Innoviz: Countdown to dilution, downgraded to sell (NASDAQ:INVZ)

Innoviz (Nasdaq:INVZ) announced its fourth quarter results, and the Israeli company pleasantly surprised investors by reporting a record $15 million in revenue for the quarter. Furthermore, operating cash flow consumption was the lowest at $14 million. Getting off to a solid start, Luminar, which had sales of $152 million this year, is reducing its workforce and refocusing on its core business of evolving its InnovizTwo sensors beyond B-sample status and maximizing sales of its InnovizOne sensors wherever possible. seemed poised to continue its cost-cutting trajectory, including focusing on

In contrast, Q1 results were mixed, leaving a slightly negative impression and revealing some less positive insights. The company’s operating expenses of $22 million were 10% higher than expected, and cash fell by $25 million, leaving it with $128.5 million in the end. Revenue amounted to $7.1 million, including non-recurring engineering (NRE) revenue and sensor sales, but the breakdown was not disclosed. The company said primarily he NRE contributed to this figure. Although this is significantly higher than he was in Q1 2023, This result does not inspire confidence in future sales growth and indicates that I7’s sales are not on a stable growth trajectory.

The second quarter estimate of $4 million to $5 million is particularly suggestive for BMW (OTCPK:BMWYY) Partnership, forged by reality. Currently, the order book reference is permanently missing, and the space created contains his description of LiDAR demand in 2030 and his new regulations from NHTSA in 2029. Furthermore, it is not clear whether Innoviz has secured a contract extension nomination. His BMW from InnovizTwo. Indeed, it was omitted from his description of the RFQ in the news release.

The first quarter update reflects much of what was said about the fourth quarter. There was little discussion about the delivery of the I7. Once again, the BMW 5 Series was mentioned as a future commercial launch. Despite the need to clarify the sale of Innoviz LiDAR in the Chinese market, details regarding the launch and Innoviz’s revenue sources remained unclear.

Moving on to other updates, Innoviz has discussed opportunities with nearly all OEMs through RFQ level negotiations. They’ve kept their expectations unchanged for the past six months to get two or three nominations, but the timeline has now been extended to the end of 2024.

Additionally, Innoviz also mentioned a collaboration with Mobileye (MBLY), Qualcomm (QCOM) platforms, and NVIDIA (NVDA). These collaborations highlight the company’s commitment to becoming the premier choice for LiDAR sensors and seamlessly integrating them into the broader sensor fusion environment.

In the first quarter, there was no discussion about the launch of a slimmer version of InnovizTwo, which occurred in the fourth quarter. However, the presentation featured renderings of the product. Other prototype devices such as his Innoviz360 and InnovizCore, solutions for the rotating LIDAR format, quickly disappeared as Innoviz shifted focus to its core goals. In contrast to its competitor Luminar (laser), successfully secured a $100 million nomination for a similar-looking sensor Halo to be launched only in 2026, but Innoviz only mentioned interest in new devices without making any concrete developments .

Innoviz successfully implemented nearly all initiatives in its restructuring plan, with a focus on the InnovizTwo sensor and software platform to reduce planned cash expenditures. However, as I mentioned earlier on operating cash flow (OCF), expenditures have increased by 10%, indicating that more effort is needed.

According to Seeking Alpha’s revenue forecast database, Innoviz is expected to generate revenue of $39 million, based on a combined analysis of four analysts. This figure is slightly lower than the company expected, considering that at the high end of this range he could reach up to $70 million in NRE income. However, this range has him starting at $20 million with a difference of $50 million, demonstrating the unpredictability of these predictions.

What does this mean for the company’s financial position? The implications are significant, especially considering that half of the expected NRE, or $35 million, is included in the $39 million revenue estimate. Probably. In this scenario, the earnings from InnovizOne would look quite modest compared to his 2024 earnings that have been communicated to the investor community thus far.

With $128 million in cash and $21 million in operations, Innoviz faces a challenging financial outlook. With gross losses of approximately $5 million and negative gross margins of 16%, Innoviz is projected to have only $56 million in cash left by the end of this year, potentially running out of cash by 2025.

In contrast, Luminar recently filed for a $150 million ATM on May 3, and Innoviz filed for a shelf sale for $200 million in 2022. Considering Innoviz offered his $60 million in a public offering last year, I think up to $140 million is likely available to ATM without renewal. It’s worth noting that there were no stock sales in the first quarter, based on our cash flow examination.

Given these financial constraints and the fact that the company does not expect significant revenue inflows in the short term as it continues to work toward securing nominations, the path to financial success is extremely difficult. is. Although the opportunity exists, it remains uncertain whether it can be converted into revenue given existing financing options.

Therefore, I downgrade the company to ‘sell’. I expect Innoviz to sell nearly $140 million of its remaining inventory within the next 12 months, possibly pushing the stock price below his $1. I acknowledge that Innoviz could win the nomination, whether through new or extended existing relationships with companies like Volkswagen, but I do not expect financial performance to improve significantly. I have not. Additionally, we expect at least one more product to be available by 2026.

While the stock could experience positive movement based on the RFQ, and a projected win could turn into a nomination, the prospect of significant dilution is a major disincentive to owning shares in the company. It becomes.