Good morning everyone and welcome to Innoviz First Quarter 2021 Earnings Conference call. Joining us today are Omer Keilaf, Innoviz's Chief Executive Officer, and Eldar Cegla, Innoviz's Chief Financial Officer. Following the former remarks, we will open the call for 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, we would like to remind you that our discussions 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 discussion of some of the 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 April 21, 2021. I will now turn the call over to Omer. Please go ahead..

Thank you, Maya. And good morning, everyone. Welcome to our garage. What you can see here, we decided to let you see us through the fun clad of InnovizOne, we want you to get a feel of how high resolution it is and how high is the quality. What you can see here are a few cars that we have here in order to collect data you can see here a BMW car.

We have here InnovizOne mounted and we also have additional cars. And you can actually see here, the LiDAR is mounted in different heights, because that allows us to collect data to support different applications that we support. So I think it’s like the best way to introduce Innoviz to you through the work the place where things really happen.

And I think we can start there. Thank you. Okay, before we start just to avoid any concern. We are all well to save here at our headquarters in Israel. Our employees are working as usual. Our production lines are fully operating abroad. We hope that this unfortunate situation will end.

On this call, I'll provide you with an overview of our business, some key performance indicators and future guidance and then turn it over to our Chief Financial Officer, Eldar to review our financials for the quarter. As you may have already seen, we issued an exciting press release this morning about a major design win.

I'm pleased to announce that after a comprehensive due diligence process that lasted over two and a half years, which involve multiple rounds of tests and audits to validate our products reliability, maturity, qualification and certification we were selected by a leading tier one automotive supplier as the LiDAR provider for its autonomous shuttle program.

Innoviz will provide its InnovizOne solid state LiDAR units to the company for use on charters across Europe, which are currently expected to be launched towards the end of 2022 and change the face of public transportation.

We believe that our selection is a testament to the quality of our technology and the attractiveness of the economics of partnering with Innoviz. To put it simply, this is an incredibly exciting design win for us. This win validates our reputation amongst global OEMs and we believe it puts us ahead of the pack when compared to other LiDAR companies.

With every new automotive customer who uses our LiDAR will not only generate incremental revenues, but we also benefit from powerful second order effects like the increased validation of our technology and the growing quality of the Innoviz brand name. As we continue to deal with BMW, we hope to provide ongoing updates as the project evolves.

This project is just one of many that we are currently working on with different prospects, partners, tier ones and well established companies across the globe evaluating our LiDAR for use on their platforms and programs.

As a company with a goal to become a leading automotive supplier, we work with high standards of confidentiality that’s commonly expected in this industry. That's why we do not and cannot disclose company names due to their internal policies and the confidential terms in place. We are bound by such rules and practices.

Only some of our partners share their projects and progress with the world and they do so on their own timeline. With this level of conservative approach by ourselves and our customers, we can gain long term relationships and a very long potential order book. We also work on the long tail of applications, and I will share some of them later.

But it's important for us that you understand our strategy. By winning even just a few of our potential, our prospects would allow us to reach and exceed our targets. Of course, we're continuously looking on ways to disrupt. We will continue to provide updates and share names and when we are authorized to do so.

We were pleased to see a few weeks ago that Subaru had shared some of the work with InnovizOne in a YouTube video as part of the autonomous driving framework by the strategic innovation creation program, which is promoted by the Japanese cabinet office. Subaru has included Innoviz LiDAR in its vehicles in demonstrations in Tokyo's coastal areas.

Subaru is yet another automaker that has recognized Innoviz early dominance in the LiDAR market. We also gained good traction in Japan earlier this year when we announced that Macnica, Japan's largest distribution company is starting to sell InnovizOne to customers interested in a wide area of applications.

From a production standpoint, we started the ramp up of the automotive certified high volume production facility in Holly, Michigan where all key equipment has been already deployed and is currently producing units. This is a pivotal moment for Innoviz.

As we increase production volume we expect to increase market access to our products and enhance our exposure to different sectors in the market. We've also worked on improving all automated assembly processes just recently, we achieved 90% yield at our contract manufacturer Jabil in Jena, Germany.

And we are working to improve and replicate this throughout the entire supply chain. This improvement to our yield which increases our total production capacity hasn't been yet reflected in our financial and operation results.

On top of that, our automated and offline system was deployed in Holly and has gone through the site acceptance test successfully.

To satisfy the evolving requirements for our customer and to ensure that we produce the highest quality products we achieve the ISO 27001 certification for cyber security and the VDA 6.3 for supplier management this quarter.

As our customers' needs evolve, we intend to continue earning this certification as part of becoming an automotive certified supplier. As we continue to ramp up on the production side, we haven't stopped the diligence on the design side.

Just a few weeks ago, we showed our updated specs for InnovizTwo, our generation LiDAR sensor following several major technology and design back breakthroughs. A few months ago, we provided updates about two new products on the roadmap. InnovizTwo and Innoviz SLR.

The initial update was focused on introducing two variants, one for low cost and the other for improving performance. Due to the amazing work of our engineers, we are now able to offer the advanced performance of the Innoviz SLR is the low cost of the InnovizTwo.

This consolidation into a single low cost high performance device will have a major effect on our ability to win more business now. Customer sentiment has been overwhelmingly positive and makes us confident that we will be able to continue winning new accounts and expanding our scope of work with existing accounts.

InnovizTwo offers an expected 30 times performance improvement over InnovizOne and approximate 70% bill of material cost reduction.

InnovizTwo will also offer our perception system embeddedly and a unique complimentary service that solves many of the integration difficulties related to cost, bandwidth, perception validation and functional safety and will allow a seamless integration between platforms.

We believe its high performance and low costs will ultimately increase market share. As many of you are aware, there was an awful lot of noise in the LiDAR space with which of the many LiDAR providers boasting about their products were not really revealing the respects of the LiDARs, we have differentiated ourselves by opting for full transparency.

Transparency has always been our modus operandi. And in the same vein, we have decided to share the full specs of InnovizTwo with you. Obviously, sharing this information with you allows our competitors to understand what we offer to our customers.

But we believe that InnovizTwo offering cannot be matched and we urged others in the market to join us in showing their performance and maturity in great transparency and accuracy. In the automotive industry, we see safety as the most important component that defines the quality and brand of each OEM.

Thus we set high non compromising values such as transparency, reliability and accuracy. In a world of autonomous driving, we believe that people eventually will adopt technologies, these technologies only if they are backed by companies with these high level of lines. We've also made progress on the software side.

We began shipping our automotive perception platform Innoviz App interviews up to automotive customers evaluating InnovizOne.

Innoviz App interfaces with our sensor hardware and enables autonomous vehicles to identify and classify objects, proprietary AI algorithms designed by our engineers, analyze the point cloud and can detect and classify objects up to 250 meters away and estimate their velocities with high level of precision.

Along with our progress on Innoviz App, we also shared our work with the Nvidia team to implement InnovizOne LiDAR is part of the Nvidia ecosystem. And we are planning to expand that effort. In parallel to our walk on design, we continue to collect real world data. In Israel, Europe, U.S.

and the East Asia to train and validate the AI that powers our perceptions software. Turning again to the business side. I'd like to begin by reaffirming how we acquire customers and through whom we do so. Innoviz partners with tier 1 automotive suppliers, who in turn, produce and distribute our products to original equipment manufacturers, OEMs.

Innoviz has four of these tier 1 relationships, which we believe is more than any other LiDAR provider in this space. This partnerships give Innoviz excellent visibility and access to OEMs programs that are in different sourcing stages.

One of this relationship wins, which we earned through our first tier 1 partner Magna International was BMW autonomous driving program, which we anticipate will generate up to approximately $2 billion in total revenue by 2030 through adoption of our LiDAR in different cars series such as the 7 series and 5 series.

In addition to working with automotive tier 1 as a component business model, we also make a full package sales directly to customers and distributors such as the design win we just announced today. The process of securing design wins for LiDAR typically has several stages and within the automotive programs may take as long as two years or more.

It starts with evaluating of the fit of the LiDAR key metrics for the customer use case besides performance metrics like size, weight, costs and reliability are key and to our advantage. At the next stage, customers may test LiDAR on their platform sometimes for up to an additional year.

After successfully completing this stage commercial and requirements negotiation may continue for up to another year. Some of these steps may start earlier or happen in parallel in some cases in the automotive industry, which has standard sourcing process the last two stages corresponds to RFI and RFQ stages.

Prior to our production ramp up, we faced a bottleneck in getting customers into a through our pipeline. Many of the units that we had produced were being used primarily for the BMW program and other key high book value projects in final evaluation stages. Today, it's a whole different ballgame.

With expanded capacity at our disposal, we are shipping LiDARs to more companies in a variety of industry sectors, and we can provide more and more customers with samples. Consequently, we expect to see a large influx of customers into initial revelation stages.

There is a market for LiDARs in many key verticals and as you can see InnovizOne has a strong fit in many of them. In the past few months, we've partnered with over 20 companies across multiple industry.

We recently announced some of these partnerships, Macnica for distribution in the Japanese market, [Indiscernible] in security and surveillance, Vueron, calibration for adoption in Vueron’s AV platform, data speed in autonomous driving and sensor grade in smart cities.

After announcing and understanding the scope of our agreement with BMW, we projected that cumulative future sales of hardware as well as perception software through 2030 with total of $2 billion, we refer to this number is a forward looking order book and it's based on our estimates for pricing and order volume.

We have analyzed the customer expected sales of cars that are designed to carry the new platform and compare it to adoption rates of similar new technologies in the automotive industry.

Today, we're increasing our projection for forward looking order book by 20% to $2.4 billion by 2030 in order to account for the major design when we just announced earlier today.

Taking a look at our pipeline, there are currently 32 perspective customers in late stages of technical evaluation RFIs and RFQs of which six are in the late stages of the RFQ and commercial negotiations. We believe that these six prospects alone represents more than $3 billion in future potential order book.

We expect that some of these programs to materialize into contractual relationships by mid 22. In conclusion, there are several positive growth catalysts on the horizon including the validation of InnovizTwo, further development of Innoviz App, yield improvements and of course ramp up of an automotive production line.

We have recently added a steady flow of customer from many industry verticals into our pipeline which is driven by both our technological and economical edge. With our recent win announced this morning, we now project $2.4 billion in forward looking order book, which we expect will continue to grow with prospects convert.

On the heels of a successful capital raise that leaves us well positioned to invest in our business and meet both near and long term production and R&D goals. We are in a very-very good place. So with that, I'm happy to turn the call over to Eldar to discuss our financials for the quarter..

Thank you, Omer. Thank you. And good morning, everyone. In December 2020, we entered into a definitive agreement to merge with the spec, which resulted in Innoviz becoming a public listed company upon closing of the transaction in early April this year.

The transaction included a $230 million fully committed ordinary share pipe which included a strategic investment from our tier 1 partner Magna International.

On April 5, 2021, the business combination successfully closed, providing Innoviz with approximately $371 million gross proceeds comprised of the specs of $141 million of cash held in trust as well as $230 million from the pipe. A $30 million increase from the original subscription on the date of signing of the business combination agreement.

The cash from this transaction will be instrumental in supporting us ramp up to meet near term production targets, invest in a next generation research and development programs as well as sales and marketing initiatives in the longer term. Ultimately, we believe that our strategic cash position will help drive organic growth now and in the future.

Our total revenues for the first quarter of 2021 were $728,000. InnovizOne related sales in the first quarter increased by 48% to $682,000, and represent 94% revenues compared to $459,000 or 55% of revenues in the first quarter of 2020.

Innoviz expects the portion of revenues from sales related to InnovizOne LiDARs to increase as production is increased to meet order volumes. Turning to our operating expenses for the first quarter of 2021, our operating expenses increased by approximately 9% to $19.7 million from $18.1 million in quarter one of last year.

Driven by the continuous investment in R&D and an increase in G&A expenses in connection with becoming a public company, we anticipate that nearly 80% of the OpEx budget will be spent on R&D and expect to increase R&D headcount by approximately 30%.

We also intend to ramp up investment in business development and other marketing activities now that our product is maturing and we are penetrating new markets. To quantify this, we believe that our sales and marketing budget will almost double this year and are looking to grow the team headcount by upwards of 60%.

Separately, we anticipate that we will recognize additional transaction costs relating to business combination incurred during the second quarter of this year. This expense are currently recorded on our balance sheet as of Q1, 2021 and may have some impact on our operational costs.

We also expect to record share based costs in relation to manage measures to be granted as a part of the business combination closing. This is a non-cash impacting costs and will be reflected in our operational costs. On the balance sheet, we had $199 million in cash at March 31, 2021 compared to $50 million at December 31, 2020.

The increase in cash is a result of a portion of the pipe proceeds received in escrow as a part of the business combination closed on April 5, 2021.

As previously mentioned, our use of cash in both the near and long term focuses on making key investments in R&D, sales and marketing, and improving our production use and investing in tools to drive automation. This completes my financial summary and with that, we are ready to open the call for your questions..

Thank you. [Operator Instructions] Our first question today is coming from the line of Michael Pilato. Michael please mute yourself and go ahead..

Hi, can you hear me?.

Yes..

Great. Thanks for taking my question. Glad to hear everyone on the team is safe and doing well and congrats on the first quarter. So just a quick question about the six projects that are in commercial negotiations at the RFP stage.

I know, you can't provide any, obviously company names, but I'm wondering if you could maybe provide details around where these companies lie in terms of the end markets whether it's OEMs and for ADAS applications or shuttle companies, etc.

Just a little detail there?.

So, it's. Can you hear me? Okay. So out of these six, four are carmakers for level three programs. The other two are shuttle programs..

Okay, got it. Thank you very much.

And then maybe just a little detail around sort of the volume numbers in terms of the units you sold this quarter and the average ASP or the weighted ASP, and then how you expect that to sort of progress throughout the rest of the year in into 2022?.

Yes. At this point of time, we don't disclose these numbers. In terms of number of units the ASP is north of 10Ks. It's mainly sample units..

Okay. Understood.

And when you're having these negotiations with ADAS customers and shuttle customers, I guess what is the price point you're quoting them ads for InnovizOne and InnovizTwo, I know it depends on volumes, but roughly, is it that the $1,000 point for the InnovizOne and then the InnovizTwo 500 or sub 500?.

Yes. So those are the overall average ASP through the entire program kind of lifetime. So InnovizTwo targeting sub $500 to support several programs with very-very meaningful volumes..

Got it. Thank you very much, and congrats on the first quarter..

Thank you very much..

Our next question will be coming from the line of Mark Delaney from Goldman. Please unmute yourself and go ahead. Mark, are you able to hear us? Okay, Mark will be back with you in just a few moments. We will take another question now from the line of Kevin Cassidy. Kevin, please go ahead and unmute yourself and go ahead..

Okay, can you hear me? Okay, great. I just understand the transition from InnovizOne to InnovizTwo.

When does that happen? What does that mean for your gross margins?.

Sure, happy to answer this question. Actually, maybe we can upgrade upload the certain slide about the transition to InnovizOne to InnovizTwo. So since the company first founded, we've done incremental improvements of the technology.

Every year we were able to improve the performance between a factor of 20 to 40 times coming from different contribution of different parts of the technology as you might be able to see now on the screen. So you can see in 2016, going into 2017 and 18, every year, we're able to improve the performance by a factor between 20 and 40.

Maybe you can click it to play. And also being able to reduce the price quite significantly, as every year we are also pushing the boundaries on that.

So we were able to make that through the last five years and now moving from InnovizOne to InnovizTwo providing another very substantial improvement in performance in a factor of 30, on top of InnovizOne and also a very substantial cost reduction which is roughly 70% in the boom.

We always target a 50% gross margin when it comes to our business model working in a component model, which means that with the tier 1 that we work with and eventually do the assembly in their sites we sell the components with a gross margin of 50%. Put aside the perception software which we bundle or we add on top of it at around $50 per license.

Did I answer your question? Just making sure..

Yes, absolutely. Great answer. Thank you. I was leaving towards the next question is just how long can you keep up this type of pace? Is it all just a Moore's law, but it's $50 to target..

I think Moore's law doesn't talk about 20 times improvement in a year. I think it talks about maybe two times in every year and a half. We drastically kind of running in a faster speed here. And the reason behind it is because the Moore's law is pretty much accurate.

But it's always, mostly focusing on when you’re making an improvement to a specific technology. One of the advantages in the Innoviz that we are actually developing multiple components that help in building our device. So by providing incremental improvements of a factor of two or even sometimes five, when we really do a very good job.

Those are additive improvements that eventually you can multiply them. So we're very multidisciplinary team. We're not just doing a very good sensor or very good scanner or very good optical design.

We work in on all fronts and we're also going into additional layers of the design because we try to find additional ways to improve, always look at that kind of 10x improvement. I always believe that a company should have a linear plan, but should always keep an exponential plan, meaning that you need to leave some space for variance.

And we always keep some investment into our CTO office to work on technology that can actually leapfrog in some cases, and those contribute every year.

I think that having the fact that we have such talented engineers help us to together and I already know kind of how InnovizThree will look like and we know exactly where are the knobs that we need to continue to push. Eventually, LiDARs need to be not sub $500, they need to be sub $100.

And we always try to find the best ROI on where we should put our investment or focus in research and I would say vertical integration and improvement to performance. So those are things that we keep always working on.

And we believe that InnovizTwo would give us an excellent way to penetrate the market until 2030 from what we see in the market on requirements for performance and also price point. It's interesting to see that we actually moved to an offensive kind of approach. We actually educate customers about the requirements they should provide to the LiDAR.

InnovizTwo is providing performance metrics that unmatchable and we try to educate customers to understand better about the use cases, which InnovizTwo solves in the application. And I believe that it will give us a lot of opportunities to the market and we'll continue to push on it..

Great. Thank you..

Our next question is coming from the line of Mark Delaney from Goldman. Let's try it again. Please go ahead. Okay, unfortunately, we cannot hear Mark. Please stand by for further questions. There are no further questions. Please proceed..

Okay. One second. So thank you all for joining us today's call. I hope that what we shared with you helped you understand how Innoviz is positioned to grow and become the market leader.

We have been and will continue to be focused on several big opportunities in the market, but now we're also positioned to grow our customer base as a result of the growing availability of our production line. I especially want to thank our employees, partners and investors for their continued support.

As you've heard today, there are many things to be excited about and we can't wait to update you about this in the quarters to come. Thank you very much..