Innoviz Technologies Ltd.

Welcome to Innovee's second quarter 2021 earnings conference call. Joining us today are Omer Kailaf, Innovee's chief executive officer, and Eldar Segla, Innovee's chief financial officer. Following their formal 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.innovis.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 Inoviz. 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 21st 2020. i will now turn the call over to omer please go ahead okay hi thank you maya thank you very much um so today we want to make another exciting demo for you last time we did it from our garage and this time we're going to do this on the highway as you can see here you can see this is this is road number six it's the 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 reference so you can see what it's looking at okay so let's let's go uh 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 let's go into the car and drive okay so let's go in the car sorry about this it takes a minute to go inside go inside Mikey, let's go. All right. Drive safely. Okay, so we will go out to the highway safely. Okay, so what you're looking at is InnoVis One. This is our first generation automotive grade product that I showed you. I showed you a second ago. And now we're going to turn on, okay, the computer vision. I see it's on. And, okay, so what you're 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 product I would say, advantage that we have because we've been developing this for many, many years. InnoVis is collecting a lot of data. We have over a million mutations, object detection, objects that were collected. And you can see here that the LiDAR has a very high resolution. in very high frame rate. Now this is important because whenever you want to get an impression of the LiDAR it is very important that you will check the LiDAR performance in a moving platform, in a moving vehicle because I've seen many demos of LiDARs that are made in a stationary setup and you are unable to really know the real frame rate and the actual resolution of the product so you can see here this is from a driving in what's your speed like it 100 105 you can go better than that all right drive safely okay so uh this is obviously for a highway drag driving application This is what we do on a day-to-day basis. There is no other LiDAR that can actually meet this performance in terms of resolution, frame rate and range. We're very proud of what we have today and in a few months now that we will have in Ubis 2 it will be crazy okay so thank you again and i let's move let's move to the earnings score presentation so we can move to uh to this this camera so let's let's shut down the this camera okay um so now we can go to the more formal way to do an earnest call and as you can see we we tend to try to do things a bit differently because i think it's part of our nature to be slightly more innovative okay i want to start before going into the quarterly details i want to give to reinstate our mission as you know transportation is a is a big is a big part of our life. And yet, it is still the biggest threat, one of the biggest threats that we have on our day to day due to our need to commute, whether we drive or not. And this definitely doesn't need to remain. There should be no reason in the world why the right technology would not solve this problem. And this is why Innoviz is committed to develop the technology that will bring safety to us all. Every year, there are 1.3 million people dying on the road and up to 50 million people that are injured. I will share with you my personal story When I was 10 years old, one night my family got a phone call from the hospital telling that my older sister is seriously injured in a car accident. It changed the life of my family. It changed my life. And it took my sister a few years to go back on track. She's fine now. And as you can imagine, it makes me understand very clearly why this problem has to be solved and it could be solved. 80 to 90% of all accidents are due to human error. 94% of all fatal accidents are related to human error. we need to remove the human error and it's possible we just need to develop the right technologies my background is unit 81 some of you might not know unity one it's a it's a very prestigious uh technology unit from the israeli defense force developing very unique technologies Our slogan and our spirit is about talent, passion and commitment can make the impossible possible. And that's why I believe many of our engineers that come from there decided to join Innobis because they feel passion to bring an impact to this industry. five years ago when i started you know with i was told many times that what i'm trying to pursue is impossible which is that was exactly what i was looking for i was looking to bring the right solution that can actually make an impact if and and my belief that if a certain problem is important enough there is there should be no reason to assume that it's impossible to solve it Now, Innobis for that is developing a very unique technology. Our ION solid-state LiDAR, which is targeted for low cost, is developed in order to allow car makers to accelerate the adoption of life-saving technologies. And that's what we're doing. Developing impossible and solving impossible problems is not easy. it's not only about the excitement of autonomous driving it's really about the very hard work that my team is doing day and night to make it happen and i'm very proud for my team that is commitment committed to make it happen now i'll i want to go into the quarterly updates and i will start with the technology development we have innobis one which we that have gone through uh several design cycles and it's on the verge to reach its hardware freeze and that will allow us to reach high volume production there are currently two production lines that are active one is in germany and one in the US that will support Innobis One manufacturing. Innobis One Plus is an evolution of Innobis One. It's a new version that allows us to improve the performance of the product by extending its range and doubling its resolution. And that serves more and more customers that we leverage on a very mature platform. It will also leverage on the existing production lines that can reach to production faster. InnoVis2 is making great progress. We are meeting our plans. There are already samples that are in production. We are waiting for the last component to arrive. It should arrive in October. And that will allow us to do the integration and have first samples. It's a revolutionary product that will have a substantial improvement in performance, about 30 times and 70% cost reduction. That will definitely accelerate adoption of the technology to many spaces. I'm happy to share with you some of the feedbacks, and these are just a few of some of the comments that we get from customers that are using our product. it is very encouraging and i would say reaffirming our mission we've been working for many years to make this available and it's great to see that our product is creating a good and strong value to our customers and we will continue to develop new technologies to support our partners We have few cars, we have several cars around the world and it's growing in order to collect more data and we collect data in three continents. This data is helping us to strengthen our computer vision. I'm showing you here two videos that can help in understanding how it works. So when we go out and collect the raw data, The data is stored, and we use it in order to build a catalog of objects, whether it's trucks, cars, and pedestrians. We write everything through our computer vision in order to get classification, and we use manual annotation in order to make it more accurate. And we have over 1 million verified objects that are used in order to give us a ground truth for our perception. In parallel to this, we have simulation tools that help us to, again, strengthen our computer vision by having an endless of objects and testing edge cases and specific things. What you're looking at is a simulation of InnoVis2, which is now in production, and it allows us already to make progress. Now going to the commercials. So we announced a few partnerships and distributors throughout the last few months, and I'm happy to share more color on that. We have new partners in different countries. All of them are going to help us to generate more sales and get our product more mature. And of course, those in different countries that are new to us. We have a new partner in China. It's a cool startup called Whale Dynamics. Whale Dynamics is developing a full stack level four platform and have decided to use InnoVis One as their primary sensor in China. Korn AI, located in the UK, developing computer vision solutions and applications for autonomous driving and smart cities. On the distribution, we have a new partner in Singapore, which we just recently announced. Curium is a very interesting company that is developing a software robust autonomous driving that is doing sensor fusion. Again, decided to use for their platform and will help us to distribute our solution in Singapore. EDOM is one of the largest electronic and semiconductor distributors in China. And they will serve as a channel for us to increase ourselves in China, but also to provide support to customers. GreenCloud is a very known B2B company in Korea that provides mobility as a service. uh in in their intention to provide to to have a strong ecosystem of autonomous driving in korea they've decided to use injuries i want to use this opportunity to thank all of our partners in this place and for more than that for working with us it's an important journey now this slide which talks about probably 90% of InnoVis' attention in the last quarter and basically throughout every day. It's our engagement with new customers. When we are working with customers that are looking to use the LIDAR, the discussions are far more complex than just talking about the KPIs of the LIDAR, which is resolution, range, and frame rate, which I would love to talk and explain why we believe InnoVis 1 and for sure InnoVis 2 is the most superior LiDAR in the space. But the discussions are far more complex and goes into any angle which is related to going to high volume manufacturing. Those are the discussions that are related to mechanical integration within the car, quality audit, manufacturing plans, yield reliability aspice and cyber security i'm very proud of my team that is able to keep a very strong relationship with multiple customers and serving as a as a university for knowledge of how to develop an automotive light though we've been told by a very strong oem in the space that InnoVis is really the company with the highest level of expertise and knowledge in how to bring a LiDAR to automotive, and I'm very proud to hear that. So far, we reviewed about two design wins for series production in the automotive space. we told you about our award with the shuttle program with the european t1 that is going to that these planets are to to have the shuttles already end of next year this program is going well we had several integration sessions on both sides Also, on the BMW program, things go on track. We are on the verge for a design freeze that will allow us to go to the B sample, having our product going into the SOP of our line in the middle of 2022. Here, I want to mention another category which we haven't discussed previously, but it is important for us to give this guidance. We have two programs that already are in what we call advanced development projects. Those are customers that have evaluated different types of sensors and decided to use InnoVis as the primary sensor to equip all of their fleets. Now I'm happy to announce that we have signed another contract with a European truck company that decided to use InnoVis LiDAR's InnoVis-1 as uh to equip all of its trucks beginning of next year for their testing and development of uh of their platform this is of course going along with a lot of activities we do on a lot of many fronts as a summary of of our funnel we've got a nice propagation between the different stages uh increase of the number of partners and and customers going into the commercial requirements and negotiations uh we are showing here the new category of the adp which has grown by one and increase of our potential order book by 200 million dollars I will be happy to explain more about our order book. These are questions that we are getting from time to time. I'm referring to $2.4 billion that comes from the BMW program and the Shuttle program. The way we calculated these numbers, the order book, is a very straightforward way. We took the number of cars that BMW is selling on average every year through the models that are expected to use our LiDAR, which are the 7 Series and the 5 Series and others. And we multiplied it by the penetration rate that we expect And we took as a benchmark the radar technology, which was in a similar position. And we multiplied it by the ASP that was agreed between the companies. And this is how we reached the $2 billion. It's a very familiar standard process that companies are doing in this space. On the Shutter program, there was no benchmark. So what we've done here is slightly different. we received from our customer three scenarios in which they believe the program will grow and we took also the minimum committed volume that was granted in in our contract when we signed the deal we did a weighted average while giving the minimum the highest probability as a has been a conservative conservative approach which led to the total sum of 400 million dollars And I would add to it that things are going very well, and we actually are more optimistic about us being in a much bigger position and growing this order book. Now going into the corporate update, we've increased our staff to support multiple programs. We have 29 hires. Most of it comes in the R&D. Here, I want to share with you something that is important for me as the CEO of this company. In the last two quarters, we had about eight people that used to work at Innovate in the early days and decided to leave because they were exhausted. And they decided to come back. For me, it's a very strong recognition. If you ask them for the reason of them coming back, it was mostly because they missed working in Indoviz and they feel passionate about going back and complete our mission. For me, as a CEO of the company, it's the most important thing and hopefully it will continue. I will hand over it now to Eldar to go over the financials.

Thank you, Omar, 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 Innovis One LiDAR to increase as we increase production to meet order volumes. Operating expense for Q2 2021 was 70.7%. $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 the primary reason for the increase in operating costs was $47 million attributable to stock-based compensation granted as part of the SPAC business combination. In Q2 2021, we continued 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 30th, 2021 reflects the closing of our SPAC business combination transaction with $156 million in cash and $195 million dollars in stock in short-term uh deposits through this transaction we are maintaining significant cash levels of over 350 million dollars that will support the company's cash needs in the coming years our issuance costs were 26.3 million dollars paid in cash and 77 $2.3 million through equity. InnoVis' private warrants are classified as liabilities and are measured at fair value through earnings. During the three months ended on June 30th, 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 F1 we filed on July 27. As part of the business combination with the SPAC, Innovis agreed to file a registration statement on Form F1 to register the release of shares and warrant of pre-closing Innovis security holders and pipe investors. InnoVis filed a registration statement, and it was declared effective by the SEC on August 5th, 2021. While the shares of certain pre-closing InnoVis shareholders registered for resale remain subject to 180 days of contractual lockup, the shares of Fipe investors are now freely tradable. This completes my financial overview Back to you, Omer.