Welcome to Innoviz Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Rob Moffatt, VP Business Development and IR of Innoviz. Rob, you may begin.

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 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, 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 30, 2022. 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. I'm excited to provide another update on the progress we've been making at Innoviz. This has been a fast-moving quarter with our steady march towards 2023 production, new additions to our pipeline, expanding our order book with existing customers, and something I am particularly excited about is our special guest today, Steven Schondorf, the former Chief Engineer of ADAS systems at Ford who has recently joined us as a senior strategic advisor to the company. And that’s just on the automotive side. On the non-automotive side, we hit important milestones with the unveiling of the Innoviz 360 at CES in January and the addition of non-automotive distributors since our Distributor Summit last November. With that said, let's start things off with a quick update on our march towards 2023 SOP. This continues to be a key focus of our company right now. It is something we've been working towards for over five years, and we are excited to be so close to achieving it. Both of our 2023 launches, the BMW program and the Shuttle program, are on track, and we are making solid progress towards their volume ramp, which should come in the back half of the year. You can even see a nice photo here of one of our test vehicles doing some final winter testing, getting ready for the launch. And while we are discussing our existing customers, I wanted to let you know that we are currently under discussions to expand our existing commercial agreement with Volkswagen, to design-in InnovizTwo on additional platforms beyond the one that has already been communicated. Our initial production win with Volkswagen was awarded in 2022 and was for one meaningful platform with multiple brands and multiple models…

Thank you, Omer and to the whole Innoviz team. I’m really excited to be working with Innoviz, a clear early market leader in an industry that has significant exponential growth ahead of it. Omer asked me to say a couple of words on the importance of LIDAR in Level 3 systems from an OEM’s perspective, and talk about the things we’ve done together since I’ve begun working in my advisory role. Autonomous driving is an incredibly complex problem to solve. Human eyes and brains are much more sophisticated than any camera and compute system available for cars. The world’s driving infrastructure has been designed with these capabilities in mind. It hasn’t been designed for computers and robots to succeed. Most people trying to design autonomous systems want as many sensing capabilities as possible to deal with the trickiest edge and corner cases. These are expensive endeavors that autonomous teams are engaged in, and time is of the essence. It doesn’t make sense to over constrain your team and jeopardize the ultimate success of your system by limiting the amount of sensory input. Of course, they have to consider the overall system cost, but most people I’ve talked to and read about are focused on using cameras, radar and LIDAR to attack the problem. I’ve been working with Innoviz for three months now and I’ve just returned from my first onsite visit in Israel. My mission is to help evolve Innoviz’s strategy and to accelerate their path towards being the best Tier 1 direct supplier in the LIDAR space. I already had a positive view of Innoviz’s technology and expertise before I started working with the company, otherwise I wouldn’t be here. But my recent trip to their facilities in Israel expanded and confirmed those impressions. In the last 15 years I’ve met many suppliers working on amazing technologies, some mature and some cutting-edge. Success depends on good technology, strong leadership, a highly skilled team and the right mindset. Innoviz has all of those. The team is top notch with amazing potential. I’ve had the opportunity to get a much closer look behind the curtain, and I feel strongly that the company is at the head of the pack from a design and technology perspective. The design is robust, the manufacturing process is well-considered, and the strategies they have in place will take them far. So, thank you for the opportunity to work with you and the team Omer, and for giving me a chance to speak with your investors as well. I look forward to working together. I’ll hand it back to you.

Thank you, Steven. Having someone who can bring the mindset of an OEM more directly into the company will be a valuable asset for Innoviz going forward. Now, moving from the automotive side to a product that’s aimed more at the non-automotive world, I’m very proud of the work that our innovation team has done over the past year to turn the Innoviz 360 from an idea into a reality. We first announced the intention to develop the Innoviz 360 at the 2022 consumer electronics show, setting an ambitious goal to launch it the following year in 2023. It’s hard to explain how ambitious of a goal this was, going from a concept to a working sample with such exceptional performance and such a compact design in only one year. And honestly, the final month before the show involved a lot of late nights making final tweaks ahead of its unveiling to the world. But as always, the Innoviz team put in the work and came through to meet the deadline. This product is aimed largely on the non-automotive side of the industry, with very strong use cases across commercial trucks, heavy machinery, shuttles, rail, smart cities, logistics, and maritime industries. We have heard directly from customers in these industries that there is a major opportunity for disruption here for new solutions with automotive grade specs and automotive scale price points. We are still in the product’s early days, but we believe there is an opportunity to become a meaningful disruptor in the 360 space. And on the price side, the Innooviz360 design leverages many hardware advances from InnovizTwo, including a single laser, single detector, and ASIC, and will benefit from the economies of scale, as the products will share many of the same components – particularly the highest cost…

Thank you, Omer, and good morning, everyone. Before going too deep into the financials, I first wanted to take a moment to give an update on our unit sales from the fourth quarter. As you remember, our third quarter revenue was impacted by the move of our company headquarters and the associated downtime of our calibration and testing lines. At the time of our third quarter call, we communicated the volumes were recovering nicely into Q4. I am pleased to announce that units sold were up an impressive 170% from 3Q and 164% versus the fourth quarter of last year. And when looked at on the full year basis, units were just shy of doubling, coming in at growth of 99%. These numbers highlight the impressive progress we have made over the last year on the manufacturing side as we ramp up our capabilities ahead of our SOP launches later this year. Moving to the 2022 financials. Starting with cash, we ended 2022 with approximately $186.2 million in cash, short-term deposits, short-term restricted cash and marketable securities on the balance sheet. Our largely matured cost structure and our operating cash outlays remained mostly stable during the quarter and were in-line with our 2022 budget. Moving to the income statement, revenues in 2022 came in at $6 million, compared to 2021 revenues of $5.5 million, representing a growth of 10.2% year-over-year. The difference between the unit volume growth of 99% and revenue growth of over 10% comes from the non-repeat of 2021 machinery and other revenues, coupled with the natural decline in ASPs as we pivot from sample unit pricing to production-level pricing for our largest customers. This phenomenon is likely to continue into 2023 as we move towards full production with the BMW program and our shuttle program. For the…

Thank you, Eldar. I have just one housekeeping item before we transition over to Q&A. As we’ve indicated in the past, we’ve had some customer pushback on communicating changes to the forward-looking order book in real time as deals are announced, as this can be a source of competitive intelligence. So, going forward in 2023, we are going to transition to communicating the total new order amounts, including NRE awards, annually, on our year-end call. I just wanted to flag that change in advance. As you’ve already heard today, 2023 is going to be a big year for Innoviz with multiple milestones. The entire team is excited for the year ahead and we have our heads down, focusing on our SOP launch and converting as many customers from the pipeline into the order book as possible. With that, I’ll turn the call over to the operator to take us into the Q&A.

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

Yes. Thank you for the updates and appreciate you taking my questions. I was hoping to start first with the NRE commentary. You spoke about a target of $20 million to $40 million of NRE bookings in 2023. If the company were to achieve that, is that bookings something that will be recognized over several years or mostly in 2023? And should we think of that mostly as coming in as revenue or [indiscernible] cars you said it could vary.

Sure. I’ll start and let Eldar continue. Generally, every program, which when we are quoting, we’re not only quoting for this price or the tooling cost we also include a big part of NRE, which is fund activity. This is traditionally paid across the program, from denomination time to the SOP. So, we expect it to be paid in the course of the program, which is roughly three years to four years related to the recognition of the knowledge.

So the recognition goes based on the milestones that we meet. So, if we potentially win a program this year with NREs, and there is a certain milestone that will converge this year, it means we will recognize this part of the NRE and this will be – if it will be recognized and revenues, it’ll be on top of the target that we mentioned.

Maybe the fact, I do want to add fact that we’re now talking about the NRE. We realized that we overlooked this part, which is quite meaningful to our business. Having this we are now still one importing one programs, that NREs become very meaningful and as you can imagine $20 million to $40 million report those, I would say the target from those $10 million to $15 million could be eventually on a recurrent year-over-year, could be a very meaningful base to our funding.

That’s good. And maybe to round that discussion out, I mean, trying to think through gross margin in 2023, you talked about shifting from selling some full samples to providing components. Perhaps there’s some NREs coming in that are contract COGS. So, when you think about some of those factors, what are some of the implications for gross margin? I realize you’re not giving specific gross margin guidance, but do you think you can cross into positive gross margins at some point in 2023, and perhaps maybe be positive even on growth margin for the full year?

I think we should see improvements in gross margins. I don’t want to give guidance on whether or not we become positive, but we do expect better gross margins on the overall year outlook.

Okay. And then one last one for me, on the last call you spoke about one to three OEM decisions taking place over the next six months. Maybe you can just update us on how those have been progressing? Have any of them been decided and how do you think this is doing? Thanks.

No, we’re still pending for several decisions. It’s very difficult to really give an accurate estimate of when things happen. So this time I’m trying to refrain from doing that. But we are working toward several decisions and we hope that and we’ll feel positive about them and that will strengthen our order books and NRE.

Thank you.

Thank you, Mark.

Our next question today comes from the Jared Maymon from Berenberg. Please go ahead.

Hey, good morning guys. Thanks for the update, Omer, Eldar, and Steven, good to meet you. Happy to hear you’re taking the expertise from Ford, and going to help out the guys at Innoviz. That’s great. I guess just, so two questions for me, kind of high level stuff. First one’s on China. So there’s obviously been a few Chinese competitors in the news recently, one for, IPO footprint expansion, and then the other one for production ward with a subsidiary of a global OEM. So, I guess maybe for Omer, just wondering if your view has kind of changed on the threat of Chinese competitors at this point, especially in the mass market segment. So maybe the right way to frame this question up is, have you seen these guys more often in procurement with the ADAS and purchasing teams of global OEMs? And then is there anything you think Innoviz can do or is already planning to do to better you’re out in the Asian market, or take the fight to China beyond the recent production award with the Asian based OEM?

Yes, great. I’m happy you asked question. So actually, when talking about non-Chinese OEMs, we currently do not see the China-based ladder companies competing. My assumption is based on the fact that the requirements that we’re seeing are far, much higher than the solutions that are offered by them. And I assume this is a big part of why we not competing on that. On the other hand, we just had a visit of our China team from China visiting Innoviz for the first time after three and a half years. It was a good opportunity to catch up and I would say reinstalled our position or strategy in China. InnovizTwo in a way solves many of the difficulties we had in the past. InnovizOne when competing on different programs, we got very good feedback from customers that were actually quite impressed by the product. But from the competitive landscape in China, it was decided to be too expensive. We think in second part was, the success of our production line is not in China. And those were the two topics that in a way made it a bit more difficult for us to win business in China. Now that InnovizTwo is so significantly cheaper and so significantly better. And also, we are targeting a production line in China with InnovizTwo that opens up that opportunity all over again. So we are revisiting our activity in China with InnovizTwo and we are hoping for a great success there.

Got it. Great. Thanks, Omer. And then second one, actually you are going to open this up nicely with the requirements commentary. But just I guess there’s been some talk recently on kind of the use case of level three both from the silicon guys and then some of your competitors in LiDAR as well. And kind of on the use case of traffic genesis [ph] versus the full level three highly autonomy system and whether or not each is useful in their own right. That said, one of your competitors recently said publicly and largely unopposed that your technology won’t be able to deliver level three highway autonomy at 130 kilometers per hour. So I’m just wondering, can you kind of talk about the programs that you have with BMW, Volkswagen, [indiscernible] based OEM and what’s being targeted both by the OEMs and the platform partners you’re working with on those contracts?

Well, definitely. Yes, I would say, innovative technology is currently providing really the higher than say requirements in many ways. We are seeing today our size, and our excuses [ph] in a way are copied from our data sheets. And we are happy to set the barrier for the rest of the market. I can go very long and I’m happy that we actually, I did have a session workshop where I introduced level three requirements and explain very well how 80 miles an hour or 130 kilometers an hour are possible through a different certain specification of the LiDAR, which is one to one with the requirements that InnovizTwo is providing. And actually if you go one by one, you’ll see that all of our parameters are meeting that and exceeding it. The other companies that have mentioned that is actually far below that. And I’m surprised by their comments, and I’m happy that they raise that question. When we are working with car companies and in their target to reach 130 kilometers an hour, they are setting very clearly the requirements they have for the frame rate. We are operating it at 20 frame per second, as I understand they operate at 10. Frame rate is a very important element in the reaction time that the car would have. And I would say that this is a very huge advantage that Innoviz able to provide. Other than that, the very uniform resolution of 0.05 degree resolution across the field of view with a very wide vertical field of view, which is nearly for different driving scenarios. It’s something that Innoviz is capable, while the other solution is not. So I definitely believe that Innoviz is actually the one that is capable in providing those specifications while the rest are not. And I’m happy to direct anyone for the white paper I wrote on the matter. I’m happy to find any challenge from anyone on that. Very glad.

Thanks, Omer.

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

Hey Eldar. Hey Omer. Good morning or good afternoon, I should say. Congrats on the quarter and thanks for taking our questions. I just wanted to maybe get a little more clarity on the revenue guidance for 2023, right, so I see that $12 million to $15 million. So just to maybe understand that is predominantly comprised from and please correct me if I'm mistaken here, but is predominantly comprised of the revenues from the BMW partnership and the shuttle program, both of which will begin ramping up with startup production in the second half of this year. Is that correct?

It's partially correct. Of course, the shuttle program and the BMW program have a significant part of our revenues for this year, but we have additional expectation from the market that we are operating as well as non-automotive opportunities that we are selling into. So it'll be a mixture.

Okay. Got it. But I guess what I'm wondering is, it's probably going to be a little bit more weighted on the second half of the year, right?

That's correct. That's correct.

Okay. Thank you. That's helpful. And maybe just a quick follow up is – just remind us again where things stand with your capital needs, right, so total liquidity is about $186 million. What is the expectation that gets you through? Is that through SOP or is that into 2024? Have you talked about that?

So, of course it'll allow us to get to SOP and even beyond that. I would also say that our expectation this year is to win additional programs that will actually allow us to subsidize our activity in a meaningful manner. If you add the two launches that we have this year, the sale to an automotive that will grow also over next year and then at least that will going to collect from the different car companies we will – we believe that it will help us into funding the activities in all going forward.

Got it. And sorry, maybe if I could squeeze just one last one. You mentioned today that you are in conversations with Volkswagen to potentially explore additional opportunities from that relationship. So I guess if I ask bluntly, what does that mean, right? Is that for other vehicles? Is that for other another one of your products? Maybe just help me understand what that means exactly?

Sure. We were nominated for a platform where we collaborate with Volkswagen and CARIAD, where this platform is going to sell different brands and different vehicle. This design includes the single LiDAR and different other sensors and the computing platform, et cetera. There are two other platforms that possibly would include more than one LiDAR and possibly a different set of other sensors and computing platform. It's a different platform that was decided recently to include also the LiDAR to reach the Level 3 – Level 2+ to Level 3. And having follow that decision there are discussions between them and us about the way that Innoviz could possibly supporting parallel these multiple integration platforms and allows them to launch with the LiDAR. Obviously, if you look at our original older book from the first win, it does not reflect the entire opportunity of Volkswagen. Volkswagen is a very big car company, and eventually the opportunity of that we hold behind this group, potentially bigger than the first platform. And we also see us growing into the Volkswagen in a more meaningful way.

Understood. Very, very helpful. Thanks again and congrats on the quarter. I’ll pass it on.

Thank you, Andres. Our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Please go ahead.

Yes, thanks for taking my question. And thank you for having this update. Just to expand on those last question see, for moving to a different platform, when you’re saying there are other sensors, are there, is it more LiDARs or you’re moving into other types of sensors?

No. Not a different LiDAR. I’m just saying eventually this platform is designed to serve, it’s a different platform that we were awarded to which is actually launching without the LiDAR initially, and now they want the decision to include LiDAR. Generally, I’m not aware of the other sensors of the today, there’s no LiDAR there. It’s a different platform that we need to integrate into. That’s what it means.

Okay. Great. Thanks. And it looks like 2023 is going to be a critical year as you’re pointing out, there are 15 more bids happening.

That’s what, like that…

Yes. Maybe, as you’re looking at this, that some of your competitors will probably fall off the pace and, what is your view of, as you’re clearly got some major wins and we’ll survive, but would you be interested in acquiring these other companies as they fall off the pace for their technology or even maybe their customer base?

Not necessarily. I mean, obviously we believe that the, our technology is currently winning the market. And we are very; we believe there is a long path for what we’re doing. And as you can see, we continue to develop new technologies such as the Innoviz360. If there will be a technology that we will find as interesting, we might look at it. And right of now we are very much fitting would say content, the right word with the technology that we are building ourselves.

Okay, understood. Thank you.

Thank you. That concludes the question-and-answer session for today. Would you like to add closing remarks?

Well, as Kevin said, it’s a very exciting year for us, like every year and we are excited – to think that will come along. And we know that we can’t also, we always start the year and we find out more opportunities that becoming, that exciting as they although the cost – year that we’re not even aware of. And I’m very pleased of where Innoviz is today and I have very good confidence that we continue to grow and success. Thank you for joining our Innoviz.

Thank you.

Good bye.