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spk05: Thank you for standing by. Our conference will begin shortly.
spk06: 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 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 InnoVis. 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.
spk01: Thank you, Rob, and good morning, everyone, and thank you for joining us. 2Q was a really, really big quarter for InnoVis. While the quarter itself was only 90 days long, you could say it was actually five years in the making. This quarter we delivered on what was easily the biggest milestone in our company's history. we shipped our first production units ever. They are on their way to our customer and close partner, BMW, and will be installed in the grill of the beautiful 7 Series, which will include our InnoVis-1 LiDAR sensor and our AI-enabled perception software package. I know many of you saw this already, but BMW Blog did a wonderful article and video summarizing BMW Group's plans for the Level 3 7 Series. If you haven't watched it yet, I encourage you to go to the bmwblog.com or search for it on YouTube. In the video, you can see the 7 Series driving seamlessly through a variety of scenarios and hear more about BMW's plans and timeline for deploying the technology. We've been saying for a while now that the platform was expected to SOP in the back half of 2023. So to get the first production units out in the earlier part of the third quarter feels like a nice win. While there's always going to be some level of uncertainty in the library industry, we are building a track record of credibility that includes delivering on our goals. With the 7 Series SOP now underway, we are turning our attention to additional models and markets. While the 7 Series was planned to be our initial flagship launch for the Innobis One, we've said in the past that our technology was certified on several models and variants within the BMW group. We are pursuing integration with additional models. This includes supporting the recently announced localized development efforts of Level 3 autonomous driving, including within China. While all of the news about the first generation Innobis platform, Innobis One platform is obviously exciting, the bigger news today is around this morning announcement that we are entering an all-new development phase of a second generation ladder platform for the BMW Group that is built around the Innobis 2 sensor and our AI-enabled perception software stack as an opportunity for a second platform with BMW. Our first generation program included selling Innobis One components and perception software to BMW. The lighter components were shipped to Magna, the tier one on that program, and then manufactured into a finished lighter and shipped to BMW. But the second generation platform that we're developing is remarkably different. First of all, we are quoting the program now as a tier one. This means that instead of selling LIDAR components and only getting part of the economics, we could have the opportunity to sell the entire package, including the LIDAR and the AI compute model directly to the customer. And since this new platform is being developed around the much more advanced InnoVis2 LIDAR sensor, and it's planned to run on our newest custom ASIC, which I'll talk more about shortly, It is expected to be able to offer a much more robust perception software package, including several new AI-enabled features. Without going into too much detail, this stronger version of our perception software is designed to do much more than earlier versions. One of the best example of that is the new Minimum Risk Maneuver, or MRM, software that we plan on developing with BMW. And we plan for this more robust software to sit on a dedicated AI compute model offering more compute power than we've ever had before. I will go into this in more details in the coming slides. The BMW Group has been an amazing partner for us. They operate with some of the highest engineering and design standards in the industry. We have set a high bar together with the 7 Series launch, and I believe we are both excited to continue that work on developing a next-generation platform. As part of this process, BMW is making a meaningful investment in terms of time and resources and is embedding a dedicated team of engineers with Innobis so that we can move quickly on this next phase of development. is planned to target a much broader range of models than the first generation program. And with a higher install rates that should result in higher and larger volumes. We believe that ladder technology and level three driving is going to become much more common over the next decade as it trickles down from cutting edge EVs and luxury, ultra luxury models and more into mainstream vehicles. This opportunity for Innobis doesn't exist just at BMW or Volkswagen, but across the entire industry. We can see the level of opportunity that is out there in our RFI and RFQ pipeline. Level three vehicles are increasingly going to become a reality. Next, I want to introduce you to the InnoVis Core, our new AI compute model. This is the dedicated compute model that I mentioned earlier as part of the solution that is being developed for BMW. I want you to think about the Core as a new base for us to grow our suite of AI machine learning powered software. It offers decentralized compute power dedicated entirely to the LiDAR and the LiDAR-based software solutions. By leveraging the core, we can reduce the total compute load of the central ECU. This can reduce the cost of the central ECU to the OEM and free up compute resources for other applications, all while creating a dedicated ECU for the LiDAR and other LiDAR-based solutions. This is a critical component of the BMW solution that we are developing due to the more robust perception software and the entirely new application built off it, such as the new MRM software. Having a second compute resource should allow for more total processing power, which can unlock analysis at higher resolution and increase frame rates. And with that, reduce the overall bandwidth and simplify the system architecture. It also separates the hardware from the central ECU, adding a layer of redundancy that is critical for a level 3 or higher system. the biggest operating system. This can enable a number of functions, including over-the-air updates, data sharing, and high-definition 3D mapping. It also enables connectivity through dedicated ports to other sensors, such as the camera or radar. While we are not integrating camera or radar data into our software offering today, with the InnoVis Core as a platform, it should be possible to begin working on solutions that can integrate this functionality in the future. This gives us a path for ongoing future software product development and extensions. I want to revisit our MRM solution. Last quarter, we introduced the concept of the MRM to you. In this quarter, we announced that we have begun development of the solution with BMW as part of our offering. As a quick reminder, the MLM system is software that is designed to sit on top of the InnoVis Core AI compute model within a vehicle and operate as a backup system. In the event of a complication with the primary system, the MLM could take over control of the vehicle, offering a transition period for the driver to retake control of the vehicle and offer the ability to safely pull the vehicle to the side of the road if the driver does not retake control within a specific timeframe. MRM systems are not new. They have been around for several years, but historically, they have been camera-based. We believe that operating a ladder-based system should offer key structural advantages over camera systems, including a true 3D image, along with reduced risk in low light and extreme sun situation, as well as an environmental consideration like rain or snow. Customers have told us that in order to be able to drive at increasingly faster highway speeds, the MRM system likely needs to be based on a higher resolution 3D sensing modality, replacing the 2D solution being used today. The InnoVis MRM solution is developed to fuse AI, deep learning, and classic computer processing for object detection and classification, landmark and lane marking detection, ego motion estimation, path planning, and maneuvering. The dedicated parallel processing pipeline is expected to ensure fail-safe execution of any needed risk maneuver. Successfully building out this product category would be a natural extension of the success we have already demonstrated in perception software and would help us to 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 ladder sensor technology brings to the table. And second, the gross margin profile on the software is much higher than hardware. In the automotive end market, where you have more than 19 million units of volume per year, you can generate meaningful leverage and strong returns on investment capital from a growing software suite. As we're talking about the intersection between hardware and software, I want to talk a little bit about our second generation custom ASIC, which was taped out a few months ago and is now in our labs. An ASIC is an application-specific integrated circuit. At a very high level, it's a custom-built chip designed specifically for one use. And for us, it's a 16-nanometer chip mixed-signal automotive process design that has nearly 50 processors with multiple dedicated proprietary DSPs to process dozens of pixels simultaneously at the speed of light. Our first-generation ASIC was taped out in 2019. That chip has clearly served its purpose, having won multiple series production awards since then and building a substantial RFI and RFQ pipeline for us. This is the chip that is going into SOP because this year, but we believe this second-generation chip is going to take our performance to the next level, leveraging several additional years of learning and R&D. There are two key benefits to this second generation ASIC. The first, that it unlocks much more range, taking our maximum range detection range to over 450 meters, up from 300 meters before. And the second is to have better resolution. The more powerful chip enables us to produce millions of more points. In fact, we were able to nearly double the total number of points that we can process per second. This can power the higher density point cloud with even better resolution than before. Together, this dramatically higher range and resolution translates into more points of data. And that data is what fuels our AI tools, including the neural networks that are a critical part of our software development. Faster neural network training translates into better perception software. Better perception software can unlock new features like enabling vehicles to travel at higher speed or operate in more complex environments. Moving faster than competitors and unlocking features like this can drive higher service production wins rates for our sensors and higher dollar value for our software packages, all while deepening our embedded relationships with customers. While we are on the topic of resolution, I want to take you through a quick trip through our company's history. On the right hand side of the slide, you can see the progression of our point cloud over time. As I mentioned earlier, we didn't have the first generation custom ASIC until 2019. So the point clouds before then were much more limited. And as you can see, in 2020, with the addition of our first custom ASIC, coupled with our improvements in the optics, hardware, and software, we took a big step forward. In 2022, we had another big leap forward with the development of the InnoVis 2. We didn't stop there. The video you see on the screen is one of the latest point clouds from the InnoVis 2 with the first-generation ASIC. You can see it has continued to improve since last year, and it is at a point where we are approaching high-definition camera-like resolution with the added benefits of a true 3D point cloud. I'm confident that once we get this second generation ASIC fully integrated, we'll take another major step forward and broaden the gap between us and the competitors. In terms of our timeline, we expect the first samples with this new chip to ship this fall to our customers, including Volkswagen and BMW, including our recently announced new light commercial vehicle program partner. We are beginning automotive qualification of the part, which should be ready for mass production by mid-late 24. And while we are on the topic, I just want to make one more point. And that's that there are a number of other players out there in the LiDAR industry that are still using FPGAs instead of custom ACID. While it's true that you can build a LiDAR with FPGAs, at Innoviz we strongly believe that you won't be able to scale a LiDAR company that way. If we try to produce the Innoviz 2 with FPGAs, it would take somewhere between four to six very expensive FPGAs, adding hundreds of dollars of cost to the finished product. It would be heavier, take more space, produce more heat and consume much more power. And while not really matching our current performance, since only a custom ASIC allows for the power processing of dozens of channels of data, which is the salt of the higher pixel rate and improved resolution. I believe that our first generation custom ASIC has been a major source of the competitive advantage that we have demonstrated thus far. And this next chip is going to take our lead to the next level. One of the other benefits of our custom ASIC that I wanted to touch on is the ability to support multiple LIDAR configuration with just one architecture. We designed our chip to have the flexibility to be able to offer a wide area of configurations across all different types of ranges, resolutions, field of views, and frame rates. We can tweak the product with only minor changes that can mostly be done through the software. As a result, we can create end-to-end solution for a variety of use cases from long haul commercial track that need ultra long range for highway speeds all the way down to wide field of view, static smart city applications. With this benefit, we can go to the market with one architecture built around our already cost-advantaged 905-nanometer-based single laser, single detector solution and fulfill almost any use case across automotive, trucking, robot taxis, buses, shuttles, smart cities, and more. All with the same optics, the same hardware, and the same ASIC. This should enable us to run much higher volumes through the same components, rapidly lowering our cost per unit. driving attractive unit cost economics and delivering potentially a meaningful structural cost advantage. Next, I want to give a quick update on the new light commercial vehicle program that we announced last quarter. As you recall, we said that this program where we are moving on a faster than normal timeline due to the fact that we're displacing a development stage competitor mid-project. I'm happy to share that we've already begun shipping sample units to the customer with the first units being sent towards the end of the second quarter with additional shipments expected to run through the back half of the year. With those units now in the customer hands, We expect that you will be able to see the new test vehicles on the roads in the coming months with our ladder, offering additional tangible evidence of Innove's ongoing commercial momentum. Moving on to our pipeline, even with the two of the platform moving from our pipeline to our awards and programs category, year to date, we're still solidly in the middle of the 10 to 15 range of programs in an official RFQ process. and we still have roughly half in the more advanced RFQ stage. And while the first half of the year has been defined by success, primarily with existing customers, we believe that the back half of the year and the fourth quarter in particular could be defined by new customers. One interesting insight that I have to offer from some of our RFQ work this quarter is that one customer has indicated they are only considering 905 nanometer solutions and another has decided to shortlist his 905 solutions to only 905 solutions. For both, this follows their previous experience with other solutions and the challenges they face with power consumption and resolution. As we disclosed in the past, we are working on more than five active RFQs in parallel, which is the highest level of activity in the company's history. There appears to be a very robust level of activity, all targeting the 25 to 2028 OEMs want to compete on the technology. And we believe the next big differentiation factor is going to be level three driving, exactly like what BMW is bringing to the roads now. And between the programs we've already announced, to 15 in the rfi and rfq pipeline we've either already won business or actively quoting new awards with eight out of the top 10 global automakers we ultimately believe that this is likely going to be a winner takes most kind of market the technology is safety critical there are very high levels of tech differentiations 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. And with that, I will turn the call over to Elda.
spk09: Thank you, Omer, and good morning, everyone. Starting with cash, we ended Q2 2023 with approximately $130 million in cash, bank deposits, marketable securities, and short-term restricted cash on the balance sheet. With our cost structure being largely mature, our operating cash outlays remain mostly stable during the quarter, with cash operating expense roughly flat quarter over quarter and in line with our 2023 budget. Moving to the income statement, revenues in Q2 2023 came in at $1.5 million compared to Q1 2023 revenue of $1 million delivered a 45% quarter-over-quarter increase. On a year-over-year basis, it compared to Q2 2022 revenues of $1.8 million and was impacted by our 2023 pivot towards SOP with BMW, which weighed on the first half of the year as we transitioned from selling LIDAR samples units to selling just the components to Magna, who is the tier one for the BMW program. That step down was most evident in Q1 2023, and since then, our quarter-over-quarter revenue cadence has accelerated nicely, with sequential revenue growth of 45% in the second quarter, supported by a 47% quarter-over-quarter increase in total unit shift. As we think about revenue cadence for the year, we expect revenues in the third quarter to approximately double versus the second quarter, driven by a combination of high NRE service revenues coupled with additional unit volume growth. In fact, we have already secured orders for the third quarter, surpassing the revenues in Q2, and we are only in the five weeks into the quarter. And looking forward to the fourth quarter, we expect an even more meaningful step up in sequential revenues with tailwinds from improving production volumes, revenue-based NREs, and increased sample shipment to new programs. Moving forward down to the income statement, on the cost side, were $30.4 million, an increase from $28.8 million in Q2 2022. Q2 2023 operating expenses included $5 million of share-based compensation compared to $4.4 million in Q2 2022. The increase in quarterly operating expenses compared to the last year Q2 operating expenses was primarily due to the higher R&D expenses mainly on Innovis II costs, a general increase in headcount, associated share-based compensation, and facilities costs. Research and development expenses for Q2 2023 were $23.8 million, an increase from $21.9 million in Q2 2022. The quarter included $3.4 million attributable to share based compensation compared to $2.7 million in Q2 2022. In conclusion, we are delivering on the growth cadence that we outlayed coming into the year. Q1 2023 was the draft. We delivered 45% quarter over quarter growth in Q2 and have a line of sight growth in Q3 and a very strong Q4. Importantly, we are delivering on the milestones that we have set for the company. We kicked off SOP with BMW and the shutter program is around the corner. We just kicked off the B sample phase of a second generation LiDAR development program with BMW. and we are diligently going after all of the programs in our robust pipeline. We expect to finish the year on a very strong note with continued momentum for 2024 and beyond. And with that, I will turn the call back to Omar.
spk01: Thanks, Eldar. I wanted to wrap up with some more good news, which is our guidance. As Eldar noted, we delivered 45% quarter over quarter growth in the second quarter. And we have line of sight to double our revenues sequentially in the third quarter and deliver even stronger results in the fourth. And with that kind of trajectory in mind, we are taking our revenue forecast higher, raising it from 12 to $15 million to 15 to $20 million. This is driven by both volumes and annuaries. Our unit volumes are accelerating from the first quarter trough fueled by two drivers, our BMW and Charter SLV launches and shipments to our new secure programs, including the new light commercial vehicle program. Additionally, as a result of increased activity in our RFQ program and program extensions, an increased confidence level in our likelihood to convert some of this program based on the progress that we have made year to date, We are also raising the midpoint of our new NRE booking guidance range as well, increasing it from 20 to 40 million to 20 to $70 million this year. The wider range represents the wide variety of outcomes that is out there and the sheer scope of some of the NRE awards. If we add the NRE quotes that we are asking for on the different RFQs and other program extensions from existing customer, where they are indicated that decisions should come this year, we can come to the number that is over double the high end of the range. But these awards are very lumpy, with a typical range of $20 to $40 million each, with some as large as $60 million. Given the fact that we can't control the timing of the decisions of the customers, we feel that they need to discount the range. But given the increase in the total amount of dollars that we are competing on since We first set the target from the beginning of the year. We felt the need to communicate the opportunity set that is in front of us. On the customer side, our targets remain the same. We continue to expect one to three additional programs from existing customers and continue to target adding at least two series production awards with new customers. These are ambitious goals, but we are moving fast and making solid progress toward making them a reality in 2023. Before turning the call over to the Q&A, I wanted to offer a few final remarks. It's always important for us to share with you the roadmap that the company is on. In 2022, we hinted at a major new OEM customer, and months later, we delivered on Volkswagen. Coming into this year, we hinted at a program expansion, and the next quarter, we delivered the light commercial vehicle announcement. Last quarter, we said that we're working on an MRM solution for a customer And this quarter we announced that expanded BMW offering with MLM and our AI compute model. And for the last year, we've been pointing to the 2023 SOP with BMW. And we just began shipping the production units a few weeks ago. We want investors to recognize that we're delivering on the things that we say that we're going to do. And we consistently work very hard to make them happen. There were a lot of additional new milestones for us to deliver on, shared on this today call. And I'm confident that we can continue our track record of executing on what we say we're going to do. With that, operator, please turn it over to the Q&A. Thank you. Thank you.
spk05: In order to ask a 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
spk07: Yes, thank you very much for taking the questions. Congratulations on the start of production with BMW for the 7 Series, which I realize is a big milestone for the company. Now that you're at SOP, I'm hoping to better understand how quickly that may ramp up in terms of your own revenue opportunity and what the key variables are as you understand it that may determine the cadence and size of that ramp.
spk01: So BMW is going to launch with the seven series. We are expecting additional models to follow. In terms of the volume of the seven series, I cannot share more information. We expect a smooth launch at the beginning and ramping up following that.
spk07: Okay. No, I appreciate that. And then a second question was, Something you brought up last quarter, you mentioned you were in discussions with NVIDIA to be integrated into series production programs leveraging the Hyperion platform. Is there any update you can share on progress there?
spk01: We actually started the OEM in which this is related to. We started the audit to become their tier one. Still working process, but going well.
spk07: Okay. That's helpful. And just lastly for me, today you spoke about the MRM system and also developing higher value software in conjunction with BMW. Are those going to be exclusive product categories for BMW given the co-development? Or can Innoviz develop those sorts of products for other OEMs? And then if so, how much of the engineering work can you potentially leverage that you're currently working on with BMW? Or do you need to do that from scratch? Thanks.
spk01: so actually the mrm discussion was first introduced by from bmw and we we are approaching other oems with this kind of solution to try to see this is something that can fit in their architecture i i would say that We are getting good feedback from customers, which this comes as a very interesting proposition, having that the MLM based on the LiDAR has better potential in terms of safety. There are synergies. Some of this development is tailored to BMW. There is a lot of integration related to the vehicle itself when it comes of the control. I expect that there should be some synergy, but this is really an early stage to say that.
spk05: Mark, any further comments?
spk07: No, thank you very much.
spk05: Thank you. Our next question today comes from the line of Andrea Shepherd of Kantor. Please go ahead.
spk03: Hey, good morning, guys, or good afternoon. Can you hear me okay?
spk00: Yes.
spk03: Wonderful. Congratulations on the quarter, and thanks for taking our question. Was wondering if perhaps you can give us a little more color on the NRE bookings. You know, obviously the increase in the targets there is excellent. Just wondering if you maybe have any more visibility in terms of whether this will be, you know, recognized into either revenue or contract expense, just a little more color there. And when do you see this taking place? Is this a Q4 event or perhaps a gradual through Q3 and Q4? Thank you.
spk09: Yeah, so the booking of NRE, we are trying always through our contract to push them into the revenue line. Some of the NRE will definitely be already recognized in Q3, and I think more so even in Q4, and there will be a significant impact also for next year.
spk03: Got it. Thanks, Eldar. And then maybe just on liquidity with, you know, roughly 130 million now in total liquidity, just remind us what is the run rate with that liquidity in hand? That's still sufficient, obviously, through SOP later this year, but just remind us kind of what the run rate there is. Thank you.
spk09: Yeah, so our run rate, as you probably noted from from this quarter and looking back on the previous quarter, we are not spending more money. It's actually going down, but it's roughly stable and will still stay stable. On the other side, we do expect these revenues coming in, in addition to the NREs that are supporting our cash flow. So we think this you will see over time a better and better cash flow.
spk01: Maybe I can add to this. So we are expecting some NRE already this year, and we are talking about bookings of NREs that the high end of it in our targets is $70 million. In front of us, there is a bigger opportunity, which is very meaningful in our ability to fund our activities. I would add that in part to this, we are in discussion with our strategic customers in regards to pulling in prepayments and annuaries in order to strengthen our balance sheet.
spk03: Okay, that's super helpful. And maybe just one last one, if I may. Any color on kind of what gross margins might look like for the second half of the year? Obviously, with the significant ramp up in revenue, is it safe to assume a big improvement around gross margins? Thank you.
spk09: Yeah, so as we are able to recognize the NREs, this will be a great contribution to our gross margin. So I am optimistic that the trend that you are seeing now will be even stronger towards the second half of the year.
spk03: Got it. Thank you so much, guys, and congratulations on the quarter again. I'll pass it on. Thank you.
spk05: Thank you. mobile or desktop application and wait for your name to be announced. Our next question today comes from the line of Sameek Chatterjee of JPMorgan. Please go ahead. Sameek, are you able to unmute yourself? Sameek, your line is unmuted. Please go ahead. Our next question today comes from the line of Kevin Cassidy of Rosenblatt Securities. Please go ahead.
spk04: Yeah, thanks for taking my question and congratulations on the SOP starting. Very interesting that the InnoVis Core, is that custom ASICs inside there also? You said a GPU and a CPU, or are those merchant supply that you've designed for this system?
spk01: So the ASIC I was referring to, area on the call, is an ASIC that goes into the LIDAR, into the InnoVis 1 or InnoVis 2. The chip that we're using in our InnoVis core is a chip that comes from a supplier. which has very strong processing power, about 35 tops, and multiple processing accelerators. We haven't yet disclosed who the partner there is.
spk04: Okay, great, thanks. And just as your R&D spending, what's the split and what do you expect the split to be in the future, hardware versus software?
spk09: So roughly speaking, it's, I would say 60% of the hardware, 40% on the software. At this point, obviously the hardware team needs, it's not only headcount, we are spending also on the hardware itself and the test and the different testing and labs and so on. So software is a little bit less cost consuming.
spk01: I would want to add to that maybe because I think that to see companies like Innobis, usually when you are developing and enabling technology such as the LiDAR, then you obviously have a certain weight on the hardware Of course, when those sensors and technology materialize and becomes more mature, the software becomes a bigger part of the company. And the services upon it will drive the company forward. So at this point, we are building the enabling technologies, which are the hardware around it. But I actually foresee that in the long run, the software will become a bigger part.
spk04: Okay, great, thanks. And if I can get in one more question, just the point of clarification for last quarter, you mentioned you had one program that was in late stage discussion. Maybe just to be clear, was this the announced BMW program or was that the new light vehicle program?
spk01: No, it was actually the light commercial vehicle was announced last quarter. We were actually referring to the BMW program that we were kicking off this time. The purpose of this joint development is to get the architecture more mature towards expected launch of the program to serious production towards the end of the year.
spk04: Okay, great. Thanks.
spk05: Thank you. Our final question today comes from the line of Kevin Garrigan of West Park Capital.
spk08: yeah hey good morning omar and elder let me uh echo my congrats on the announcements today um as you as you guys kind of move up the software stack i know you guys are the first lighter company for mrm but are are you finding the conversations you're having with oems in this kind of area more difficult than you know for you know a lidar production agreement in that there's you know more increased competition in this kind of area
spk01: So again, the MLM solution was first introduced from the side of BMW. And since then, we've been working with them on the definition of the product. This has been gone for the last more than six months. Other customers, we are, I would say, introducing this solution to them. This does not yet come as a new requirement from other OEMs. This is different than the perception software, which was always part of the discussion and comes up in many RFQs. And I believe that this part of the education that we're doing is allowing the customers to understand the potential of using the MLM, and that might lead to additional business on it.
spk08: Okay. Got it. That makes sense. Um, and then just, I know, I know there was an announcement recently about, you know, BMW BMW doing R and B in China for level three. Can you guys give us a, you know, a sense of what you guys are doing in China beyond the agent based OEM to, you know, capture any, any other production awards over there?
spk01: Sure. So generally, when you're validating your perception software, you need to do it based on the data that comes from the target, I would say, area in which you want to operate your system. Since, as you probably know, there are limitations in the ability to extract data from China. So we have a compliance room where we are operating engineers that are working on data in China, that are people that are from China, in order for us to support a possible launch in China by BMW and also other customers that we have that also plan to launch in China.
spk08: Okay, got it. Thanks, guys.
spk05: Thank you. We have a follow-up question from the line of Sameek Chatterjee from JP Morgan. Sanik, are you able to unmute?
spk02: Hey, guys. Can you hear me now? Yeah. Hi. Hi, Sanik. Okay. Great. So I guess I jumped on a bit late, but if I can ask you about the extension of the program you have in regards to BMW on InnoVis 1, I'm just wondering why Is the company taking the action to extend the association or extend models on InnoVis 1? Is it really more of a time-to-market decision rather than sort of wait to integrate InnoVis 2? Or how are you thinking about why sort of work with the older generation product and not wait for the new one? Is it more of a time-to-market constraint? I have a follow-up.
spk01: So maybe just to make sure, the announcement we've made today is related to InnoVis 2. The new platform is going to focus on the integration and development of features around InnoVis 2, not InnoVis 1.
spk02: Right. The additional model and variants that you announced for the first-generation platform, my question was more around that as to why extend the model vehicles with the first generation and not wait for the second one. What's the driver of that decision from the company?
spk01: Okay, okay. So this is related still to the first platform. This is a vehicle that we've been testing for some time. I mean, the effort of integrating a ladder so it can launch with level three takes a very long time. and testing. The platform is adapted and tested and validated with InnoBiz One. And therefore, the launch was expected to follow the seven series would still use InnoBiz One.
spk02: Okay, good. And then just in terms of the relationship that you're extending with BMW to now do more parts of the software stack and the compute sort of box as well, It sounds like a great opportunity, but also if you sort of extend that to other OEMs as well, it does seem like you need more resources or more people to sort of support those additional OEMs with the customization that you'll need to drive. How are you thinking about then sort of the overall sort of headcount? How are you thinking about the OPEX here, just given that that entails a lot more customization than probably if you only were shipping the LiDAR module, right?
spk01: So, in regards to the InnoVis compute model, that's actually an activity that we are working on for some time. We already have, I would say, an early version of it. In terms of the R&D effort, it's not a very extensive project. Most of the effort is related to the perception software, which we already are doing. We are offering the compute model to other customers. This is in regards to the computer vision, not to the MLM, so far. Most of the RFQs that we have do include perception software. Some of them require a compute model, so that's very, I would say, beneficial also for other programs. In regards to the MRM, this effort is obviously supported by NREs that we are collecting from the customer in order to support it. And we see it as an opportunity to strengthen our R&D capabilities and offer it to other customers.
spk02: Okay, I'll leave it there. Thank you. Thanks, and sorry about earlier.
spk05: Thank you.
spk01: Please proceed. Okay. Thank you, everyone. I appreciate the time that you spent with us. We are working very, very hard to make this progress with customers such as BMW and Volkswagen, and we are expecting to give you, I would say, more from the fruits of our work. Thank you very much. Bye-bye. Bye-bye.
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