Good morning. This is Rob Moffatt, Vice President of Corporate Development and Investor Relations at Innoviz. And I want to welcome you to our earnings conference call. Joining us today are Omer Keilaf, Chief Executive Officer; and Eldar Cegla, Chief Financial Officer. Following their opening remarks, we will open the call to your questions. I would like to remind everyone that this call is being recorded and will be available on the Investor Relations section of our website at ir.innoviz.tech. Before we begin, I would like to remind you that our discussion today will include forward-looking statements that are subject to risks and uncertainties relating to future events and the future financial performance of Innoviz. Actual results could differ materially from those anticipated in the forward-looking statements. Forward-looking statements made today speak only to our expectations as of today and we undertake no obligation to publicly update or revise them. For 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 20-F filed with the SEC on March 09, 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. 2Q was a really, really big quarter for Innoviz. While the quarter itself was only 90 days long, you could say it was actually five years in the making. This quarter we delivered on what was easily the biggest milestone in our company’s history. We shipped our first production units ever. They are on their way to our customer and close partner BMW and will be installed in the grille of the beautiful 7 Series, which will include our InnovizOne LiDAR sensor and AI-enabled perception software package. I know many of you saw this already, but BMW Blog did a wonderful article and video summarizing BMW Group’s plans for the Level 3 7-Series. If you haven’t watched it yet, I encourage you to go to BMWblog.com or search for it on YouTube In the video, you can see the 7 Series driving seamlessly through a variety of scenarios and hear more about BMW’s plans and timeline for deploying the technology. We have been saying for a while now that the platform was expected to SOP in the back half of 2023, so to get the first production units out in the earlier part of the third quarter feels like a nice win. While there is always going to be some level of uncertainty in the LiDAR industry, we are building a track record of credibility that includes delivering on our goals. With the 7 Series SOP now underway, we are turning our attention to additional models and markets. While the 7 Series was planned to be our initial flagship launch for the InnovizOne, we have said in the past that our technology was certified on several models and variants within the BMW Group, and we are pursuing…

Thank you, Omer, and good morning, everyone. Starting with cash, we ended Q2 2023 with approximately $130 million in cash, bank deposits, marketable securities, and short-term restricted cash on the balance sheet. With our cost structure being largely mature, our operating cash outlays remained mostly stable during the quarter, with cash operating expense roughly flat quarter-over-quarter, and in-line with our 2023 budget. Moving to the income statement, revenues in Q2 2023 came in at $1.5 million compared to Q1 2023 revenues of $1 million, delivering a 45% quarter-over-quarter increase. On a year-over-year basis, it compared to Q2 2022 revenues of $1.8 million and was impacted by our 2023 pivot towards SOP with BMW, which weighed on the first half of the year as we transitioned from selling LiDAR sample units to selling just the components to Magna, who is theTier 1 for the BMW program. That step-down was most evident in Q1 2023, and since then our quarter-over-quarter revenue cadence has accelerated nicely with sequential revenue growth of 45% in the second quarter, supported by a 47% quarter-over-quarter increase in total units shipped. As we think about the revenue cadence for the year, we expect revenues in the third quarter to approximately double versus the second quarter, driven by a combination of high NRE service revenues coupled with additional unit volume growth. In fact, we have already secured orders for the third quarter surpassing the revenues in Q2 and we are only in the five weeks into the quarter. And looking forward to the fourth quarter, we expect an even more meaningful step-up in sequential revenues, with tailwinds from improving production volumes, revenue-based NRE’s and increased samples shipments to new programs. Moving further down the income statement. On the cost side, operating expenses for Q2 2023 were $30.4 million, an…

Thanks Eldar. I wanted to wrap up with some more good news, which is our guidance. As Eldar noted, we delivered 45% quarter-over-quarter growth in the second quarter, and we have line of sight to double our revenues sequentially in the third quarter and deliver even stronger results in the fourth. And with that kind of a trajectory in mind, we are taking our revenue forecast higher, raising it from $12 million $15 million to $15 million to $20 million. This is driven by both volumes and NRE’s. Our unit volumes are accelerating from the first quarter trough fueled by two drivers, our BMW and shuttle SOP launches, and shipments to our new secured programs, including the new light commercial vehicle program. Additionally, as a result of increased activity in our RFQ program and program expansions, and increased confidence levels in our likelihood to convert some of these programs based on the progress that we have made year-to-date, we are also raising the mid-point of our New NRE Bookings guidance range as well, increasing it from $20 million to $40 million to $20 million to $70 million, this year. The wider range represents the wide variety of outcomes that is out there and the sheer scope of some of the NRE awards. If we add the NRE quotes that we are asking for on the RFQ’s and other program extensions from existing customers where they have indicated that decisions should come this year, we can get to the number that is over double the high end of the range. But these awards are very lumpy, with a typical range of $20 million to $40 million each, with some as large as $60 million. Given the fact that we can’t control the timing of the decisions by the customers, we feel…

[Operator Instructions] Our first question today comes from the line of Mark Delaney of Goldman Sachs. Please go ahead.

Yes, thank you very much for taking the questions. Congratulations on the start of production with BMW for the 7 Series, which I realize is a big milestone for the company. Now that you're at SOP, I'm hoping to better understand how quickly that may ramp up in terms of your own revenue opportunity and what the key variables are as you understand it that may determine the cadence and size of that ramp.

So, BMW is going to launch with the 7 Series. We are expecting additional models to follow. In terms of the volume of the 7 Series, I cannot share more information. We expect a smooth launch at the beginning and ramping up following that.

Okay, I appreciate that. And then a second question was something you brought up last quarter. You mentioned you were in discussions with NVIDIA to be integrated into series production programs leveraging the Hyperion platform. Is there any update you can share on progress there?

We actually started the OEM in which this is related to. We started the audit to become their tier one, still a working process, but going well.

Okay, that's helpful. Lastly for me, today you spoke about the MRM system and also developing higher value software in conjunction with BMW. Are those going to be exclusive product categories for BMW given the co-development or can NVIDIA develop those sorts of products for other OEMs? And then if so, how much of the engineering work can you potentially leverage that you're currently working on with BMW or do you need to do that from scratch? Thanks.

So, actually the MRM discussion was first introduced from BMW and we are approaching other OEMs with this kind of solution to try to see if this is something that can fit in their architecture. I would say that we are getting good feedback from customers, which this comes as a very interesting proposition, having that the MRM based on the latter has better potential in terms of safety. There are synergies. Some of this development is tailored to BMW. There is a lot of integration related to the vehicle itself when it comes to the control. I expect that there should be some synergy, but this is really an early stage to say that.

Mark, any further comments?

No, thank you very much.

Thank you. Our next question today comes from the line of Andres Sheppard of Cantor. Please go ahead.

Hey, good morning guys or good afternoon. Can you hear me okay?

Yes.

Wonderful. Congratulations on the quarter and thanks for taking our question. I was wondering if perhaps you can give us a little more color on the NRE bookings. Obviously the increase in the targets there is excellent. Just wondering if you maybe have any more visibility in terms of whether this will be recognized into either revenue or contract expense. Just a little more color there. And when do you see this taking place? Is this a Q4 event or perhaps gradual through Q3 and Q4? Thank you.

So, the booking of NRE, we are trying always through our contract to push them into the revenue line. Some of the NRE will definitely be already recognized in Q3 and I think more so even in Q4. And there will be a significant impact also for next year.

Got it. Thanks, Eldar. And then maybe just on liquidity with, roughly $130 million now in total liquidity. Just remind us, what is the run rate with that liquidity in hand? That's still sufficient obviously through SOP later this year. But just remind us kind of what the run rate there is. Thank you.

Yes, so our run rate as you probably noted from this quarter and looking back on the previous quarter, we are not spending more money. It's actually going down, but it's roughly stable and will still stay stable. On the other side, we do expect these revenues coming in, in addition to the NREs that are supporting our cash flow. So, we think this will support us and maybe we'll see over time a better and better cash flow.

Maybe I can add to this. So, we are expecting some NRE already this year and we're talking about bookings of NREs that the high end of it and our target is $70 million. In front of us, there is a bigger opportunity, which is very meaningful in our ability to fund our activities. I would add that in part of this, we are in discussion with our strategic customers in regards to pulling in prepayments and NREs in order to strengthen our balance sheet.

Okay, that's super helpful. And maybe just one last one, if I may. Any color on kind of what gross margins might look like for the second half of the year? Obviously, with the significant ramp up in revenue, is it safe to assume a big improvement around gross margins? Thank you.

Yes. So, as we are able to recognize the NREs, this will be a great contribution to our gross margins. So, I am optimistic that the trend that you're seeing now will be even stronger towards the second half of the year.

Got it. Thank you so much, guys. And congratulations on the quarter again. I'll pass it on.

Thank you.

Thank you. [Operator Instructions] Our next question today comes from the line of Samik Chatterjee of JPMorgan. Please go ahead. Samik, are you able to unmute yourself? Samik, your line is unmuted. Please go ahead. Our next question today comes from the line of Kevin Cassidy of Rosenblatt Securities. Please go ahead.

Yes. Thanks for taking my question and congratulations on the SOP starting. Very interesting that the InnovizCore. Is that, is that custom ASIC inside there also, you said GPU and a CPU or are those merchant supply that you've designed for this system?

So, the ASIC I was referring to, area on the code, is an ASIC that goes into the LiDAR into the InnovizOne or InnovizTwo. The chip that we're using in our InnovizCore is a chip that comes from a supplier which has very strong processing power about 35 tops and multiple processing accelerators. We haven't yet disclosed who the powder is.

Okay, great thanks. And just that as your, your R&B spending, what's the split and what do you expect the split to be in the future hardware versus software?

So, roughly speaking, I would say 60% of the hardware 40% on the software, at this point obviously the hardware team it's not only headcount, we are spending also on the hardware itself and the testing, the different testing and labs and so on. So, the software is a little bit less cost-consuming.

I would want to add to that maybe because I think that it's very interesting to see companies like is usually when you are developing an enabling technology such as the LiDAR, then you obviously have a certain weight on the hardware. Of course, when those sensors and the technology materialize and becomes more mature, the software becomes a bigger part of the company and the services upon it will add a drive the company forward. So, at this point we are building the enabling technologies which are the hardware around it, but I actually foresee that in the long run the software will become a bigger part.

Okay, great. Thanks and yes, if I can get in one more question, just the point of clarification for last quarter you mentioned the L1 program that was in late stage discussion maybe just to be clear is this a was this the announced BMW program or was that the new light vehicle program?

No, it was actually the light commercial vehicle was announced last quarter. We were actually referring to the BMW program that we were kicking off this this time. The purpose of this joint development is to get the architecture more mature, total expected launch of the program, series production, towards the end of the year.

Okay, great. Thanks.

Thank you. Our final question today comes from the line of Kevin Garrigan of WestPark Capital. Please go ahead.

Yes, hey, good morning, Omar and Eldar, let me echo my congrats on the announcements today. As you guys kind of move up the software stack, I knew you guys are the first LiDAR company for MRM, but are you finding the conversation you're having with OEMs in this kind of area more difficult than for a LiDAR production agreement and that there's more increased competition in this kind of area.

So again, the MRM Solution was first introduced from the side of BMW and since then we've been working with them on the definition of the product. This has been gone for the last more than six months. Other customers we are a pro we out would say introducing this solution to them. This does not yet come as a new requirement from other OEMs. This is different than the perception software which was always a part of the discussion comes up in many RFQs and I believe that this part of the education that we're doing is allowing the customers to understand the potential of using the MLM and that might lead to additional business on it.

Okay, got it that makes sense. And then just I know there was an announcement recently about BMW doing R&D in China for level 3. Can you guys give us a sense of what you guys are doing in China beyond the Asian based OEM to capture any other production words over there?

Sure, so generally when you're validating your perception software you need to do it based on the data that comes from the targets I would say area and which you want to operate your system. Since as you probably know there are limitations in the ability to extract data from China. So we have a helpful compliance room where we are operating engineers that are working on data in China that are people that are from China. In order for us to support a possible launch in China by BMW and also other customers that we have that also plan to launch in China.

Okay, got it. Thanks, guys.

Thank you. We have a follow-up question from the line of Samik Chatterjee from JPMorgan. Please go ahead. Samit are you able to unmute?

Okay, guys, can you hear me now?

Yes.

Great. So I guess I jumped on a bit late but if I can ask you about the extension of the program you have in regards to BMW on InnovizOne, I'm just wondering why is the company taking the action to extend the association or extend models on InnovizOne, is it really more of a time to market decision rather than sort of wait to integrate InnovizTwo or how you're thinking about why sort of work with the older generation product and not wait for the new one, is it a more of a time to market constraint? I have a follow-up.

So maybe just to make sure Samik the announcement we've made today is related to InnovizTwo. It's the new the new platform is going to focus on the integration and development of features around InnovizTwo not InnovizOne.

Right, the additional model and variant that you announced for the first generation platform, my question was more around that as to why you extend the model vehicles with the first generation and not wait for the second one what the driver of that decision from the company.

Okay, so this is related still to the first platform. This is a vehicle that we've been testing for some time. I mean this the effort of integrating a ladder to so it can launch with level three takes a very long time and testing the platform is adapted and tested and validated with InnovizOne and therefore the launch was expected to follow the 7 Series would still use InnovizOne.

Okay, okay, and then just in terms of the relationship that we extending with BMW to now do more parts of the software stack and the compute sort of box as well it sounds like a great opportunity but also if you sort of extend that to other OEMs as well it does seem like you need more resources on more need people to sort of support those additional OEMs with the customization that you need to drive. How are you thinking about then sort of the overall sort of headcount, how you're thinking about the OpEx here just given that that entails a lot more customization then probably if you only were stripping the ladder module right.

Yes, so in regards to the Innoviz Compute model that's actually an activity that we are working on for some time. We already have, I would say, an early version of it. In terms of the R&D effort, it's not a very extensive one. Most of the effort is [Indiscernible] into the perception software, which we already are doing. We are offering the compute model to other customer. As other customers, this is in regards to the computer vision not to the MLM so far. I mean most of the RFQs that we have do include perception software some of them require and compute models so that's very I would say beneficial also for other programs. In regards to the MLM this is this effort is I mean obviously supported by NREs that we are collecting from the customer in order to support it and we say it is an opportunity to strengthen our R&D capabilities and hopefully to other customers.

Okay, I'll leave it there. Thank you. Thanks and sorry about earlier. Bye.

Thank you. We have no further questions, please proceed.

Okay. Thank you everyone. I appreciate the time that you spent with us. We have -- we are working very very out to make this progress with customers such as BMW and Volkswagen and we are expecting to give you say more from our the fruits of our work. Thank you very much. Bye, bye.