope of activity that we think is possible plays out, we are confident that they will prove conservative and we could have the ability to raise them during the year as we did with revenues during 2023.

On the customer front, we expect two to three additional programs from both existing and new customers on the energy service revenue side, we expect that will translate into $20 million to $70 million of new energy bookings in 2024.

For revenue, we are going to revert to quarterly guidance. Last year, was first year, we gave annual guidance and it was a little premature for all our businesses. There are many factors that can influence full year numbers, including lumpy NRE income that may remain recognized as either revenue or contra expense to R&D depending on the accounting treatment, which is difficult to know in advance at the beginning of the year.

It is also difficult to know in advance what take rates on the i7 in Germany might look like and the timing for adding additional because on vehicles or additional geographies such as the 5 Series in China. So the Innoviz one deployment. We saw how this played out in 2023. We initially set the bar too low with at $12 million to $15 million, then we raised it to $15 million to $20 million and even that proved conservative by year end, we don't want to set the bar too high, but we don't want to set it too low.

And we feel like quarterly guidance will ultimately be more prudent, an accurate way to approach revenue target at this point. With this in mind, we are targeting first quarter of '24 revenue of $5 million to $6 million, which would be up roughly 400% to 500% year over year.

Similar to 2023, we expect revenues to be more back-half weighted based on seasonality, channel field and customer activity.

All in all, we are off to another exciting year in 2024. We are extremely busy pursuing additional programs with both new and existing customers. And we know that we have a lot to deliver. We are also ramping up our work towards the InnovizTwo SOP, which is right around the corner.

We are already deep into the first quarter of '24. It to be ready for 2026 shipments. We are preparing to innovative product roadmap and production capacity to be ready for 2025. This will be here sooner than you expect. This is obviously important for our existing customers, but it also gives us a critical competitive advantage that is becoming a point of increasing focus in our conversations with new customers, even though oil decisions are more moving slower than planned, their SOP timelines mostly haven't changed.

We have multiple RFQs that are still working towards 2026 and 2027 SOP targets. And for those OEMs engaging, we put out a supplier, will the wheels are already in motion to be ready for production in late 2025 is a significant advantage.

We also have the benefit of our contract manufacturing strategy. This allows us to be instantly flexible. If addition awards come in, we can rapidly ramp up new lines at our manufacturing partner in any region of the world that a customer would want us to produce without the disruption delay or capital requirements of building our own factories.

The capital needs would be minimal and the pace at which we could deploy capacity would be substantial. We are in a great position heading into 2024, and I'm confident that we will be that we will have a lot more to talk about in the coming quarters.

With that, operator, please turn it over to Q&A.

Thank you. (Operator Instructions)

Mark Delaney, Goldman Sachs. Mark?

Yes, thanks so much for taking the questions. To start, I was hoping you could comment on how the forward-looking order book has evolved, which at one point I think was estimated to be north of $6 billion, and to what extent the order book and future revenue pipeline has been impacted by slower projected customer sales of EVs using your LiDAR. Thank you.

We didn't update the order book having that, the main change in Delta will come from the addition of the ID. Buzz, as we said in the past, we would not make updates to the order book based on a single customer in order to not reflect the program size in respect to our customer confidentiality. So we will make updates once we bring more programs and then we can communicate them.

I guess though, if you could talk more around how you see revenue progressing over the next two to three years, give some of the changes in your projected EV sales from some of the models that may be using your LiDAR have you seen any shifts in customer plans around volumes that you can share even if on a qualitative basis?

Sure, I would say that we were not getting any feedback from customers concerning their slowdown of EV or not EV. The LiDAR platform is not a correlated specifically to EVs that can operate on combustion engines just as well. And so far, we didn't get any communication around EV slowdown related to the volumes that they expect.

And just one last one for me, if I could, please. I realize you're not guiding 2024 revenue, but I'm hoping to better understand how you're thinking of the shape of the year. Would you anticipate first quarter revenue to be the low point of the year given what you know about customer, schedules and NRE opportunities or any other qualitative color on the shape of the year that you may be able to share? Thanks.

So yeah. So specifically, as we said on the earnings call previously, we are expecting the second half will be more meaningful, but we don't give any specific for each quarter since it is very lumpy because of the structure of the revenues that we are expecting.

Thank you.

Andres Shepherd, Cantor Andres.

Yes, good afternoon, everyone, and congratulations on the quarter and thanks for taking our questions. Maybe to follow up on that last question specifically regarding the $20 million to $70 million in new NRE bookings that you're targeting for 2024. I'm wondering if you have a sense as to when the majority of this will be recognized as is the Q4, Q3 story? Or is this something that maybe will be expected gradually throughout the year? And if you have a sense of whether some of it or most of it will be likely be recognized as revenue versus a contract expense? Thank you.

So the NRE, NRE booking will be recognized over the lifetime of the program up to SOP that, which means basically whatever we book this year will probably be recognized over a few a couple of years, maybe two to four years until the SOP. As we mentioned before it's difficult to say how you recognize it and what point of time and if it will be recognized as revenue or rather a contra to the expense side.

I mean, when we talk with customers, we tried to draft the agreement in a way that we can recognize it as revenues. Maybe you can give examples some ways from come.

So I don't want to go into the accounting side, but it's usually you look at the specific contract if it's specific to a customer or it's more generic. And then based on that you are able to recognize into coding.

Got it. Okay. That's helpful. And maybe as a follow-up, I'm wondering if you can maybe give us some direction on your path to breakeven gross margins. I know you're not guiding gross margins, but do you anticipate this could potentially be a '20 to '24 timeframe or are we looking more into perhaps next year and onwards? Thank you.

So I say I think you need to look at the trend that we have shown over the past year 2023. So Q1 was roughly almost 400 negative margins and then Q4 was a negative 15% margin. So I think you see a nice trend here. We are hoping that the trend will continue, I don't want to say when we expect to be positive, but we are expecting or we are hoping that this trend will continue and at least we will be flat due this year.

Got it. Okay. And maybe one last one, if I could. Just in regards to your liquidity. So you have now roughly $150 million. And just curious as to how you're thinking about future capital raising opportunities, what is the run rate with the current liquidity on hand? Thank you.

So I think that in terms of liquidity, we were able to end the year with our $150 million. We started the year with $186 million. And so we were able to put some additional cash on our balance sheet.

On the last quarter, we were able, as we said, to start collecting NRE, which we said, will balance off significantly our expense. So as we win more programs, we will be able to continue to balance off our expense side. And our goal is a to be viable all through the window of opportunity that we are seeing in front of us to capture. And each program that we win extends our runway with additional NREs.

What I can add maybe to this. So we are seeing in front of us several big opportunities that we are working on for quite a long time. And that can unlock opportunities for us to pull on to for the next two years. We've been spending a lot of effort and time in trying to bring those opportunities and unlock them I believe that innovate and position very strongly to make that a reality.

And I feel that if we will continue to be successful as we were in the last two years, I believe that our technology is currently leading the pack in many ways. I believe that's our experience, our customer base is giving us many advantages. I think some of the dynamics in the geopolitical, et cetera, gives us a big step-up right now. So I feel that there are several opportunities in front of us that could be very meaningful. And I'm positive that we'll be able to reach them.

Thank you. That's very helpful. Congratulations again on the quarter. I'll pass it on. Thank you.

Kevin Cassidy, Rosenblatt Securities.

Thank you. Let me ask a question and congratulations on the progress. Just on the RFI and RFQ process, you mentioned there are delays. Can you go into more details on what the delays are as of the additional competition or OEM just more cautious or technical obstacles. Maybe just give some details on that.

So it depends on the OEM, there are several discussions with one customer related to their desire to, I would say discussions on some interface cybersecurity. I mean, specifically what we're doing having that they wanted to check if we can support a different kind of interface, sounds very technical, but eventually, this requires a strong integration between us and the compute platform they're using and it requires, I would say, good alignment before they can feel comfortable with the nomination based on this architecture.

So there is several technical discussions on this, and you must understand that once you kick off a project, the customer needs to feel very confident that nothing changes. If for any reason they try, they need to change something in the product on either side, whether it's delayed our owned or the compute platform it's I would say it's a very expensive decision to make and therefore, they are cautious on kind of freezing the design and kick it off.

It's one, another OEM I think it's mostly related to their internal kind of change of teams. They added a new team coming from another activity they stopped working on. And that team had to be integrated into the team, it kind of slow down things towards the end of the year. But I can say that the progress in the last few weeks was very on steroids, I would say. So I think that we're catching up there.

Okay, great maybe you touched on something there about the platforms. And I wanted to ask about that. You had mentioned that your unmet Qualcomm and Mobileye platform, that's great news. But is the decision still I guess they're not packaged together, it's still the OEM can decide one platform with Qualcomm and then even choose a competitor's LiDAR?

Yeah, definitely. The intervention is the OEM decision on which LiDAR to use. But I would say the following residentially when they make those decisions, there are many different metrics they look at before making that decision. And one of them is risk related to doing something that someone else didn't do.

Second is a cost, obviously when someone would ask Qualcomm, Mobileye start developing their own platform based on another line that would be a very expensive effort and I'm sure they will not just carry the cost until they would just throw that back into the OEM.

And I think that from a cost perspective, I don't think there's a lot of motivation for anyone to do that, but it's never the decision of the platform there, but it's they have ways to, I would say, give the motivation to the OEM not to add too much efforts when it's not needed.

Great. Thank you.

Kevin Garrigan, West Park Capital.

I think you unmuted the wrong, Kevin.

I think I did now. Please go ahead.

Yeah. Hey Omer and Eldar, thanks for taking my question and let me echo my congrats on the progress. Can you talk a little bit more about your contract manufacturing strategy? Just remind us how many manufacturing partners you have, what have you learned working with them? And any thoughts on eventually building kind of your own manufacturing facility or if your contract manufacturers are kind of the best strategy?

It's always depends on the return on investment that you're making compared to the market volume, eventually right now, we are trying to be elastic in terms of supporting different OEMs in different locations. We don't want to be committed to one geography once you, while we are trying to scale. Our ability to work with contract manufacturers is I think it's one of our strengths today because we have access to different facilities that we don't need to make investment in ramping them up.

Another part, which I think is maybe up in all. I think it's important, when you go through an audit with an OEM this primarily for the top 10 OEMs that set quality standards are the highest when you're audited for a program, they cannot audit you, they cannot nominate you based on the facility does not exist.

When you are certified as a Tier one to an OEM and nominated for Series Productions. The teams need to be in the facility and audited and make sure that the activity in the operations is meeting the standards, you cannot be nominated based on a future to be facilities that one day will meet their requirement.

We did not have any alternative other than work with a contract manufacturer because for example, when we were audited by the time, they wanted to be in the facility that eventually reserved. And I want to make sure that we provided them five options of different contract manufacturers, they had preference to one specific because of their previous engagements audited and actively managed to go through. Now that's specific contract manufacturer has different facilities in different areas around the world, and that gives us that flexibility.

I believe that once the program volumes were reached and several millions a year in production, it would start to make sense for Innoviz to make those investments. But I think at this point of time, it makes more sense. And I think it's part of our advantages.

Got it. Yeah, that makes sense. And I appreciate the color on that. My second question, just with BMW getting ready for deliveries, can you just talk about how unit projections changed from when you originally win the contracts when you're about a quarter out or so from kind of start of production, I mean, I'm assuming you kind of get more color on the units, but do you kind of go from your early projections sort of OEM giving you weekly or quarterly estimates? Are they kind of stick with kind of the yearly projections?

So I mean, eventually we will BMW is launching for the first time the Level 3 program as expected, that would be a soft launch kind of filling the water, there are plans to launch additional vehicles. As I mentioned, one of them is also in China, but I cannot say right now the volumes, I mean, I believe that will over the course of the following quarters, we'll see the ramp and probably it will get a better understanding of how fast it will get to the maximum capacity.

Okay. Perfect. Thanks guys.

Thank you. And there are no further questions. So thank you all for your participation, and this concludes our call. You may now disconnect.