Innoviz Technologies Ltd. Q1 FY2023 Earnings Call

Good morning. This is Rob Moffatt, Vice President of Corporate Development and Investor Relations at Innoviz. And I want to welcome you to our earnings conference call. Joining us today are Omer Keilaf, Chief Executive Officer; and Eldar Cegla, Chief Financial Officer. Following their opening remarks, we will open the call 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 Innoviz. Actual results could differ materially from those anticipated in the forward-looking statements. Forward-looking statements made today speak only to our expectations as of today and we undertake no obligation to publicly update or revise them. For discussion of some of the important risk factors that could cause actual results to differ materially from any forward-looking statements, please see the Risk Factors section of our 20-F filed with the SEC on March 09, 2023. I will now turn the call over to Omer. Please go ahead.

Thank you, Rob, and good morning, everyone, and thank you for joining us. I'm excited to provide an update on the progress 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 to 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 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, specifically a commercial van that will include three to four LiDAR units 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 start of production, with test vehicles on the road already this year, which you'll be able to see. This means that this program can contribute nicely to revenues in the back half of 2023 with sample shipments ramping and attractive levels of non-recurring engineering 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 Innoviz 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 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 players. 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 think 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're one step closer to making that happen. We are in discussions with NVIDIA about being integrated into sales production programs, leveraging their Hyperion 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 OEMs typically make their decision around autonomy platform vendors. Conversations with OEMs historically have progressed in one of two ways. Sometimes they run their compute platform and LiDAR suppliers 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 situation, already being integrated with the compute platform on another program can significantly reduce the time and cost required for an additional automaker 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 the LiDAR supplier. Our goal here is to become embedded on all major compute platforms as quickly as possible. We view this as a potentially meaningful structural advantage, and we are making excellent progress on this front every quarter. While we're discussing software, I'm excited to share some details on a new product that we are quoting in conjunction with advanced discussions 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. As a result, they expanded the scope of the RFQ to include what could be the first industry-first LiDAR-based minimal risk maneuver, or MRM, system. Let me give a little color on 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 providing 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've been around for several years, but historically they've been camera-based. We believe that operating a LiDAR-based system offers many 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 would 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, it can build upon and further expand the value that our LiDAR hardware technology brings to the table. Second, the gross margin profile of software is much higher than hardware. In the end market like automotive, where you have more than 90 million units of volume per year, we can generate meaningful leverage and stronger 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 MRM software, and we are starting to explore this product with additional OEMs. This could offer us incremental revenue that we believe would positively impact 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, CARIAD, and we are happy to say that we continue to work towards a mid-decade start of production for our existing series production. I'm also happy to announce that we are continuing to explore new ways to grow our relationship with the company, and we are working with both Volkswagen and CARIAD 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 range of LiDAR integration options that would give the OEM an almost modular approach to LiDAR deployment that could allow integration into multiple platforms. The key point here is that we're 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 LiDAR vendor for every additional future program they decide to deploy LiDAR on in the coming years. Given the 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 continued 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 the Shuttle program, are on target to start production in the back half of this year. The Asian EV focused OEM is targeting a late 2024 to 2025 start of production, and our current Volkswagen award is targeting a mid-decade timeline. The new large vehicle program we announced today is targeting a similar mid-decade timeline. While we have delivered on several major milestones this quarter, the focus 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 moved from 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 and the 10 to 15 in the RFI and RFQ pipeline, we've either 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, which will be difficult to match. Given that most of these programs will be on the road for eight to 10 years, we believe that a major portion of the industry's 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 program activity is accelerating. After winning BMW in 2018, it took us over three years to win our next production award. From then, 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. 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 solid evidence that the pace of LiDAR 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 the new program today and we have a line of sight into potentially two to three more decisions with existing customers before the end of the year, we are raising our guidance from one to two programs to one to three. On the new customer front, we're 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. In terms of financial targets, we are introducing a very important new metric—cash collection from customers—which we target to be $20 million 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 non-recurring engineering fees that are not always counted as revenues, $20 million to $30 million this year. The purpose of this new metric is to more accurately communicate the powerful contribution of non-recurring engineering fees to our financial picture and to encourage investors to take non-recurring engineering fees into consideration along with revenue. Let's pause for a moment and make sure everyone is clear on what non-recurring engineering fees are, 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 the business 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, we have three sources of income and cash: sample unit shipments, non-automotive shipments, and non-recurring engineering fees. Sample unit shipments are important because they carry much higher gross margins than production pricing. For instance, sample units typically sell in the $5,000 to $15,000 range compared to automotive production average selling prices which are under $1,000 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. For each customer program we can bring in from our pipeline, we could typically sell several hundred units per year during the pre-production phase of the program. 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. 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, the average selling price for non-automotive sales is basically in line with sample unit sales, ranging from $5,000 to $15,000. 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. The addition of the Innoviz360 is expected to be a meaningful catalyst here. Then you have non-recurring engineering fees. Non-recurring engineering fees stands for non-recurring engineering services. Basically, it's a phrase for a wide range of services that we provide to customers that center mostly around engineering of the product as it works through the development process. At a very high level, I would encourage you to think of non-recurring engineering fees essentially as services revenue. 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, while sometimes they must be recognized as a contra item to expense, such as R&D. 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 contra 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 a total amount of non-recurring engineering fees that we are quoting to those customers, and the number is in the range of $150 million to $250 million, with most programs falling into the $10 million to $50 million range, depending on their size. Yes, there are programs that could contribute as much as $40 million to $50 million each. 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 non-recurring engineering fees are usually only available to tier one suppliers. Typically, the total pool of non-recurring engineering fees is allocated to tier ones. If anything is allocated to tier twos, 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 one so we could collect non-recurring engineering fees 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 a tremendous amount of opportunity in our pipeline. Each deal we win has the potential to bring in tens of millions of dollars of non-recurring engineering revenues and sample shipments. Both of these items offer high gross profit flow-through, and we are specifically intending 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 upon themselves. With the potential for automotive sample units, non-automotive sales, and non-recurring engineering fees, offering the potential to contribute tens of millions of dollars, we can 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.

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 remain mostly stable during the quarter, and we're 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 was impacted by our pivot towards start of production 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 units to selling just the components to Magna, who is the tier one for the BMW program. As we think about revenue 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 InnovizTwo volumes, revenue-based non-recurring engineering fees, and increased sample shipments to new programs. Moving forward down to the income statement, on the cost side, operating expenses for Q1 2023 were $33.3 million, an increase from $31.1 million in Q1 2022. Q1 2023 operating expenses included $5.2 million of fair base compensation compared to $4.7 million in Q1 2022. The increase in quarterly operating expenses compared to last year's Q1 operating expenses was primarily due to higher R&D expenses, mainly on InnovizTwo costs, a general increase in headcount, associated share-based compensation expenses, and facility costs. Research and development expenses 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. In conclusion, 2023 is an important year of growth for Innoviz. We are launching our first series production vehicles, ramping our InnovizTwo 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 Omer. Thank you.

Thanks, Eldar. You've heard us talk a lot about existing customers today, including Volkswagen. So I wanted to take the opportunity to offer a reminder about my upcoming fireside chat with Gero Kempf, the AD/ADAS lead over at Audi. Usually, it's Gero asking me all the questions, but this time I will turn the table around and ask him about Audi's 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 Innoviz as its sole LiDAR supplier. Investors should be able to stream it along at the website on this line. 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 record of everything that was said. We announced a new light commercial vehicle 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 player can lead to additional opportunities for growth going forward, including with other OEMs. We also talked about our discussions with another top three compute platform player, which is NVIDIA, exploring a deeper integration with Hyperion platform that could bring further programs into our pipeline in addition to those that are already working on Innoviz 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. We believe that there could be as many as three to five decisions by the end of this year. For one of those programs in the RFQ process, we disclosed 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 value chain. We are starting to explore offering this bundle to additional OEMs. 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. I know it can be exhausting working at a company where things are moving this fast, and we know that things are only going to get easier with more than five RFQs running in parallel with customers all around the world. There is a lot of travel and time away from family, a lot of late nights and early mornings. So I just wanted to finish by saying thank you to everyone on the team for your contributions 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 Q&A. Thank you.

Thank you. Our first question today comes from Mark Delaney of Goldman Sachs. Please go ahead.

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?

Yeah. Sure. So on the light commercial vehicle, we already kicked off the activity, so we're already there. There are two deployments. So there are two vehicles that are going to be equipped with our LiDARs this year, some of them in the next month or two, and another one later in the year. So the work has already started. This will be several years of work that will eventually lead to the start of production 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. Following the RFQ process, we hope that we will be able to win this contract.

Okay. That's helpful. Thank you. Innoviz 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 in being successful with these awards in 2023 with the two new customers. Thank you.

We currently have more than five RFQs in progress. Additionally, we have one to two programs with existing customers. This gives you an idea of how many programs are with new customers. I believe we are in a strong position. Innoviz's offerings are very appealing. Beyond the great product and pricing, being awarded several programs gives us a significant advantage. Conversations with these customers show that they have already made decisions regarding LiDAR sourcing. Their confidence in us is bolstered by our existing customers and our relationships with reputable companies like Volkswagen. The combination of our excellent product, competitive pricing, automotive experience, and guaranteed volume from customers positions us very well. I am confident that we will secure these two new awards.

Good morning. Thank you for the question. Congratulations on having eight of the top ten global OEMs, which is quite significant and certainly exciting for you, as any one of these could mean millions or even hundreds of millions in future revenue. This also demonstrates the OEMs' willingness to incorporate LiDAR into their designs. My first question is about a major silicon platform provider that recently expanded their supply and development agreement with Volkswagen for level two plus and level three vehicles. This provider has been increasingly highlighting the importance of radar and LiDAR subsystems lately. It appears that their award is for a vision-only system, yet they are discussing the eventual addition of LiDAR and radar subsystems with all their clients. I'm interested to hear about your collaboration with that platform provider and how significant it could be if they choose to partner with Innoviz for the redundant system they are working on.

Sure. So what I can say, as we said during our talk earlier, the discussions with Volkswagen regarding expansion on additional platforms are also with additional compute platforms, and basically, any program that will involve LiDAR will be with Innoviz LiDAR. That means that if the decision is to kick off a program based on a Mobileye platform or that silicon company, it will be with Innoviz and we will work with them together.

Got it. Okay.

Of course, just to add, it will also have a nice impact on additional opportunities that they are a part of.

Right. Yeah. A lot of opportunities that they're a part of there. So that's great to hear. Then just on the light commercial vehicle award this morning, curious if there's any kind of read across here for potential expansion into passenger light vehicles with that OEM. 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 a key competitor. I guess also just curious if you could share anything on that OEM strategy with LiDAR. For example, 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?

Before I answer that, I'd like to explain why we're not disclosing the customer's name. In negotiations with various OEMs, we've chosen not to discuss marketing after a nomination, as it can irritate the customer. This particular customer made it clear from the start that they do not want the marketing aspect brought up during the negotiations. They mentioned that other companies communicate more with their marketing team than with them, and they requested that we refrain from pressing this point at this time. We intend to honor that request and behave as a traditional tier one supplier, which they expect from us. Since this program will be visible on the road in a few months, we didn’t find it necessary to insist on marketing discussions and certainly didn’t want to create obstacles that could slow down the process. However, like last year with our announcement regarding the VW Group, we will likely be able to provide the customer's name in the coming months. Regarding whether this OEM has experience with LiDARs and passenger vehicles, we can confirm that this is an existing customer that is already using our LiDARs in other platforms for passenger vehicles.

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 single digits or low double digits, or could it be more meaningful? And then, just clarifying, is this kind of drive policy, or application level? Anything you'd tell us there.

Well, I think it's too early to 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 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 in different weather conditions and light conditions with the ability to see lane markings, et cetera, I think is a very interesting development that we're seeing. We hope that will be successful and that it will become a product that we will be able to offer to others. But in terms of pricing, I would rather not mention anything right now.

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 kind 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 as the opportunity. Are you thinking about all of them being a similar sort of spec in a way, or is it a more diverse opportunity where you have InnovizTwo and Innoviz360 sort of all on the same vehicle? How are you thinking about that? And I have a follow up. Thank you.

Yeah. Sure. So within, we can communicate the volume of the program, but it is only based on InnovizTwo, so there's three to four LiDARs per vehicle. I wish at this point not to disclose additional figures until things are shared with the customer because that's something we want to be cautious about out of respect for the customer. We said that we will update our order book by the end of the year, so we don't need to talk specifically on every program and its size. However, it does reflect a lot of information that our customer may not necessarily want us to disclose.

Yeah. The non-recurring engineering fees are a very important factor in our business and they are meaningful to our cash flows. So when we talk about non-recurring engineering fees booking, we usually approach a program, we quote for a few tens of millions of dollars of non-recurring engineering fees typically, and this is for the first part, development part, the first two to three years of the program as of the win. Then we have the collection. The collection is done over the period of the development process. For instance, if we book $30 million and it's spread 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 each year.

And maybe just to add, 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 Innoviz will have to increase its burn rate in order to act as a tier one supplier. I think the proof behind us now, over the last year, we did not increase our burn rate, for sure not significantly, in order to maintain our position as a tier one supplier. That's our plan going forward. The product we're offering to different customers is the same ones, the InnovizTwo, and ideally, the non-recurring engineering fees are going to offset our spending. We expect to have more wins this year, which will allow us to offset even more significantly our spending with those earnings. Some of those programs can be quite meaningful. The non-recurring engineering fees can range between $40 million and $50 million each.

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 non-recurring engineering fees. So just to better understand, do we have a sense of when the non-recurring engineering fees might be recognized? And just to clarify, if they are recognized as revenue, then is it safe to assume that would be additional revenues above the guidance that's provided? In other words, would that be upside to the revenue guidance? Thank you.

New bookings from non-recurring engineering fees, which are paid as we meet certain milestones this year, may be recognized as revenue and could exceed the revenue target of $12 million to $15 million. However, we need to assess this further later in the year. It certainly has the potential to be significant.

Got it. Thank you, Eldar. In regards to the revenue cadence that you provided, 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 kind of heavier loaded Q4? Or should we assume perhaps a more gradual split between Q3 and Q4? Thank you.

No. It's exactly the first part. Yes, the Q3 would see gradual growth, and then Q4 will have a more meaningful impact with the full effect of reaching the start of production of our different programs for this year, the Shuttle program, and BMW. So the impact will be there, and it will be more meaningful.

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 number of vehicles and includes an NRE in that regard to expedite the process.

So for this year, we have sufficient funding needed to execute our strategy definitely. This will impact our next year as well. In terms of our expenses, as Omer mentioned before, we are not planning to increase expenses significantly. While we do expect in the second half of this year to see more and more revenues, more importantly, we should see more and more collection from the non-recurring engineering fees, which will balance off some of our burn.

Yeah. Hey, guys. Thanks for letting me ask a question and congrats on the announcement this morning. Just a quick clarification. So your pipeline is estimated to be over 20 million LiDAR units in total with non-recurring engineering bookings in the $20 million to $40 million range. In your press release, you said you added a new RFQ to the pipeline. Does this addition kind of change the number of LiDAR units significantly or non-recurring engineering bookings, or was this RFQ kind of already baked into the estimates?

Maybe just to make sure I understood your question. The pipeline that we have, or the programs that we are in RFI and RFQ stages with, we said more than half of it is actually at the RFQ stage, which is quite amazing. The total, I would say, non-recurring engineering opportunity is $150 million to $250 million. I heard you say $20 million to $40 million. The $20 million to $40 million is just our target for the booking that we have this year. The programs that are beyond that figure for each are our more mature stage in the funnel. So the numbers of the different programs are the same, only that they are in a more mature stage in the process. We currently have two production lines for InnovizOne, one in Germany, which is small-scale, and a larger one in Michigan owned by Magna, supplying LiDARs to BMW. We're building InnovizTwo at our facility with an NPI line and are designing an automated production line aimed at significantly increasing capacity to 200K units per machine. Our plan is to replicate these machines for flexible volume. We will rely on contract manufacturers rather than our own facility to support suppliers. Our production approach differs from others; we prefer leveraging existing factories instead of building new ones, which allows us to focus on utilizing contract manufacturers for production. While we might eventually have our own factory if we become a tier one supplier, it is premature to decide now. Our straightforward and automated production process eliminates the need for a dedicated factory.

Thank you. We now have a follow-up question from the line of Jared Maymon from Berenberg. Please go ahead.

Hey, thanks for taking the other question, guys. Just a quick one on the model, with the BMW program starting production soon, can 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 a start of production that coincides with the SOP of new BMW models, or does that scope include some mid-cycle refreshes? Anything you can update us on how many platforms or models that's across now?

Yeah. As we said before, the first launch is with the i7 and the design fits also the five series and the IX, but we cannot disclose right now when BMW decides to launch them at this point.

That does conclude our call for today. Thank you very much for attending. Have a good day. You may now disconnect.