Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations together with (i) our unaudited interim consolidated
financial statements as of and for the six months ended June 30, 2024, included as Exhibit 99.1 to this Report on Form 6-K (this “Report”), (ii) our audited consolidated financial statements and other financial information as of and for the year
ended December 31, 2023 appearing in our Annual Report on Form 20-F for the year ended December 31, 2023 (our “Annual Report”) and (iii) Item 5 — “Operating and Financial Review and Prospects” of our Annual Report. Some of the information contained
in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including
those factors set forth in the section entitled “Cautionary Statement Regarding Forward-Looking Statement” and in the section entitled Item 3.D. “Risk Factors” of our Annual Report, our actual results could differ materially from the results
described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless otherwise designated, the terms “we”, “us”, “our”, “Innoviz”, “the Company” and “our company” refer to Innoviz Technologies Ltd.
All references in this Report to “Israeli currency” and “ILS” refer to Israeli New Shekels, the terms “dollar,” “USD” or “$” refer to U.S. dollars.
Forward-Looking Statements
Statements in this Report may constitute “forward-looking statements” within the meaning of the United States federal securities laws. These forward-looking statements can
generally be identified as such because the context of the statement will include words such as “may,” “might,” “will,” “could,” “would,” “intends,” “plans,” “believes,” “anticipates,” “expects,” “seeks,” “estimates,” “predicts,” “potential,”
“continue,” “contemplate” or “opportunity,” the negative of these words or words of similar import. Similarly, statements that describe our business outlook or future economic performance, anticipated revenues, expenses or other financial items,
introductions and advancements in development of products, and plans and objectives related thereto, and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are also
forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. Factors that could cause or contribute to such
differences include, but are not limited to, those set forth in Item 3.D. “Risk Factors” in our Annual Report, as well as those discussed elsewhere in our Annual Report and in our other filings with the
Securities and Exchange Commission.
Company Overview
We are a leading Tier-1 direct supplier of high-performance, automotive grade LiDAR sensors and perception software that feature technological breakthroughs across core components
and bring enhanced vision and superior performance to enable safe autonomous driving at a mass scale. We believe that we provide a complete and comprehensive solution for OEMs and Tier-1 partners that are developing and marketing autonomous driving
vehicles to the passenger car and other relevant markets, such as robotaxis, shuttles, delivery vehicles and trucks.
We were founded in 2016. From our founding, our culture drew from our core values of solving sophisticated technological problems through creativity and agile thinking. We have
relied on these values to address the needs of autonomous vehicles in a manner that strikes the desired balance between performance and cost. We created a new type of LiDAR sensor from the chip-level up, including a suite of powerful and
sophisticated software applications for high-performance computer vision to allow superior perception. In 2018, we achieved a design win to power BMW’s Level 3 autonomous platform, a program which reached maturity during 2024 and with vehicles
already being sold with our LiDARs and perception software.
During 2022, we made the major strategic decision to become a Tier-1 supplier of LiDAR and perception software to the automotive industry. This decision allows us to have direct
technical discussions with end customers and to improve pricing to automotive OEMs with the goal of continuing to strengthen our position in the automotive market. This strategic decision has already played a significant role in our major OEM program
wins since, as discussed below.
In 2022, following more than two years of extensive diligence and qualification, we were selected by Volkswagen as its direct LiDAR supplier for automated vehicles within the
Volkswagen brands with our InnovizTwo next generation high-performance automotive-grade LiDAR sensor. BMW and Volkswagen are leaders in deploying new technologies into the automotive industry. We believe that our close cooperation with these OEMs
uniquely positions us to make Level 3 and Level 4 autonomous driving a commercial reality.
The sustained cooperation with our customers provides our engineers and other research and development personnel with a valuable competitive edge. These engineers and other
research and development personnel have been meticulously trained to design, operate and verify our many ground-breaking innovations in accordance and in compliance with the ISO26262 standard for Functional Safety in the automotive industry.
Compliance with this and other standards have been enforced by regular ongoing audits of Innoviz and rigorous testing by our key suppliers, existing customers and prospective customers that thoroughly review the performance of various elements of our
operations. As a result, our products have been constructed from the bottom up with hardware and software technology that meets the most stringent automotive safety, quality, environmental, manufacturing, and other standards.
Our innovation has produced LiDAR solutions that deliver market leading performance and that meet the current demanding safety requirements for Level 2+ through Level 5 autonomous
vehicles at price points suitable for mass produced passenger vehicles. Our robust software suite enables our ~905nm wavelength laser-based LiDAR architecture to be easily leveraged to provide compelling solutions for Level 2+ through Level 4 (and
Level 5 when applicable). Our integrated custom design of advanced hardware and software components, which leverages the multidisciplinary expertise and experience of our team, enables us to provide autonomous solutions that are likely to accelerate
widespread adoption across automakers at serial production scale. This means that we are positioned to penetrate the current market, which is focused primarily on Level 2+ and Level 3 production, and to continue to capture and extend our market share
to Levels 4 and 5 as the market continues to mature.
We are currently expanding our third-party manufacturing capacity through contract manufacturers to meet an anticipated increase in customer demand for our products, while also
further developing a next generation high-performance automotive-grade LiDAR sensor, the InnovizTwo, that is expected to provide further cost efficiencies, while enabling even higher performance solutions for vehicles offering driving automations
levels of Level 2+ and above.
A. Results of Operations
The results of operations presented below should be reviewed in conjunction with our unaudited interim consolidated financial statements as of and for the six months ended June
30, 2024, included in Exhibit 99.1 to this Report, our audited consolidated financial statements as of and for the year ended December 31, 2023 appearing in our Annual Report, and Item 5 - “Operating and Financial Review and Prospects” of our Annual
Report. The following table sets forth our consolidated results of operations data for the periods presented:
| |
|
Six Months Ended
June 30,
|
|
| |
|
2024
|
|
|
2023
|
|
| |
|
(In thousands, except share and
per share data)
(Unaudited)
|
|
|
Revenues
|
|
$
|
13,721
|
|
|
$
|
2,476
|
|
|
Cost of revenues
|
|
|
(15,255
|
)
|
|
|
(9,572
|
)
|
|
Gross loss
|
|
|
(1,534
|
)
|
|
|
(7,096
|
)
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
40,606
|
|
|
|
49,888
|
|
|
Sales and marketing
|
|
|
4,116
|
|
|
|
4,620
|
|
|
General and administrative
|
|
|
10,233
|
|
|
|
9,169
|
|
|
Total operating expenses
|
|
|
54,955
|
|
|
|
63,677
|
|
|
Operating loss
|
|
|
(56,489
|
)
|
|
|
(70,773
|
)
|
|
Financial income, net
|
|
|
5,261
|
|
|
|
5,267
|
|
|
Loss before taxes on income
|
|
|
(51,228
|
)
|
|
|
(65,506
|
)
|
|
Taxes on income
|
|
|
(77
|
)
|
|
|
(468
|
)
|
|
Net loss
|
|
$
|
(51,305
|
)
|
|
$
|
(65,974
|
)
|
| |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per ordinary share
|
|
$
|
(0.31
|
)
|
|
$
|
(0.48
|
)
|
|
Weighted average number of ordinary shares used in computing basic and diluted net loss per ordinary share
|
|
|
166,095,197
|
|
|
|
136,640,997
|
|
Comparison of the Six Months Ended June 30, 2024 and 2023
Revenues
| |
|
Six Months Ended June 30,
|
|
|
Change
|
|
|
Change
|
|
| |
|
2024
|
|
|
2023
|
|
|
$ |
|
|
|
%
|
|
| |
|
(In thousands)
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
|
|
|
|
Revenues
|
|
$
|
13,721
|
|
|
$
|
2,476
|
|
|
$
|
11,245
|
|
|
|
454
|
%
|
Revenues increased by approximately $11.2 million, or 454%, to approximately $13.7 million for the six months ended June 30, 2024, from approximately $2.5 million for the six
months ended June 30, 2023.
The increase in revenues was primarily due to increased sales of non-recurring engineering or application engineering services (“NRE”), which contributed $10.4 million in revenues during the six months
ended June 30, 2024 compared to $0.0 million in revenues during the six months ended June 30, 2023.
Cost of Revenues and Gross Margin
| |
|
Six Months Ended June 30,
|
|
|
Change
|
|
|
Change
|
|
| |
|
2024
|
|
|
2023
|
|
|
$ |
|
|
|
%
|
|
| |
|
(In thousands except percentages)
|
|
|
(In thousands)
|
|
|
|
|
|
|
Cost of revenues
|
|
$
|
15,255
|
|
|
$
|
9,572
|
|
|
$
|
5,683
|
|
|
|
59
|
%
|
|
Gross margin
|
|
|
(11
|
)%
|
|
|
(287
|
)%
|
|
|
|
|
|
|
|
|
Cost of revenues increased by approximately $5.7 million, or 59%, to approximately $15.3 million for the six months ended June 30, 2024, from approximately $9.6 million for the six
months ended June 30, 2023.
The increase in cost of revenues was primarily due to cost related to sales of NRE. Gross margin increased to approximately (11)% for the six months ended June 30, 2024, from approximately (287)% for
the six months ended June 30, 2023, primarily due to sales of NRE during the six months ended June 30, 2024.
Operating Expenses
| |
|
Six Months Ended June 30,
|
|
|
Change
|
|
|
Change
|
|
| |
|
2024
|
|
|
2023
|
|
|
$ |
|
|
|
%
|
|
| |
|
(In thousands)
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
|
|
|
|
Research and development
|
|
$
|
40,606
|
|
|
$
|
49,888
|
|
|
$
|
(9,282
|
)
|
|
|
(19
|
)%
|
|
Sales and marketing
|
|
|
4,116
|
|
|
|
4,620
|
|
|
|
(504
|
)
|
|
|
(11
|
)%
|
|
General and administrative
|
|
|
10,233
|
|
|
|
9,169
|
|
|
|
1,064
|
|
|
|
12
|
%
|
|
Total operating expenses
|
|
$
|
54,955
|
|
|
$
|
63,677
|
|
|
$
|
(8,722
|
)
|
|
|
(14
|
)%
|
Research and Development
Research and development expenses decreased by approximately $9.3 million, or 19%, to approximately $40.6 million for the six months ended June 30, 2024, from approximately $49.9
million for the six months ended June 30, 2023.
The decrease was primarily attributable to decrease in payroll of $4.7 million (primarily related to allocation of direct costs related to sales of NRE), third-party software and
consulting services of $2.5 million, stock-based compensation of $0.5 million, as well as facilities cost of $0.4 million.
Sales and Marketing
Sales and marketing expenses decreased by approximately $0.5 million, or 11%, to approximately $4.1 million for the six months ended June 30, 2024, from approximately $4.6 million
for the six months ended June 30, 2023.
The decrease was primarily attributable to a decrease in headcount.
General and Administrative
General and administrative expenses increased by approximately $1.1 million, or 12%, to approximately $10.2 million for the six months ended June 30, 2024, from approximately $9.2
million for the six months ended June 30, 2023.
The increase was primarily attributable to an increase in consulting services (primarily legal).
Financial Income, net
| |
|
Six Months Ended June 30,
|
|
|
Change
|
|
|
Change
|
|
| |
|
2024
|
|
|
2023
|
|
|
$ |
|
|
|
%
|
|
| |
|
(In thousands)
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
|
|
|
|
Financial income, net
|
|
$
|
5,261
|
|
|
$
|
5,267
|
|
|
$
|
(6
|
)
|
|
|
(0
|
)%
|
Financial income, net was approximately $5.3 million for the six months ended June 30, 2024, compared to financial income, net of approximately $5.3 million for the six months
ended June 30, 2023.
The difference was primarily related to lower net gain of $0.5 million related to marketable securities, foreign currency exchange differences of $0.2 million, as well as warrants
liability revaluation income of $0.1 million. These were partially offset by an increase in bank deposit interest income of $0.8 million.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of risks, including foreign currency exchange fluctuations, changes in interest rates and inflation. We regularly assess currency, interest rate and
inflation risks to minimize any adverse effects on our business as a result of those factors.
Foreign Currency Risk
Our financial results are reported in USD, and changes in the exchange rate between USD and local currencies in the countries in which we operate (primarily ILS) may affect the
results of our operations. In the six months ended June 30, 2024, approximately 91% of our revenues were denominated in USD. The USD cost of our operations in countries other than the United States may be negatively influenced by devaluation of the
USD against other currencies.
During the six months ended June 30, 2024, the value of the USD appreciated against the value of the ILS by approximately 3.6%. Our most significant foreign currency exposures are
related to our operations in Israel. We hedge our anticipated exposure by exchanging USD into ILS in amounts sufficient to fund up to three months of operations and monitoring foreign currency exchange rates over time.
Interest Rate Risk
Our investment strategy is to achieve a return that will allow us to preserve capital and meet our liquidity requirements. We invest in bank deposits and marketable securities,
primarily in USD.
Our cash and cash equivalents are exposed to market risk related to changes in interest rates, which is affected by changes in the general level of the Bank of Israel interest
rates and United States Federal Reserve interest rates. Due to the short-term nature and the low-risk profile of our interest-bearing accounts, an immediate 10% change in interest rates would not have a material effect on the fair market value of our
cash and cash equivalents, bank deposits and restricted bank deposits or on our financial position or results of operations.
Our investments in marketable securities are primarily in securities with an average credit rating of “A” and a maturity of up to three years. We do not intend to invest more than
5% of our investment portfolio in a single security at time of purchase.
Other Market Risks
We do not believe that inflation had a material effect on our business, financial conditions or results of operations during the six months ended June 30, 2024 and 2023.
B. Liquidity and Capital Resources
Sources of Liquidity
During the six months ended June 30, 2024 and 2023, we funded our operations primarily from the proceeds of the Business Combination (completed in April 2021) of approximately $370
million and, to a lesser extent, from revenues generated from the sale of goods and services.
In the third quarter of 2023, we completed an underwritten public offering in which we issued and sold an aggregate of 26,352,878 ordinary shares for proceeds of approximately
$61.4 million, net of the underwriting discount and before deducting offering expenses.
As of June 30, 2024, we had approximately $106.4 million in cash and cash equivalents, short term deposits, short term restricted cash and marketable securities. Cash equivalents
and marketable securities are invested in accordance with our investment policy.
Cash Flow Summary
The following table summarizes our cash flows for the periods presented:
| |
|
Six Months Ended June 30,
|
|
| |
|
2024
|
|
|
2023
|
|
| |
|
(In thousands)
|
|
|
(In thousands)
|
|
|
Net cash used in operating activities
|
|
$
|
(42,628
|
)
|
|
$
|
(51,432
|
)
|
|
Net cash provided by investing activities
|
|
|
40,303
|
|
|
|
29,605
|
|
|
Net cash provided by financing activities
|
|
|
111
|
|
|
|
227
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
|
|
(43
|
)
|
|
|
29
|
|
|
Decrease in cash, cash equivalents and restricted cash
|
|
$
|
(2,257
|
)
|
|
$
|
(21,571
|
)
|
Operating Activities
During the six months ended June 30, 2024, operating activities used approximately $42.6 million. The primary factors affecting operating cash flows during the six months ended
June 30, 2024 were the net loss of approximately $51.3 million, impacted by non-cash charges of approximately $8.7 million consisting of stock-based compensation of approximately $11.1 million, depreciation and amortization of approximately $4.0
million and an increase in working capital of approximately $(6.4) million.
During the six months ended June 30, 2023, operating activities used approximately $51.4 million. The primary factors affecting operating cash flows during the six months ended
June 30, 2023 were the net loss of approximately $66.0 million, impacted by non-cash charges of approximately $14.6 million consisting of stock-based compensation of approximately $10.4 million, depreciation and amortization of approximately $3.0
million and a decrease in working capital of approximately $1.2 million.
Investing Activities
During the six months ended June 30, 2024, cash provided by investing activities was approximately $40.3 million, which primarily resulted from withdrawal of bank deposits of approximately $56.0
million and proceeds from sales and maturities of marketable securities of approximately $16.7 million, partially offset by investment in bank deposits of approximately $15.5 million, investment in marketable securities of approximately $14.8 million
and purchase of property and equipment of approximately $2.0 million.
During the six months ended June 30, 2023, cash provided by investing activities was approximately $29.6 million, which primarily resulted from withdrawal of bank deposits of approximately $79.5
million, proceeds from sales and maturities of marketable securities of approximately $40.3 million, partially offset by investment in bank deposits of approximately $62.0 million, investment in marketable securities of approximately $23.0 million
and purchase of property and equipment of approximately $5.1 million.
Financing Activities
During the six months ended June 30, 2024, cash provided by financing activities was approximately $0.1 million resulting from the exercise of employee stock options.
During the six months ended June 30, 2023, cash provided by financing activities was approximately $0.2 million resulting from the exercise of employee stock options.
Funding Requirements
We expect to continue to invest substantially in our research and development activities and incur commercialization expenses related to product sales, marketing, manufacturing and
distribution. As we achieve further commercial success, we may need to obtain additional funding to support our continuing operations. In addition, our financial stability is reviewed by existing and potential customers from time to time and we
believe that a stronger cash position provides us additional time to execute our growth strategy and is perceived positively by such customers and may also provide us with higher grading in such customers’ diligence processes. If we are unable to
raise capital when and if needed or on attractive terms, we could be forced to delay, reduce or eliminate some of our research and development programs or future commercialization efforts.
As of June 30, 2024, we had cash and cash equivalents, short term bank deposits, short term restricted cash and marketable securities of approximately $106.4 million. We expect
those funds to be sufficient to continue to execute our business plan for at least the next 12 months.
We also expect our losses to be similar in future periods as we:
|
• |
expand production capabilities to produce our LiDAR solutions, and accordingly incur costs associated with outsourcing the production of our LiDAR solutions;
|
|
• |
expand our design, development, installation and servicing capabilities;
|
|
• |
continue to invest in research and development;
|
|
• |
increase our test and validation activities as part of our Tier 1 responsibilities;
|
|
• |
produce an inventory of our LiDAR solutions; and
|
|
• |
continue to invest in sales and marketing activities and develop our distribution infrastructure.
|
Because we will incur costs and expenses from these efforts before we receive incremental revenues with respect thereto, losses in future periods will be significant. In addition,
we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.
Off-Balance Sheet Arrangements
Our remaining performance obligations are comprised of application engineering services not yet rendered. As of June 30, 2024, the aggregate amount of the transaction price
allocated to remaining performance obligations was $1.0 million, which we expect to recognize as revenues within the next 12 months.
Other than as set forth above, we have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.
7