Q4 2021 Vuzix Corp Earnings Call

March 1, 2022

[music].

Greetings and welcome to the Vuzix fourth quarter and full year, ending December 31, 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.

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 the Vuzix fourth quarter and 2021 full year ending December 31.

Financial results and business update conference call.

With us today are Vuzix CEO , Paul Travers, CFO Grant Russell and C O O Pete Jameson.

Before I turn the call over to Paul I'd like to remind you that on this call management's prepared remarks may contain forward looking statements, which are subject to risks and uncertainties.

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 1095.

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.

Ability to attract and retain qualified personnel as well as changes in legal and regulatory requirements.

Any projections as to the Companys future performance represent managements estimates as of today March one 2022.

Vuzix assumes no obligation to update these projections in the future as market conditions change.

Today's call May include certain non-GAAP financial measures when required reconciliation to the most direct comparable financial measures calculated and presented in accordance with GAAP can be found in the company's Form 10-K annual filing at SEC 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.

We will then hear from Pete Jameson, our Chief operating officer, who will provide some operational comments.

Pete will then turn the call over to grant Russell Vuzix, CFO , who will provide an overview of the company's fourth quarter and full year financial results.

After which we will move on to the Q&A session.

Paul.

Thank you Ed Hello, everyone and welcome to the Vuzix Q4, and full year 2021 conference call on this call we're going to review our results and recent developments and then give you some perspective on where we see things headed.

Here it everywhere augmented reality is the future of computing. The met averse is one of the most talked about tech topics in the world and most major corporations are realigning their future strategies around all of this vuzix has been an augmented reality smart glasses pioneer from the beginning we have been building vuzix to a leader.

In this space and the enterprise portion of the industry is finally, reaching the inflection point where growth should accelerate we're bullish on our outlook for 2022 and even more so thereafter.

We believe we have the technological wherewithal and the financial resources to deliver on near term and long term initiatives that we expect should unlock significant shareholder value.

For the full year smart glasses revenue increased 27% year over year to $12 8 million, representing approximately 98% of our full year revenue total of $13 2 million and 400 remained our workhorse accounting for the lion's share of our smart glasses sales.

Turning to our fourth quarter results total revenue of $3 2 million was largely driven by smart glasses sales and was incrementally higher than the preceding third quarter and consistent with the quarterly growth trend, we have been seeing over time.

During the fourth quarter, we furthered our engagements with key customers and Isps and expanded our global sales channel in Europe . We also made further progress on the OEM side. After a period of inactivity due to COVID-19, delivering preproduction units for the waveguide based HMD system to a global tier one aerospace firm and entered into a.

Barring engineering agreement with horizon centered around the Vuzix shield <unk> connectivity and professional sports training and gaming are smart glasses sales in the fourth quarter and 2021 as a whole were driven by repeat business and larger orders from customers as well as the rollout of our global channel partner program across all major market segments.

In 2021, we made a number of advancements as an organization on the technology side, we invested in and advanced our core competencies and waveguide display engine and optical solutions. We also improved our IP position, which increased to 241 patents and patents pending up 57%.

From a 184, a year ago, and we also bolstered our optics Knowhow, which we believe is keeping US ahead of most of the competition.

Our ongoing investment in our core technology positions Vuzix to play a critical role in an industry that is expected to ultimately represent many billions of dollars of revenue annually.

We took initial steps towards the creation of a SaaS based solution offering with the launch of our Vuzix custom solutions group and remain focused on delivering more value to our customer through smart glasses and software solutions and are actively driving a number of key initiatives that should transform our company from being primarily smart glasses supplier to a diversified supplier of smart glass.

This is SaaS based solutions and OEM components and products.

On the operational side, which we will go into more details on later in the call. We invested in staff and infrastructure that will enable our company to successfully take advantage of the opportunities at hand.

We continued to invest in R&D and successfully introduced two new products at CES 2022, the music shield a first of its kind in the M 400 feet and we'll share more on both of these new product shortly and lastly, we increased our cash position by $84 million during the year to roughly $120 million as of.

December 31 and ended the year with a working capital position of roughly $132 million.

As of March one with 10 months to go in the year. We believe we have a healthy sales pipeline promising OEM relationships and multiple strategic opportunities and our expected plan and enterprise. We are focused on driving smart glasses adoption in solution selling with our core customers and on the OEM front, we are leveraging the advancements we have made related to <unk>.

Micro displays waveguide manufacturing in their optical performance and.

In 2021, our core smart glasses product revenue grew 27% year over year with an uptick in order frequencies and size, we are seeing growing customer acceptance with larger deployment sizes and as a result, we expect our core smart glasses revenue in 2022 to accelerate in.

And grow significantly over 2021.

The shift towards quoting for larger orders coming in from our repeat customers for execution of enterprise wide deployments within their organizations is very positive.

A prime example of this is occurring with some of our larger engagements within logistics.

As a reminder, a typical customer begins with the five to 10 units for a pilot to evaluate the platform. Then there would be a follow on orders for 10% to 50 units to perform additional evaluations. This has been happening for the last three years to four years, frankly, and Covid effectively brought most of this activity to a halt on the logistics side of our business with the introduction.

<unk> and high acceptance of the <unk> 400, what we're seeing now, especially in logistics is a migration towards actual site rollouts, which typically ranges anywhere from two to 400 units per site.

No more testing.

No more pilots, but rather formal enterprise wide rollouts.

One of our Fortune 50 customers with whom we are engaged is evaluating several use cases to save money drive efficiencies and support their business operations.

This customer recently placed a $400000 follow on order during Q4 to support just one use case and just one of their facilities.

As for the potential business reviews ex this customer has well over 100 facilities that would meet this solution for this one use case and you can do the math.

Another fortune 50 customer initially introduced our smart glasses into one warehouse earlier last year to support training and remote maintenance. The initial introduction was successful and they subsequently expanded to 40 more warehouses during the fourth quarter.

They have recently placed another follow on order in Q1 to expand the usage of Vuzix smart glasses to even more participants and more of their worldwide facilities. Our expectation for 2022 is that top line revenue growth for our smart glasses will have multiple drivers, including significant deployments by some of the world's largest companies.

In terms of market segments logistics will drive significant revenue expansion in 2022 for Vuzix, followed by health care and then industry for pointed out. We're also seeing considerable momentum and expansion opportunities related to our global channel program, which we introduced over the second half of 2021.

In terms of product mix, we expect the 400 to continue to be our workhorse in enterprise. We also see growth and improved margins with our upgraded blade series and finally, we expect contributions to the top line from new smart glasses that will be hitting the market in the first half of this year, including the shield and the <unk> hundred <unk>.

On the acquisition and investment front, given that's continues to be engaged looking at several companies that could broaden our service offerings across key market segments and broadened our technical capabilities and Knowhow as a result of internally driven initiatives and potential acquisitions, we expect SaaS solutions revenue as a percentage of smart glasses revenue.

To increase over the balance of the year.

As we look at our OEM business group, we expect 2020 to be an active year for follow on programs and new customer engagements revenue related to our OEM programs was down year over year in 2021, but this comparison is not a good indicator of where our OEM business is headed as we feel COVID-19 delayed customer decision, making.

Vuzix now has standard OEM display engines and wave guide offerings with high brightness projectors, and 40 plus degree field of view solutions. We also have introduced developer kits that make it easy to integrate and design in our wave guides for almost any given OEM solution.

As you all know we have been working closely with our long standing tier one aviation customer and are already supplying preproduction devices. We're also expecting to be employed in a new product design win that will feature vuzix proprietary optics and waveguide technology inside these product design wins should represent the potential for many millions of dollars of revenue from <unk>.

Music on an annual basis and for years to come.

As a U S based manufacturing company Vuzix is well positioned to ultimately offer in conjunction with key Prime defense contractors solutions for outfitting U S ground troops humvees and aircrafts with heads up display optics and waveguide technology that is made in the USA.

There's been a lot shared in the public domain regarding the U S. Army's IV program and some of the challenges they are facing we.

We believe this has helped vuzix to foster business relationships with key defense contractors that will yield new OEM programs and follow on programs over the course of 2022.

Although it takes time for these projects to move into production programs contribution to the top line will increase over the balance of the year as these programs come online and move through the process.

I would like to remind everyone that 10 years ago Vuzix entered into a 10 year noncompete related to the U S. Military market as the result of its then sale of its defense OEM products and related engineering services business.

The exploration of this noncompete in June will allow vuzix to actively solicit business in this market and other areas without the need to pay third party commissions to the holder of the original noncompete.

Over the last 10 years, and especially over the last 12 months.

<unk> has achieved some strong advancements related to our optical display engines and improvement and waveguide manufacturing quality, which we can now convert into substantial increased production scaling capabilities. Our core technology is well suited for the U S military and foreign defense markets and we look forward to formally re entering in supporting this.

Segment of the market after the exploration of this noncompete.

The Vuzix <unk> hundred with its economic design for K camera, eight core CPU and nearly limitless number of wearable options is our work horse in the enterprise market and has emerged as the go to device of choice in health care logistics and industry four <unk>.

Use of the Vuzix blade smart glasses continues to grow and enterprise within the health care industry for pointed out as we sell through the remaining inventory of the Vuzix blade, we expect a sales backlog towards the end of the second quarter.

As a result of ongoing demand and qualified enterprise programs, we will be introducing a follow on program later in the year. This follow on product will feature our latest advanced waveguide optics, a larger field of view and have the ability to run Android 11 out of the box. We believe a follow on waveguide based product were answered.

Call for many of our enterprise customers that love the blades form factor, but required an upgraded Android OS to support their application architecture.

There are numerous potential volume deployment opportunities in the sales pipeline related to the blade for 2022, and we expect to commence volume production of a follow on wave guide based product later in the fiscal year.

Four years ago, when we showcase the Vuzix blade at CES. It represented a significant advancement in the industry and demonstrated that smart glasses don't have to be big and bulky and could be lightweight and even considered fashion forward compared to other solutions in the market.

We knew even back then at in order to make the technology disappear, we had to advance our display technology and focus on micro Leds at CES in January we showcase the Vuzix shield, which featured a much smaller industrial designed in our Vuzix blade and we were able to add more CPU power to superior cameras for.

Stereo vision and are buying ocular micro led display with a much larger field of view.

We are particularly proud of the Vuzix shield as it is the first of its kind in the world today and its performance, albeit monochrome as far advance versus the competition and not just in Vuzix opinion.

Youll development, one of the world's top research analyst firms around display technology has the opportunity to desk drive this yield at CES, Let me paraphrase Theyre published remarks.

Besides samsung's if there is another booth that looked as crowded as in any other CES year that would be that of vuzix.

I was excited to try the company's new shield our glasses.

The devices powered by Jay Bird displays Green 640 by 481 three inch micro OLED panel.

This little Beast, the size of a grain of rice can crank up to 4 million niche and it shows.

I was able to stare directly at a bright light and still clearly see and read text on a three D image that was comfortably floating about one meter three feet in front of me.

Music Shields feature to displays and wave guides with a full stereoscopic effect. This was by far the most convincing visual experience of any type of AR glasses, so far BC.

Besides being comfortable to wear with good weight balance the image was crystal clear with no Hayes, nor artifacts be screen the display the waveguide optics and the projection module Vuzix has done a remarkable job optimizing performance and quality.

Vuzix yield smart glasses have garnered interest from several big consumer companies interested in our optics and waveguide technology as well as enterprise customers that require a more traditional eyeglass form factor and capabilities afforded to them by this yield to solve operational challenges.

Volume production of the first music Shield model is expected to commence in the second quarter. This year.

With enhanced versions being introduced when components are available, including ultimately full color.

Alongside the music shield at CES, we introduced the Vuzix and 400 seat, which is our second generation USB C based windows PC and phone compatible smart glasses that take full advantage of the robust design and camera afforded by the Vuzix <unk> hundred including IP 67.

We have shipped a limited number of initial production units of the <unk> hundred <unk> to a windows mobile computer manufacturer and we anticipate their first volume production orders will be received during the first half of 2022.

As most of you know there are several consumer tech companies with large budgets and R&D teams trying to enter the AR smart glasses arena the barriers to entry to overcome related optics and displays is super challenging music.

<unk> has been working on solving these problems for over 20 years, and we're not only getting it done but building real products that feature some of the best optics and wave guides on the planet.

This past year Vuzix has made significant strides on our waveguide technology with our most recent wave guides, having significantly reduced forward light also known as I grow by as much as 80% we.

We have tripled our wave guide efficiency for higher brightness and more efficient battery usage we.

We are now capable of employing high index substrates and polymers supporting single layer designs and much larger fields of view.

Our display engines that drive into our wave guides as shrunk to the size of a pencil eraser with monochrome available now in full color and development.

We have gone far beyond prototypes here and in fact in the first half of 2022, we will start shipping the world's first micro led based smart glasses utilizing some of the advanced wave guide capabilities and again the smallest display engines that were built.

Again, there are only a few wave guide manufacturers in the world today, and only one U S based wave guide manufacturer in VAT to Vuzix.

There was one other U S based wave guide company, but they are not a manufacturer rather they are simply licensing there primarily to Asia third party manufacturers.

Last year in May snap acquired wave optics.

Wave guide supplier for more than $500 million.

And in November the only other U S Wave guide company the licensing company raised money at over a $500 million private market valuation.

Comps in the market are indicative that there is tremendous value being assigned to wave guide suppliers that haven't even begun to scale.

Music has been working on solving the challenges to miniaturize displays and couple them with wave guides longer than every company out there using <unk> is not only getting it done in our R&D labs, but transferring this technology from the lab and designing and building real products that arguably featured the best optics and wave guides on the <unk>.

<unk> developed and manufactured by Vuzix right here in the United States.

We are far beyond just a wave guide manufacturing company.

As it relates to value and growth. We have many uses for the capital of Vuzix and we're putting that capital to work to accelerate our growth as fast as we can.

That said one investment area that we see is as the company itself.

We believe based on these private company comps of just wave guide companies, let alone everything else Vuzix is leading the industry on the market is significantly undervalued our company. The Vuzix Board agrees with management assessment and as a result, we are investigating the repurchase of up to $25 million worth of our common stock.

I would like to now introduce to everyone Vuzix Chief operating officer, Pete Jameson I have.

I've known Pete for quite a few years and I have to say I don't think vuzix could have found a better fitting person to help us grow through the fast pace accelerating business, we're starting to see.

<unk> has a history of building technology based operations from the ground up with growth in the hundreds of millions in revenues.

He also has significant firsthand knowledge of the smart glasses industry.

So he uniquely understands the amazing opportunities and challenges we face Pete knows how to navigate the waters of high Tech growth companies, which is exactly where vuzix is that.

So without further Ado, let me introduce you to Pete.

Pete.

Thanks, Paul.

Some of you May know me from my time in the early days of a R and it's great to be back in an industry that is really starting to have a profound impact on the way, we work communicate and interact with digital content.

Been a big fan of Vuzix leadership team in technology for years, and as you might imagine I'm Super excited to be part of the company and to bring my background knowledge of a our imaging and business operations to the table a joined the Vuzix team a year ago to help contribute to the success of a company that has already established itself as a leader in the AAR glasses space.

The primary focus that Vuzix is on the execution and refinement of our business strategy and plan and in turn to drive continued growth of our business and success for our customers.

In 2021, we embarked on a number of initiatives to expand our operations, our physical presence and our capabilities not only on the technology and manufacturing fronts, but also across core competencies and customer touch points, let's take Europe . As an example, a few weeks ago, we announced the opening of a third party logistics operation at base logistics.

In the Netherlands, Brexit and COVID-19 had caused serious challenges to the supply chain and the arrangement with base logistics not only significantly improves our level of service to current European customers and partners, but positions us to deliver on the increasing demand from the region.

We also added to our European sales team in 2021 with an expanded physical presence in the region, which also helped to fuel sales growth.

In 2022, we will continue to expand this physical presence by adding additional key personnel to the European team and by opening a new Vuzix European regional office, allowing us to further support and grow sales.

During the second half of 2021, we introduced a global sales channel program, which has allowed vuzix to efficiently increase our customer reach support and Salesforce, but partnering with established third party distributors that have a knowledgeable and extensive retailer network. As a result, we've witnessed accelerated growth in Europe in 2021, we will see this pro.

Graham expand internationally in 2022, as we are seeing significant customer pull in Latin America, and in Asian markets with untapped opportunities across the region, including South Korea, India and China.

On the marketing side in 2021, we overhauled our digital presence experience and reach for our customers partners and investors, including a completely new corporate website and shopping experience. The search engine optimized and optimized for lead generation and information flow across multiple regions languages and currencies. We've also renewed our.

Focus on marketing and communication of whole product solutions, but maintaining and building a very close working relationship with our ISP partners across key market segments to better support and customers use cases and drive further adoption. We're taking the same approach with our global sales channel to ensure that all our distributors and their resale in that.

Works are trained experts when it comes to Vuzix smart glasses.

In 2021, we made further investments in our OEM and engineering services to create more standardization in our product offerings and engagement with third parties to better meet the increasing market demand for our heads up display technology and products from multiple government agencies and the department of defense, we've coupled this with streamlining our.

Sse's and manufacturing capabilities to meet this increasing customer interest in our wave guides projectors, and AAR imaging systems I'd now like to pass the call over to grant for his financial review.

Yes.

Thank you Pete the 10-K, we are filing with the SEC offers a detailed explanation of our annual financial.

So I'm just going to provide you with a bit of color on some of the numbers.

For the full year ended December 31, 2021, Vuzix reported $13 2 million in total revenues as compared to $11 6 million for the.

Prior 2020 year, an increase of 14% year over year sales.

Sales of products rose by 27% to $12 8 million in 2021, driven by increased sales of our M series Smart glasses, primarily the M 400.

Sales of engineering services, primarily for defense contractors for the year.

And in 2021 decreased 75% $2 4 million from $1 5 million in 2020.

These customers, we feel temporarily slowed their ongoing development projects due to Covid and most have recently indicated they intend to take them back up in the near future.

For the three months ended December 31, 2021, Vuzix reported $3 3 million in total revenues versus $4 2 million in the prior year's period.

In total product sales for the quarter ended December 31, 2021 fell 15% as compared to the same period in 2020.

Engineering services declined $2 2 million in Q4 of 2021 versus <unk> 5 million in the prior year's period for the reasons discussed earlier.

For the full year ended December 31, 2021, there was an overall gross profit of $2 4 million net of a <unk> 5 million dollar inventory obsolescence provision that was recorded in Q4, which was primarily related to end of life components for existing blade, one byproduct line than that.

Gross margin for 2020 was $1 9 million net of inventory provisions of $1 3 million.

On a product cost of sales basis, only and before inventory obsolescence provisions in manufacturing overheads direct product costs were 49% of sales in 2021 as compared to 54% of product sales in 2020, the overall improvement primarily due to product mix changes.

Manufacturing overhead costs much of which is relatively fixed rose by <unk> eight.

$8 million to $2 4 million or 19% of product sales for the year ended December 31, 2021, as compared to representing 16% of product sales in 2020.

Do you primarily to additional manufacturing management supply chain HOA personnel.

Research and development expenses for.

For 2021 rose, 54% to $11 7 million as compared to $7 6 million for the 2020 period. The increase was largely due to a $2 $5 million increase in salary related expenses.

<unk> dollars 9 million was related to noncash stock based compensation and an increase of $1 2 million in external development expenses, primarily related to our new field smart glasses.

Marketing costs for all of 2021 rose, 51% to $6 1 million from $4 million in 2020 with the increase attributable to a $1 1 million rise in salary related expenses of which <unk> 4 million was related to noncash stock based compensation.

An increase of <unk> 6 million in sales consulting and marketing fees and <unk> 6 million dollar increase in advertising costs.

General and administrative expenses for.

For 2021 increased to $22 5 million as compared to $6 9 million for the 2020 period the.

The increase was primarily due to a $13 $5 million increase in salary expenses of which $12 7 million was related to noncash stock based compensation, primarily from the company's new long term incentive plan or <unk>, which was implemented in the first quarter of 2021.

And as a result of a $1 $9 million increase in legal expenses I would like to take a moment to point out that the large stock compensation amount recorded in related to the company's L tip options only vest upon the achievement of predetermined market equity capitalization revenue and EBITDA milestones.

Participants are currently employed by the company when the milestones are achieved.

They are not the equivalent of traditional incentive stock options, which is simply just by the passage of time the fair value of options granted under the <unk> program were calculated by using a Monte Carlo simulation for the equity market condition tranches and the Black Shoals Burton option pricing model and the performance based.

Revenue and EBITDA tranches further for.

So the valuation of the equity market condition Francis.

Carlo valuation model utilizes multiple input variables that determine the probability of satisfying the market conditions stipulated in the words. These models require highly subjective assumptions as inputs and then.

This regard I would like to point out that since management in our fourth quarter revised the determination of the fair market value of the market capitalization milestone the words, what at first determine as of March 31, 2021. This is being reported as an accounting error and as a result in our 10-K, we are disclosing in treating this jane as an accounting error and mature.

Weakness in our internal controls for this rather unique and highly complex transaction.

That said our financial statements as of December 31, 2021, and December 31, 2020 are correct and present fairly in all material respects, our financial position results of operations in our cash flows for that.

<unk> presented in this annual report on Form 10-K in conformity with GAAP.

While the potential rewards in the L tip, our significant upon their achievement. They will only be awarded if the target market capitalization revenue and EBITDA milestone for Vuzix are achieved during the term of the plan and providing the participants stays employed with the company.

The market cap targets run from $2 billion to $10 billion.

The revenue milestones provide awards for the company achieving revenue targets ranging from $25 million to $1 5 billion and the operational targets require TV EBITDA percentages ranging from zero to 16% of revenues all of these <unk> stock options, which are exercisable at $19 a share will only become <unk>.

<unk> with the achievement of each applicable milestone target and we feel.

It will be a big win for all music stockholders. If all of these targets are ultimately reach.

In total there was $17 3 million in non cash stock based compensation expenses booked in 2021 as compared to $2 8 million in 2020.

For the full year December 31 2021.

The net loss of $40 4 million or <unk> 65 per share as compared to $18 million or a net loss of <unk> 53 per share for the full year of 2020 now for some balance sheet highlights our cash position as of December 31, 2021 was $122 million and we had a net working capital position of $133 million.

Cash used in operations, excluding changes in working capital was $20 million for the year ended December 31, 2021, as compared to $12 5 million for 2020.

Cash used for investing activities in 2021 was $4 9 million up from $1 4 million in the prior year as we spent more on new product tooling manufacturing equipment and a new display chip design project in 2021 investments in patents and trademark rose.

$6 million in 2021 versus $2 5 million in 2020.

With that I would like to turn the call back over to Paul.

Thanks, Grant and with that we'll now turn the call over to the operator for Q&A.

Thank you.

And ladies and gentlemen at this time, we will conduct a question and answer session.

I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

Press the Star key followed by the number two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Our first question comes from Matt Vanvliet with <unk>. Please state your question.

Hey, guys. Thanks for taking the question good afternoon.

Maybe wanted to touch on <unk> and maybe just the general return of water trade shows out there as you as you make appearances there and you're talking to the attendees.

I guess, how much of an actual business development.

And sales driver mechanism do you feel like has returned.

Maybe give us any kind of either qualitative or particularly quantitative results from CES in particular and.

Or whether you feel like Youre generating orders from customers that are ready and willing to buy in attendance.

Yes.

CES was a very unique CES Matt.

Sure in fact, it was it was sort of bizarre I will say that the Vuzix booth was packed the whole time was very busy like normal.

I think you've probably heard the old I kind of echo that sentiment. So business was good for Vuzix. When we were there a lot of it we go to CES for two reasons. One is definitely meet with select key customers and accounts and we did that although to a lesser degree than normal I would suggest the bigger reason why we go though is it's a launch.

For people to share their new products for the year, it's like.

Sort of like the Big Party of this is the thing come in the latest and greatest.

Usually that's accompanied by a fair amount of press that come to report on all of that in.

This was a pretty disappointing component of CES most of the press that we saw where smaller guys.

They have smaller followings, they were from Europe , and the likes the bigger the bigger press folks and it's really sad mad because the.

The shield is an amazing new device.

It blows people away when they put it on and there were very few people that had the opportunity to where our blue sky.

The show so we're looking forward to giving the shield in the hands of some of these folks as the year unfolds.

So I guess the bottom line was it wasn't Ho Hum for abuse. It was a good show.

It could have been a lot better had the press showed up.

And then you spent a fair amount of time in the script talking about the logistics and supply chain verticals and really starting to see some traction there.

I guess, maybe help us think a little bit more about the overall deal flow that you've been seeing what what kind of indications or.

Sort of preliminary commentary are you getting from some of your customers. So you can pretty prepared for.

Orders and be able to fill those quickly.

Just help us think about what your what youre expecting for the year from that vertical in particular.

It's super exciting vertical for Vuzix.

It was probably the number one vertical when we first started making smart glasses frontline workers is one thing, but the whole idea of an industry. That's been 50 years stuck with handheld barcode scanners in Malaysia right.

I wouldn't suggest that practically every major retailer today that has a brick and mortar and all that does lots of distribution centers and the like are using our glasses in some fashion. So that the bulk of the fortune 50, guys that are in that bucket are using our glasses here.

Kind of comments that we're getting are.

We're using it on the.

Lauren it's.

Two shifts.

Not around the plant, but do we should expect that it's working great. We're in this center, we're moving into that center and by the fall of the year, we plan on deploying in a bulk of these things so.

It's fantastic.

Other places that we've been years working with them and they are finally rolling out.

If you look at our history you got to do is take a look you'll see press releases with some of these guys.

I love named dropping I'd like to be able to share. These things, we can and a lot of these cases, but we will be able to share that more as this year unfolds.

Impossible. When these guys are rolling out and so many facilities.

To keep it a secret it's just going to be the way it is and it is.

We've talked about revenues for 2022 in the past I would suggest that this is really fortifying reviews. It you just don't want in 2022.

Our baseline is right. This is going to add a lot to the baseline.

And then maybe one last one on the healthcare segment and I think that was a big winter through through Covid.

Are you still seeing the same level of adoption from new facilities from new medical professionals.

Trying to enable that.

Not only advancement, but but maybe some.

From a distance between.

Patients and doctors.

Just curious in terms of the overall.

I guess pace of adoption that you're seeing in the last several quarters versus at the height of the pandemic.

<unk> continues that ability to go look at companies like rods and cones.

And we tend to turnaround there is another facility. There is another hospital. There is another company that is using their stuff to aid in surgery. Another good one is pixie 60 medical with knee surgery keep doing more and more they have expanded into the United States. Their businesses is rocking right along the doctor.

Similar boat, they just keep expanding and growing with the use of our products like <unk> hundred one.

It's a group of like immediate thousand.

Deployments that they were thinking they are significantly expanding how theyre going to be deploying with our glasses and the networks that they're building and by adding into the 101 and remote support surgeries for especially third world countries and places that really need to help. So we just see this thing as a continuing move of business and growth for the company.

It's like.

Like many of these areas were finally, they figured it out mark glasses are becoming the devices of the future.

The research analysts have talked about this for a long time, they talk about billions in revenues.

And.

For Vuzix, it's really starting to unfold in the enterprise space Medical is one example, again again the logistics and supply is another one.

Alright, great. Thank you.

Yes.

Our next question comes from Christian Schwab with Craig Hallum. Please state your question.

Hey, good afternoon, guys. Thanks for taking my questions. So I guess theres some pretty substantial.

Revenue in.

EBITDA targets for the company.

On the.

Equity awards that you've kind of talked about can you give us a good idea.

You would expect to see.

Percentage wise revenue has been growing here, but.

When we begin to see.

<unk>.

More substantial top line driven by.

We have to re list every growth driver again, but.

And customer who's adopting the technology, but can you just give us a better clarity of how you expect you know the kind of the hockey stick of revenue to look like over the next few years.

Yes, I mean I.

One of the charts that we showed.

It did have.

Growing top line revenue in 2022, not that we give our guidance on the year, but.

At Arrow is the reason why it's there on the line is there is we should see a nice jump.

This year over 2021 for sure in fact.

It's practically in the bag with some of the stuff that's happening with our friends in the in the.

Supply chain side of the business. So 2022 will be great and we just see it continuing to grow from there.

About how big the supply chain industry is.

The one account that we talked about that that is one use case.

And they've got other use cases, which is probably an order of magnitude bigger you've got companies that are barcode scanning companies that went around forever that do billions in revenues.

<unk> technology is sort of being slotted into that place and a bunch of different areas with some of the clients that we're talking about so I think you're just going to see it continue to grow and I think 2022 will be a nice clip well over 2021.

Thanks.

Okay, great. Thank you for that and then.

As you kind of look at the ramp of the revenue.

On a go forward basis is is there a.

Our plan as far as Youre concerned when you return to be in a situation.

Uhm to generate cash on a yearly basis from operations.

Well, it's for sure Christian that's on our mind, I mean, where we sit right now our burn is maybe $20 million on an annual basis, we've got cash and cash equivalents of $132 million in the bank right now that's like five or six years worth of run time for the company. The top line is important the bottom line is important.

So we're in a race here.

There's a lot of companies that want to play in this space, we're winning and we're going to invest to make sure that vuzix hits those long term incentive plan bullet points, that's where we want to be the company believes that that's not an unreasonable plan and that we ought to be able to achieve those goals and so I think youll see us continue to grow top line revenues.

I think youre going to see us continue to invest and I think people will start to finally ascribe the true value that Vuzix has I mean, just look at some of these private.

<unk> companies. That's all they do is make a wave guide it worth a half a billion dollars today the revenues are practically zero.

Vuzix waveguide technology in many cases is superior.

We're able to make them in high volume, especially with some of the things we're doing on the plant floor now.

We're setting ourselves up to win big time.

And the entire AR smart glasses space.

Great and then my last question disappointed.

You guys are not announcing today.

$25 million buyback of.

Sure.

You're saying you guys have been contemplating that did I hear that right I'm sorry.

Yes, that's right.

Look the board feels like management does as the company is significantly undervalued.

It takes a little bit of time to.

Figure out exactly how you implement these things.

But I will tell you. It is an incredibly serious investigation at this point in time.

The odds are quite high that this will end up moving forward.

Sooner rather than later.

Great.

Q4 2021 Vuzix Corp Earnings Call

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