Innoviz Technologies Ltd.

Q1 2023 Earnings Conference Call


spk01: Good morning. This is Rob Moffitt, 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 Kalev, Chief Executive Officer, and Elder Segla, 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 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 factor section of our Form 20F filed with the SEC on March 9th, 2023. I will now turn the call over to Omer. Please go ahead.
spk00: Thank you, Rob, and good morning, everyone, and thank you for joining us. I'm excited to provide an update on the focus we've been making at Innoviz. This has been another fast-moving quarter with new programs, new partnerships, new product opportunities, and our steady march toward 2023 production with BMW and the shuttle program. Let's start off with what I believe is the biggest development, our new light commercial vehicle program. Last quarter, We told you that we were in a late stage discussions with one of our major existing customers for a new program. And today we're announcing that we have delivered on that promise. This program is for a level four light commercial vehicle and more specifically a commercial van that will include three to four lighters per vehicle. And perhaps what is most exciting here is that the expected program is on a very accelerated timeline. Due to the speed at which this program is moving, we are beginning our activity based on an agreed framework while working on the final requirements and commercial terms. This program is moving quickly, targeting a mid-decade SLP. With test vehicles on the road already this year, which you will be able to see. This means that this program can contribute nicely to the revenues in the back half of 2023, with sample shipments ramping and attractive levels of NRE expected to come on sooner than they typically do. The reason this program is moving so quickly is because we are displacing a development stage competitor. This is a new milestone for InnoVis as a company, and I believe it is a very important indicator of the quality of our technology and the benefits of 905 nanometer solutions where we believe we are the leader. Another aspect of this deal that is very important is the autonomous compute platform provider that we will be working with. This is our second program with this OEM, and it is the second compute platform partner that we are integrating with for this automaker. This helps to expand our compute platform exposure and shows our flexibility to integrate with all of the major leading platform pairs. Ultimately, we believe that working with the top autonomy platform partner should enable a faster time to market, accelerate the customer evaluation process, and ease the overall customer decision process. And I believe it could help open doors to additional wins as they continue to work together going forward. And while we're on the topic of compute platforms, we have an update on another major compute platform partner, and that involves our work with NVIDIA. Investors often hear us speak about the top three autonomy platform players and why we think it is important to not only work with all three of them, but to eventually have vehicles on the road with each of them. Based on development this quarter, we think we are one step closer to making that happen. We are in discussion with NVIDIA about being integrated into series production programs leveraging the Appirion platform. These conversations span multiple major OEMs and could introduce RFI and RFQ activity that ultimately would be incremental to the NVIDIA based programs that are already in our pipeline. In order to help investors understand why this is such an important development, let me explain how OEM typically makes their decision around autonomy platform vendors. Conversations with OEMs historically have progressed in one of two ways. Sometimes they run their compute platform and ladder suppliers also in parallel, making each of the decisions independently. And sometimes they will start by picking the compute platform first and then build the sensor suite around it. In scenarios like the second situations, already being integrated with the compute platform on another program can significantly reduce the time and cost that it takes for additional automakers to deploy the same system. You essentially become an off-the-shelf solution, significantly reducing the risk for a new OEM to choose you as their lighter supplier. Our goal here is to become embedded on all major compute platforms as quickly as possible. We view this as potentially meaningful structural advantage, and we are making excellent progress on this front every quarter. And while we're discussing software, I'm excited to share some details on a new product that we are quoting in conjunction with an advanced discussion with a leading global OEM. During our evaluation process with this OEM, they were highly impressed with the capabilities that our LiDAR and perception software brings to the table. And as a result, they expanded the scope of the RFQ to include what could be the first industry, first ever LiDAR-based minimal risk maneuver, or MLM system. First, let me give a little color of what an MRM does. The MRM system is software that sits on a dedicated compute box within a vehicle and operates as a backup system. In the event of a complication with the primary system, the MRM could take over control of the vehicle, offering a transition period for the driver to retake control of the vehicle and to offer the ability to safely pull the vehicle to the side of the road if the driver does not retake control within a specific time frame. MRM systems are not new. They have been around for several years, but historically, they have been camera-based. We believe that operating a LiDAR-based system offers key structural advantages over camera systems, including a true 3D image, along with reduced risk in low light and extreme sun situations, as well as environmental considerations like rain or snow. Successfully building out this product category would be a natural extension of the success we have already demonstrated in perception software and will help us move further up the stack, potentially offering additional incremental opportunities down the road. The benefits of having a larger software offering are clear. First, they can build upon and further expand the value that our lighter hardware technology brings to the table. And the second, the gross margin profile on software is much higher than hardware. And in the end market, like automotive, where you have more than 90 million units of volume per year, we can generate meaningful leverage and strong returns on invested capital. As part of this program, we are quoting a bundle that includes the LIDAR, the perception software, the compute box, and the MLM software. And we are starting to explore this product with additional OEMs. This could offer us incremental revenue that we believe would be positive to the gross margin profile. Next, I want to give a quick update on our largest customer, Volkswagen. There have been several industry headlines lately regarding changes in the internal software company Carriot, and we are happy to say that we continue to work towards a mid-decade SOP for our existing series production. I'm also happy to announce that we continue to explore new ways to grow our relationship with the company. And we are working with both Volkswagen and Carriot on additional programs, including several that are in advanced stages of discussion. We are also working with other compute platform partners to build a wide area of ladder integration options that would give the OEM an almost modular approach to ladder deployment that could allow integration into multiple platforms and sub-variants. The key point here is that we are making good progress with Volkswagen. And because of that progress, we believe we have additional opportunities for growth with them. As a reminder, the long-term strategy of our business is to gain an initial foothold with major OEMs with one platform, and then over time, earn the right to be the lighter vendor for every additional future program they decide to deploy lighter on in the coming years. Given the amount of ongoing momentum we are seeing with our existing customers like Volkswagen, we believe we are well along the path to proving this important milestone of our business. And we look forward to continuing growth with all of our existing customers. Our goal here is to further build upon our industry-leading $6.9 billion forward-looking order book, which will be updated on our fourth quarter 2023 earnings call. Coming into the quarter, we had four series production awards, BMW, VW, the Shuttle Program, and the Asian EV-focused OEM. Two of those awards, BMW and Shuttle Program, are on target to SOP in the back half of this year. The Asian EV-focused OEM is targeting a late 2024 to 2025 SOP, and our current Volkswagen Award is targeting a mid-decade SOP. The new light vehicle program we announced today is targeting a similar mid-decade timeline. While we have delivered on several major milestones this quarter, the progress we've seen in our pipeline during the last quarter is at least equally exciting, if not more so. We had a record number of programs move from an RFI to the RFQ process in this quarter, with roughly half of the pipeline now at the RFQ stage, which is a first in the company's history. We are now working on more than five RFQs in parallel. Between the programs we've already announced in the 10 to 15 in the LFI and RFQ pipeline, we either have already won business or are actively quoting new awards with eight out of the top 10 global automakers. Let that sink in for a minute. Eight of the top 10 largest car makers in the world are in our pipeline and are actively making sourcing decisions for our LIDAR. We ultimately believe that it's likely going to be a winner-takes-most market. The technology is safety critical. There are very high levels of tech differentiation. And the player that wins the most business is ultimately going to have a scale and cost leadership advantage that is likely going to be difficult to match. Given the fact that most of these programs will be on the road for 8 to 10 years, we believe that a major portion of the industry market share is going to be determined in the next 12 to 18 months. Looking at our customer programs, you can already see some solid evidence that the pace of programs activity is accelerating. After winning BMW in 2018, it took us over three years to win our next production award. From there, it took us a full year to announce the next one. In the past year, we've already announced two production awards along with today's new program. And looking forward, we think there are three to five programs that have the potential to make a decision before the end of the year. I believe this timeline shows some solid evidence that the pace of ladder decision making is likely accelerating. We feel very confident about how we are positioned in the process, and we hope that we will have much more to share in the coming quarters. And this outlook is embedded in our 2023 targets. As you can see, we are now targeting one to three additional programs with existing customers. Since we have announced new program today, and we have a line of sight into potentially two to three more before the end of the year, we are raising our guidance from 1 to 2 programs to 1 to 3. And on the new customer front, we are still targeting two series production awards with new customers. We have a few RFQs that we believe can advance into final commercial negotiations in mid-summer, and I'm hoping we will have something to share by late summer to early fall. And in terms of financial targets... We are introducing a very important new metric, cash collection from customers, which we target to be $20 to $30 million this year. This is a metric we consider to be even more important than the reported revenue because we target to collect large amounts of NREs that are not always counted as revenues. The purpose of this new metric is to more accurately communicate the powerful contribution of NREs to our financial picture and to encourage investors to take NREs into consideration along with revenue. Let's pause for a moment and make sure everyone understands what NRE is, because it's critical to our cash flow and the funding strategy of the business. Most investors we speak with understand our income profile once a vehicle is in production, but they often do not understand the drivers of revenue in the two to three years before production starts. During that period of time, we have three sources of income and cash, of income of cash, sample unit shipments, non-automotive shipments, and NREs. Sample unit shipments are important because they carry much higher gross margins than production pricing. For instance, sample units to $15K range compared to automotive production ASP, which is under 1K and can eventually approach $500 per unit at extreme volumes. These sample units are not priced on gross margins. They are priced to recover fixed costs like R&D investments. And for each customer program we can bring in from our pipeline, we could typically sell several hundred units per year This could potentially translate into millions of dollars per year for each award and potentially tens of millions of dollars per year across multiple awards. Here, we are also starting to ship units into the non-automotive market. This effort began in late 2022 and is starting to ramp up as we go through 2023. As you can see, ASP for non-automotive sales are basically in line with sample unit sales ranging from 5K to 15K. So here, too, you have the potential for a very high gross margin that can help absorb your fixed costs. While our efforts in non-automotive are still in the early stages, we think this is a market that could be in the tens of thousands of units per year for us in the next few years. And the addition of the Innovis 360 is expected to be a meaningful catalyst here. And then you have NLEs. NRE stands for non-recalling engineering. Basically, it's a phrase of wide range of services that we provide to customer that center mostly around engineering of the product as it works toward SOP. At a very high level, I would encourage you to think of NREs essentially as services revenues. The communication challenge that we have, however, is that they cannot always be recognized as revenues, depending on their accounting treatment. Sometimes they can be recognized as revenue, and sometimes they have to be recognized as a contract item to expense, such as R&D. And you don't always know upfront how you will be able to classify them, since it can often depend on terms and milestones that require input from the customer. I won't go into all of the factors that play into the accounting details. What's important here is that whether it's classified as revenue or contract expense, it doesn't really matter. Either way, it's a cash payment made by the customer and received by us, and it's a critical part of our funding strategy. Last quarter, we looked across 10 to 15 programs that are in our pipeline, and we calculated the total amount of NRE that we are quoting to those customers, and the number is in the range of $150 million to $250 million. to $50 million range depending on their size. Yes, there are programs that could contribute as much as $40 to $50 million each. So here too, we have the potential to bring in tens of millions of dollars per year if we can convert several of the programs from our pipelines. One last important point here is that the NRE are usually only available to Tier 1s. Typically, the total pool of NREs allocated to the Tier 1. And if anything is allocated to the Tier 2, it is a tiny amount at best. This was a key part of our decision to invest the time and effort to become a Tier 1 so we could collect NRE as part of our funding strategy in a meaningful way. We've been getting an increasing number of questions lately on our funding strategy, and my response to it is the most important step in funding our activity, our business, is growth. We have tremendous amount of opportunity in our pipeline, and each deal we win has the potential to bring in tens of millions of dollars of NREs and sample shipments. Both of these items offer high-growth profit flow-through, and we are specifically intended to help absorb fixed costs. We don't assume that we can win every single program, but if we can continue to show the momentum that we have demonstrated lately and continue to bring in several programs per year, then these things will start to build up upon themselves, with the potential for each of these automotive sample units, non-automotive cells, and NREs, offering the potential to contribute tens of millions of dollars each, structurally lower our burn rate. extend our cash runway, and bring us one step closer to breakeven. With that, I'll turn it over to Eldar to go over the financials.
spk05: Thank you, Omer, and good morning, everybody. Starting with cash, we ended Q1 2023 with approximately $156.5 million in cash, short-term restricted cash, and marketable security 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 2023 budget. Moving to the income statement, revenues in Q1 2023 came in at $1 million compared to Q1 2022 revenues of $1.8 million. Revenue were impacted by our pivot towards SOP with BMW and the Shuttle program, which will weigh on the first half of the year before revenues begin to grow in the back half of the year. The biggest factor involved here is the lower sales price as we transition from selling LiDAR sample unit to selling just the components to Magna, who is the tier one for the BMW program. As we think about revenues cadence for the year, we expect the second quarter to look largely similar to the first quarter and for the same reasons. Looking to the back half of the year, we expect revenues to step up modestly in the third quarter. and then step up to a large extent in the fourth quarter with tailwinds from improving production volumes, growing Innovis 2 volumes, revenue-based NREs, and increased sample shipments to new programs. Moving forward down to the income statement, on the cost side, operating expenses an increase from $31.1 million in Q1 2022. Q1 2023 operating expenses included $5.2 million of share-based compensation compared to $4.7 million in Q1 2022. The increase in quarterly operating expenses compared to last year Q1 operating expenses was primarily due to the higher R&D expenses mainly on Innove's two costs, a general increase in headcount, associated share-based compensation expenses, and facility costs. for Q1 2023 were $26.1 million, an increase from $22.8 million in Q1 2022. The quarter included $3.5 million attributable to share-based compensation compared to $2.7 million in Q1 2022. important year of growth for Innovis. We are launching our first series production vehicles, ramping our Innovis 2 volumes, expanding in the non-automotive market and diligently going after all of the programs in our robust pipeline. We expect to finish the year on a very strong note with lots of momentum heading into 2024. And with that, I will turn the call back to Omar. Thank you.
spk00: Thanks, Eldao. You've heard us talk a lot about existing customers today, including Volkswagen. So I wanted to take the opportunity to offer a reminder for my upcoming fireside chat. with Gero Kemp, the head of ADAS over at Audi. Usually it's Gero asking me all the questions, but this time I will get to turn the table around and ask him about Audi autonomy strategy and some of the lessons he learned along the way during his years of experience in the field. I'll probably also fit in one or two questions on what led Audi to choose Innobis as it's still one ladder supplier. Investors should be able to stream along at the website on this slide. Before turning the call to Q&A, I wanted to offer a few final remarks. We covered a lot of ground today and shared a lot of positive news, so I just wanted to offer a quick recap of everything that was said. We announced a new light commercial digital program that is on an advanced timeline and is expected to already begin contributing financially in 2023. As part of that process, we're displacing a development stage competitor, and we believe we can do it again in the future. We also talked about being integrated into a second compute platform with this OEM customer, and we said that working with this compute platform for growth going forward, including with other OEMs. We also talked about our discussion with another top three compute platform player, which is NVIDIA, exploring a deeper integration with the Hyperion platform that could bring further programs into our pipeline, in addition to the ones that are already working on NVIDIA base. On the RFQ front, our pipeline is the biggest it has ever been. And even more importantly, we have a record number of programs in the RFQ stage with more than five programs running in parallel. And we believe that there could be as many as three to five decisions by the end of this year. And for one of those programs in the RFQ process, we disclose that we're actively quoting a new MRM product that can increase our revenue and profit per vehicle through a bundled system, while allowing us to move further up the software stack offering this bundle to additional audience. And after updating our 2023 targets to include a solid outlook for cash collection from customers, we outlined how strong growth could serve as the primary building block of our long-term funding strategy. I'm incredibly proud of the progress the team has made this quarter. moving this fast and we know that things are only going to get busier with more than five RFQs running in parallel with customers all around the world. There is a lot of travel and time away from the family, a lot of late nights and early mornings. So I just wanted to finish by saying thank you for everyone on the team for your contribution this quarter and going forward. We have a lot to be proud of with more to come soon. Let's keep up the momentum. With that, I'll turn the call over to the operator to take us into the community. Thank you. Thank you.
spk08: In order to ask the question, please raise your hand using your mobile or desktop application and wait for your name to be announced. Once again, please raise your hand using your mobile or desktop application and wait for your name to be announced. Our first question today comes from the line of Mark Delaney of Goldman Sachs. Please go ahead.
spk02: Yes, thank you very much for taking the questions. Omer, you spoke about integrating with a major compute platform for the new commercial vehicle program and also about being in discussions with NVIDIA for its Hyperion platform. Can you speak more on what work needs to be done in order to be successful with those integrations and then the timeframe that you expect to be integrated with Qualcomm, Mobileye, and NVIDIA?
spk00: Yeah, sure. So on the commercial commercial light commercial vehicle, we already kicked off the activity. So we're already there. There are two deployments. So there are two fleets that are going to be equipped with our lighters this year. Some of them the next month or two and another one later in the year. The work has already started. This is going to be several years of work. The eventual SOP is in the middle of the decade, but we already started to work. With NVIDIA, the discussion is around several programs that are still in the RFQ stage. Basically, following the RFQ process, we hope that we will be able to win this contract.
spk02: Okay, that's helpful. Thank you. And then Univision has a goal of series production awards with two new customers this year, I believe. How many shots on goal do you have specifically with new customers this year so we can get a sense of the win rate you're expecting? And maybe you can comment a bit more on your confidence on being successful with these awards in 2023 with the two new customers. Thank you.
spk00: So we talked about having more than five RFQs in parallel right now. And we said that there are additional one to two programs that are with existing customers. So you can get a sense, we said more than five. So you get a sense of how many programs are with new customers. And I believe that we're in a very good position. Generally, I think that what Innoviz is offering today is very, I would say, very attractive. Beyond the fact that the product is great, pricing, et cetera, I think the fact that we are already awarded with several programs today is giving us a huge advantage. You can see that those are not the first customers who made a decision for the lighter sourcing. The fact that they can rely on us having already customers that are going to make sure that we'll be on time and working with very credible customers like Volkswagen is giving them a lot of confidence. So I believe that. automotive experience that we have, guaranteed volume from customers is giving us a huge advantage. So I would say that I'm confident that we will be able to get to those, at least to new awards.
spk02: Thank you. I'll turn it over.
spk08: Thank you. Our next question comes from the line of Jared Maimon from Verivik. Please go ahead.
spk07: Hey, good morning, guys. Thanks for taking the question. Obviously, congratulations, by the way, eight of the top 10 global OEMs is very meaningful. That's pretty exciting. Obviously exciting for you because even if one of those is one that could be dozens of millions or hundreds of millions of revenue in the out years. So pretty exciting stuff. And then also obviously shows the... kind of motivation of OEMs to design in LIDAR. First question I had, I know there was a large silicon platform provider that recently announced an expansion of their supply and development agreement with Volkswagen for level two plus and level three vehicles. That same platform provider has been kind of increasingly discussing the need for radar and LIDAR subsystems in recent years. It sounds like that award is for a vision-only system, but that same provider is in talks with, it sounds like, all of their customers specifically. for that system to eventually add LIDAR and radar subsystems. So just curious if you can tell us about your work with that platform provider and then how meaningful it could be if they partner with Innoviz for that redundant system that they're creating.
spk00: Sure, so what I can say, as we said during our talk earlier, the discussions with Volkswagen in regards to expansion on additional platforms is also with additional compute platforms. And basically any program that will go with a ladder will be with InnoVis ladder. And that means that if the decision to kick off a program based on a Mobileye platform or that Silicon, sorry, Silicon company, that will be with InnoVis and we will work with them together.
spk07: Got it.
spk00: Sorry, just to add, of course, it will have a nice impact on additional opportunities that they are part of. Right.
spk07: Yeah. And obviously a lot of opportunities that they're kind of a part of there. So that's great to hear. And then just on the light commercial vehicle award this morning. So curious if there's any kind of read across here for potential expansion into passenger light vehicles with that OEM and It sounds like if that's the case, both on this kind of commercial vehicle award and potentially on passenger light vehicle awards, you could be displacing kind of a key competitor. So I guess also just curious, anything you could share on that OEM strategy with LIDAR, for example? You know, is this an OEM that's similar to Nissan where they're hoping to install LIDAR on all of their vehicles by 2030 or something like that?
spk00: If you allow me, maybe before I answer that, maybe just comment on why we're not mentioning the name of the customer. Generally speaking, when we're in discussion with the different OEMs, the topic of marketing following a nomination is something that we decided not to have as part of the negotiation, which we learned it's becoming, I would say, annoying to the customer. That specific customer told us from the beginning that they expected the marketing element would not be even raised during the process. They told us that some other companies talk with their marketing team more than they talk with them. And they asked us not to push for that at this point. And we want to respect it. I mean, we want to advocate. and they expect us to act in that manner. Since this is a program that you actually see on the road in a few months, then we didn't see a good reason to push for it and for sure not to add friction in the process in order to make things move faster. But as we did last year when we announced on our VW group and eventually without naming them and following that we did, so that will be possible in the following months. To your question about whether this OEM has experience with LiRARs and also with passenger vehicle, It's an expansion that this is an existing customer that is using our LIDARs already on other platforms that is using for passenger vehicle.
spk07: Got it. Okay, loud and clear. And then one more for me, if I can just on the MRM software, obviously, that's pretty exciting. You guys have a big software team. Sounds like this is maybe one of the things that they've been working on. Just curious on an ASP basis, is this kind of, you know, single digits or low double digits? Or could it be more meaningful? And then just clarifying, is this is this kind of drive policy or application level? Anything you tell us there?
spk00: But I think it's too early to kind of name the pricing we give to it. I mean, we're still quoting it. but I think it's a very interesting direction where the market is going, understanding that they see the LiDAR as the more resilient sensor in order to provide the backup for a compute box that will eventually drive the vehicle for safety and needs to make a decision on which sensor it wants to rely on. The fact that our sensor has the ability to see very clearly different weather conditions and light conditions, and with the ability to see lane markings, et cetera, I think it's a very interesting, I would say, development that we're seeing. We hope that that will be successful and that it will become a product that we'll be able to also offer to others. But in terms of pricing, I would rather not mention it right now.
spk07: Got it. Fair enough. Thank you, guys.
spk08: for desktop application and wait for your name to be announced. Our next question comes from the line of Samik Chatterjee, JP Morgan. Please go ahead.
spk03: Hi, hope you can hear me. Thank you for taking my question and congrats on the win you announced this morning. I guess a question on that. Maybe if you can help us size the sort of impact that has on the order book. I know you're waiting to sort of frame up the parameters around it, but any sort of ballpark numbers of how it impacts your overall order book, the magnitude of the win you're expecting there. And you mentioned three to four LIDARs per vehicle is the opportunity there. Are you really thinking about sort of all of them being a similar sort of spec in OVIS 2 or are there more sort of, it's a more sort of diverse opportunity where you have in OVIS 2 and in OVIS 360 sort of all on the same vehicle? How are you thinking about that? And I have a follow up. Thank you.
spk00: Yeah, sure. So we didn't yet communicate the volume of the program. but it is only based on InnoVis 2. So there's three to four ladders per vehicle. And I wish at this point not to disclose additional figures until things maybe will be also shared with the customer, because also that's something that we want to be a bit more cautious with in respect to the customer. We said that we will update our older book by the end of the year, so we don't need to talk specifically on every program and its size, a lot of information that our customer not necessarily want us to disclose.
spk03: Sorry, and a quick one for Eldar here. The difference between the NRE bookings and the cash collection guidance is maybe just explain the difference there and does it expand as your sort of does the gap between cash collection and NRE bookings expand as your NRE expands over time? Is there any sort of thing to keep in mind there?
spk05: So the NRE is a very important factor in our business and it's meaningful to our cash flows. So when we talk about NRE booking, usually when we approach a program, we quote for a few tens of millions of dollars of NRE typically. And this is for the as of the win. Then we have the collection. The collection is done over the period of the development process. So the collection is being done. So if we book $30 million and it goes over three years, it may be collected $10 million every year just as an example. But it's very meaningful and incremental. Each program adds additional collection opportunities for
spk00: Maybe just to add, you know, last year we announced our first win with Volkswagen and we stated that we're acting as a tier one. I know there were a lot of concerns whether Inoviz will have to increase its burn rate in order to act as a dark supplier. I think that the proof behind us now over the last year, we did not increase our burn rate. for TrueNotes significantly, in order to maintain our position as a DAX supplier. And that's our plan also going forward. So the product that we're offering to the different customers is the same ones, the Innobis 2. And ideally, the NREs are going to offset the spending that we have. And we expect to have more wins this year, which will allow us to offset significantly, I would say more significantly, the spending that we have by those NREs. And some of those programs are quite meaningful. The NREs are between $40 and $50 million each.
spk03: Thank you. Thanks for taking my question.
spk08: Thank you. Thank you. Our next call comes from the line of Andrea Shepherd of Cantor. Please go ahead.
spk04: Hey, good morning or good afternoon, guys. Congratulations on the quarter. And thanks for taking our question. I wanted to maybe follow up on the NREs. So just to better understand NREs. Do we have a sense of when the NREs might be recognized? And just to clarify, if they are recognized as revenue, then is it safe to assume that that would be, that would result in additional revenues than the guidance that's provided? In other words, would that be upside to the revenue guidance? Thank you.
spk05: Yeah, newer NRE bookings which are paid and we meet certain milestones already this year, and this potentially is expected, might be an upside if recognized as revenue. So this might be on top of the revenue target of between 12 to 15 million. But again, this is something... Meaningful.
spk04: Got it. Thank you, Eldar. And in regards to the revenue cadence that you provided, so it looks like Q2 will be similar to Q1. And then with revenue stepping up in Q3 and Q4, I'm wondering, can you give us a little bit more color in terms of the second half of the year? Is it safe to assume a gradual increase in revenue in Q3 and then a meaningful
spk05: a heavier loaded q4 or or should we assume perhaps a more gradual between q3 and q4 thank you it's exactly the the the first part yes the q q3 we would expect a gradual growth and thank you for being more meaningful uh with the full impact of programs for this year, the shuttle program and BMW. So the impact will be there.
spk00: There is also a delivery towards the last quarter, which is related to the new program that we announced today, which will equip a large amount of vehicles. And there is activity that includes an NRE in that regard in order to expedite the process. So that's part of it as well.
spk04: I see. Okay. Thank you. And maybe one more, if I could squeeze in. In regards to the liquidity, so with the 100 and let's call it 157 million in liquidity, can you remind us, sorry, what is the kind of expected runway with that? I mean, I presume that's sufficient through at least start of production in the second half of the year, but just remind us what the runway expected is with the current liquidity. Thank you.
spk05: So for this year, we have funding needed to execute our strategy, definitely. And this definitely impacts also next year. In terms of our expenses, as Omar mentioned before, we are not planning to increase our while we do expect on the back half of this year or the second half of this year to see more and more revenues and, more importantly, more and more collection from the NREs, which will balance off some of our burn.
spk04: Wonderful. Okay, thank you, guys. Congratulations on the quarter again. I'll pass it on.
spk08: Thank you. Thank you. Our next question comes from the line of Kevin Garrigan from West Park Capital. Please go ahead.
spk06: Yeah. Hey, guys. Thanks for letting me ask a question and congrats on the announcement this morning. Just, I guess, kind of a quick clarification. So your pipeline is estimated to be over 20 million LiDAR units in total with NRE bookings in the $20 to $40 million range. In your press release, you had said that you added a new RFQ to the pipeline. Does this addition kind of change the number of LiDAR units significantly or NRE bookings, or was this RFQ kind of already baked into the estimates?
spk00: Maybe just to make sure I understood your question, because the pipeline that we have are programs that we are in an LFI and RFQ stages with, which we said that which is quite amazing. The total, I would say, NRE opportunity is $150 million to $250 million. I heard you say $20 to $40 million. The $20 to $40 million is just our, I would say, target for the booking that we have this year. And as I said, our programs that are beyond that figure for each. And then your question was whether the new announcement today changes the figure in the pipeline. Is that the question?
spk06: So in your press release, you had said that you added an additional program to the pipeline by bypassing the RFI stage and moving directly to the RFQ stage. Was that already kind of booked into these numbers?
spk00: Yeah, yeah, yeah. Because those were customers that were in an RFI stage and moved into the RFQ stage. So they were in the booking on that figure earlier. But the RFQ stage is a very meaningful one because it's the last stage. you know, can linger and could be also several times. An RFQ is a more focused, I would say, where you down select the different suppliers and you work with generally two to three suppliers in order to conclude the process. So the figures, the numbers of the different programs are the same, only that they're at a more mature stage in the funnel.
spk06: Okay, got it. Thank you for that clarification. And then just as a follow-up, so, you know, you guys are really starting to gain momentum with platforms in the late stages with many platforms. Do you feel comfortable with kind of your current manufacturing capacity, or is there kind of any plans to expand capacity at any point?
spk00: Of course. By the way, just to maybe add something, we did add, there were one or two new programs added to the order book. I don't know how it changes the overall number, but the funnel is continuing to grow. To your second question, obviously, yes, of course. I mean, we have two production lines today that are building Innobis One today. One in Germany, but that's a small scale, I would say, production line. The other bigger one is in the States and it's actually owned by Magna in Michigan. That's the production line that is producing lighters for BMW today. InnoVis 2, today we're building it at InnoVis. We have our own NPI line and we're designing the production line for automation. that will eventually provide a significantly higher capacity. The plan of work is to reach a capacity of 200K per machine. And the idea is that we will be able to duplicate those machines in order to get to a rather flexible volume. For sure, we eventually will need to support millions of letters. It won't be at Inubis facility. It will be based on contract manufacturers that we work with. Our production strategy is possibly different than others. I mean, by the time the market would grow for volume, You know, we want to leverage on existing factories. We don't want to spend money on building factories. And we want to leverage on existing factories by contract manufacturers that can operate our production. So we are designing the production line. Contract manufacturers will operate it for us. I mean, at the time that we were audited by Audi more than a year ago, You know, in order for them to nominate us, they had to qualify and feel comfortable with the production line that eventually served them. It can't be based on one day we'll have a production line, one day it will be Automotive grade and one day we will meet all of the requirements they need. We had to point at a production line that can already prove that meets their standards. Obviously, one year and a half ago when we had that process with them, we couldn't show it because we don't have a production line that is automotive grade. And they couldn't nominate us based on that. So we had to point on an existing facility by a country manufacturer that meets their standards and actually works with them already. And they nominated us based on that production line that we served them eventually. So that production line is a high volume production line that we eventually serve Audi and others of our customers. And maybe one day we will have our own factory As we became our own tier one, possibly one day we'll do the same on the production, but I think it's too early, and I think it's not right at this point. And we benefit from the fact that we have a simple production process and automated, and we don't need to have our own dedicated factory for that.
spk06: Okay, yeah, that makes a ton of sense. Okay, perfect. Thanks, guys.
spk08: Thank you.
spk06: Thank you.
spk08: We now have a follow-up question from the line, Jared Maimon from Derenberg. Please go ahead.
spk07: Hey, thanks for taking the other question, guys. Sorry if there's a little bit of background noise here. Just a quick one on the model. With the BMW program starting production soon, hoping you just get a bit more color on the kind of recent developments and expectations for that agreement. Can you just remind us if this is an SOP that coincides with the SOP of new BMW models or does that scope include some mid-cycle refreshes and then anything you can update us on how many platforms or models that's across now?
spk00: Yeah, so as we said before, the first launch is with the i7, and the design fits also the 5 Series and the iX, but we cannot disclose right now when BMW decides to launch them at this point.
spk07: Got it. Thank you very much. Thank you.
spk08: That does conclude our call for today. Thank you very much for attending, and have a good day. You may now disconnect.

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