Innoviz Technologies Ltd. (INVZ) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights a 46% YoY revenue increase and reduced cash burn, signaling financial improvement. The strategic partnership with Fabrinet and collaboration with NVIDIA, along with optimistic revenue and margin expectations for 2025, are positive indicators. Despite some uncertainties in the Q&A, such as details on the top 5 OEM program and ATM usage, the overall sentiment is positive due to strong financials and strategic partnerships.

Key Financial Performance

Revenue for Q2 2025 $9.7 million, a 46% increase year-over-year, driven by NREs and sales of LiDAR units.

Revenue for the first half of 2025 $27.1 million, surpassing the total revenue for all of 2024.

Cash burn in Q2 2025 $7.3 million, reduced from $20.7 million in Q1 2025, due to strong cash inflows from NRE payments and operational realignment.

Gross margin for Q2 2025 16%, with a 31% margin for the first half of 2025. Margins are expected to vary due to product ramp timing and NRE payment fluctuations.

Operating expenses for Q2 2025 $18.5 million, a 20% decrease from $23.3 million in Q2 2024, attributed to cost allocation related to NRE sales and operational realignment.

Research and development (R&D) expenses for Q2 2025 $13.2 million, down from $16.8 million in Q2 2024, primarily due to cost allocation to NRE sales and operational realignment.

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Operating Highlights

InnovizTwo LiDAR: Development agreement with a top 5 passenger automotive OEM for Level 3 global production passenger vehicle program, targeting SOP in 2027. Units are being shipped to the customer, with potential expansion to short-range LiDAR.

InnovizSMART: Launched for industrial and nonautomotive applications, featuring collaborations with Cogniteam, Sparsh CCTV, and Cron AI for safety and security projects. Established compatibility with NVIDIA Jetson AGX Orin platform.

Geographic Expansion: Entered a new geography with the top 5 passenger automotive OEM agreement, potentially unlocking further opportunities in the region.

Robotaxi Deployment: Collaborations with Mobileye, Volkswagen, and others for Level 4 robotaxi programs, including the VW ID. Buzz shuttle rollout in Europe and the U.S. starting in 2026.

Production Scaling: Started shipping units from Fabrinet's high-volume production line to meet growing demand for L3, L4, and nonautomotive applications. Targeting a 10x increase in unit shipments in Q3 2025 compared to Q2.

Financial Efficiency: Reduced cash burn to $7.3 million in Q2 2025, down from $20.7 million in Q1. Increased NRE booking guidance for 2025 to $30 million-$60 million.

Strategic Partnerships: Collaborations with NVIDIA, Cogniteam, Sparsh CCTV, and Cron AI to expand into nonautomotive applications.

Market Positioning: Working with 2 out of 5 top global automotive OEMs, covering close to 1/5 of the global auto market share. Positioned as a key player in LiDAR technology for autonomous driving and safety.

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Risk or Challenges

Cash Burn: The company reported a cash burn of $7.3 million in Q2, which is a reduction compared to Q1. However, the need to maintain a low cash burn rate while ramping up production and development could pose financial strain.

Revenue Growth Dependency: The company is heavily reliant on NRE payments and LiDAR unit sales for revenue growth. Any delays in customer milestones or production ramp-ups could impact financial performance.

Production Scaling: The company is scaling production to meet growing demand, but any disruptions in the supply chain or production processes could delay deliveries and impact customer satisfaction.

Customer Concentration: The company is working with 2 out of the top 5 global OEMs, which could lead to over-reliance on a few key customers. Any changes in these relationships could significantly impact revenue.

Regulatory and Market Risks: The adoption of LiDAR technology is tied to regulatory approvals and market acceptance, particularly in the automotive and autonomous driving sectors. Any delays or changes in regulations could impact growth.

Non-Automotive Market Entry: The company is entering non-automotive markets with InnovizSMART. While this diversifies revenue streams, it also introduces risks related to new market dynamics and competition.

Financial Stability: The company launched a $75 million ATM program to maintain liquidity and demonstrate financial strength. However, reliance on such programs could indicate underlying financial vulnerabilities.

Technological Competition: The LiDAR market is highly competitive, and the company must continuously innovate to maintain its technological edge. Failure to do so could result in loss of market share.

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Guidance & Outlook

Revenue Expectations: The company expects a twofold increase in revenues year-over-year for 2025, targeting $50 million to $60 million. This is supported by NRE payments and sales of LiDAR units.

NRE Booking Guidance: The company has raised its guidance for NRE bookings in 2025 to $30 million to $60 million, up from the previous $20 million to $50 million.

Cash Burn: Cash burn is expected to remain in single digits for the remainder of 2025, supported by tightly managed expenses and NRE payments.

Production Ramp: The company plans to ship 10 times more LiDAR units in Q3 2025 compared to Q2 2025. Production ramp-up is supported by Fabrinet's high-volume production line.

Strategic Partnerships and Product Launches: The company is working with two out of the top five global automotive OEMs, with plans to expand collaborations. The InnovizSMART product has been launched for non-automotive applications, with partnerships established with companies like NVIDIA, Cogniteam, Sparsh, and Cron AI.

Future Product Development: Development of the next-generation InnovizThree is ongoing, with plans to secure additional design wins in both automotive and non-automotive segments.

Robotaxi Deployment: The company is collaborating with Volkswagen and Mobileye for the deployment of LiDAR-powered robotaxis, with fleet launches planned for 2026. Hundreds of ID.Buzz shuttles will be equipped with Innoviz LiDARs in 2025.

Market Trends: There is growing recognition in the industry that LiDAR technology is essential for safe autonomous driving. The company is well-positioned to capitalize on this trend.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What would it take for the development program with the top 5 auto OEM to become a series production win, and when is it expected to know if it will become a series production award?

A:The SOP is set for 2027, and work on the program has already started to meet long lead item requirements. The company is working on the contract and final details, hoping to converge as soon as possible.

Q:If the development program becomes a series production award, what will the program look like in terms of annual volumes and whether the LiDAR will be standard fit or optional?

A:The OEM is one of the top 5, with high volumes. The program involves several vehicle lines, with the first line expected to be a standard fit. More details will be shared once the customer is announced.

Q:How quickly does the company plan to use the $75 million ATM announced, and how much might be raised this year?

A:The company is minimizing cash burn and expects growth in LiDAR sales. The ATM will be used opportunistically, considering liquidity needs. The structure of the ATM program helps buffer lumpiness in NRE payments and timing variabilities.

Q:What is different about the statement of development work agreement in terms of process or timeline?

A:The RFI and RFQ processes are complete, but the OEM required modifications to requirements, leading to design changes while concluding contract details. This situation is similar to past experiences, such as with Volkswagen's ID. Buzz program.

Q:Does the acceleration of robotaxi deployments benefit Level 3 (L3) autonomous vehicles?

A:There is no clear correlation between robotaxi deployments and L3 vehicles. Autonomy is gaining interest, with L3 being pursued by traditional OEMs and Level 4 (L4) by commercial vehicles like trucks. Both markets are experiencing growth, but they operate on different spectrums.

Q:Can the LiDAR be tuned for industrial applications, or will multiple SKUs be needed?

A:The InnovizSMART LiDAR used for automotive is also suitable for industrial applications. It includes an add-on for easier connectivity. The LiDAR meets functional safety requirements, which is a gap in the nonautomotive sector, providing a significant opportunity.

Q:What is the strategy for selecting customers and managing engineering resources?

A:The focus is 95% on automotive, aiming to capture market leadership. Excess production capacity is used to penetrate nonautomotive markets, which have shorter sales cycles. Partnerships with integrators and platforms like NVIDIA Jetson facilitate seamless integration.

Q:Has this quarter been one of the highest for commercial revenue contributions, and will Q3 be the highest for commercial revenue shipments?

A:The company is ramping up production, and Q3 is expected to be the peak for commercial revenue shipments to date. Production validation for Volkswagen's SOP in 2024 is ongoing, and new business opportunities are being pursued.

Q:What is the timing for Volkswagen to pull units for the ID. Buzz program?

A:The SOP is targeted for Q3 2024. Units will be shipped a quarter before deployment, with additional shipments for testing, data collection, and NREs.

Q:Will pricing and margin profiles change for nonautomotive opportunities?

A:ASPs and margins for nonautomotive are significantly higher than automotive, with ASPs in the thousands compared to hundreds. The company provides a better product without the need for discounts.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the annual volumes and customer identity for the top 5 OEM program, citing confidentiality. They also did not provide a clear timeline for the use of the $75 million ATM or specific guidance on the amount to be raised this year.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings report shows strong revenue growth and improved financial metrics, such as decreased operating expenses and cash burn. Strategic partnerships with top automotive OEMs and tech companies like NVIDIA are promising. The Q&A reveals positive sentiment, despite some uncertainty in L3 development timelines and L4 details. The raised guidance for NRE bookings and production ramp-up, combined with optimistic market trends for LiDAR, support a positive outlook. The lack of detailed guidance for 2026 is a minor concern but doesn't overshadow the overall positive sentiment.

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Innoviz's earnings call highlights strong financial performance, with revenue and gross margin improvements. Key partnerships with Mobileye, Fabrinet, and NVIDIA, and expansion plans beyond automotive, enhance growth prospects. Despite regulatory and supply chain risks, the company's strategic collaborations and cash position bolster confidence. The Q&A section revealed positive sentiment from analysts, though caution was noted regarding margins. Overall, the positive outlook for revenue growth, strategic partnerships, and operational efficiency supports a 'Positive' sentiment rating, predicting a 2% to 8% stock price increase over the next two weeks.

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