Good morning and welcome to Innoviz Second Quarter 2021 Earnings Conference Call. Joining us today are Omer Keilaf, Innoviz Chief Executive Officer, and Eldar Cegla, Innoviz Chief Financial Officer. Following their 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 a 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, 2020. I will now turn the call over to Omer. Please go ahead.

Okay. Hi. Thank you, Maya. Thank you very much. So today, we want to make another exciting demo for you. Last time, we did it from our garage and this time, we are going to do this on the highway. As you can see here, you can see this is Road #6, it’s the longest highway in Israel. You can see our car here and you can see our LiDAR, come check it out. You can see here, we positioned our LiDAR on the front of the car and we have a camera as a reference so you can see what it’s looking at. Okay, so let’s go. Let’s go back. Can you open it? Okay. Okay. So basically, the demo that I’m going to show you now is for our LiDAR on highway and our computer vision, which is running on this platform, which you can see here. Everything that we run is under a very small chip. It’s actually a very low cost chip, which is automotive grade. And now, let’s go into the car and drive. Okay, so let’s go into car. Sorry about this. It takes a minute to go inside. Okay, let’s go. Drive safely. Okay. So, we will go out to the highway safely. Okay, so what you are looking at is InnovizOne, this is first generation automotive-grade product that I showed you. I showed you a second ago. And now we are going to turn on the computer vision as it’s on. And okay, so what you are seeing is not – it’s not a prototype, it’s not – it’s actually embedded in our platform, which is going to production and this is a very unique, I would say, advantage that we have, because we have been developing this for many, many years.…

Thank you, Omer and good morning everyone. Revenues for the second quarter of 2021 were $1 million, an increase of 39% compared to the first quarter of this year. We see continuous growth from our InnovizOne product. InnovizOne related revenues for the second quarter of 2021 were $990,000, an increase of 29% compared to the $770,000 in the second quarter of 2020. We expect the portion of the revenues from InnovizOne LiDARs to increase as we increase production to meet order volumes. Operating expense for Q2 2021 were $70.7 million, an increase from $13.5 million in Q2 2020. The $70.7 million of operating expenses included $49.9 million of stock-based compensation as well as $1.8 million of issuance costs. The primary reason for the increase in operating cost was $47 million attributable to stock-based compensation granted as part of the SPAC business combination. In Q2 2021, we continue to invest heavily in R&D, with R&D expenses totaling $32 million, of which $17.6 million was attributable to stock-based compensation compared to $11.5 million of R&D expenses incurred in Q2 2020, of which $0.5 million was attributable to stock-based compensation. Our balance sheet as of June 30, 2021 reflects the closing of our stock business combination transaction with $156 million in cash and $195 million in stock in short-term deposits. Through this transaction, we are maintaining significant cash levels of over $350 million that will support the company’s cash needs in the coming years. Our issuance costs were $26.3 million paid in cash and $77.3 million through equity. Innoviz primarily what – Innoviz private warrants are classified as liabilities and are measured at fair value through earnings. During the 3 months ended on June 30, 2021, the company recorded $850,000 loss related to the change in fair value of the private warrants. Before I turn the call back to Omer, I would like to briefly comment on the F-1 we filed on July 27. As part of the business combination with the SPAC, Innoviz agreed to file a registration statement on Form F-1 to register the release of shares and warrants of pre-closing Innoviz security holders and PIPE investors. Innoviz filed a registration statement and it was declared effective by the SEC on August 5, 2021. While the shares of certain pre-closed Innoviz shareholders registered for resale remain subject to 180 days of contractual lockup, the shares of PIPE investors are now freely tradable. This completes my financial overview. Back to you, Omer.

Thank you. Thank you, Eldar. Okay, so last statement, thank you for joining us on today’s call. We are pleased with our developments in the past quarter and believe we are in the right path to grow and become the market leader. We have been and will continue to be focused on several big opportunities that are out there for us. In everything we do, in all solutions, safety comes first. For us at Innoviz, safety is not just a LiDAR feature, it’s the reason we are in business, it’s our mission, our driving force, demand our customer base in PIPE and grow, the safer the roads [indiscernible]. Thank you very much. And I will be happy to answer your questions.

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

Hi, guys, Can you hear me?

Yes, hi, Michael.

Great. Hi, how are you doing? This has been a great presentation. I really appreciate it. I don’t think I have seen an earnings call in a car before. So I am a big fan. Anyway, so first things first, I just wanted to sort of get maybe more of an update on the BMW award. It sounds like we see started production in Q2 of next year, which maybe implies we start to see it in cars in the back half of next year. But I mean, is that the right way to think about it? And maybe could you confirm which model you expect to see it launch on? You mentioned the 5 Series, the 7 Series, but I guess there was a quote from the SVP of Automated Driving at BMW that said maybe the iX would have this new technology toolkit. So, any comments around that would be helpful?

Yes, sure, Michael. So, first, I can only repeat the quote from BMW public quotes. Recently, 2 months ago, there was a quote saying that they plan to use Level 3 technologies on the 7 Series, the 5 Series and the iX as we mentioned. Related to the timeline and we cannot quote on behalf of BMW, we can give a quote on our readiness for production, which is middle of next year and that is related to the production validation of the Magna in Holly production line that is now in position to the disassemble.

Okay, understood, understood. And then Eldar maybe a question for you as well, you guys said in the press release you are reiterating sort of confidence in the long-term guidance. Now, I am not sure if that includes the 2021 revenue outlook from the SPAC presentations. But if so, that would imply sort of pretty big ramp up in the back half of the year. Do you still feel comfortable about the target you have laid out for the full year and if so, I mean, what should we expect for the back half?

So, basically, we did not give guidance – specific guidance for this year. Of course, there are other projections that we show that during the SPAC and what we are expecting is the ramp up of our production following the freeze of the hardware and this should be impactful on our revenue stream.

Okay, got it. And one more just last quarter, you referenced 6 prospects in the late stage commercial negotiations worth about $3 billion of order book, including 4 engagements, I believe with OEMs. Now, that number of prospects has grown to 8. And I am wondering which is great news, but I am wondering if you could give an update on whether or not the same 6 prospects are in that included in those numbers? And then, what’s the mix, are anymore of those OEMs or sort of other opportunities?

So, out of those 6, one of them propagated into the ADP, which is a truck company. There are additional 3 that entered that stage. The bigger programs are still ongoing and we have – we are thinking about those. We are making very good progress. And we will give updates once those will converge in the next 6 to 12 months.

Okay. Alright, great. Thanks a lot, guys. Appreciate it.

Thank you.

Thank you, Michael. Our next question comes from the line of Mark Delaney. Mark, please go ahead and unmute yourself and ask your question.

Yes. Can you hear me?

Yes.

Thank you very much for the presentation and the demo. Very helpful to see. A question on the intermediate term outlook and I think in the de-SPAC presentation, the company had talked about $23 million of revenue and the plan for 2022. Wondering if you guys still feel comfortable with that the general ZIP code of revenue as we are starting to think about next year?

So, we are not yet changing our guidance on that. We are ramping up our production line. We are – as I said earlier, we are on the verge of losing our design, which will allow us to increase our volume and that will allow us to reach much higher revenues. Anything you want to add to this?

Yes, that’s good.

That’s helpful. And the follow-up question was around gross margin. And I think last quarter, you mentioned it’s a very good progress on your manufacturing yields getting to I think in excess of 90%. Is this is a – potentially some good progress on yields. At the same time, there has been a lot of increases in component costs, impacting a number of different parts of the automotive industry. And potentially some of those higher costs could be sustained into the 2022 timeframe. So, as you think about some of those puts and takes in terms of input cost, as well as your – where your yields are tracking, maybe you can talk about whether or not you feel comfortable with the gross margin trajectory that you had outlined. Again, you are not trying to get specific to this year, but over the intermediate term? Thanks.

So, we still don’t know the full impact of the situation is going to be maintained by the shortage of components at this level or during this year, it had some impact, but very low impact, because the volume – our volumes are low. And the impact factor of more of the production might ramp up and the different overheads are against the relative low volume.

Maybe I can move to this.

Yes. Go ahead.

So, as you know Mark that we are on a program for automotive grade. And as such, we are required to keep our design open, as long as we complete the design validation in order to make the needed changes. As of today, we have completed the design validation of the existing design. And we don’t see any reason to make any change. So, we are optimistic that this design, the one that we are now entering into will not require any change. We have gone through a lot of testing. Once we will get to the time that we will see that all of our test has passed, we complete the design and goes to higher volume. Once you are in interactive mode, we cannot go into high volume orders that obviously have impact on the cost of each part of the device. And therefore once we were first designed to allow us to work with the bigger batches of the different components and that will allow us to improve our gross margins. I hope it illustrates some color.

Understood. Thank you very much.

Thank you.

Thank you, Mark. Our next question comes from the line of Kevin Cassidy. Kevin, please un-mute yourself, and go ahead.

Hi, thanks for taking my question and congratulations on the progress. I just – maybe along the same lines of manufacturing, what are your agreements looking like as you are setting them up for holding inventory or how much inventory your customers might be asking you to hold for them or will the customer hold the inventory? And just want to understand the production ramp?

So, thank you for the question. So usually, how it works in the automotive is that different customers ask for a minimum quantity. This is the minimum that’s usually a relatively low number and low commitment. And these commitments are expected by the different vendors to be met. So, at least at this point of time, I don’t see any significant ramp or significant obligation to stock-up additional inventories in order to meet these minimum orders. Of course, we are very optimistic about the ramp up and once USOP started production, you can assess the real ramp-up into the market. And according to which and it’s usually half a year in advance, you can assess the committed volume, and do the relevant purchasing.

Maybe I can add something, I think it’s also important to understand that in our engagement with Magna and BMW, our business model is such that the inventory is actually held by Magna and not by us. So, we sell Magna our components, so most of the inventory is actually held by the Tier 1 and not us.

Okay, yes, that’s helpful. Thank you.

Thank you, Kevin. Our next question is coming from the line of Michael Pilato. Michael, please go ahead and un-mute yourself.

Hey, guys, figured I would come back for a little more. So, you talked about the InnovizOne Plus. Now I am just wondering, when you expect that to be ready for serial production or higher high volume production, is it fair to assume that the timeline to say, the sample product to the InnovizOne Plus would be quicker than it would be for a new products, given that it’s based off the InnovizOne architecture?

Yes. Definitely, based on the fact that it’s a very minor change in just basically a few components, so the design validation and production validation would be faster. Currently, when in discussions with customers, we are talking about an automotive grade version, 1 year following the InnovizOne as a precaution, but we are planning to push it.

Okay, got it. And is there any way you could frame sort of the improvement in performance, in terms of quantitative metrics, between InnovizOne and InnovizOne Plus?

Sure. It’s doubled the resolution from 0.1 to 0.05 with resolution, and about, I think, around 30% range improvement. So, it’s taking us to the 200 meters that we need. So, it’s a very interesting product. Just had a very good trip to the U.S., now, with corona, is allowing some more traveling, it’s great to get some firsthand demos and demonstration. I think there is a very good fit for InnovizOne Plus for the truck industry. At least that’s kind of it seems that there was a very good interest coming from that area.

Got it. Okay. Thanks. And then should we assume that the InnovizTwo is still on track to be delivering samples to customers by the end of the year?

Yes. We already did several design validation, showing us the 30x and actually higher improvements in the optical performance. And we are very eager to have the first samples in our hands starting to build it. Most of the components are on their way to in production and they both are in the production and we are going to have it integrated for the first time during October and to be able to ship first time those two customers that we are in discussion with. It’s a very intriguing product due to the very high performance and cost. This I mean, I can use this opportunity maybe to share more information. InnovizTwo is 70% cost reduced versus the InnovizOne. And I was asked several times about how we managed to do it. And maybe here I can say that, InnovizOne is based on four lasers and four detectors in order to scan the entire scene. In InnovizTwo, we are going to use only one laser and one detector, which explains how we managed to make it significantly cheaper, not only because of the less number of components of the laser and detector, but also because the number of optical alignment, and basically optics, kilometers, etcetera. Everything becomes much more simple. The production cycle is going to be extremely faster because it requires alignment of only one channel versus four, actually more than InnovizOne. And I think it’s a very attractive product. It’s intriguing to think about how we can use less lasers in the next product, but probably one would be the limit.

Got it? No, it’s helpful, looking forward to hearing customer feedback when that gets to your customers. One last one, you talked about how KPIs sort of performance specs aren’t really – they are not the whole game, right. And there is lots of other factors that your customers consider when evaluating light hours. Maybe you can talk about how your experience with BMW sort of helps you win with these other OEMs, because I think we all know, at this point that it wasn’t the easiest road and they have a pretty high bar for testing and validation. So, how that’s sort of prepares you to win with other OEMs?

Definitely. I think one of the things I saw in the last quarter, in many discussions with customers, Innoviz is like a university for LiDAR development. We have the menu of many topics that I think that Innoviz keeps a lot of knowledge around when it’s related to developing LiDAR for automotive products. And these things that are related to know from cleaning system to the integration with the camera, and simulation of the heat transfer. So, we have done a lot of lessons learned. Throughout this process, we really give the menu to our customers. And I see that there are many things that we have gone through and have experienced that the car makers that are now doing audits for a solution are leveraging from our students. So, I think this is a big element of this. And but also into the KPIs, because when you think about an autonomous car driving on the highway, there are many use cases that we encounter that we can provide as guidance to the customers in order for them to understand. This comes from also from obscureness of the cars and how to manage a situation when suddenly you have dirt on the window, and calculations that are related to reaction time of the car in specific scenes. We have a lot of tools for simulation of driving and scenarios that we share with our customers. So, it’s really end-to-end. It’s also related to logistics and RMA. And for sure, in the computer vision, there are many fields, many elements there that are related to know lane detection, and under drivable, over drivable. I mean, I am happy to do maybe next time sessions that we can share more information about the way the market is analyzing the requirements for the LiDAR and maybe explain better for the market to understand how those requirements are eventually translated to the LiDAR. I can happily do it next time.

That would be great. Really appreciate the time. Thanks.

Thank you. Our next question comes from the audience and I will read it on their behalf. What does the one million object annotations mean for the Innoviz App platform, are there more platform developments coming?

Okay, so the computer vision is growing. And what I mean is that the more data that you collect in your catalog, the more – the stronger the confidence level that you have with your flow algorithms. Now, in order to have as strong as in any AI, data is the fuel behind it. And you need to have very accurate dataset that is used for training 1 million validated objects, it means that there was someone that not only collected the data, but also verified its accuracy. And this is kind of the ground truth that is used by our system. And it carries although beyond InnovizOne, it goes to the InnovizOne Plus and it goes to InnovizTwo and we collected ourselves by the way, we also collected it through our partners that are giving us edge cases as they are using our LiDARs outdoor and whenever they see an interesting case, they are sharing it with us. So, it helps us also to cover some corner cases.

Thank you. You have no further questions. Go ahead.

Okay, thank you. So, thank you all very much. Keep following us on LinkedIn and Twitter. We try to share our best in our journey on a day-to-day basis and see you next time on the earnings call.

Thank you very much. That does conclude our call for today. Have a great day.