Q2 2022 Innoviz Technologies Ltd Earnings Call
By integrating our perceptions of the carrier's automated driving spec.
As the program progresses, we expect more brands within the <unk> group incorporated.
VW is the second largest carmaker with more than 10 million cars sold annually with multiple brands, including Audi Porsche Volkswagen SCADA and many others.
We are full steam ahead with first samples already integrated into cardiac status.
We expect revenues from the program already in the coming years as the development and testing processes of our customers require hundreds to thousands of units in the next three to four years, which are priced several times greater than the official start of production.
Following S&P, we expect an exponential ramp up although the lifetime of the project.
Which is eight to 10 years from tens of thousands to over a million litres annually to the <unk> group at competitive price points there.
The pulse volume growth nomination is reflected in <unk> order book is an increase of $4 billion, which now aggregated to the total of $6 6 billion.
<unk> received multiple RF skus from all of our markets first if I can set of requirements, where the most demanding and we have seen.
And eventually pushed us to design the best in class lineup to date our.
<unk> to win the <unk> program was due to four main contributors that first.
The exceptional of price and performance that our new products <unk> III is all free for achieving high speed Highway autonomous side.
The second.
Our reach automotive experience working closely with leading companies such as BMW and Magnum.
The third the maturity level that these two products is already act.
And the last is the tier one value proposition and our capabilities, but we also.
We are putting new phosphate and win as a tier one this poor growing assets.
The reason, we are confident of our ability to win many more programs in the market.
While we are working closely with multiple Oems to be condo lighter supplier, we value the importance of strengthening the collaboration with the leading platform vendors.
We are happy to share unique events that individual hosts in the coming months.
<unk> is hosting our partners customers and analyst event on the 19th of September . The event will include keynote speakers and a tour to our facilities.
Two automated production and test time.
We are excited that two distinguished chemicals have already confirmed their attendance.
Alex who cottage VP of automotive product management that Qualcomm, Qualcomm, which provides the snapdragon ride platform, which was already selected by several leading Oems and tier ones.
And October each of our VP of autonomous driving Central's integration platform in cooperation with BMW group.
Our second event on October 20 <unk>.
<unk> and <unk> were selected to host <unk> perception workshop during the European conference on computer vision.
We then Nvidia workshop will discuss the mix challenges and advantages associated with the use of <unk> data for autonomous driving.
Volkswagen is our second nomination for series production of passenger vehicles.
First thing BMW.
With this win <unk> is now servicing two of the world's leading car makers, which together represents 15% of the entire automotive market.
From the inception of immuno. Please our strategy has been to focus on prominent industry, leading car makers, which is well known that the German car makers set the standouts in the industry.
Therefore, we have provided these customers our highest attention.
BMW and Volkswagen are both innovators will strive to bring leading edge technologies to the automotive market.
Our proven track record of success in Germany.
Given us the maturity and global recognition of other car companies based in Europe , The U S, Japan, and China, allowing us to offer our solution at tier one.
We announced in May.
We announced in May appointing Scott, Greg and bridges Truecar as country manager of the U S and Japan is the logical next step to capitalize.
On our growth opportunities following our nomination with Volkswagen, we already see the fruits of new business generation experience as we aim to break more new brown.
We are in the process of conducting qualification processes to become a tier one with more carmakers and look forward to sharing updates with you as those proceed.
We believe these future partnerships with further strengthening and solidify our position as a leader leading supplier for autonomous vehicles.
I'd like now to explain a little bit more about our tier one strategy.
This slide shows the benefits of becoming a tier one supplier from volume perspective.
Demand for lower cost solutions in the industry increases the pricing pressure.
Requires higher vertical integration.
As you can see from the chart on device as a direct supply of tier one who can provide customers with a lower averaging price, while increasing our revenues and keeping our margins. Clearly this is a win win and why we remain focused on obtaining this business model.
Many have asked about our need to spend capex.
On our production capacity as a tier one.
And these videos you can see the production line with design for the <unk>.
Sure.
Okay.
As you can see there are several machines that were developed to automate the production and testing of the first product.
No part of the assembly or testing is manually.
The same is true for <unk>.
We are developing full automation of the enodis to production and testing line. Whilst those machines are designed built and tested with plan to ship them to cell therapy contract manufacturers, we bought most of great facilities to manage the operation of the production worldwide.
The cost of the machine is fully funded by our customers.
I am confident our tier one capabilities, including our ability to manage mass production manufacture ability automotive grade quality.
<unk> validation and computer vision validation will sell as a differentiating factor as other Oems select there are direct litres per plan.
<unk> has recently moved to our new offices, which includes our production lines testing facilities and the 300 meter underground laser testing correct the longest in Israel.
The new production lines with <unk> towards <unk> will help to enhance the process and safe development costs eliminate any risk of traveling restrictions that Mike slowed the ramp up.
And reduce the production cost until volume ramps up we are in the process of moving the <unk> test times between the offices and expect these lines to ramp up the production line Safina with one continues to run on them as they are located off site.
In parallel we are working to establish to enter this two production line in the new offices to support volume ramp up beginning of early 2023.
We remain focused on establishing our leading position in the automotive market with key Oems in the near term.
Spending in leveraging the maturity of the <unk>, one product to benefit nonautomotive segments in the industry and expand our market share to be a key driver for revenue, we see important opportunities in the nonautomotive markets, where we will leverage the majority of our products, we expect the average selling price.
It'll be higher in the nonautomotive markets where volumes per program.
Highlighting further our strong momentum with nonautomotive partnerships, we recently announced a cooperation agreement with Joe wound industrial who will serve as a distributor for a wide range of innovative applications across industrial industries from industrial machinery to have equipment in the Korea market and deal with.
Also announced that interface riders were selected by Japan post to construct digital maps on their parcel delivery cost savings away for next generation Smart cities services, such as autonomous driving an unmanned delivery.
Turning to our sales funnel and targets.
We have already met or exceeded our 2022 targets, we continue to see momentum in bringing new potential customer into our sales funnel. Currently we are managing 12, automotive RFID and art skus at different stages, where almost all of them are for passenger vehicle programs, we expect to stage two to three programs BMT.
Excited in the next six months.
Our overall automotive market share was increased by 12% to a total of 15 we.
We are excited about the progress we've made.
Now that we are just at the beginning.
We expect to drive material revenue during 2023 from a previously announced series in W. And the Air Force Shrunk charter program as well as from non automotive end markets.
Overall I remain confident in our cash position, we've always been conservative with regards to how we allocate capital will continue to do so going forward as we win additional OEM contracts and establish ourselves as the leading supplier in the automotive market, we will manage our expenses accordingly, and evaluate all options available to us to ensure we are optimally.
<unk> to continue executing our strategy.
We're continuing to invest in technology and perception software and are in the process of ramping up the <unk> central which will include performance improvements over the <unk>, but more importantly is designed for volume production. We are currently focused on maturing and automating the process to support the volume.
Targeted at the beginning of 'twenty three.
In parallel our innovation team is working on the final design because of the <unk> 360, with most parts already in production with planned for Starz integration during Q3 with the expectation of showing first samples of <unk> 360 by the end of the year as planned.
I'd like to show.
A short video on the end of this year.
As always we are happy to share with our investors. The progress we make them feel proud of what we've managed to accomplish thoughtful as you will see and visit <unk> has outstanding results that leave our customers very impressed and excited.
I truly believe is the best slides are out there today and say this has a very attractive price point and performance I feel very confident in its ability to be widely stores by many kilometres making those decisions in the near future.
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You may begin.
Sure.
Good evening.
Okay.
Yes.
Okay.
[music].
Okay.
[music].
Yes.
Okay.
With that.
With that I'll turn it over to adults will go over the financials.
Thank you Omer and good morning, everyone.
I would like to start by briefly explaining how our full sparganum related 4 billion dollar forward looking order book was calculated.
In terms of volume production. The full funding group holds about 10% of the market share, which translates to over 10 million vehicles sold automotive there.
The program plan is based on three years of development and validation cohort by eight to 10 years of safe.
With the expectation to see growing growing take rates of 1% to 14% over the course of the program starting with the more premium brands in Colorado and trickle down over the years to the less expensive car brands and models.
We expect to supply our lidar sensors for at least 8 million cars over the lifetime of the program multiplied by the ASB aggregates to the $4 billion order book, we have announced.
We maintain a high.
And liquidity level of approximately $246 million in cash short term deposits restricted cash and marketable securities as of June 32022.
Using our resources responsibly staying within our expense budgets for the second quarter of 2022, and maintaining a robust cash position, which gives us both the flexibility to execute our 2022 its strategy and provide us with a run rate to invest in our new and innovative.
<unk> <unk> technology.
Revenues for Q2, 2022 were one $8 million compared to Q2 2021 revenues of $1 million.
Our revenues in Q2 this year were interviewed one related.
Are also targeting to send the first samples of innovation. Two later this year.
Operating expenses for the first quarter of 2022 versus 28 $8 million a decrease from 77.
$7 million.
In the second quarter of 2021 operating expenses in Q2 of 2022 included $4 $4 million of share based compensation compared to 49 9 million shares.
Share based compensation in Q2 2021, the decrease in operating expenses in Q2 2022 compared to Q2 2021 was primarily due to a decrease in share based compensation, partially offset by an increase in head count during the second quarter of 2020.
You too.
Research and development expenses for Q2, 2022 were 21 $9 million a decrease from $32 $1 million in Q2, 2021 research and development expenses in Q2, 2022 included $2 $7 million attributable to <unk>.
Based compensation compared to $17 $6 million.
The million dollars attributable to share based compensation in Q1 22 in Q1.
To conclude we maintain a strong position in the marketplace as evidenced by our recent design win with Volkswagen Group and we believe that we are well positioned to gain additional market share during this year and the years to come and with that I will turn the call back to Omar for closing remarks.
Yes.
Thanks to them.
<unk> four by how far we've come in the recent months and look forward to updating you on our progress on future earnings calls.
Before I open up for questions Im happy to share that we will be back to New York during the week of September .
Taking part in bulk <unk> Global Technology conference as well as the Evercore ISI annual Technology Conference. We are happy to meet with you there.
Thank you for joining us today and with that I will turn the call over to the operator to take us into the Q&A.
Thank you in order to ask a question. Please raise your hand, using your mobile or desktop application and wait for your name to be announced once again. Please raise your hand, using your mobile or desktop application and wait for your name to be announced our first question today comes from the line of Mark Delaney.
From Goldman Sachs. Please go ahead.
Yes.
Thanks, very much for taking the questions.
And.
Good afternoon.
First question is better understanding.
Gary add and I do think there has been media reports around.
Some software challenges that carry out and I think some of the brands. According to the media we're rethinking what they wanted to use from carry adverse maybe doing some stuff themselves.
So I'm, hoping to better understand to what extent you've already factored some of those dynamics into the order book.
Thank the order book calculation of $4 billion with pretty conservative if I understood that correctly, and if anything perhaps or chances to expand the number of models that you are on but maybe you could speak a little bit more in terms of how confident the different brands are perhaps under the different brands are in using this product and what opportunities there are to perhaps even built on.
The amount of the order book so far there.
Sure.
Thank you for asking the question.
Interviews.
Is confirmed.
<unk> contracted to become.
To be a supplier direct supplier tier one.
All of the brands.
Our agreement is with all of the brands within Fort Logan and the program is managed by Kellyanne tie. It is responsible for driving stack that eventually will be integrated into the different brands, but our.
CVP and integration discussions with each brand by itself the already stable of brands that discussions are ongoing eventually our software is also integrated into this platform caveat platform.
When we host our perception software as part of the overall software that will.
Drive the car.
No changes.
Related to the program.
Going very smoothly I would say and the dynamics are very very positive and to your last comment.
I am actually very optimistic that additional brands would be included.
Following the discussions we are having now.
That's very helpful. Thanks for that and then for my second question you mentioned that two to three programs can be decided in the next six to 12 months.
To vote of market do you have any indications from those potential customers about how likely and if it is maybe to win or any more detail you can share on.
On your expectations for potentially winning some additional programs out of those those two to three that you mentioned.
I believe the penalty is positioned very strongly on those programs.
Obviously eventually.
Susan.
We are pending doom.
But I.
I would say.
The level of discussions and the nature of the details that I will now discuss I would say that I am all double positive.
But I would rather wait with the news.
When they conclude.
Conclude.
Okay.
And maybe I would just say those are related to passenger vehicle programs and as such.
Very interesting for us.
Good.
Once we have.
We have the program with Volkswagen.
Can get a feed that volume and having the volume.
In our economic of scale allows <unk> to be very competitive even with programs.
<unk>.
Not at the size of enforcement and Thats, a very key.
Element in our ability to be very competitive on all programs right now.
Because we can leverage on guaranteed volume, we have with the sales and program and basically this is why I would say traditionally.
Selections made by car companies like fourth bucket is so critical and why.
Other car makers tend to follow the decisions made by.
The importance of organ group.
And Mark are you there.
Okay. We'll proceed to our next question. Our next question comes from the line of Andreas Shepard from Cantor Fitzgerald. Please go ahead.
<unk> good afternoon, congrats on the quarter and thank you for taking my question.
I wanted to I thought that slide about the Volkswagen and the order book.
Assumptions was very very helpful. I, just want to make sure I understood it correctly.
So with the with this new agreement the expectation is for revenues to start ramping up.
In between three and four years I think initially but once that takes place. The expectation is that the sensors will be used in over 10 million vehicles per year, maybe you can give a little more detail on that and just kind of sure I understood.
We definitely targets at that number but no.
Sure.
We're talking about the penetration rate from 1% to 14% of the total volume.
Of the $10 million.
And which is related to the kickoff is related to some of our brands. Several models that are already planning to launch with the leather and heavily yield that will deal with leases of four.
Cost every year and there will be a ramp up so the total eventually of the entire program is calculated based on some of roughly 6 million cards for the duration of 8%.
10 years.
We believe that eventually more brands will eventually.
The lineup and the numbers good growth.
Got it that's very helpful. Omar Thanks for that color and maybe in regards to then the switching.
Switching gears for a minute in the BMW partnership.
You've mentioned.
Today that you expect.
Material revenue starting towards the end of next year.
I'm wondering can you maybe give us a little more granularity as to.
How you see those.
Ramping up maybe not necessarily quantifying it specifically, but just at a high level.
Can you just give us a sense of what that agreement will look like as those revenues begin to ramp up next year.
Okay. So there are two parts to the revenues.
And expected from the <unk> one is related to NRT.
Which was agreed with BMW to be provided.
So peak time and.
And the second part which is related to the to the sales force.
Cars, which will.
Equipped with this later.
Okay got it and maybe one last question if I may.
In regards to the 12.
<unk>.
Customer agreements that you are working off of which sounds like most of them are for passenger vehicle programs. So that's great.
Is the.
Is the hope is the strategy too.
How likely is it to secure those 12 agreements should we be a little bit more conservative perhaps.
Soon.
A handful of them or I mean, how confident are you in in.
Of those 12.
Programs.
Okay.
I believe that in any one of them.
It is.
<unk> going to be already he's on the shortlist.
And shortly means that there is either one competitor or two.
Our competitors other tier ones in the market because carmakers.
Make their decision based on whether the supplier Mr Group some notes.
So you can probably estimate who might be our competitors.
<unk>.
This too is very strong.
Products, all phone performance, but also from pricing and with the staff of the tier one supplier now by a very credible car maker.
Which is the full slugging group gives.
Gives us a very strong position and removes any friction in any discussion that we had so far with any car maker to become industrial bias there.
Okay.
I would say that.
We used to say that our.
Conversion rate is 1% to three because that's what we usually see.
When one or two companies competing on the other skewing the last.
Discussion.
I would probably say that since we have increased our chances.
Due to the recent win when.
Appropriately take a 50% probability from my perspective, but you can be conservative and more.
Mortgage servicing business.
Got it fair enough. Thank you and sorry, maybe one last one for me if I could.
In terms of the.
The.
I guess do you find that now being recognized as a tier one is that.
Maybe talk about that is that giving you.
Additional credibility with these other Oems are you finding that having a tier one.
This has increased the likelihood of securing these deals or have you seen.
A quick.
Improvement in the perception of <unk> product as a result of the tier one status.
Definitely.
Before we will have the ability to talk about our design win with Volkswagen is our supplier.
There were a car makers that its first perceived it is at risk.
But that was completely removed once we were able to talk about the fact that we're able to go through the quality assessments.
Forces to become a direct supplier to.
The group.
All of the brands in the group.
Therefore, we already kicked off.
With some carmakers were already kicked off the process to become a tier one meaning that eventually that carmaker in order for them to add you to their supplier system.
You need to go through a process and make sure that you will meet their group standards all of their quality assessment for production logistics quality software development and since we were able to show that we passed that with a very credible custom.
Customer the motivation.
And therefore, those who are already starting.
<unk> enough now that we are a tier one.
Two the fourth leg of growth and we are on their system as a tier one.
Were handed with scenario Q4 radar.
To compete.
We don't plan to enter our SKU, but it shows that.
Once you are qualified to one to the car company basically it opens a door or you can say connected connected bridge, but.
We knew and the cognex has to offer.
The different technologies, because becoming a tier one is not related to the technology, it's related to the company it means that fewer and reliable.
Supplier.
Yes.
The company can decide to work with and I find it.
A very strong opportunity for us to grow going forward.
Wonderful. Thank you so much and thanks for answering all my questions I'll pass it on thanks again and congrats.
Thanks.
Thank you as a reminder, in order to ask a question. Please raise your hand, using your mobile or desktop application. Our next question today comes from the line of Kevin Cassidy from Rosenblatt Securities. Please go ahead.
Yes, Thanks for taking my question and congratulations on the win.
Yes.
The Capex discussion you mentioned that.
It's customer paid for for the equipment.
Give us a little more details on how that range.
The arrangement works.
Sure.
Yeah sure so.
Our basically our investment in Capex.
That offset to declining meeting certain client needs a certain capacity is paid for the specific line, but he is using so we are designing our own machine build up the <unk>.
Can very easily duplicate these machines and located everywhere in the world where EBIT.
And that cost is covered by our clients. So there is an additional burden.
Yes, maybe I'll add to it.
Sure.
In order to build a lighter.
Basically there are two shifts.
Net.
One is for.
For the optical.
<unk>.
So they would be normally stewart became significantly simpler than it will be lumpy because we only have one laser and 1% typical so the.
The cycle time of the processes have been really softened.
And the footprints of the machine is actually the size of the various stimulus table towards EUR leukemia.
And the capacity of every machine is quite high in the order of hundreds of 200000 Litres a year.
And it's a very unexpected.
Equipment.
Eventually you can imagine and I saw that on the video it's a robotic arm that basically the optics and thats the designed that way.
We can build those machines and as Dow said eventually.
Eventually we can place them difficult locations into one where it's convenient for the different customers.
The footprint is small the operation of the production of these simple because it's automatic.
The ramp up and then we have experienced that already with one meaning that the production nine which is consistent.
Process.
We designed and built and tested this in Germany, and we shifted tool to the U S.
Magna is managing this process.
And they are operating this.
Eventually.
This is one machine and the second one is related to the testing it's a similar as a timber where you place the library side basically the targets that moving in and out and you'll need to calibrate in that item. Once those machines are up and running can duplicate them in place or.
I'm not very expensive and they have quite a nice capacity other than that when it comes to the PCB is an electronic boards of various standout I would say material, we don't need to develop those process still felt very standout and we can use company to produce the electronics and assembly is very simple.
I hope it all color.
Yes, thanks, very much it's great detail.
And maybe just a simple question on the VW or.
Whats the configuration is it going to be just one of your lidar or.
Are there opportunities for let's say lane change lidar or other lidar on the vehicle.
It's a singular or configuration.
And I'm not sure we're having to stand on the second question.
Yes.
Im talking about Lidar for lane changing.
Si side views.
Well done.
So I don't know if you've seen the videos in the field of view always is high enough.
It's one 'twenty over 40 degrees.
Captures the field of view for any cutting scenarios.
This is required by the customer.
Okay. Thank you.
Welcome.
Thank you you have no further questions. Please proceed.
Okay. Thank.
Thank you very much.
And I would say that.
In <unk> there.
And Russell excitement.
We definitely see the vote of confidence from our customer lifeboats plug in is a dream come true, but also we are also seeing so many other opportunities.
We are excited to have as well.
And I hope that we won't be able to bring them to the table as well and I am sure we will.
Thank you very much.
And then talk to you next time.
Okay.