Q2 2021 MicroVision Inc Earnings Call

In the Investor Relations section of Microvision website at Www Dot Microvision Dot com.

And now I'd like to turn the call over to Sumit Sharma Sumit.

Thank you Lindsay and good afternoon, everyone.

It's great to have the chance to update you on our progress.

Later in the call I will also update you on our strategy for initial direct sales of Lidar sensors, while we work on developing opportunities for sales to Oems and tier 1 partners.

We refer to these sales opportunities to Oems and tier ones partners, our strategic sales.

We remain profoundly confident in our ability to successfully execute this strategy that I believe will drive long term value creation for our shareholders.

Let me start off by thanking our shareholders for their enormous support and confidence in the company.

The continued support of our shareholders has allowed the company to fund the development and maintain all of ownership of rights to our technology.

We are purposefully driving towards the future of inflection point, where I believe our cash flow from these investments will lead to significant greater value creation.

I will also provide some additional perspective on how we plan to position our technology and products towards the expected automotive lidar market.

I believe this should give you a greater insight into our bullish view of the future.

I would like to sincerely. Thank our employees for the continued hard work and dedication.

We began transitioning back to the office in July and it is great to see some normalcy returns.

I would also like the warmly welcome potential business partners to this call, we're starting to join and follow our public updates.

I am happy to report that we have made great progress since our last call building on our work from the past year.

Since last year, we have been submitting responses to rfps or request for information initiated by OEM tier 1 and mobility of the service companies.

With the completion of our sample we were able to share our data from outdoor testing with OEM and tier 1 companies that demonstrated our sensor operating at ranges greater than 200 meters high resolution and velocity of output among other features.

Our team has been actively conducting conducting outdoor testing on various development platforms since December 2020.

This has allowed us to share performance data and support various deep dives into our technology to highlight the advantages of our hardware and software as part of these rfps.

We have been building bridges, the these potential partners throughout our development.

With Covid related international travel restrictions and constraints placed by companies in Europe, and North America limiting onsite visits we were required to share of tremendous amounts of data for RFID inquiries.

With travel restrictions lifting we are now beginning to plan in person trips and public demonstration of our Lidar technology, starting with IAA mobility show in Munich. This September.

Feedback we have received from potential customers. So far has been very positive.

With our proprietary active scan locking architecture, which is based on proven technologies. We believe are lighter and meets or exceeds their product expectations and will be the most cost effective led our product on the market.

Our features and costs are 2 key sustainable strategic advantages of our technology that we expect to maintain well into the future.

While we still have work ahead of us in completing partnerships, we believe our technology and clearly meet our customers' short and long term needs.

We often get questions from our investors of our publishing a comparison of our specification versus our competitors.

On our last call I went into detail of our specifications and advantages of our technology and roadmap.

Unfortunately, such clarity on relevant specifications is not available from our competitors.

Since providing incomplete comparison chart would not be constructive and could be misleading.

We will we will instead of periodically release updates from our craft testing program and other validation efforts.

We remain confident that our lidar sensor is best in class.

I am pleased to report the this month, we will start conducting moving platform testing at a third party track.

We will test of our lidar with of test vehicles at speeds typical for highway driving.

The crack will have various test protocols set up which are specified by national Highway Trans traffic safety administration are nitza and euro end cap to achieve Adas safety ratings.

OEM vehicles.

With the interest we have received so far we expect to continue expanding our funnel for target partnerships with the addition of the business development team in Germany.

We also expect to add business development teams to address North America, and Asia Pacific market at some time in the future.

Automotive Lidar represents the biggest opportunity in the history of our company.

The successfully engage potential partners. It is important for our customers to understand our commitment and our pedigree.

We appreciate the important reason why we received such interest from Oems and tier ones, we need to look back at where we have been and what we have accomplished over our company's long history.

Early applications of our technology included heads up displays for U S military and automotive systems.

In the market today, our technology can be found in Microsoft Holo lens to product.

In the past we have worked with other global brands to incorporate our core technology into their consumer products as well.

Our hardware and software teams.

What it takes to develop technology that meets or exceeds extremely high expectations.

Our core technology has proven its ability to ability to successfully perform and scale to mission critical standards.

Our team is very experienced and has the pedigree of delivering products that have the potential to open large market the laser beam scanning technology.

With a strong history of reliability predictability and precision we feel confident that our automotive lidar sensor will perform the standard is expected by the industry.

I am honored to say with confidence to our potential customers that we are well established well funded and committed to deliver.

We see great long term value in our life of our strategy to address the immediate market with direct sales and in parallel engaging Oems and tier ones from potential long term partnerships for our hardware custom Asics and proprietary software as part of strategic sense.

Let me first elaborate on the importance of our direct sales strategy.

We expect to introduce our line of our family of products, which will include 4 new product models.

This will include our premium product with dynamic field of view with near mid and far fields of view in a single product.

We believe this product with some day be considered of standard for safety.

We will also introduce 3 additional models with fixed fields of view and near mid or far fields.

All 4 models will be built on our current hardware with the appropriate software.

Because all of 4 products, we built on the same hardware it will limit our inventory exposure, while allowing our business development team to have flexibility and converting our sales funnel.

We believe our product the dynamic field of view will ultimately be a flagship product.

By supporting our customers with fixed focus sensors and plugging gaps that may exist in their current sensor suite.

We expect the opportunity of providing them a software transition through our hardware platform.

We are looking at every opportunity to accelerate sales and adoption of our hardware while targeting a blended margin in the range of 50% for direct sales opportunities.

Our capability to potentially enable Adas safety features directly from our sensor will allow us to demonstrate to Oems and tier ones of Adas features currently in the market can be improved.

Current Adas systems utilize low cost camera module technologies, there are limited to daytime use.

Without practicing program, we expect to show of potential partners the capability of our Lidar, the perform day or night and still be cost competitive.

We are excited at this prospect.

I will now like to discuss strategic sales.

Our system sales will focus on the biggest volume opportunity in the latter market, we see coming from automotive Oems and tier 1 partnerships.

About 24 million passenger vehicles are projected in 2024 to have advanced safety features ranging from level, 2 and higher with.

With an expected increase of about 37 million vehicles by 2030.

The current industry leader selling level 2 camera module based system safety system has publicly announced its push into lidar.

We believe we are ahead of this and other companies with a current sensor specifications long term competitive cost and proven majority of our technology.

With the large market and significant growth ahead of us using the great opportunity for further value creation with our focus on strategic sales.

I am excited about our dual path strategy to drive revenue and profitability.

Now, let me turn the call over to Steve to discuss the second quarter's results and then I'll be back from provide some additional perspective, Steve. Thank you Sumit good afternoon, everyone.

For the second quarter revenue was 746000.

56% increase over last quarter's revenue of 479000 <unk>.

All of the second quarter's revenue was royalty revenue and attributable attributable to Microsoft Corporation, who we.

The previously referred to as of April 2017 customer.

As I pointed out before royalties related to this customer will be credited against the non refundable prepayments of the customer made in 2017.

Once the prepayment is exhausted the customer will begin making cash payments of royalties due.

Okay.

At the end of Q2 of the balance of the prepayment stood at $6.5 million of.

The $6.5 million is on the balance sheet as the contract liability.

Our second quarter cost of revenue included a $31000 credit related to the reversal of of warranty accrual. The result in the second quarter gross profit of 777000 in comparison gross profit was 484000 in the prior quarter.

Operating expenses were $15.7 million in the second quarter, which is higher than our guidance of $13 million to $14 million and we discussed on April 29.

Net up from $6.7 million in the prior quarter.

The increase in Opex was primarily due to noncash compensation of $7.9 million.

Recruiting and payroll expenses associated with an increase in head count.

Came to about 800000.

And there was a write off for unused production equipment related to our interactive display.

The interactive display product of around 660.

The head count at the end of June was <unk> 74 up from 57 at the end of March.

And we were really very pleased that we were able to attract 17, new employees in the quarter given the tight labor market.

And we remain in the hiring mode and plan to hire more people primarily in engineering, but we will also expect to fill positions in sales and other administrative functions.

We expect that by the end of the year, we could be up to 110 to the 125 people.

How much of the increase of the projected the head count is for our software and hardware hardware teams as Sumit mentioned, we plan to add features and reduce cost to enable strategic sales and the level of 2 and.

Higher categories and these people will be needed to make that happen.

Given the higher operating expenses in the second quarter, our net loss was $15 million or <unk> of share.

In second quarter cash used in operations was $6.7 million.

First quarter loss was $6.2 million of <unk> per share.

And first quarter cash used in operations was $4.5 million.

The increase in cash used in operations during the second quarter was primarily attributable to salaries and recruiting expenses in connection with the increased head count.

The development materials and suppliers as we continued development on our long range LIBOR Lidar.

And pre payments to vendors from materials and software tools and inventory that we expect will be used to build product in the fourth quarter.

Okay.

Cash and cash equivalents at the end of the second quarter was $135.3 million up from $75.3 million at the end of the prior quarter.

The increase was the result of the company raising funds on the $140 million ATM, we put in place in June.

In the second quarter, we issued 4 million shares and raised $67.8 million in net proceeds.

We have not raised any additional funds on the ATM, thus far in the third quarter.

We were pleased to put the ATM in place and raise the cash we did as it gives confidence to prospective customers and partners.

As well as employees and prospective employees that Microsoft is the micro vision will be of strong long term partner in the automotive lidar market.

Now I'd like to turn to the third quarter and give some thoughts on our spending and cash usage as we move forward through this year.

So Q3 will also have a significant amount of noncash compensation.

Additionally, we continue to hire.

And get ready for production.

And begin promoting our lidar sensor.

Direct sales.

And I expect to see our Q3 operating expenses in the range of $14 million to $16 million.

As for cash used in operations.

In addition to the increased expense as I mentioned, we will begin adding inventory in advance of starting production in Q4, So I expect to see cash used in operations in the $9 million to $11 million range.

The third quarter.

The Q4, but Thats Q3, the Q2 in Q3.90 of 11.

Finally, let me echo assume it's excitement about our competitive position and the progress we've made so far in <unk>.

'twenty 1.

We are focused on the successful start of direct sales of our Lidar sensor and we're also focused on building the company that can succeed with the long term strategic sales that summa discussed earlier.

I'll now turn the call back over the sooner for some comments before we open up the call to questions.

Before we open the call couple of questions. Let me revisit a couple of important themes from this call.

Good day.

Our focus remains on establishing ourselves as a trusted partner for automotive Oems tier 1 and mobility of the service companies.

We expect our closely integrated hardware and software to enable the Adas safety market, while also supporting potential partners in the autonomous driving market.

We expect to start validating our Adas safety capabilities torque track testing program by second quarter of 2022.

Nothing is more important to us in getting this right the products and partnerships.

Our technology and company of already demonstrated our pedigree and enabled of large global brands.

I expect us to establish ourselves and lead the Adas and autonomous driving space, the hardware and software into the future.

We remain confident in our ability to successfully execute on our strategy.

I am clearly bullish on our future let's.

Let's open the call up for questions.

Yes.

We will now begin the question and answer the question to ask a question you May Press Star then 1 on your telephone keypad if.

If you are using a speakerphone, please pick up the handset before pressing the keys.

To withdraw your question. Please press Star then Sue you may submit online questions at any time today using the window on the webcast.

First question comes from Glenn Mattson from Ladenburg Thalmann <unk> co. Please go ahead.

Hi, Thanks for taking the questions.

So the first of all.

Interesting that you're able to Microsoft finally is the customer in April 17, customer I know thats been pretty well known for a very long time now but it's.

Just curious as to why Youre able to actually.

The talk about it publicly now and now that we're talking about of publicly maybe can you give us a day.

More clear sense updates on.

Just.

End of life, the roadmap that debt there that they are on what kind of the.

What kind of growth do you expect from them over say the next 18 months.

Regards to that project.

Any color there thanks.

Yes, Glenn this is Steve.

So we evaluated our legal obligations and the information that was.

In the market.

And disclose the information today.

As far as.

Any discussion of roadmap or anything like that.

We have no comment on that.

I will note if you're just looking for what is revenue look like.

This year on the royalties.

As you are well aware of we disclose our estimate for that in the footing the revenue footnote in the in the SEC filings so that'll be the net in the queue.

We have I think it's going to show about 2.3 is what's expected for the for 2021.

But of course, that's subject to change as we get more information.

Okay.

Thank you.

Alright, so that's.

R&D.

Predominantly.

<unk> 4.

Early tests of sample product sales in Q4 is there any sense of.

Yes.

Volume you would expect.

What kind of what true.

Broke up there first of all the repeat the question second half of it I could not volume.

The quote you kind of talked about production.

Shipments in Q4 for the Lidar. So can you just give us any sense for.

What kind of I know, obviously, it's very early but just kind of what kind of level, we should expect.

I think I think as I said right. We just call. It initial sales of expected to be small I think.

I think there is no more opt into that beyond that as you can imagine producing a product getting going.

The times so.

I think we will sell college of initial sales by Q4.

How many of the additional personnel would you it sounds like you're building up a bit of a sales force to support the product. So can you get a sense of how big that sales force would be and how difficult is it to.

Yes.

Find people in the specialized niche in the.

Just color there too.

Generally share specific of the ride, but as Steve mentioned, we expect to be somewhere between 110.225 people, obviously of the mix of that but it all depends on the needs that we see ahead certainly a lot of that is investment the engineering, because we really still have to think about the bigger markets and think about the cost reduction and the improvements in the features of it.

We'd like to get done and I think as part of the sales team is concerned to be appropriately sized.

From a strategic sale standpoint.

Direct sales standpoint, so so.

We have some thoughts, but we're going to be.

The rollout of we'll understand more of available size of appropriately.

Okay and on the ATM can you give us a sense on what level of cash you feel is necessary to support the business.

The cash obviously balances.

Gone up tremendously over the last year.

Year or so.

Where should the investors think that.

Do you think you need to be sort of.

<unk> of the cash.

On the balance sheet.

We'd like the rate raise the remaining roughly $70 million is on the on the ATM, we wouldn't like to but we don't have any specific plans to do that at this time.

Part of the reason why a lot of the reason for the ATM the.

Confidence, it's giving to customers and suppliers.

And employees and prospective employees so.

The vendor.

Okay.

Did you say, what the stock comp would be in Q3 I might have missed that.

I didn't.

I didn't give a projection on that.

I expect it to be less than what it was in Q2.

Of the volatility of the stock makes it difficult to force.

The be predictive.

I'm kind of I'm kind of thinking.

$6 million, plus or minus is in that ballpark, but.

It is it really matters on what the stock prices on the day of the specific brand and with our volatility that's tough to predict.

Okay, Alright, great Thats it from me thanks, guys.

Your next question comes from Richard Shannon from Craig Hallum Capital Group. Please go ahead.

Hi, guys. Thanks for taking the taking my questions.

1 or 2 on <unk>.

In light of our ear I guess submit in the first 1 is.

You talked about.

Family of 4 products here of premium 1.

And then 3 others that has the single.

Range specs here, maybe you can help us understand the.

The driving force behind this the split of the specifications.

Any way you can discuss what the specs are relative or quantitative and then the use cases do you expect for each of each of them would be great to hear.

And that's of Great question that's of Great question. So as you can imagine Richard in.

All of the different partners that may be testing of system, perhaps the have a flash based short range Lidar and they are lacking the capability for long range only but they don't want to completely changeover of yet because of develop a bunch of software on it so having 4 different products in the family does not force feed 1 solution, which may be the ultimate solution.

Right right off the bat sort of group.

Net sales do you want to accommodate their specific need maybe for example, mid range only needed added on because they're not doing highway speeds or somebody wants to go even longer range and a short range only so the allows us the mix and match for their specific needs. So it allows us also of the flexibility of connecting with them and.

<unk> offering them the benefits of our hardware platform.

Still believe having a single lidar with all 3 fields of you with those kind of ranges allows you the flexibility of low speeds, although the highway speeds I think I've spoken about this before.

And getting the resolution of the velocity all of those at the single of Lidar level as the feature.

But I think any kind of new technology being introduced.

Allows us more of a softer introduction to it with the hardware.

The benefit of course is it's all on the same piece of hardware that we have right now that we've made.

That would be the 1 single family product and of course, the software and other things would be slightly different in there, but that allows us to maintain our inventory levels at a very low level the low risk on that 1 and we can provide the features specific features that are potential customers may need.

That makes sense if people have different needs they may have.

Low resolution out of certain range and they just need something to plug that in and then they start seeing the other benefits of it and that allow them to come back onto our ecosystem.

Okay, maybe just to restate, what I think I've heard here assume it's sort of.

The the 3 products with singular.

Range of supported there those are you expecting to be plugged into platforms, where they have a whole and in light of our needs here, whereas your premium on as expected to beat the the wandering around which the the platform is designed is that a fair way to think about it.

That's fair to say it direct sales of use the the 3 that are fixed most likely we will sell the.

The dynamic field of view version as well, but yeah for strategic say I'll think about the dynamic field of view of the premier product.

Okay that is helpful. My other question here.

I have missed the the terminology you assume it so please correct me.

On this 1 but I think you said you're expecting too.

Well it started validation by second quarter 'twenty 2.

Is that with the current a sample as you describe it or is there going to be of forthcoming version that you might label at the BRC sample here.

Just help us understand that and then as the ones Youre validating starting in Q2 is that the 1 that you expect to be ramping into production in 'twenty 4 'twenty 5.

The simple that we have right on the hardware sample is the sample of that we're going to be testing part of this program. In Q2.2022, let me sort of a little bit more clear on what that is about so as I mentioned in the earlier part of the call that we're starting are practicing program. So obviously, it's going to be over long period of time.

And it starts with ground food testing and other other.

The other scenarios hickey scenarios that Oems hold is that the design sensor suites for the.

The Q.

Q2, 2020 to mentioned that I had that the first opportunity we want to show that we can be from right from a lidar that we are able to actually address some of the safety.

Protocol test protocols that are defined by Nitza and euro end cap.

The performance drive from the latter by itself. So it's a it's a different kind of products. If you think about level to a level 2 plus plus.

And some of the features of our level 3 I think there's always a new level thats all of US created richer those can be addressed when we believe from a lot of our loan for example, a b fat frankly, the warning that there is a whole lot of features that can be addressed and the bigger market of course still remains of the level 2 level, 2 plus plus as you know.

We want to be able to demonstrate that.

From a truck testing someplace, where net seller in.

In Europe, and GAAP testing is done.

Okay. That's helpful. So the.

The answer you're actually brings up another quick question from me, which is on the topic of safety.

If you could talk about the.

The importance relative importance of safety over the last 6 months here both from an Oem's perspective, but also and I think you referred to it here briefly is.

Regulatory bodies and in the various jurisdictions worldwide what are they seeing here what are they expecting to do or are you expecting them to do we're going to see something more standardized here that will ultimately drive more lighter penetration in the faster.

I think I think the.

This is a really good question because if you think about <unk> safety. It is really determined by the governing bodies. These regulations that test protocols in the past to be able to get your product qualified and this is at the OEM level, so us being able to demonstrate that the removes the.

Barriers of adoption the things that are.

Hardware that can actually solve the problem early on as far as I think you may have read I think recently in Europe, I think Germany, a level 4 system some control.

The test will be allowed but it all at the end of the day every 1 of these things before it gets into a car that has to go through qualification that these regulatory bodies will define and test protocol debt every OEM tier 1.

Lidar company would have to meet.

So therefore, that's the path of effectively so far level, 2 and levels of <unk> plus plus the other half test protocols available level III still not dominantly available right now and level of floor is just starting to become there, but no legislation that I've read so far has been clearly defined of a timeline for level 4.

The technology to be out on the.

Available to the public effectively maybe some control all cases, but not really.

The openly available yet so the main game the main volume still remains in level 2 of level, 2 plus plus and other features or other sub levels that can be created to replace the level III.

And that's why the end of the number I gave of 24 million of approximately a bulk of that is including the.

Most of those levels as well as level 2 level, 2 plus plus another 1 EMEA right.

Okay. That's of interest sugar checked of I appreciate the thoughts here. That's all of the questions from me. Thank you guys.

Interest free.

Okay.

We will now respond to some of the over 150 questions. We received from investors via email. Many of the questions are variations on the same topic in many of the questions were addressed in our prepared remarks.

We tried to consolidate the questions on the same topics, but tried to address the basic issue.

<unk> be able to answer every question submitted but we will go through some of them here.

Then we will open up the call to investors like we did on the last call.

So the first question is can you provide an update as to the progress on your internal testing and external validation of the sensor and supporting partner and customer confidential evaluations.

As I mentioned earlier, we've been conducting indoor testing on various development hardware since December 2020.

Our engineering team is focused on exercise of the hardware and developing features towards our objectives for initial sales.

We share data from our development progress features and progress of indoor and outdoor.

Validation test with the interested parties potential interested parties.

The commonly accepted understanding is that of laser product that has not been CE mark in the EU or has been.

Or has the product of course submitted to the <unk> in the U S may be operated by anyone else other than the manufacturer in the in certain cases and approved and qualified manufacturers representative.

Once the product is ready for initial sales we will of course have class 1 laser qualification complete and then any potential customer of <unk>.

Until that time, we need to be present to demonstrate the device.

This is understood by folks we speak with.

The folks with.

Although the unfortunate internationally that we speak with the right. They understand this as well it is prudent that in a private event are setting the evaluation sample that is not been CE. Mark is all of maintained under the physical control of manufacturers' personnel and not left with the customer.

Because of this restriction right I think we've done the best we can the chair as much as I say of tremendous amounts of data that we've shared with them the COVID-19 restrictions still in place.

Nationally and of course locally some restrictions are.

Non employees being on site.

The next question relates to opening the German office.

Can you shed more light on the reason for that office in the.

The the regulatory environment have anything to do with it.

European Oems and tier 1 in Germany have been the most active in that space.

Most of the because of regulation on Adas <unk> and beyond.

As we have mentioned before we have been active actively promoting our technology in Germany since 2019.

It just made sense to have an office there that can be responsive to those companies in the same time zone.

And same language.

We received a number of questions about the upcoming trade show in Germany, what can we expect to be shown at this event.

Yes, we're very excited about debt ratio and.

And can show our sensor publicly and be able to highlight the advantages of our technology I've mentioned in previous calls.

We will have several displays and live demo there that I would not want to steal thunder from.

Well, we of course will share videos from the show, we're making public during the show and after the show.

Okay. The next question that we had was questions around the ATM.

I think I am.

Answered address those win when Glenn.

His question is about it.

I think the point the bank here as debt.

The ATM and the cash that we have a strong balance sheet.

It has been.

Advantageous when dealing with customers suppliers and.

Net employees.

So debt.

A big reason for the ATM.

Next question is also about the April 2017 customer in which we disclosed the Microsoft.

And again.

We answered those questions with.

Glen asked his question.

The next 1 is.

A question that is often asked about our plans for production specifically can you provide progress from a progress report on the long term and the.

The long range Lidar sensor pilot.

Pilot line in Redmond.

Or you plan the Asian production line.

Our original plan most of develop our pilot line in Redmond during COVID-19 restrictions and transfer of tooling automation in our process to Asia.

1 of the partners is.

In this plan is in Japan.

Unfortunately, the Japanese COVID-19 travel restrictions are still in place.

Our team each of travel to the partner for a successful transition.

Once we became aware of events in the second quarter, we adapted our plan.

All of the automation is being delivered in 2 of our Redmond headquarters.

Then to qualify the line and produce our initial quantities of our Q4 sales in Redmond.

As before we expect the transition to a partner for scaling from there and we are evaluating all our options.

Next question relates to other verticals what is the status of these verticals and are you actively pursuing or investing in them now.

As I shared in previous calls all of our effort is on the automotive lidar.

We believe there is value in other verticals and we stand ready to support the potential customer as needed.

But that is not our focus now.

Uh huh.

Next question is about strategic alternatives, what can you share about strategic alternatives.

As we mentioned in the prepared remarks for the past year, we've been responding to RFID sharing data.

Sharing the test data.

And we will continue the work, but as we have previously disclosed in the SEC filings. We currently have no agreements or commitments to engage in any specific strategic transaction.

Okay and the last question before we take more of our live questions relates to the Mems production. What can you report about the year fifth generation Mems and your Mems fab partner.

I'm happy to report that we have received our first wafers from our Mems fab partner.

In fact, they are in the devices, we are building now.

Expect our Q4 initial sales units will use.

Dice produced from.

Our men's biocraft partner beyond that I think there is.

We're not commenting any more than that.

Okay.

We will now take some lines.

Questions from investors operator, we're ready for the first question.

Thank you. Your next question comes from Thai Bordner. Please go ahead.

Yes, Hi can you guys hear me.

Yes.

Okay, Great Hey, congratulations on the for you guys in the in the entire company to the progress you made in Q2 sort.

Congrats on that.

Hey, Steve I think in the last call you mentioned that you were projecting around 80 head count.

By the end of the year and obviously now that's changed.

I think current projections of 110 to 125. So can you comment on why that significant increase.

Yes, I tried to hit that in my prepared remarks is there is an opportunity to.

Get our sensor into the Adas level 2.2 plus.

And.

And higher.

And to do that we need some software from hardware teams to build some features and get the cost down.

And so that's really the focus we think we think there's opportunity there.

But we'll need some people that do that.

Okay, So I guess that that wasn't.

Necessarily well known back in the back in Q1.

No I think.

In Q1, we talked about the future product roadmap, but as we've been able to do work and dig into what the opportunity is in the timeframe of what we think we could do it and what it would take the resources that was all happening in Q1 and Q2, we've kind of.

We develop the plan that we think of it makes sense to go forward.

Okay got it.

Also in back in the Q1 finally, you mentioned the extending the contract with sharp for an additional year.

Any can you provide any status on that of you had any communication with them at all.

Yes. The reason we extended that contract was just to give them time because of Covid was difficult.

The difficult period for people to get out in May.

New product.

The decisions. So we thought it made sense to extend that they're they've been a good partner.

And we want them to succeed so that's really the reason for the extension.

No.

Do we communicate with them yeah, yeah today as a matter of fact, but I don't have anything I can tell you about.

Specifically about about debt.

I believe they are still working.

2.

Find customers.

Okay and last question is just for Sumit.

Some of it you know you've used a lot has changed over the last 17 months 12 months. So microvision is clearly in a different position than you were then.

And you used the used an analogy back then.

Specifically I think in regards to negotiating with the <unk>.

The large companies that use the referenced of wrestling analogy of being on the map and I guess.

Yes. My question to you is now do you feel like you are up off the mat now.

Right.

What kind of hit here.

The best way I can say it the way I think about it philosophically if youre not a trillion dollars company Youre all of us on the map alright.

Alright, So you got to go build value launch expenses and just give volume right.

That's about the best answer I can give you the boson sensor I'd give you.

Okay.

Thanks.

That's all of your final question comes from Mike Welcome. Please go ahead.

Hey, guys, great progress in Q2 and congratulations.

We're excited as well as an investor.

I wanted to talk a little bit about you mentioned the.

You would be able to manufacture and sell small quantities of the automotive lidar sensor in Q4.

Are these sensors being manufactured and sold 2 automotive Oems for their own internal advanced road testing.

Sure.

Exactly how are they in other words sort of small number.

Don't know what that number is what do they does the who sells for we've given them data on our own internal testing and we will continue to but what are these sensors for.

I think Mike.

Think about these these are as I said the initial sale small quantities therefore are.

Direct sales, so theres going to be.

A cohort of potential customers that we will be addressing these and they will all have different needs that could be all different segments of not specifically 1 segment. We are saying that there could be robotics that could be there could be people then autonomous driving software development of could also be tier 1 tier 2 it could be a whole group of people. So therefore, the sensor by itself right.

The news for different things, so think about the market is many many different segments and if you think about some of our competitors when they talk about the public sales.

Of note that are significant amount over the years that kind of strategic sales of our different people used for different things.

So it would be hard to say like what specific I can use. We're now your question about test data CAD data is important because you have to validate what you're believing that you can do you can actually solve the problem.

And when you think about an automotive OEM or tier 1 they're going to make a product that they were going to support for 15 years. After they make the purchase so they look for something different right. So before you can enter that phase of making that product forever you have to actually do some initial work and it could be a wide range of things that can be used force. So it'd be very hard to say specifically.

But the most basic thing is.

If you say it does something that the go validate that and they may have some special requirements themselves that the.

It's not common to anybody else right that we would work with them and support them. So it's a very a variety of things that could be done but.

Theyre going to Duffy past debt stationary moving.

The calibrating to other things of that I've already done Rachel it'd be pretty hard to comment on what they will use of force.

Right now what are the higher.

Of the comments publicly what the revenue, but we certainly will know what they're using it apart but publicly the of course, we're not going to comment Mike.

Okay and 1 other question about the business development office in Germany.

Dr. Luiz who is going to be head of business development there.

<unk> has previously been for 7 years CEO of a company called opt the flocks.

Germany.

And of course, he is he's going to go to work for the company, which is great based on his credentials.

Going through the website cause off the fluxes.

Interesting company and I could see the possible connection between our 2 companies.

Go into the website. He still is going to represent the flux as the managing director or even though he is taking the job of head of <unk>.

Business development of Germany for Microvision is there an engineering partnership or any connection between the 2 companies that you can share with us.

Right so.

Thomas looser.

Joined Microvision September so until then he is still CEO of managing director of there. So.

So once he joined Microvision he is going to be with Microvision.

Okay any connection between the 2 companies with respect to engineering or <unk> going forward.

In terms of <unk>.

The product.

Product.

He mentioned our hardware and software our teams are going to be here based in Redmond, Washington.

And that's where we're at in the scale up.

Okay.

Thanks for answering my questions.

The pleasure.

There are no further questions at this time that does conclude the conference for today. Thank you for attending today's presentation. You may now disconnect.

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Yes.

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Yes.

Yes.

Thanks.

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