OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

 

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, and 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 U.S. Securities and Exchange Commission (the “SEC”).

 

Company Overview

 

We are a leading Tier-1 direct supplier of high-performance, automotive grade LiDAR sensor platforms and complementary software stack 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 comprehensive solution for OEMs (original equipment manufacturers) 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 complementary software stack.

 

Since 2021, we have funded the development of two production path programs: the InnovizOne and InnovizTwo LiDAR sensor platforms and complementary software stacks. With the InnovizOne program transitioned from the development phase into full series production in 2024, we eliminated duplicative cost structures and reduced spending on InnovizOne development, while reinvesting a portion of the savings into the InnovizTwo sensor platform and complementary software stack. All quoting and bidding activity in our request for information and request for quotation pipeline is now focused on the InnovizTwo platform.

 

During 2022, we made the strategic decision to become a Tier-1 supplier of LiDAR and complementary software stack 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 played a significant role in our subsequent major OEM program wins, 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 platform, and in 2023, we announced that Volkswagen aims to expand its use of our InnovizTwo LiDAR to its existing light commercial vehicle program, the I.D Buzz.

 

In 2024, we announced that Mobileye Vision Technologies Ltd. (“Mobileye”) will use the InnovizTwo Long-Range and the new InnovizTwo Short- to Mid-Range LiDARs for the Mobileye Drive™ platform. The new InnovizTwo Short- to Mid-Range leverages InnovizTwo Long-Range’s maturity and is designed to meet the requirements for light commercial vehicles, shuttles, robotaxis, and can be customized to suit a wide array of vehicular design and functionality requirements. We believe that the combination of our LiDARs and Mobileye’s platform is critical to enabling comprehensive sensing capabilities for navigating complex urban environments and enhancing the overall safety and reliability of autonomous driving systems, and that this partnership showcases the flexibility of our LiDARs to work across a variety of vehicle platforms to further testing and deployment of autonomous vehicles. Our partners are leaders in deploying new technologies into the automotive industry. We believe that our close cooperation with these partners and OEMs positions us well 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 rigorous ISO26262 standard for functional safety in the automotive industry, and the IATF 16949:2016 certification for quality management in the automotive industry. Compliance with these and other standards has 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 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), using both our long- and short- to medium-range LiDARs. 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 we believe will 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+, Level 3 and Level 4 production, and to continue to capture and extend our market share to Level 5, as the market continues to mature.

 

In February 2025, we announced an optimization of our operations to extend our cash runway and accelerate progress towards profitability and free cash flow generation, resulting in a reduction in our employee headcount of approximately 9% during the first quarter of 2025.

 

We are currently expanding our third-party manufacturing capacity through contract manufacturers to meet an anticipated increase in customer demand for our products. As part of this effort, we selected Fabrinet (NYSE: FN), a leading provider of advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services, as our manufacturing partner for the InnovizTwo LiDAR platform. In July 2025, we announced the shipment of the first InnovizTwo LiDAR units from Fabrinet’s high-volume production line. This collaboration is expected to enable Innoviz to ramp its InnovizTwo LiDARs to volume with a manufacturing partner that has automotive-grade facilities around the world, allowing for flexible and cost-effective production.

 

Recent Developments

 

Achieving ISO/IEC 17025:2017 certification for LiDAR Testing Laboratories

 

On September 30, 2025, we announced that our hardware qualification testing laboratories received ISO/IEC 17025:2017 certification, an internationally recognized standard that validates the competence of our testing and calibration laboratories.

 

Selection by a Major Commercial Vehicle OEM for Future Series Production of Level 4 Autonomous Trucks

 

On September 8, 2025, we announced that we have been selected as a future series production supplier by a major commercial vehicle OEM to supply advanced LiDAR units for SAE (Society of Automotive Engineers) Level 4 autonomous class-8 semi-trucks.

 

Open Market Sale Agreement℠ with Jefferies

 

On August 13, 2025, we entered into an Open Market Sale Agreement℠ (the “Sales Agreement”) with Jefferies LLC relating to the sale of our ordinary shares and filed a sales agreement prospectus together with a base prospectus on Form F-3 with the SEC. In accordance with the terms of the Sales Agreement, pursuant to the filed sales agreement prospectus, we may offer and sell our ordinary shares having an aggregate offering price of up to $75,000,000 from time to time through or to Jefferies LLC, acting as sales agent and/or principal (the “ATM Program”). During the quarter ended September 30, 2025, we issued and sold 4,894,936 shares under the ATM program for net proceeds to the Company of approximately $7.9 million.

 

Events in Israel

 

On October 9, 2025, Israel, Hamas, the United States and other countries in the region agreed to a framework for a ceasefire in Gaza between Israel and Hamas. It is unknown whether this ceasefire will endure, or if other conflicts in Gaza, Lebanon, Yemen, Iran, or in the broader region will reemerge or escalate in the future, as military activity and hostilities continue to exist at varying levels of intensity, and the situation remains volatile. At this time, we do not expect the current conflict (or other ongoing conflicts) to have a material impact on our financial and operational results; however, since these are events beyond our control, their continuation or cessation may affect our expectations. We continue to monitor political and military developments closely and examine the consequences for our operations, assets and financial and operational results.

 

 

The results of operations presented below should be reviewed in conjunction with (i) our unaudited interim consolidated financial statements as of and for the nine months ended September 30, 2025, included in Exhibit 99.1 to this Report, (ii) our audited consolidated financial statements as of and for the year ended December 31, 2024 appearing in our Annual Report, and (iii) 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:

 

Comparison of the Nine Months Ended September 30, 2025 and 2024

 

Revenues

 

 

Revenues increased by approximately $24.2 million, or 133%, to approximately $42.4 million for the nine months ended September 30, 2025 from approximately $18.2 million for the nine months ended September 30, 2024.

 

The increase in revenues was primarily due to increased sales of NRE (Non-Recurring Engineering services), which contributed approximately $29.9 million during the nine months ended September 30, 2025 compared to approximately $13.9 million in revenues during the nine months ended September 30, 2024, as well as the sale of machinery to a customer during the nine months ended September 30, 2025.

 

Cost of Revenues and Gross Margin

 

Cost of revenues increased by approximately $11.6 million, or 58%, to approximately $31.6 million for the nine months ended September 30, 2025 from approximately $19.9 million for the nine months ended September 30, 2024.

 

The increase in cost of revenues was primarily due to an increase in costs related to sales of NRE and costs related to sale of machinery to a customer, partially offset by decreased excess and obsolete inventory. Gross margin increased to approximately 26% for the nine months ended September 30, 2025 from approximately (9)% for the nine months ended September 30, 2024, primarily due to increased sales of NRE, the sale of machinery to a customer and decreased excess and obsolete inventory.

 

Operating Expenses

 

 

Research and Development

 

Research and development expenses decreased by approximately $20.0 million, or 33%, to approximately $40.4 million for the nine months ended September 30, 2025 from approximately $60.3 million for the nine months ended September 30, 2024.

 

The decrease was primarily attributable to decreased payroll of approximately $13.0 million (primarily related to allocation of direct costs related to sales of NRE and to a decrease in headcount), decreased stock-based compensation of approximately $4.8 million and decreased materials purchases and prototype expenses of approximately $1.1 million.

 

Sales and Marketing

 

Sales and marketing expenses decreased by approximately $1.6 million, or 27%, to approximately $4.2 million for the nine months ended September 30, 2025 from approximately $5.8 million for the nine months ended September 30, 2024.

 

The decrease was primarily attributable to decreased payroll of $0.9 million (primarily attributed to a decrease in headcount) and decreased stock-based compensation of $0.4 million.

 

General and Administrative

 

General and administrative expenses decreased by approximately $1.8 million, or 12%, to approximately $13.1 million for the nine months ended September 30, 2025 from approximately $14.9 million for the nine months ended September 30, 2024.

 

The decrease was primarily attributable to decreased legal consulting services of approximately $1.0 million and decreased stock-based compensation of $0.9 million.

 

Financial Income, net

 

 

Financial income, net was approximately $0.4 million for the nine months ended September 30, 2025, compared to financial income, net of approximately $6.6 million for the nine months ended September 30, 2024.

 

The decrease was primarily related to foreign currency exchange differences of approximately $4.1 million (primarily due to differences arising from our ILS denominated lease liabilities under ASC 842), decreased bank deposits interest income of approximately $1.7 million, decreased net gain related to marketable securities of approximately $0.3 million and warrants liability revaluation of approximately $0.1 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 nine months ended September 30, 2025, all 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 nine months ended September 30, 2025, the value of the USD devaluated against the value of the ILS by approximately 9.4%. 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 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 nine months ended September 30, 2025 and 2024.

 

B. Liquidity and Capital Resources

 

Sources of Liquidity

 

During the nine months ended September 30, 2025 and 2024, we funded our operations primarily from the approximately $370 million in proceeds we received in connection with our business combination with Collective Growth Corporation (completed in April 2021), the approximately $61.4 million in net proceeds we received from our August 2023 underwritten equity offering, the approximately $37.3 million in net proceeds we received from our February 2025 registered direct offering and the revenues generated from the sale of goods and services.

 

As of September 30, 2025, we had approximately $74.4 million in cash and cash equivalents, short term bank deposits, short term restricted cash and marketable securities. Cash equivalents and marketable securities are invested in accordance with our investment policy.

 

Cash Flows Summary

 

The following table summarizes our cash flows for the periods presented:

 

 

Operating Activities

 

During the nine months ended September 30, 2025, operating activities used approximately $38.8 million. The primary factors affecting operating cash flows during the nine months ended September 30, 2025, were the net loss of approximately $46.5 million, impacted by non-cash charges of approximately $7.7 million consisting of stock-based compensation of approximately $11.9 million, depreciation and amortization of approximately $4.1 million and an increase in working capital of approximately $(8.3) million.

 

During the nine months ended September 30, 2024, operating activities used approximately $59.1 million. The primary factors affecting operating cash flows during the nine months ended September 30, 2024, were the net loss of approximately $76.2 million, impacted by non-cash charges of approximately $17.1 million consisting of stock-based compensation of approximately $15.9 million, depreciation and amortization of approximately $6.2 million and an increase in working capital of approximately $(5.0) million.

 

Investing Activities

 

During the nine months ended September 30, 2025, cash used in investing activities was approximately $26.2 million, which primarily resulted from investment in bank deposits of approximately $77.9 million, investment in marketable securities of approximately $29.9 million and purchase of property and equipment of approximately $3.2 million, partially offset by withdrawal of bank deposits of approximately $52.4 million and proceeds from sales of marketable securities of approximately $32.6 million.

 

During the nine months ended September 30, 2024, cash provided by investing activities was approximately $60.4 million, which primarily resulted from withdrawal of bank deposits of approximately $88.6 million and proceeds from sales and maturities of marketable securities of approximately $35.3 million, partially offset by investment in marketable securities of approximately $33.5 million, investment in bank deposits of approximately $26.7 million and purchase of property and equipment of approximately $3.2 million.

 

Financing Activities

 

During the nine months ended September 30, 2025, cash provided by financing activities was approximately $46.4 million resulting from approximately $37.3 million in proceeds from our registered direct offering, net of issuance costs, $8.4 million in proceeds from the sale of our ordinary shares under the ATM Program, net of paid issuance costs and approximately $0.7 million from the exercise of employee stock options.

 

During the nine months ended September 30, 2024, 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 existing and potential customers and may also provide us with higher grading in such customers’ diligence processes. If we are unable to obtain 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 September 30, 2025, we had cash and cash equivalents, short term bank deposits, short term restricted cash and marketable securities of approximately $74.4 million. We expect those funds to be sufficient to continue to execute our business plan for at least the next 12 months.

 

Additionally, we intend to fund our operations from revenues generated from the sale of goods and services, together with funds received under the registered direct offering, proceeds from our ATM Program and savings pursuant to optimization of our operations.

 

We also expect our losses to be similar or lower in future periods as we:

 

 

 

 

 

 

 

 

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 September 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $12.9 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.