Good morning. 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 are Omer Keilaf, Chief Executive Officer, and Eldar Cegla, Chief Financial Officer. [Operator Instructions]. 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 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. Before we begin our business commentary, I wanted to spend a moment on the situation in Israel. The safety and security of our employees is of the utmost importance, and I can report that everyone at Innoviz is safe. With a small portion of the local workforce serving in the reserves, the rest of our team has stepped up to cover what is needed, and I want to thank them for their incredible fortitude at this challenging time. Innoviz was able to remain open with no meaningful operational impact. As a reminder, we are located in the center of the country, a good distance away from the conflict zone. All of our automotive customers are located outside of Israel, and our high-volume manufacturing sites are in the United States and Germany, with a third planned for Asia. Determined to not let the situation slow us down, during the week of the attack, we achieved an important milestone on time, delivering the final SOP version of the perception software of the BMW 7 Series launch. We worked closely with the teams at Magna and BMW to complete testing and lock the final version of the software that will be installed on the vehicles in the coming weeks. Since then, we've also delivered on milestones for the Volkswagen Group program and the BMW Gen 2 program, all while managing audits, testing, and negotiating with multiple OEMs in our RFQ pipeline and staying on track to deliver record revenues for the fourth quarter. With that said, let's turn to our BMW SOP. In the early weeks of the third quarter, we moved forward on a very important milestone in our company's history, moving into SOP with our BMW Gen 1…

Thank you, Omer. Good morning, everyone. Starting with cash. We ended Q3 2023 with approximately $164 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 on a normalized basis. We did defer roughly $2.9 million of R&D expense as a result of booking NRE revenue. While this drove lower-than-normal operating expenses in the third quarter, we expect to recognize the deferred expenses in the coming quarter as COGS. At a higher level, on a normalized basis, you can see that our cost structure has been mostly flat since the second half of 2022. The bulk of the growth in our cost structure occurred during our transition from a Tier 2 to a Tier 1 relating to the Volkswagen Group award in 2022. As we have said before, with the transition to a Tier 1 mostly behind us, we do not expect material increase in our cost structure. One of the factor behind this flexibility is our transition to SOP with the InnovizOne. As this program transitioned from development stages to high-volume manufacturing, it freed up headcount to work on either the RFQ pipeline or the InnovizTwo SOP. This gives us meaningful flexibility going forward without the need to significant growth in our fixed costs. Moving to the income statement, revenue in Q3 2023 came in at $3.5 million compared to Q2 2023 revenues of $1.5 million, delivering a 138% quarter-over-quarter increase. On a year-over-year basis, it compares to Q3 2022 revenues, which were impacted by our headquarters move of $0.9 million, delivering growth of nearly 300% year over year. On the cost side, operating expenses for Q3 2023 were $27.8 million, a decrease from $31.3 million in Q3 2022. As I mentioned earlier, Q3 2023 operating expenses saw $2.9 million dollars of R&D expenses deferred into future quarters and will be recognized as COGS to match costs with future NRE revenues. This quarter's operating expenses included $5 million of share-based compensation compared to $4.9 million in Q3 2022. Research and development expenses for Q3 2023 were $20.7 million, a decrease from $24.2 million in Q3 2022. The quarter's R&D expenses included $3.1 million attributable to share-based compensation compared to $3.2 million in Q2 2022. In conclusion, we are delivering on the growth cadence that we laid out coming into the year. Q1 2023 was the trough. We delivered a 45% quarter-over-quarter growth in Q2, 138% in Q3, and have line of sight to another meaningful step-up in the fourth quarter. Even more importantly, we are executing on this growth while dealing with record level of RFQ activity. We expect to finish the year on a very strong note with continued momentum for 2024 and beyond. And with that, I will turn the call back to Omer.

Thank you, Eldar. Okay. Before turning the call over to the Q&A, I wanted to offer a few final remarks. In 2022, we hinted at a major new OEM customer, and months later, we delivered Volkswagen. Coming into the year, we said that we're working on a program expansion and we delivered on the light commercial vehicle program in the first quarter and announced development of the second-generation system for BMW last quarter. And in the third quarter, we delivered on our BMW SOP timeline while also moving three RFQs past financial and high-volume manufacturing audits and into final phases of price negotiation and post-nomination milestone alignment. My team and I spent a lot of time visiting OEMs across Europe, Asia, and North America in the past few months, and we have several more trips planned before year-end. We will be in Germany next week taking our new B2.0 sample with the new custom ASIC to existing customers and new ones and prospects. We are very excited about what we achieved, and I want to personally deliver these new samples. We have things that we really want to deliver on for you that we think we are very close at hand, and we will work nonstop until we accomplish them. Thank you very much, and we can move to the Q&A.

[Operator Instructions]. Our first question comes from the line Mark Delaney from Goldman Sachs.

Yes, good morning and good afternoon. Thank you very much for taking my questions. You spoke about having a very active RFI and RFQ pipeline. I'm hoping you can share your latest views on the potential timing for new wins and your confidence in reaching the two new series production awards with new customers this year.

Yeah. So as I said during my talk, the team is working intensively on several fronts with different OEMs. As we speak, we are conducting an audit. We have several audits already in this month. We are expecting at least two of these three customers that we talked about that are in later stage to make a decision still this year according to their plans. So we are working towards that.

Understood. Thank you, Omer. And then my other question was around the shuttle program and hoping to better understand how that's developing. You mentioned more LiDAR is now being used with them making that change and also being relatively close to start of production. Can you help us understand if that is going to impact either the timing or magnitude of the ramp? And also, could you clarify if the additional LiDAR that will be used, are those definitively going to Innoviz, or is that something that's still being evaluated by the customer?

So possibly, I did not describe it right. This is a decision made more than six months ago or maybe more than that. We were just reflecting the fact that several -- that every Level 4 program uses more than one LiDAR. And that was an example of a program that initially started with four but later became six some time ago. So it's obviously -- it's an Innoviz LiDAR, not anyone else, and it's not affecting the timeline.

Understood. I'll pass it along. Thank you.

Our next question comes from the line Andres Sheppard from Cantor.

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

Yeah.

Yeah, Andres.

Wonderful. Thank you. And congrats on the quarter and all of the developments, and congrats on the SOP being finally here. Wanted to maybe just ask how should we be thinking about that the BMW contract continuing to ramp up as we head into next year? You provided revenue guidance for Q4, which is very helpful. Just kind of curious if maybe you can give us a little bit more color as to how and what we should expect into 2024. Thank you.

Yeah. I'll start, and probably Eldar take the lead later. BMW is currently launching with the i7. The additional volume would start in a moderate manner. We do expect another model to be launching next year. That's the plan right now. In terms of guidance, I'm not sure that we are providing such right now.

We definitely will provide guidance going forward. But we are hopeful based on the pipeline that we see that we will have a growing revenue cadence going forward as well.

Got it. Okay. That's helpful. And maybe can you give us a sense around gross margins? There was a pretty significant improvement in this quarter as evidenced by the BMW contract ramping up. Any sense on how we should continue to think about gross margins for next quarter and again into next year? I know you're not providing guidance, but would you expect those to continue to gradually improve quarter over quarter, or what's the best way to think about that? Thank you.

So obviously, as we get to production volumes as the products mature, we are expecting that the gross margin due to these factors on the production and the sales of LiDARs will improve. This is one factor that comes into play. And the second factor, which is also very important and dominant, is the NRE recognition. As we gain more and more NRE and are able to recognize more and more NRE, and this will be an important factor both for this year and next year, we will see that positive impact on our gross margins.

Got it. Very helpful, Eldar. Thank you. And just maybe if I could squeeze in one last one. With the $164 million now in cash and equivalents, just remind me what is the expected run rate with that cash on hands.

So as we said, we have a strong balance sheet. We just -- in August, we raised additional funding to have this strong balance sheet. In addition, this balance sheet, if you take it linearly, bring us well into 2025. In addition, we have growing revenues, which will balance off some of the expenses. We are expecting to win additional programs. And as we said before, our pipeline, our current pipeline is over $150 million potential in NRE. So once we win these additional programs, this mean additional NREs. And this brings us far and beyond to where we need.

Thanks again, guys, and congrats on the quarter. I'll pass it on.

Our next question comes from the line Kevin Cassidy from Rosenblatt Securities.

Yes. Thanks for taking my question and congratulations on the great progress. The number of RFQs that you're working on now, if you close on two of those, the other ones are still in play. As we get into 2024, they're just being delayed. Can you maybe give a timeline on some of the other programs?

So we said that we expect some to make a decision this year. I think that by the progress we're seeing with the other RFQs, I would say they are split between the -- maybe the first quarter and the second quarter, also taking into account the timeline in which they plan to launch. So I would expect that it will not take longer than that, but that's how I see it right now.

Okay, great. And maybe just so to understand a little more. With the six LiDARs being controlled by the perception software. Is there a maximum number of LiDAR the software can handle?

It's not about the software, it's about the compute platform that eventually needs to process the point cloud, which, of course, as you increase the density and frame rates, you require stronger compute platforms. But I can also share that one of the things that the team has substantially improved between the first generation and the second generation is also the architecture in which they are performing their algorithms. InnovizOne -- the transition from InnovizOne to InnovizTwo was quite meaningful. We were able to improve the performance by more than 50 times, and we were able to reduce the cost by 70%. Obviously, once you improve the density so significantly, you need to take into account the compute that cannot improve by that factor. So of course, you do need to take, I would say almost revolutionary step. And I think many of the learnings that the team had during the first program when we developed the perception software for BMW was very much about understanding the, I would say, the boundaries and how we can significantly optimize it. So we are -- eventually, the number of platforms that are used by our customers are not many. There are primarily two or three main platforms that everyone is using, either it's NVIDIA or Mobileye or Qualcomm, maybe also . So we are very familiar with all of these platforms. Some of our work with these platform players is in order to learn about their hardware accelerators, so we can make use of them as best as possible. So we don't need to exhaust the power consumption in the processing power. So I would say it's part of the reason why a company that is developing a LiDAR needs to have its hand very much involved in the software development. I think that doing that in a split between different vendors, the outcome would certainly likely not be very good.

Okay. Thanks for that explanation. And just one other question. As we look at the competitive landscape and we've been talking about this market consolidate, are there assets out there that would help Innoviz, or is there any plan where your competitors start falling off the pace that maybe you can pick up some assets to help you move forward?

So, of course, we are aware of the different companies in the space. And I would say that the motivation for Innoviz to possibly look on the assets that are done by others if we feel that there is a complementary solution that we are missing. So far since our focus is primarily automotive and winning those RFQs, I don't see a gap in our offering, but we continue to look on the different counterparts. But so far, I don't see a good fit.

Okay. Thanks and congratulations again.

Thank you.

Our next question comes from the line Kevin Garrigan from WestPark Capital.

Yeah. Hey, Omar and Eldar. Thanks for taking my questions. Let me echo my congrats on the progress. Going back to Mark's question regarding hitting your targets this year and you know you're in the final stages of these RFQs and just waiting at this point in time. Just wondering if the decisions don't get made in the next few months, would it be a potential cause for delay? Would EV programs not working out for some companies cause a delay at all, or something that you might have seen with Volvo where the software doesn't develop?

No. Maybe to explain what are the complexities related to an RFQ and what might cause a delay, you need to understand that once you get the nomination, eventually, you need to start executing on a plan that was aligned between both sides. This means that the plan is to consider everything that needs to happen from nomination to SOP. So you can imagine that the amount of details that need to be decided and aligned between the two sides is quite meaningful, the integration of the sensor into the car, including the connectivity, the software, thermal interfaces, et cetera. Really the amount of details that are needed to be considered when taking that well into account are many. And it is important to align on everything because once the carmaker is choosing a supplier, they basically cannot change anything in the plan, otherwise, it drives change requests that are quite expensive usually to the OEM. So the RFQ process, while they are auditing the supply, part of the process is also to get to a clear alignment between both sides and all of the details. And that takes sometimes a lot of time because it also requires some -- things become more clear to the OEM on things that he needs to do and take into account. And sometimes, he's not aware of it, and sometimes it takes for them a more holistic view and talk with other parts of the vehicle teams. But generally, even if a decision is pushed, it's mostly technical. And even if it's not done in one quarter, then maybe it's done in the second quarter. It doesn't necessarily -- and by the way, usually, when they change their RFQ's timing, they don't change their SOP time. So it adds pressure to all sides. I wouldn't say consider, push off an RFQ decision as a meaningful element in the industry.

Okay, got it. Got it. That makes sense. And then I know you have a strong relationship with the ADAS compute platform companies, Qualcomm, Mobileye, NVIDIA. How these partnerships beneficial, if at all, and helping with potentially capturing some of your shots on goal?

So every program that we're competing on, we are trying to understand which platform they target to use. Sometimes they already know; sometimes they are still assessing. These are important details because on the RFQ process, as I said, a big part of the RFQ is aligning on the tasks and the costs that are involved or so related to those tasks. When we show that we are already doing some of those tasks, on one side, we lower the risk related to potentially integration risk and we show them obviously the timeline. But in some cases, we can also share costs of these activities with the OEM and overall providing them better NRE offering. So right now, we are already working with two out of those three that you mentioned. And with some of the OEMs that we are competing, these are different platforms. Also, by the way, this is also the motivation of the platform player, talking with the head of one of them, was clear, he made it very clear to me that their motivation is similar. One of the things that a platform player is providing is called HIL, hardware-in-the-loop, which means that it's a full hardware emulation of the entire platform. It's a very costly set up, and it takes time and money. And their motivation of using the same sensor on different platform is high. So I think it's mutually beneficial for us and the platform player that other OEMs would use the same sensor. We said also that we're currently working with the third towards an RFQ decision, and I believe we have a good chance in getting it.

There are no further questions. Thank you for your participation. This concludes our call today. You may now disconnect.