Innoviz Technologies Ltd

NASDAQ:INVZ

Earnings Call Transcript 2023-Q1

[Rob Moffatt]

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.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

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 a late state discussions with one of our major existing customers for a new program and today we're announcing that we have delivered of that promise. This program is for a level four commercial -- light commercial vehicle and more specifically a commercial van that will include three to four LiDAR 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 SOP, 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 the revenues in the back half of 2023 with sample shipments ramping and attractive levels of NRE expected to come on sooner than they typically do.

The reason this program is moving so quickly is because we are displacing a development stage competitor. This is a new milestone for 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 it is the second compute platform partner that we are integrating with for this automaker. This helps to expand our compute platform exposure and shows our flexibility to integrate with all of the major leading platform 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 that -- 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 on one step closer to making that happen.

We are in discussion with NVIDIA about being integrated into sales production programs, leveraging their Hyperion platform. These conversation span multiple major OEMs and could introduce RFI and RFQ activity that ultimately would be incremental to the NVIDIA based programs that are already in our pipeline.

In order to help investors understand why this is such an important development, let me explain how OEM typically makes their decision around autonomy platform vendors. Conversations with OEM historically have progressed in one of two ways. Sometimes they run their compute platform and LiDAR suppliers also in parallel making each of the decisions independently, and sometimes they will start by picking the compute platform first and then build the sensor suit around it.

In scenarios like the second situations already being integrated with the compute platform on another program can significantly reduce the time and cost that it detect for 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 potentially meaningful structural advantage, and we are making excellent progress on this front every quarter.

And while we're discussing software, I'm excited to share some details on a new product that we are quoting in conjunction with an advanced discussion with a leading global OEM. During our evaluation process with this OEM, they were highly impressed with the capabilities that our LiDAR and perception software brings to the table. As a result, they expanded the scope of the RFQ to include what could be the first industry, first ever LiDAR based, minimal risk maneuver, or MRM, system.

First, let me give a little color of what an MRM does. The MRM system is software that sits on a dedicated compute box within a vehicle and operates as a backup system. In the event of a complication with the primary system, the MRM could take over control of the vehicle, offering a transition period for the driver to retake control of the vehicle and to offer the ability to safely pull the vehicle to the side of the road if the driver does not retake control within a specific 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 may 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 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, they can build upon and further expand the value that our LiDAR hardware technology brings to the table. And the second, the gross margin profile of on software is much higher than hardware. And in the end market like automotive where you have more than 90 million units of volume per year, we can generate meaningful leverage and 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 be positive to the gross margin profile.

Next, I want to give a quick update on our largest customer, Volkswagen. There have been several industry headlines lately regarding changes in the internal software company, CARIAD, and we are happy to say that we continue to work towards a mid-decade SOP for our existing series production. I'm also happy to announce that we continue to explore new ways to grow our relationship with the company, and we are working with both Volkswagen and CARIAD on additional programs, including several that are advanced stages of discussion.

We are also working with other compute platform partners to build a wide area of LiDAR integration options that would give the OEM an almost modular approach to LiDAR development -- deployment that could allow integration into multiple platforms and software [ph]. 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 amount of ongoing momentum we are seeing with our existing customers like Volkswagen, we believe we are well along the path to proving this important milestone of our business, and we look forward to 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, Shuttle program are on target to SOP in the back half of this year. The Asian EV focused OEM is targeting a late 2024 to 2025 SOP, and our current Volkswagen award is targeting a mid-decade. 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 an RFI to the RFQ process in this quarter with roughly half of the pipeline now at the RFQ stage, which is a first in the company's history, we are now working on more than five RFQs in parallel. Between the programs we've already announced in the 10 to 15 in the RFI and RFQ pipeline, we've either have already won business or are actively quoting new awards with eight out of the top 10 global automakers. Let that sink in for a minute. Eight of the top 10 largest car makers in the world are in our pipeline and are actively making sourcing decision for our LiDAR.

We ultimately believe that it's likely going to be a winner takes most market. The technology is safety critical. They 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 is likely going to be difficult to match. Given the fact that most of these programs will be on the road for eight to 10 years, we believe that major portion of the industry market share is going to be determined in the next 12 to 18 months.

Looking at our customer programs, you can already see some solid evidence that the pace of programs activity is accelerating. After winning BMW 2018, it took us over three years to win our next production award. From them, 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 new program. And looking forward, we think there are three to five programs that have the potential to make decision before the end of the year. I believe this timeline shows some 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 comic motors, and this outlook is embedded in our 2023 targets.

As you can see, we are now targeting one to three additional programs with existing customers. Since we have announced new program today and we have a line of site 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. And on the new customer front, we're still targeting two series production awards with new customers. We have a few RFQ that we believe can advance into final commercial negotiations in mid-summer, and I'm hoping we will have something to share by late summer to early fall.

And in terms of financial targets, we are introducing a very important new metric cash collection from customers, which we target to be $20 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 NREs 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 NREs to our financial picture and to encourage investors to take NREs into considerations along with revenue. Let's pass for a moment and make sure everyone is done what NRE is because it's critical to our cash flow and the funding strategy of the business. Most investors we speak with understand our income profile once 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 of time, we have three sources of income and cash, sample unit shipments, non-automotive shipments and NREs. Sample unit shipments are important because they carry much higher gross margins than production pricing. For instance, sample units typically sell in the 5K to 15K dollar range compared to automotive production ASP, which is under 1K and can eventually approach $500 per unit at extreme volumes. These sample units are not priced on gross margins. They are priced to recover fixed cost like R&D investments. And for each customer program we can bring in from our pipeline, we could typically sell several hundred units per year during the pre-production phase of this -- 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.

Here we are also starting to ship units into the non-automotive market. This effort began in late 2022 and is starting to ramp up as we go through 2023. As you can see ASP for non-automotive sales are basically in line with samples unit sales ranging from 5K to 15K. So here you to, you have the potential for a very high gross margin that can help absorb your fixed cost. While our efforts in non-automotive are still in the early stages, we think this is a market that could be in the tenths of thousands of units per year for us in the next few years. And the addition of the Innoviz360 is expected to be a meaningful catalyst here.

And then you have NREs. NREs stands for non-recurring engineering. Basically it's a phrase of wide range of services that we provide to customer that's central, mostly around engineering of the product as it works through [indiscernible]. At a very high level, I will encourage you to think of NREs essentially as services revenues. The communication challenge that we have, however, is that they cannot always be recognized as revenues depending on their accounting treatment. Sometimes they can be recognized as revenue, and sometimes they have to be recognized as a contra item to expense such as R&D. And you don't always know upfront how you will be able to classify them, since it can often depend on terms and milestones that require input from the customer.

I won't go into all of the factors that play into the accounting details. What's important here is that whether it's classified as revenue or 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 NRE 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. So here too, we have the potential to bring intensive millions of dollars per year if we can convert several of the programs from our pipelines.

One last important point here is that the NRE are usually only available to tier ones. Typically the total pool of NREs allocated to the tier one. And if anything is allocated to the tier two, it is a tiny amount of, 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 NRE as part of our funding strategy in a meaningful way.

We've been getting an increasing number of questions lately on our funding strategy, and my response to it is the most important step in funding our activity, our business is growth. We have tremendous amount of opportunity in our pipeline. In each deal, we win, has the potential to bring in tens of meters of dollars of NREs and sample shipments. Both of these items offer high gross profit throughout flow through, and we are specifically intended to help absorb fixed cost.

We don't assume that we can win every single program, but if we can continue to show the momentum that we have demonstrated lately and continue to bring in several programs per year, then these things will start to build up on upon themselves. With the potential for each of these automotive sample units, non-automotive sales and NREs, offering the potential to contribute tens of million dollars each structurally lower our burn rate, extend our cash runway, and bring us one step closer to breakeven.

With that, I'll turn it over to Eldar to go over the financials.

[Eldar Cegla, Chief Financial Officer]

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 were impacted by our pivot towards SOP with BMW and the Shuttle program, which will weigh on the first half of the year before revenues begin to grow in the back half of the year. The biggest factor involved here is the lower sales price as we transit -- as we transition from selling LiDAR sample unit to selling just the components to Magna, who is the tier one for the BMW program.

As we think about 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 this 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 NREs 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 Q1 operating expenses was primarily due to the higher R&D expenses, mainly on InnovizTwo cost, 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 to back to Omer. Thank you.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

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 for my upcoming fireside chat with Gero Kempf, the AD/ADAS over at Audi. Usually it's Gero asking me all the questions, but this time I will get the turn the table around and ask him about Audi autonomy strategy and some of the lessons he learned along the way during his years of experience in the field. I'll probably also fit in one or two questions on what led Audi to choose Innoviz as its still one LiDAR supplier. Investors should be able to stream 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 digital program that is on an advanced timeline and is expected to already begin contributing financially in 2023. As part of that process, we're displacing a development stage competitor and we believe we can do it again in the future. We also talked about being integrated into a second compute platform with this OEM customer and we said that working with this compute platform player can lead to additional opportunities for growth going forward, including with other OEMs.

We also talked about our discussion with another top three compute platform player, which is NVIDIA exploring a deeper integration with Hyperion platform that could bring further programs into our pipeline in addition to the ones 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. And we believe that we could be -- there could be as many as three to four -- or three to five decisions by the end of this year. And for one of those programs in the RFQ process, we disclose that we're actively quoting a new MRM product that can increase our revenue and profit per vehicle through a bundled system, while allowing us to move further up the sort of stack. And we are starting to explore offering this bundle to additional OEMs.

And after updating our 2023 targets to include a solid outlook for cash collection from customers, we outlined how strong growth could serve as the primary building block of our long-term funding strategy. I'm incredibly proud of the progress the team has made this quarter. I know it can be exhausting working at the company where things are moving this past 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 the family, a lot of late nights and early mornings. So I just wanted to finish by saying thank you for everyone on the team for your contribution this quarter and going forward. We have a lot to be proud of with more to come soon. Let's keep up the momentum.

With that, I'll turn the call over to the operator to take us into the Q&A. Thank you.

[Operator]

Thank you. [Operator Instructions]

Our first question today comes from the line of Mark Delaney of Goldman Sachs. Please go ahead.

[Mark Delaney, Goldman Sachs]

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 Mobile I [ph] and NVIDIA?

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Yeah. Sure. So on the commercial, commercial -- light commercial vehicle, we already kicked off the activity, so we're already there. There are two deployments. So there are two flicks 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. So this is going to be several years of work that the eventual SOPs 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. And basically following the RFQ process, we hope that we will be able to win this contract.

[Mark Delaney, Goldman Sachs]

Okay. That's helpful. Thank you. And then Innoviz is a goal of series production awards with two new customers this year, I believe. How many shots on goal do you have specifically with new customers this year? So we can get a sense of the win rate you're expecting, and maybe you can comment a bit more on your confidence on being successful with these awards in 2023 with the two new customers. Thank you.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Sure. So we talked about having more than five RFQs in parallel right now. Only -- and we said that there are additional one to two programs that are with existing customers. So you can get a sense, we said more than five, so you get a sense of how many programs this will -- are with new customers. And I believe that we are in a very good position. Generally, I think that what Innoviz is offering today is very, I would say, very attractive. Beyond the fact that the product is great pricing, et cetera. I think the fact that we are already awarded with several programs today is giving us a huge advantage.

In talking with these customers, you can see that those are not the first customer who made a decision for the LiDAR sourcing. The fact that they can rely on us having already customers that are going to make sure that we'll be on time and working with very credible customers like Volkswagen is giving them a lot of confidence. So I believe that with the potential with the great product that we offer, the price point that we offer, the automotive experience that we have, guaranteed volume from customers is giving us a huge advantage. So I would say that I'm confident that we will be able to get to those -- these two new awards.

[Mark Delaney, Goldman Sachs]

Thank you. I'll turn it over.

[Operator]

Thank you. Our next question comes from the line of Jared Maymon from Berenberg. Please go ahead.

[Jared Maymon, Berenberg]

Hey, good morning guys. Thanks for taking the question. Obviously -- congratulations, by the way, eight of the top 10 global OEMs is very meaningful. That's pretty exciting. Obviously exciting for you, because even if one of those is one that could be dozens of millions or hundreds of millions of revenue in the out years. So pretty exciting stuff. And then also obviously shows the kind of motivation of OEMs to design in LiDAR.

First question I had, I know there was a large silicon platform provider that recently announced an expansion of their supply and development agreement with Volkswagen for level two plus and level three vehicles. And that same platform provider has been kind of increasingly discussing the need for RADAR and LiDAR subsystems in recent years. It sounds like that award is for a vision only system, but that same providers and talks with, it sounds like all of their customers for that system to eventually add LiDAR and RADAR subsystem. So just curious if you can tell us about your work with that platform provider, and then how meaningful it could be if they partner with Innoviz for that redundant system that they're creating.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

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

[Jared Maymon, Berenberg]

Got it. Okay.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Sorry, just to add, of course, it'll have a nice impact on additional opportunities that they are part of that would be the…

[Jared Maymon, Berenberg]

Right. Yeah. And obviously lot of opportunities that that they're kind of a part of there. So that's great to hear. And then just on the light commercial vehicle award this morning, so curious if there's any kind of read across here for potential expansion into passenger light vehicles with that OEM. And it sounds like if that's the case both on this kind of commercial vehicle award and potentially on passenger light vehicle awards, you could be displacing kind of a key competitor. So I guess also just curious, anything you could share on that OEM strategy with LiDAR, for example, 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?

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Yeah. If you allow me -- maybe before I answer that, maybe just to kind of comment on why we're not mentioning the name of the customer. Generally speaking, when we're in discussion with the different OEMs, the topic of marketing following nomination is something that we decided not to have as part of the negotiation, which we learned. It's becoming, I would say, annoying to the customer. That specific customer told us from the beginning that they expect the marketing element would not be even raised during the process. They told us that some other companies talk with their marketing team and they talk with them, and they asked us, not to push for that at this point. And we want to respect it.

I mean, we are -- we want to act as a traditional -- as a tier one in this manner, and they're expected -- they expect us to act in that manner. Since this is a program that you actually see on the road in a few months, then we didn't see a good reason to push for it, and for sure not to add friction in the process in order to make things move faster. But as we did last year when we announced on our VW Group, and eventually without naming them and following that we did, so we -- that will be possible in the following months.

To your question about whether this OEM has experience with LiDARs and also with passenger vehicle, it's an expansion that we're -- this is an existing customer that is using our LiDARs already on other platforms that is using for passenger vehicle.

[Jared Maymon, Berenberg]

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.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Well, I think it's too early to kind of name the pricing we give to it. I mean, we're still quoting it, but I think it's a very interesting direction where the market is going. Understanding that they see the LiDAR as the more resilient sensor in order to provide the backup for a compute box that will eventually drive the vehicle for safety and needs to make a decision on which sensor, it wants to rely on. The fact that our sensor has the ability to see very clearly in the different weather conditions and light conditions and with the ability to see lane markings, et cetera, I think is a very interesting, I would say, development that we're seeing. We hope that will be successful and that will become a product that will be able also to offer to others. But in terms of pricing, I rather not mentioned right now.

[Jared Maymon, Berenberg]

Got it. Fair enough. Thank you guys.

[Operator]

Thank you. [Operator Instructions]

Our next question comes from the line of Samik Chatterjee, JP Morgan. Please go ahead.

[Samik Chatterjee, JP Morgan]

Hi. Hope you can hear me. Thank you for taking my question and congrats on the win you announced this morning. I guess a question on that, maybe if you can help us size the sort of impact that has on the order book. I know you're waiting to sort of frame up the parameters around it, but any sort of ballpark numbers of how it impacts your overall order book, the magnitude of the win you're expecting there.

And you mentioned three to four LiDARs per vehicle is the opportunity. Are you really thinking about sort of all of them being a similar sort of spec in a ways two, or are there more sort of -- it's a more sort of diverse opportunity where you have InnovizTwo and Innoviz360 sort of all on the same vehicle, how you're thinking about that, and have a follow up. Thank you.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

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

[Samik Chatterjee, JP Morgan]

Okay. Okay. Sorry. And quick one for Eldar here. The difference between the NRE bookings and the cash collection guidance is -- maybe just explain the difference there and does it expand as your sort of -- does the gap between cash collection and NRE bookings expand as your NRE expands over time. Is there any sort of thing to keep in mind there?

[Eldar Cegla, Chief Financial Officer]

Yeah. So the NRE is a very important factor in our business and it's meaningful to our cash flows. So when we talk about NRE booking, usually when we approach a program, we quote for few tens of millions of dollars of NRE typically, and this is for the first part, development part, the first 2, 3 years of the program as of the win, then we have the collection. The collection is done over the period of the development process. So the collection is being done. So if we book $30 million and it goes over three years, it may be collected $10 million every year just as an example. But it's very meaningful and incremental. Each program adds additional collection opportunities for each year. So it's a aggregating.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

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 lot of concerns whether Innoviz will have to increase its burn rate in order to act as a dark supplier. I think that the proof behind us now, over the last year, we did not increase our burn rate, for sure, not significantly in order to maintain our position as a dark supplier. And that's our plan also going forward. So the product that we're offering to the different customers is the same ones, the InnovizTwo, and ideally the NREs are going to offset the spending that we have. And we expect to have more wins this year, which will allow us to offset significantly -- I would say more significantly the spending that we have by those earnings. And some of those programs are quite meaningful. The NREs can between $40 million and $50 million each.

[Samik Chatterjee, JP Morgan]

Thank you. Thanks for taking my questions.

[Operator]

Thank you. Our next call comes from the line of Andres Sheppard of Cantor. Please go ahead.

[Andres Sheppard, Cantor]

Hey, good morning or good afternoon guys. Congratulations on the quarter, and thanks for taking our question. I wanted to maybe follow up on the NREs. So just to better understand, do we have a sense of when the NREs might be recognized? And just to clarify, if they are recognized as revenue, then is it safe to assume that that would be -- that would result in additional revenues than the guidance that's provided? In other words, would that be upside to the revenue guidance? Thank you.

[Eldar Cegla, Chief Financial Officer]

Yeah. Newer NREs booking, which fall into -- which are paid and we meet certain milestones already this year, and this potentially is expected, might be an upside if recognize as revenue. So this might be on top of the revenue target of between $12 million to $15 million. But again, this is something that we need to see further down this year. Definitely it has -- can be very meaningful.

[Andres Sheppard, Cantor]

Got it. Thank you, Eldar. And in regards to the revenue cadence that you provided, so 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 between Q3 and Q4? Thank you.

[Eldar Cegla, Chief Financial Officer]

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

[Omer Keilaf, Co-Founder and Chief Executive Officer]

There is also a delivery towards the last quarter, which is related to the new program that we announced today, which we equip a large amount of vehicles and there is activity that includes an NRE in that regard in order to expedite the process. So that's part of it as well.

[Andres Sheppard, Cantor]

I see. Okay. Thank you. And maybe one more, if I could squeeze in. In regards to the liquidity, so with the a hundred -- and let's call it $157 million in liquidity, can you remind us, sorry, what is the kind of expected runway with that? I mean, presume that's sufficient through at least start of production in the second half of the year, but just remind us what the runway expected is with the current liquidity. Thank you.

[Eldar Cegla, Chief Financial Officer]

So for this year, we are -- we have funding needed to execute our strategy definitely. And this definitely impacts also our next year. In terms of our expenses, as Omer mentioned before, we are not planning to increase expenses significantly. While we do expect on the back half of this year or the second half of this year to see more and more revenues and more importantly, more and more collection from the NREs, which will balance off some of our burn.

[Andres Sheppard, Cantor]

Wonderful. Okay. Thank you guys. Congratulations on the quarter again. I'll pass it on.

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Kevin Garrigan from WestPark Capital. Please go ahead.

[Kevin Garrigan, WestPark Capital]

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

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Maybe just to make sure I understood your question, because the pipeline that we have or programs that we are in an RFI and RFQ stages with which we said that more than half of it is actually at the RFQ stage, which is quite amazing. The total, I would say NRE opportunity is $150 million to $250 million. I heard you say $20 million to $40 million. This -- the $20 million to $40 million is just our, I would say, target for the booking that we have this year. And as I said, programs that are beyond that figure for each.

So -- and then your question was whether the new announcement today changes the figure in the pipeline? Is that the question?

[Kevin Garrigan, WestPark Capital]

So in your press release, you had said that you added an additional program to the pipeline by bypassing the RFI stage and moving directly to the RFQ stage. Was that already kind of booked into these numbers?

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Yeah. Yeah. Because those were customers that were in an RFI stage, and moved into the RFQ stage. So they were booked -- they were in the booking on that figure earlier. But the RFQ stage is -- it's a very meaningful one because it's the last stage of the process. RFI can linger and could be also several times. And RFQ is a more focused, I would say, where you down select the different suppliers and you work with generally two to three suppliers in order to conclude the process. So the figures -- the numbers that -- of the different programs the same only that are the more mature stage in the funnel.

[Kevin Garrigan, WestPark Capital]

Okay. Got it. Thank you for that clarification. And then just as a follow up, so you're -- you guys are really starting to gain momentum with platforms in the late stages with many platforms. Do you feel comfortable with kind of your current manufacturing capacity, or is there kind of any plans to expand capacity at any point?

[Omer Keilaf, Co-Founder and Chief Executive Officer]

By the way, just to maybe add something. I mean, we did add -- there were -- in one or two new programs added to the older book. I don't know how it changes the overall number, but the funnel is continue to grow. To your second question, obviously, yes, of course. I mean, we have two production lines today that are building InnovizOne, one in Germany. But that's a small scale, I would say, production line. The other bigger one is in the states, and it's actually owned by Magna, in Michigan. That's the production line that is producing LiDARs for BMW today. InnovizTwo, today we're building it at Innoviz. We have our own NPI line, and we're designing the production line for automation that will eventually would provide a significantly higher capacity. The plan of work to reach a capacity of 200K per machine.

And the idea is that we will be able to duplicate those machines in order to get -- to rather flexible volume. So for sure. We -- eventually, we need to support suppliers. It won't be at Innoviz facility. It will be based on [indiscernible] factors that we work with. Our production strategy is possibly different than others. I mean, by the time the market would grow for volume, we want to leverage on existing factories. We don't want to spend money on building factories, and we want to leverage on existing factories by contract manufacturers that can operate our production. So we are designing the production line. Contract manufacturers will operate it for us.

I mean, at the time that we were audited by Audi more than a year ago. In order for them to nominate us, they had to qualify and feel comfortable with the production line that eventually will serve them. It can't be based on -- one day, we'll have a production line. One day, it will be automotive grade, and one day we will meet all of the requirements they need. They -- we had to point at a production line that can already prove that meets their standards. Obviously, one year and a half ago when we had that process with them, we couldn't show it because we don't have a production manager automotive grid and they couldn't nominate us based on that. So we had to point on existing facility by a contract manufacturer that meet their standards and actually works with them already, and they nominated us based on that production line that will serve them eventually. So that production line is a high volume production line that will eventually serve Audi and others in our -- others of our customers. And maybe one day, we will have our own factory, as we became our own tier one, possibly one day we'll do the same on the production. But I think it's too early, and I think it's not right at this point. And we benefit from the fact that we have a simple production process and automated and we don't need to have our own dedicated factory for that.

[Kevin Garrigan, WestPark Capital]

Okay. Yeah. That makes a ton of sense. Okay. Perfect. Thanks guys.

[Operator]

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

[Jared Maymon, Berenberg]

Hey, thanks for taking the other question, guys. Sorry if there's a little bit of background noise here. Just a quick one on the model, with the BMW program starting production soon, but 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 an SOP that coincides with the SOP of new BMW models, or does that scope include some mid-cycle refreshes and then anything you can update us on how many platforms or models that's across now?

[Omer Keilaf, Co-Founder and Chief Executive Officer]

Yeah. So as we said, and 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 and when BMW decide to launch them at this point.

[Jared Maymon, Berenberg]

Got it. Thank you very much.

[Operator]

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