Q2 2021 Vuzix Corp Earnings Call
Yes.
[music], ladies and gentlemen, the Vuzix event will begin momentarily. We thank you for your patience and please continue to standby once again the vuzix event will begin momentarily. Thank you.
Okay.
[music].
Greetings and welcome to the Vuzix second quarter, ending June 30th 2021 financial results and business update conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the call. Please press star zero.
On your telephone keypad.
As a reminder, this call is being recorded net.
Now I would like to turn the call over to Ed Mcgregor Director of Investor Relations at Vuzix. Mr. Mcgregor you may begin.
Good afternoon, everyone and welcome to Vuzix second quarter 2021, ending June 30th financial results and business update conference call.
With us today are Vuzix, CEO, Paul Travers and CFO Grant Russell.
Before I turn the call over to Paul I would like to remind you that on this call management's prepared remarks may contain forward looking statements, which are subject to risks and uncertainties and management may make additional forward looking statements during the question and answer session.
Therefore, the company claims the protection of the Safe Harbor for forward looking statements that are contained in the private Securities Litigation Reform Act of 1995.
Actual results could differ materially from those contemplated by any forward looking statements as a result of certain factors, including but not limited to general economic and business conditions competitive factors changes in business strategy or development plans the.
Our ability to attract and retain qualified personnel as well as changes in legal and regulatory requirements.
In addition, any projections as to the Companys future performance represent managements estimates as of today August 9.2021, you use ex assumes no obligation to update these projections for the future as market conditions change.
This afternoon, the company issued a press release announcing its financial results and filed its 10-Q with the SEC. So participants in this call who may not have already done so in English to look at those documents as the company will provide a summary of the results discussed on today's call.
Today's call May include certain non-GAAP financial measures when required reconciliation to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found on the Companys form 10-Q quarterly filings with SEC Dot Gov, which is also available at www Vuzix Dot com.
I'll now turn the call over to Vuzix CEO, Paul Travers, who will give an overview of the company's operating results and business outlook.
Paul will then turn the call over to grant Russell Vuzix, CFO, who will provide an overview of the company's second quarter financial results.
We will then move on to the Q&A session and finally wrap up with a few closing remarks by Paul.
Paul.
Thank you Anne.
Hello, everyone and welcome to the Vuzix second quarter 2021 conference call 2021 has and will continue to be a transformative year for vuzix.
Revenue over the first half of 2021 is up approximately 80% year over year units sold are up 53 per cent and revenue from our top 20 customers are up 73%. We ended the second quarter with roughly $138 million in cash for our balance sheet remains in excellent health with ample cash to grow our business.
Ines drive ongoing product development and pursue strategic initiatives that expand our participation in business model. We're.
We're seeing growth in all our major geographic regions driven by customer success within the health care and the broader enterprise market segments. As we look to the back half of 2021, we expect growth of smart glasses adoption to continue as the industry continues to mature despite the slightly lumpy nature of adoption.
Glasses industry is expected to grow to millions of units on an annual basis over the next several years.
Enterprise adoption is happening today, and we're witnessing earlier successes and stickiness across a variety of market verticals concentrated across numerous large organizations and we are actively engaged in expanding and evolving our solutions and technologies to best capitalize on this projected growth.
We recently established a new software integrated solutions business unit, which I'll discuss further shortly and we're evaluating potential strategic acquisitions with due diligence of these targets already underway.
We posted 21% year over year growth of our core smart glasses business in our second quarter going forward, we expect sequentially stronger smart glasses revenue in our final 2 quarters of the year and beyond we are seeing this growth coming from the medical space, along with increasing momentum with our larger commercial customers as pre COVID-19 business opportunities.
Begin coming online again. Additionally, our OEM program engagements are progressing and we expect to see follow on NRT programs and product supply agreements with the shipment of initial production units this year.
During the second quarter, we continue to see strengthening in our core smart glasses business from some of our largest repeat customers, which continue to be a driving force of our base business on a quarterly basis, our largest 2% of customers have accounted for approximately 45% of our enterprise smart glasses revenue over the last 18 months.
With customers like Medtronic, K, DDI, USA, a clorox Johnson, and Johnson and Becton Dickinson, along with some large and as yet unnamed U S General merchandisers, leading the way before Covid logistics was 1 of the largest and most active market verticals for Vuzix smart glasses are customers.
<unk> team has now been back onsite and then regular communications with several notable name brand customers involved in the retail stores distribution centers third party logistics warehousing and inventory management. Most of these accounts and some new ones are driving forward again and are focused on scaling up to gain the efficiencies that deploying.
Smart glasses will afford.
According to market watch dot com augmented reality and virtual reality in the global healthcare market alone is expected to reach $6 billion in value by the year 2025.
This continues to be 1 of our fastest growing market verticals and accounted for approximately 25% of our total revenue in Q2 in terms of comparison, our second quarter health care related smart glasses sales increased 240% year over year as the use of Vuzix supported surgical solutions continues to steadily expand.
Band and we expect further growth to continue into the foreseeable future.
But actor based in Switzerland, as the Vuzix smart glasses based augmented reality surgical platform provider that has spent considerable time over the last year working with regulatory agencies. In June 2021, Medaka received European CE, marking for knee shoulder and spine surgeries using its next day, our solution and as received.
FDA clearance for shoulder as well as knee surgery in the United States in July surgeons in both the U S and Europe completed the first total shoulder replacement surgeries using next a our augmented reality surgical application, which is based on the Vuzix blade Smart glasses Medaka has now turned its focus to expanding its commercial sales in <unk>.
Winning traction within the surgical community <unk>.
Medtronic the world the largest medical device company and a global user of Vuzix Smart glasses continue to order at a robust pace in the second quarter to support their medical texts and surgeons in the field Medtronic now has hundreds of M for hundreds deployed and operating theaters around the world.
101, our global surgical training nonprofit organization also continues to expand their uses of our smart glasses through July 2021, a total over 900 surgical calls have been placed overviews ex smart glasses, which were used to connect more than 100 surgeons across 5 specialty areas, including neurosurgeons Gen.
<unk> and colorectal surgeons adult and pediatric orthopedic surgeons and plastic and reconstructive surgeons <unk> goal is to have their program growth to 1000 mentor mentee payers using smart glasses and they are already deployed to some level in over 3 dozen countries.
Take the medical based in France is another vuzix smart glasses based augmented reality surgical platform provider that is also gaining commercial traction.
<unk> received the FDA clearance in April 21, after spending considerable time over the last year supporting regulatory agencies to expand on their European CE, marking received in may of 2020.
<unk> Medical has now also turned its primary focus towards commercial sales and continued market expansion within the surgical community over the last 6 months Pixie medical has expanded to 10 countries added 20 distributors and has completed many hundreds of surgeries using vuzix smart glasses.
Rods and cones, a provider of a fully virtual surgical collaboration platform placed a $1.2 million order for Vuzix and 400 smart glasses in Q2 with monthly shipments scheduled to occur over the balance of the year.
These monthly shipments remain on track and will support the firm's customer expansion plans, both across Europe, and the United States.
These medical focused software firms, we are engaged with other leading device companies in this space again, smart glasses usage and telemedicine, particularly within the operating room alone represents a significant market opportunity reviews ex over the next several years and we intend to be a dominant solution supplier into this space.
As slide 8 illustrates we currently generate the bulk of our revenues from the sale of smart glasses hardware, but maintained the longer term objective of creating a base of business that will be driven by 3 indicated buckets of smart glasses hardware smart glasses, SaaS software and OEM supply to the broader markets.
As the market for enterprise Smart glasses continues to gain momentum Vuzix is spending considerable time and effort to transform our business model beyond our focus on smart glasses hardware by moving upstream closer to the customer with a complete solution in particular, the ability to generate meaningful SaaS based revenue centered around our smart <unk>.
As over the long haul with our software partners and ourselves will provide us with not only a substantially larger revenue base, but 1 that is recurring and with much higher margins.
We have adopted a 3 prong approach that will drive the changes required across the company to make this happen.
Vuzix will continue to invest in our core business, including smart glasses software and customer service to help accelerate smart glasses sales and industry adoption.
We are continuing the development of our next generation smart glasses and are on track to deliver our first EBT units before the end of this year.
We have also been working on enhancing our core M series solutions with New line extensions in models currently being aggressively worked on.
We are also increasing our engagement and service levels with our major enterprise customers and partners to complete the final steps in support of large scale enterprise wide rollouts.
Building out our internal infrastructure through key hires has been another primary focus for us this year, most notably we brought peak Jameson onboard as our general manager earlier this year.
Pete is a proven hands on executive with a track record of building and scaling multibillion dollar b to B and consumer growth businesses and has done a standout job thus far supporting our efforts to bring our capabilities to the next level.
We have also made key additions to our engineering.
Software and sales team that will expand our abilities to produce support and seller solutions. We are pursuing both organic and inorganic opportunities for enterprise business solutions to expand our participation in the overall value chain with our end customers.
On the organic front, we recently announced the creation of an integrated solutions business unit Vuzix ISP you will be focused on the acceleration of enterprise centric solutions. The development of new tools to support our current and future partners and building SaaS based solutions for business opportunities in various new and underserved <unk>.
<unk> verticals.
This new business unit will be led by Panos <unk> panel has wide experience in the electro optical field with areas of expertise in software development sales and marketing strategic planning and development of strategic partnership alliances with large organizations.
They do business unit has specific revenue and EBITDA achievement targets in place for significant portions of management equity compensation to incentivize success, and we expect the ISP you will drive significant value for our customers partners and shareholders over time.
Regarding inorganic opportunities there are numerous SaaS based solutions that exist across multiple market verticals, where vuzix is focusing we believe that the fundamental problems being solved within health care today, and Rois being delivered by smart glasses to 8 general and specialty surgeries, both financially and for better outcomes for the patient.
Could ultimately represent significant revenue on an annual basis as it rapidly becomes 1 of the standard tools for providing patient care over the next 3 to 5 years.
We also believe so strongly in the future of smart glasses in health care that we have a focus on SaaS based growth in this market and are well into due diligence in this space.
This business could deliver significant accretive high margin revenue streams for Vuzix and bring vuzix, even closer to the customer not only as a hardware supplier, but also as a solutions provider in the medical space.
And finally, we are advancing our core technologies to enable our own products grow our OEM business and supply to the broader markets.
Our core technologies, which includes optics displays and systems represents the keys to the kingdom for future AR smart glasses and related solutions across the entire space.
As this industry achieves even larger scale the control and ownership of these key technologies will significantly enhance our company's value Vuzix continues to steadily develop some of this cornerstone technology internally and I am pleased to report that our most recent patent and patent pending numbers reached a record 210, well above last summer.
Total of 166 last and perhaps most importantly, we have begun the due diligence phase and evaluating a potential investment in an eventual ownership of a disruptive nano electro optical technology.
We believe that this new technology has the potential to work seamlessly with our wave guide tech and ultimately could unlock significant additional long term shareholder value.
We are making solid progress on our key operating goals for 2021 as it relates to growing sales and that appointment order size of our M series and blade Smart glasses, we continue to see follow on orders from our customer base and expect year over year revenue growth over the remainder of 2021.
As for increasing SaaS based revenue through acquisitions and internally developed software.
Hit the ground running with our recently announced integrated solutions business unit as previously mentioned and we are completing due diligence on a potential acquisition that would deliver high margin SaaS based revenue streams initially focused in the medical space.
On the development of our core smart glasses products. The new versions are on track for production release as early as the fourth quarter of 2021, our next generation micro OLED based smart glasses are on track for planned introductions to key customers before the end of the year.
Our OEM program engagements are progressing and we expect to share follow on energy programs and product supply agreements with the shipment of initial production units this year.
During 2021, we have already increased our IP portfolio from 184 to 210 patents, which is up for 166, a year ago and 93 years ago.
Over the remainder of this year, we will continue to add to our IP portfolio with a focus on our next generation smart glasses micro OLED based display engine technology and waveguide optics.
I'd like to now pass the call over to grant for his financial review.
Net.
Thank you Paul as Ed mentioned the 10-Q, we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials.
I was just going to provide you with a bit of color on some of the numbers now sales and smart glasses for the 3 months ended June 32021 rose, 21% in the period to $2.8 million led by a 22% increase.
Year over year and unit sales in the <unk> for 100, smart glasses, and a 77% year over year increase in blade Smart glasses revenues engineering services for the second quarter of 2021 declined by $6 million to $1 million as prior development contracts for completed earlier and no new ones have commenced as of yet.
In 2021.
For overall second quarters total revenues for the 3 months ended June 32021 declined 4% over the prior year's period too.
229 million.
There was an overall gross profit of <unk> 6 million or 20% for the 3 months ended June 32021, as compared to a gross profit of <unk> 8 million or 26% for the same period in 2020 the.
The decline was mainly due to a gross profit decrease of <unk> 5 million from engineering services for the 2021 period versus 2020, our revenue segment in which the company currently earns its highest margins correct product gross margins before overheads and other items averaged 53 per cent of sales in the 2021 period.
As compared to 50% in the prior year's period.
Research and development expense was $2.7 million for the 3 months ended June 32021 versus 1.18 million for the comparable 2020 period, an increase of approximately 50% and consistent with the spending guidance provided on our last earnings call. The ryzen R&D expense with largely driven by increases in salaries due to additional.
Head count increased noncash stock compensation expense and higher research and development costs related to new product development and regulatory compliance fees.
The only an American made expense for the 3 months ended June 32021 rose, 68% year over year to $1.3 million due to increased sales and marketing staff increases in noncash stock compensation expenses and increased advertising and marketing expenses.
General and admin expense for the 3 months ended June 32021 was $4.7 million an increase of 164% for $2.9 million. The increase in G&A expense was higher primarily due to increased noncash stock compensation expenses related to the company's new performance based long term incentive plan for <unk>.
Which was not in place in 2020, along with increases in shareholder communication and insurance.
Total operating costs for the 3 months ended June 32021 increased by $4.3 million over the same period in 2020.
Of which approximately $3 million of the increase was due to noncash stock compensation and.
And primarily related to the company's new pharma space L tip introduced in March 2021.
The net loss for the 3 months ended June 32021 was 8.8.
$8 million or <unk> 14 per share versus a net loss of $4.7 million for 13 cents per share for the same period in 2020.
Our balance sheet remains strong with a cash and cash equivalents position of $137.6 million as of June 32021, and our net working capital position of $147.9 million.
Cash used in operations, excluding changes in our working capital totaled $4.6 million in second quarter of 2021 as compared to $2.9 million in 2020 cash.
Cash used for investing activities for the second quarter of 2021 was <unk> 5 million as compared to point for a million in the prior year's period.
For the 3 months ended June 30th 2021.
The $12 million in equity financing pursuant to the full exercise by the underwriters of their over allotment option related to our March 2021 common stock offering.
As of June 32021, the company does not have any current or long term debt obligations outstanding looking.
Looking forward to the balance for 2021, we expect <unk> activities to accelerate in the second half of this year as we tool and complete further development of our new products and IP.
This would exclude any amount that could be invested for the ultimate closing in the second half of 2021 of 2 potential transactions mentioned by Paul earlier that are currently undergoing due diligence we as well currently expect to increase R&D spending in our third and fourth quarters over Q2.2021.
By at least 50% over the 2020 comparable levels further we intend to incur additional spending in sales and marketing activities, particularly overseas, where we see many opportunities for growth.
And both these operating expense areas, there will be new hires in the upcoming quarters as part of the new team for the integrated solutions business unit as it scales up.
And of course for you will see further year over year increases in our noncash operating expenses of approximately $2.3 million per quarter related to the new performance based long term incentive plan.
With that I would like to turn the call back over to Paul.
Thank you grant I would like to now turn the call over to the operator for Q&A.
Thank you at this time, we will be conducting the question and answer session. If you would like to ask a question. Please press star 1 on your telephone keypad. The confirmation tone will indicate that your line is for the question queue. You May press star 2 if he would like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset.
Before pressing with Barclays.
Our first question is coming from the line of Matt Van Vliet with BPI. Please proceed with your question.
Hi, Good afternoon, guys. Thanks for taking the question.
Wanted to follow up on the.
The recent announcement about the integrated business unit and the potential for add ons SaaS development and products in conjunction with that and looking looking over the next several years.
How should we think about the way youre going to monetize that ultimately what kind of mix of revenue is that potentially.
Going to represent and does it does it impact in any way the pricing mechanism that you're going to go to market with.
With the glasses are that all be additive at this point.
At this point.
Matt Thanks for the question at this point.
I would look at it is if its additive.
Who knows as those business units unfold.
Software and SaaS based applications come out there could be certain areas, because we are selling things as a bundle where it might look a bit differently than that but currently I would just think about it as additive. It's the easiest way to do that the ISP you will actually have a couple of other kinds of revenues there.
Might imagine for.
There's lots of ways to identify a vertical market to be in.
And then some of them, we have customers coming to us, saying, we need a solution that does this these customers are willing to pay to get the engineering done. So it solves that problem, but then ultimately that's going to be part of our base software application that music sales that has recurring revenues that will be recurring on an annualized basis on a monthly.
Run rate across the year.
And that will all be on top of <unk>.
Piece of hardware that gets sold.
Alright very helpful. And then you know you talked a lot about the success you've been having recently in the health care group.
I guess as we think about the specific.
Unit Skus that are that are showing the most volume there I.
I think some of the examples have used the blade as an integrated model, but look into the queue quickly. It looks like the TM series are still the significant portion of sales and really driving the most growth. So I'm curious in terms of what the longevity of the blade and some other relationships you have in the health care industry there.
And how we should think about the the overall mix between the M series and the blades on a go forward basis.
In an operating theatre Theres. Some really nice features that the blade has excuse me that the <unk> 400 has that works well.
The PPE equipment and the rest of the equipment guys that are operating doing open heart surgery or Andrew.
<unk> surgery and the likes for the M 400 is the flagship store.
That said the blade also as true features in certain areas, where it kind of stands out on its own because of the certain aspects of its variability and the seasonal nature of it the bulk of their business that we're seeing in medicals, and 400, and we think and 4000 ultimately, especially with some of the newer software applications that are coming in around debt. So.
Should look at debt.
M series is really the lead horse in medical.
Alright, great. Thanks for taking my questions I'll jump back in the queue.
Matt.
Thank you. Our next question comes from Christian Schwab with Craig Hallum Capital Group. Please proceed with your question.
Hey, good afternoon guys.
Thanks for the slide presentation, I guess, what I'm looking at at page for the slide presentation and in the commentary in the prepared comments I'm just trying to figure out you know.
Can you give us a range of revenue.
Outcome that you expect for the year.
'twenty, 1 and what type of growth.
Rates, we should really be thinking about in the second half of 'twenty, 1 versus the second half of 'twenty.
Yes.
'twenty, 1 should continue to see consecutive growth as we move from our second quarter. Some other business in the second quarter was timing related frankly.
That said.
None of the SaaS base.
Software that we expect ultimately you will start to add to the revenue stream.
I would count in a second excuse me third and fourth quarter. This year, even though some might be there.
So.
It's probably going to be a little bit.
Actually I think it's right in line Christian with the numbers that we discussed in the past I think you look at.
$3 million to $4 million in the next quarter kind of a numbers and then.
More in the fourth quarter.
Okay. Okay.
Our forecast there sorry.
Yeah, No I haven't.
I appreciate that I guess, if we sum up those numbers could queue for be big enough to do 20 plus million. This year is that.
A little bit too optimistic and it may take too many things going in the right direction right now.
It would take some things going in the right direction I mean, it's not impossible to see that some of the business, we have could do that but.
I mean I.
We certainly would not give that advice right now because there's there's question marks on the timing for it.
Fortunately this industry.
Euro down it's come in you can see it our business continues to grow and move forward.
And the size of some other things that we're talking about are getting bigger and bigger.
Now it's only a question now is it this month the next month in and out based upon timing so.
Yes, it could be there Christian but we'd have to really work to make that happen.
Okay.
And I guess my second question has to do with strategic acquisitions is this.
You give us any direction of what you think.
The company could could.
Tremendously benefit from as far as a technology or a.
Or a path to increase revenue yourself with with new customers can you give us a little bit more color about what you guys are thinking about.
And doing due diligence on.
I would tell you that.
2 things you just asked about or characterize exactly by the acquisitions. We're looking at 1 of them is a.
A software oriented solution set.
So as an example, you might sell in for 100.
For ex amount of dollars and you would get on.
Recurring revenue basis on an annualized basis.
6 to 7 times that for us.
For the use of the software solution.
Solution that it brings to the table.
You could.
<unk> true.
Accretive on the on the top line and it's also a great margin as you might imagine because it's software.
On the technology side, and Vuzix is going to make glasses ultimately that.
It looked like always it's been our mission for for the beginning since we've been working with a special forces scars and.
We don't have the budget to celebrate the rate than companies that are out there, but we're really smart with how we spend our money and we've been looking at technologies for a long time.
On that front.
Some of the tech areas I think is only going to catapult forward, what we're trying to do to get to that those form factors. What we have today is already really pretty amazing, but some other stuff that we're looking at.
I think it takes it to another level.
To a level I think Christian that you could almost anticipate what we're doing being in the bulk of the smart glasses systems that might be on the marketplace because of that.
<unk> changing I believe.
Great. Thanks.
No other questions. Thanks, guys.
Yep, you're welcome Christian.
Thank you. Our next question comes from Jim Mccleary with Dawson James. Please proceed with your question.
Yes.
Thank you and good afternoon.
Hey, guys.
Paul in your remarks, I think you mentioned a couple of times.
OEM production revenues.
It is.
The tier 1 defense supplier that we've been waiting for it and it has a contract for the design doors that you anticipate a contract to be signed in and production revenues to occur.
It is exactly the 1.
We're <unk>.
Literally at the point in the game or the devices that we're delivering are being looked at as if their production devices and.
We are knock on wood very very soon should be in a position to where we have the supply agreement signed.
Well that would be fantastic.
Free congratulate you on that.
Okay.
Thanks for the services revenue I know its lumpy and I know it.
It depends on when you sign things, but is there.
Are there are there more service contracts coming this year or is it reasonable to think that there are more service contracts coming this year.
There should be.
I will say debt.
Some other base.
Fix and engines that were delivering now are getting good enough debt.
Folks are not really asking for much of a change in it.
So they might be looking more like their production ask order, although theyre going into very early gizmos.
You should expect some more before the year is up.
Can I rephrase that and see if I understand what youre, saying correctly. So you've built up enough of a base of let's call. It standard equipment that customers don't need to customize something.
Yes, they can get going with what we have.
Got it okay.
And.
Your comp grant your comments on head count increasing in the second half.
Can you.
Tell us what head count was at the end of <unk>.
Q2, and what you think it might be at the end of Q4.
Yeah.
Well.
Yes.
I think we're just now a total of about 110 people globally.
And we could see that probably increasing by.
Good 15 people by year's end.
And.
Yes.
2 well over 75% of them will be on the.
R&D software side.
Side of the.
The house, which includes.
The new.
Software solutions.
This division.
And that 75% number you just mentioned that applies to the increase to the total.
Yes, yes.
Yes.
I'm thinking of the 15 people, we expect to add my then 75% of those individuals.
Well be.
In the R&D area.
Our software development customer support.
Got it.
We have.
Got it.
And just I know youre not going to give me too much on the 2 potential acquisitions, but.
Maybe you can.
Talk a little bit about the philosophy you have on acquisitions if it's.
So I'm just going to throw some softballs here is it product driven is it financially driven is it.
<unk> driven is it competition driven if you can just flesh out a little bit what you are looking for when you when you think about acquisitions.
We don't do it just for the money.
I will say that it's nice to see that there is a business model.
It makes sense, but we're doing it based upon business models that have a long term play.
Opportunities to be.
And organizations that could go into the potential to be in the $1 billion even.
Look at the medical space today.
For smart glasses, Jim it's really hard it's growing all over the place and the number of analysts other predicting.
Billion plus dollar industry is being created out of it.
So that's why we have an interest in that space.
And we wouldn't.
We wouldn't acquire a company just because it had some.
Revenue per level, then it could add to that.
2 our top line right now it's moving as we're building a business that we want to own the smart glasses industry and so it's really got to be connected to what we do.
And on the technology front.
We've seen a lot of stuff.
We can add debt for years now it's got to be pretty darn special to ring the bell for us.
And there are some stuff when you're here long enough you get to see a lot of things that are.
Behind closed doors.
In People's Closets, and some other stuff is just a little bit of stuff out there that is quite amazing.
That's the stuff that vuzix looks at.
And then can you.
Can you frame it.
Can you frame the size. So if somebody came to you and said we wanted $50 million of your of your pot of gold you would tell them no way and in the world, but $20 million like workers can you can you phrase it can you frame it for us.
Are you talking about the dollar sizes, we might spend on an acquisition.
So let me say that the 2 transactions that we're looking at right now.
Sure.
There is a significant portion of the acquisition component that comes from equity.
So it should not impact much the cash position the vuzix debuts at present.
Bunch of reasons for that I mean, these guys like vuzix doesn't like.
Ill take over kind of I think these are folks that really believe in our vision and.
We believe the mayors and so they are in it to win it with us.
Fair amount of it's not going to come out of our bank accounts.
And then the dollars to operate that's a whole different story I don't want to get into all of that.
Okay. Just 1 further thing Jim on the equity component for Paul is referring to.
Well over half in both cases is entirely based on performance.
So if they are achieved.
The revenue targets.
Milestone developments.
They're not going to receive the equity.
Yes.
Go ahead Greg.
That's fine.
It might be useful.
Okay.
And supportive of the debt.
We have a we expect net they would be that would be successful obviously.
Okay.
Very helpful answer. Thank you so much and good luck with everything.
Thanks, Jim.
Thank you. Our next question comes from the line of Jack Vander <unk> with Maxim Group. Please proceed with your question.
Great.
Guys I appreciate the quarterly update calls for.
Taking my questions.
So Paul I'd also like to just touch on the OEM projects.
Aside from the commentary provided on the main 1 that comes to my mind debt tier 1 aerospace customer.
All 4 phases, but maybe could you share an update on those I think last quarter. The other for OEM projects that you had discussed there are various stages last quarter do you expect any of those other for or if there is anymore.
To reach phase for or phase 3 or beyond in the next 6 months 12 months, whatever you could share would be helpful. Thanks.
So.
There is.
I'll be Frank I can't remember exactly everybody that was in that last box. Okay. I'd have to go back to give you an accurate answer I can tell you that.
Ben Zero folks that were working with coming to Vuzix and say, we're moving off so all of these things are there.
And then couple of more come on and saying can you get us. This can you give us. This we're quoting on that business. So there is a bit new and then.
Some of those folks out of that group are coming back, saying I need more please.
So it's.
A portion of those folks for sure and it's.
1 or 2 new folks.
The bulk of that by far is defense oriented folks.
Okay Cool that's helpful. I appreciate that.
And then just.
Sort of similarly, but separately can.
Can you maybe you obviously have a ton of cash.
You talked about some acquisition plans.
Can you remind us of your existing production capacity.
A number of facilities and then maybe what your plans are for building out future production capacity ahead of demand whether that means expanding an existing facility or building out a new facility altogether.
Anything you can provide there and the associated timeline of what that might mean.
Yes.
It's funny when I talk with the landlord about more space.
So that you probably would see that in our future that said the current facility with moving some things around has the ability to expand our production.
We've got some areas that are being used for other things right now that we can move.
Yes.
The capacity they will depends upon what youre, making but.
We're running multiple shifts some where between debt.
<unk> hundred 75 upwards of 100000 gizmos could get made configure the average selling price is about to.
15, other bucks per.
That can easily get to the run rate.
So we're sitting in a pretty good spot right now to get revenue.
Between 50 and $100 million with our current facilities.
And Thats just on the hardware side, but exclude any ancillary.
Software derive revenue.
Okay.
I appreciate the additional color I'll hop back in the queue. Thanks.
Thank you.
Thank you at this point I will turn the call back to Paul Travers for final remarks.
Thank you everybody we really appreciate the support of Vuzix with appreciate the enthusiasm we know it's an interesting industry to be in I can tell you without doubt vuzix is in 1 of the coolest hottest.
Going to be the fastest growing industries come and talked about by everybody and we're seeing it all over the place.
We look forward to the second half of this year Shannon a lot with you if there should be a lot of press releases and exciting things as the as the next 2 quarters unfold. Thanks again.
Back in the future.
Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect at this time.
Yeah.
Yes.
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