MicroVision Inc. Q1 2023 Earnings Call
<unk> is uniquely positioned to win.
I'm pleased to report that Microvision had a solid first quarter 2023 with revenue coming in ahead of expectations.
We recorded 782000 in revenue, which represents impressive growth from Q4, and 123% growth year over year as compared to first quarter 2022.
Now before we talk about Q1 2023 financial results in a bit more detail I would like to discuss and remind investors how the <unk> acquisition.
Significantly accelerates, our trajectory and transforms our roadmap with new products and access to new customers.
Following completion of the <unk> acquisition Microvision is indeed at an inflection point.
Our teams have been working hard to execute the integration process ahead of our expectations.
The integration between our sales and business development teams is also picking up momentum.
And we recently added a very seasoned executive based in Detroit, Michigan to lead our U S sales and business development efforts, especially in the automotive sector.
Micro Vision's first quarter performance continues to demonstrate our financial rigor and discipline, along with strategic capital deployment.
The investment in <unk> brought us an experienced and highly talented team of engineers targeted customer relationships and a broad product portfolio.
We're now benefiting from the past R&D investments made by <unk> of over 200 million euros deployed over several years.
This considerably reduces our go to market timeline and allows us to leverage these products to generate high margin revenue for the go forward company.
Let me recap some of the highlights of our investment presentation for some of the new investors addressing the size of the markets. We compete in and how they have significantly increased due to this transformational deal.
We think of the lidar industry divided into three sub verticals.
First the Adas market.
Modeling the requirements of LTE plus an L. Three vehicles produced every year, we expect LTE plus cars to require one long range Lidar and do short range Lidar per vehicle, while LTE cars, who require too long range Lidar and for short range Lidar per vehicle.
While we continue to hear Asp's from our peers at around $1000 or design in ASIC enables us to price our lidar, our long range Lidar at 500, depending on volume greater than $10 million.
Maven.
Using this AFB estimates apply to the projected number of vehicles expected to come out of production.
We estimate that the total lidar market for the automotive and Adas sector will generate at least $82 billion of cumulative potential revenue for the entire industry through 2030.
The second sub vertical is the non automotive market, while we have seen a variety of estimates from peers and reputable business consulting firms. We have estimated on a similar basis the cumulative revenue potential through 'twenty 30 to size the non automotive market.
Further consists of three sub verticals.
The industrial we expect this market to be at $2 5 billion in 2025.
And grow at an estimated 20% CAGR.
If we sum up the total by every year through 2030, we estimate that the total sales in the industrial market will be accumulated $32 billion by 2030.
Extending the same model to non automotive smart infrastructure, we expect this market to be at $2 8 billion in 2025 and grow at a 30% CAGR.
If we sum up similarly, the total by every year, we estimate the total sales in this vertical to be a cumulative $46 billion by 2030.
For robotics, we expect this market to be at $1 8 billion in 2025 and grew at a 50% CAGR.
And summing all of these things up it adds up to $37 billion now if we add these three sub verticals, we get to $115 billion market potential for all delight our players.
The third and perhaps one of the most important pieces in the liner industry is the validation and the auto activation software.
Recall the mosaic.
This is a specialized market with not a lot of players competing.
As a reminder, this software provides ground truth data generation to reference against the sensor Oems are trying to validate.
The key advantage of our validation software platform is it enables validation of a sensor suite that includes Microvision Lidar and third party lidar to process and detect surrounding 360 degrees.
Modular approach to enable different sensors setups enables any use case setup.
While it is hard to estimate the Tam for this industry. We estimate that we may be able to generate $200 million to $300 million revenue through 2030.
Through the sales of the software.
We believe the demand for this software will increase as the OEM striking to validate more and more sensors.
Now, let's dive into our Q1 2023 financials.
For the first quarter, we recorded revenue of 782 that came in ahead of the expectations.
This revenue is both from automotive and non automotive customers.
The split of this quarter's revenue is approximately 60% lidar hardware and about 40% related to the software.
The customers in the hardware revenue stream include a major automotive OEM, along with other customers in the industrial and agricultural sectors.
The customers in the software revenue stream includes two major automotive Oems.
Before we move on to expenses a quick recap on Microsoft We received communication from Microsoft that no units were delivered in this quarter.
As a result of which we still have an unemployed $4 6 million balance left on this contract liability.
Our agreement with Microsoft continues to be an effect with an expiration date of December 2023, with automatic renewal clauses.
Now, let's move on to expenses.
Cost of goods sold.
Our gross profit margin on a GAAP basis was 30%.
Please note that going forward because of the acquisition of intangible assets from the <unk> acquisition.
We will now have a noncash amortization of intangible charges hitting the cost of goods sold every quarter.
For this reason we now believe it is more meaningful to provide non-GAAP adjusted gross profit and margins.
Exclude these noncash charges for the intangible amortization.
We believe that these adjusted gross profit margin metrics will be a better indicator of our cash gross margins.
Based on our adjusted gross profit margins were 63%.
In terms of expenses, we had $21 5 million opex, including R&D and SG&A.
I think it was approximately $5 million of noncash stock based compensation and depreciation and amortization.
The higher expenses were driven by <unk> as we added additional employees and facilities as a result of this acquisition as well.
And this quarter, we also have a bargain purchase price, resulting from the <unk> acquisition.
For the first quarter.
$14 million cash was used in operating activities, which was well in line with our 2020 full year guidance.
To remind our investors we continue to show financial discipline with our cash burn being on the expected trajectory.
In these times of uncertainty and weaker macroeconomic conditions.
Microvision stood out and beat competitors in terms of maintaining one of the lowest burn rates in the industry with a highly talented pool of engineers in both U S and Germany, and a strong balance sheet.
As expected in the first quarter of 2023, Capex was <unk> 6 million in line with our expectations.
We received the incentive payment in the second quarter of 2023, which helps us recover the buildout and the tenant improvements associated with the move into the new facility earlier this year.
We will be reporting more details on the incentive payment next quarter.
As of March 31, 2020, we have made majority of the payments associated with the <unk> acquisition.
We plan to make the remaining payment on the acquisition of 5 million euros less certain deductions and purchase price in the second quarter of 2023.
Our total liquidity was $67 million as of March 31, including investment Securities.
There has been no updates since our last earning calls in February on our ATM program.
As we had previously stated we still have approximately 44 million currently available under this program.
Based on our current operating plan for 2023 and beyond we anticipate that we have sufficient cash and cash equivalents to fund our operations through the middle of next year 2024.
Now looking ahead.
Excited about 2023 as we March forward on our path to $10 million to $15 million in revenue. This year from the revenue streams somewhat and I described above, especially with our strong Q1 performance.
We believe our three product lines.
Maven with perception software Lidar test with non recurring engineering revenues from Oems.
<unk> sales of flash based Lidar and.
And third mosaic sale of auto activation software for automotive OEM validation should be able to drive the momentum in the remainder of the year.
To summarize we're really excited about 2023 and beyond.
With our milestones and key focus on winning are accused me will be proving to the market our value proposition as a unique and.
And strong Lidar company.
I would now like to open the line for questions.
At this time, we are conducting a question and answer session.
Investors can submit their questions within the meeting webcast by typing them into the Q&A button on the right side of your viewing screen.
Analysts, who publish research you may ask questions on the phone line for.
For analysts to ask questions on the phone line. Please press Star then one on your telephone keypad.
You may remove a question by pressing Star then two.
Our first question here will come from Andres Sheppard with Cantor Fitzgerald. Please go ahead with your question.
Hi, This is <unk> for Andres here I just wanted to touch on your liquidity status that you just mentioned I know you mentioned that you have.
$67 million in liquidity down from $82 million last year, and you're funded through the middle of 2024, how are you thinking about the burn and what's going into this calculation just wanted to get more color there.
Yeah, Thanks, Shannon so.
This year as we had guided we are on track to $50 million to $55 million cash burn as we have previously stated.
We expect as we gather more momentum in rest of the year.
For the sales to pick up which we expect to continue in 2024.
We expect there would be more influenced.
In the second half and early next year. So that's why we feel very comfortable with our current liquidity position and is that.
What's coming down the pipe.
In terms of our wind projects and some of the revenue opportunities that we're chasing please keep in mind.
Bulk of this revenue as we had described earlier would be driven by mosaic and it will be.
Which obviously the high contribution margin revenue stream for the combined company.
Got you. Thank you and a follow up to that I wanted to see how you're thinking about capital raise opportunities potentially are you looking at equity or debt or how do you consider that in the future.
Yes, no. That's a great question look I think.
We are I think we have demonstrated that you know we have always demonstrated a strong rigor for accessing the capital markets as and when needed.
And we believe the capital raising should always be accompanied with strategic purposes. For example, when we had.
Close the <unk> acquisition, we tapped into the markets to fund the acquisitions, because we believed it would have it was a very good investment in the company's future.
So we continue to.
Execute the same discipline.
And because I think one of the things that differentiates us from the light our peers is again.
Being a traditional public company.
Which has been which has.
Over 20 years of.
Public company experience, so that's sort of why I feel good about the options.
Available to us as compared to some of our peers just by the virtue of.
US being one of in fact, the only company.
In this space out there.
With no stock history. So that's why we feel good about the capital raising options for the company down the road.
Gotcha.
And to switch gears, a little bit I was wondering how long it could potentially take for an OEM contract to materialize or how long do you think it would take for you to announce it or do you have plans to or do you have can you provide any color about your relationships with your Oems for they may even lidar.
I'll take that one Bob I think we've talked about that quite a lot.
That's our corporate milestones for this year.
We continue to make progress on it.
I don't think of any key there of course, we think about it.
People have announced that it's taken them years, there's no product out there.
But.
But the current tranche of.
Projects that are in these are acute.
These are the high volume ones that our core consumer.
Consumer vehicles I mean these are not for trucking you know these are for vehicles and they are not as option. So the <unk>.
Volume is a lot higher so therefore, the rigor required is significantly more but.
Based on our engagement.
With the engineering teams and of course also with these.
And there our purchasing team.
I feel pretty confident that we remain on track.
Got you.
Thank you.
I will now turn this call back over to our new Biopharma to read questions submitted through the webcast. Thank you.
Thank you so let me take some of the questions that we're getting from our investors.
The first question is.
Management has mentioned automotive RF skus want dynamic you lidar.
<unk> only maven offers this feature.
Why do you think that you won't win all the deals this year.
And are there any RF skus out there that microvision.
Is not a part of.
I guess I'll take that.
Well I'll answer the last one first.
I'm not really sure there's no like public listing of all of these different rfps that are out there that you can bid on.
We engage with all the Oems look for projects, we look for alignment.
Some cases they are fielding.
The most advance sensor they need because of the highest volume has to be an integrate within the body of the car that these requirements. So certainly right. The dynamic relied on as a perfect one for that because it kind of meets all the requirements.
I think recently you have seen that the last three months, our competitors are doing and our photoshop and some other cat images and all sorts of.
Type level staff demonstrate that they are headed in that direction, but of course, we have that so that when those specific ones, we feel pretty confident.
But there are still other rfu's that war.
Let's call it legacy, but it was not that important to have a roofline integration, maybe it's for some sort of small small truck.
A four by four or something like that kind of projects was market low to the ground and they were just leveraging what somebody else had already done but there is nothing embedded there.
So those kind of RFP as you know, we certainly we can be competitive there, but that's not the big volume stuff. So refocus on everything will be focus on EMEA Rsi RFP that comes along.
Teams are dedicated to that.
In fact.
Every week is.
Very eventful at the moment Andrew.
And we're very fortunate that we have such a largely between Redmond in Hamburg.
Nurenberg of course that allows us to address these.
So as far as the dynamics, let art concern is.
Looking.
<unk> that require long range high resolution, what's a range.
Yeah we're.
Pretty well positioned for that.
As far as ones that are not looking for that and they're just looking for a feature.
And then maybe some sort of a trucking application or something like that.
They can probably take a lower <unk>.
<unk> product as well.
As a starting point, but all the high volume stuff is as I mentioned, the dynamic with Lidar.
Thanks, Amit.
The next question is.
Over the last few days.
There was.
Significant shakeup at.
Carried.
How do you think this impacts.
The lidar players.
<unk> Microvision.
Alright.
I think it would be inappropriate to speculate.
So there are facts that I knew that I could share I would share, but as you can imagine this is all new news.
That is coming along and how thats going to rollout there is lot of speculation of what it means for the individual brands.
At VW, taking over versus carrier versus it's all speculation nothing has been announced yet but certainly as you can imagine this was.
Not a huge surprise for a lot of folks because.
Since the change of the CEO changes were expected.
But I think I've been pretty consistent about it for about a year now.
If you look at some of the early agreements that people are fine, but they are kind of defend now.
The facts are that as it was never part of the entire fleet.
Nobody should ever projected that the.
The different brands want different things.
And.
Our high end vehicle.
Sure.
That required roofline integration would never have a big bump out on the top of the roof I think I've been pretty consistent about that but besides that the shakeup that's happened at Clarion.
I would say that it's unclear what it really means and.
I've heard a lot of speculation in the last 48 hours of to be honest with you.
<unk>, but mostly speculation, but I think we just have to wait.
Until the plans are made clear of how the brands are going to deploy lidar.
By themselves or are as a team.
Okay. Thanks, Amit.
And I think.
This is you have a one box lidar solution.
Multiple sensor solutions software.
And now micro vision as a one stop shop for Oems.
Could you give us some color on the cost benefits this past four Oems verse.
Having to piece together solutions from multiple partners.
This one box one shop approach was received by the Oems.
The one box solution of course mean theirs.
One box would include the perception inside.
So you can imagine that would require to ASIC theres, one ASIC that would be point cloud only if somebody just wanted that because they want to use our software certainly we will provide that as a product.
But the perception.
Thats integrated into real products would really enable.
More efficient development at Oems and this is our this is our thesis effectively right and we're pretty clear about it I think I'm pretty enthusiastic that recently, we got our first engagement with somebody or very large.
Entity OEM Etsy.
That's looking for a one box solution and I think with all the features have been developed by the <unk> team. So it's kind of exciting but again, it's early stages because something like this you can imagine.
Evaluating a lighter takes a long time imagine LIBOR plus software.
More time to evaluate I think this is pretty consistent of what the selling cycle for automotive is but it's exciting that the thesis behind it is getting traction because it doesn't make a lot of sense now as you think about.
Economy of scale to bring prices down and it's all about giving the customer the most the most advantageous price for them.
The most of the hardware inside the Lidar will deleverage the same right now the optics of the same the sensors the lasers some of those.
Electronics with the same and some of the electronics will be different based on the perception. That's in there, but again, it's all on the electronic side. So you could really leverage I would say three quarters of the entire design and you can aggregate it across so even if you have different model years that have looked at.
Shipping.
A few hundred thousand to half a million units a year, let's just say there was some models like that.
You can aggregate them all because there's common parts.
And the only part difference would be versus one model that has a full perception and the other model within that entire segment with that OEM comes without the perception you could leverage at all in the overall price advantage you can create for them as time.
So even though it is a.
More sophisticated piece of sensor software.
We would be able to provide them economy of scales by aggregating it and this is evident in what I said today that the team is focused on finishing the <unk> sample design, because we feel like we have gotten enough feedback.
Understanding of all the different integrations that has to be done customization that they may want to also say suffered under <unk> that we talked about before but enough of the design to be made comment that we can start converging could that be sample design, that's going be the production ready designs.
Design in the future.
When the acreage right.
So I think we're at a good point right now, but I think when we talk about I think it about as mentioned about pricing ASP.
I still feel pretty confident that there is a.
That's one of the great advantages, we have with the way we've architected the product.
Force-feed, one specific solution to everybody.
Theres enough customization and even the box designed to have that.
That we are providing completely meets the requirement with an integrated thermal solution.
When you go to these higher resolutions you lose a lot of laser power you have lot of AC power you Gotta dissipated imagine.
Several watt lightbulb inside your car, it's going to get so.
So we've also our team has been working very diligently and have come up with a really.
Really great integrated solution that will keep it nice and cool right behind the windshield or in the roof line. So all of that coming together in the design you can still offer with economy of scale because most of the parts are common across all.
All the variance that we're going to offer them.
So I think I think we're in good place I think people have done a great job of Architected the product from ground up with that in mind.
Thanks, Amit.
I think we're now out of time.
We appreciate your participation in our results call and your continued support.
For Microvision.
This concludes today's conference call.
All parties may disconnect and have a wonderful day.