Q2 2023 MicroVision Inc Earnings Call
Good afternoon, and welcome to the micro vision second quarter, 2023 financial and operating results conference call.
At this time all participants are in a listen only mode. At the end of today's presentation. There will be an opportunity to ask questions via chatline investors can submit their questions within the meeting webcast by typing them into the queue in a button on the left side of your viewing screen analysts who publish research may ask questions on the phone line for analysts to ask question on the phone line. Please.
Press Star one during that time. Please note. This debate is being recorded I would now like to turn the conference over to drew marketing. Please go ahead.
Thank you.
During today by our CEO .
And our C F L antibiotics or not.
Prepared remarks will open the call to questions.
Please note that some of the information you'll hear in today's discussion will include forward looking statements, including but not limited to statements regarding our customer and partner engagement product development and performance comparisons to our competitors market opportunity product sales and future demand business and strict.
You take opportunities projections of future operations and financial results.
<unk> ability of funds as well as statements containing works like potential believe expect plans and other similar expressions.
These statements are not guarantee future performance.
Actual results could differ materially from the future results implied or expressed in the forward looking statements.
We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K, and on a quarterly reports on forms 10-Q.
These filings described risk factors that could cause our actual results to differ materially from those implied or expressed and are forward looking statements.
I'll forward looking statements are made as of the date of this call and accept as required by law, we undertake no obligation to update this information.
In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's regulation G.
Reconciliations of each non-GAAP financial measures to the most directly comparable GAAP financial measure as well as for all the financial data presented on this call. Please refer to the information included in our press release and in our form 8-K, David and submitted to the SEC today, both of which can be found on our corporate website.
I R Dot my provision dotcom under the SEC filings cats.
This conference call will be available for audio replay on the Investor Relations section of our website at Www Dot Microvision Dot com.
Now I would like to turn the call over to our CEO Kimmet Jana Smith.
Smith.
<unk> and welcome everyone to this review of our second quarter 2023 results.
We're very pleased with accomplishment support team during the second quarter towards Daniel and multi your goals.
I'm happy to report that the street changes we initiated in Q1 completion of our acquisition and plan integration proceed smoothly.
With a combined global team expanded lidar and software portfolio, we can address the needs of our OEM customers with a wider range of solutions.
I would like to elaborate on this a bit later.
We continue developing a revenue streams of strategic and other channels.
And I'm very happy with the progress we've made so far.
The biggest opportunity for the company remains a strategic partnerships with automotive Oems for a lidar products.
First I would like to start by updating you on our progress on <unk> and <unk>.
We remain engaged in multiple argues with multiple Oems they would expect it to be nominated in 2023.
We are the only.
Company that offers multiple technology notes from highest resolution smallest form factor long range, Lidar and our <unk> <unk> as well as a small form factor shorter and sequential flash based movie a lidar product lines.
Our teams remain engaged with multiple Oems, who are looking to identify their next lidar partner foreign expanded a safety for the passenger vehicles and commercial trucking product lines to be nominated in 2023.
The combined lifetime volume of all the programs up for nomination in 2023 or four millions of units.
This of course is the most exciting part.
We have the right products that are targeted to supply a desk safety for higher volume passenger vehicles and commercial trucking.
We remained very excited about where we are in the nomination process.
In case of a program when we expect two phases for the engagements.
The first phase, we expect to customize our core technology.
Specifics of each Odm's needs 100 development agreement.
Second phase, we expect to supply parts as the ada's tier one.
With a contract manufacturing partner under Master supply agreement.
With each OEM.
For the first phase with our core technology remaining the same we expect modifications will be required to the product Mechanicals thermals and some customer perceptions software features security and interfaces.
All of this.
Would have to be go through extensive validation verification on our side.
And more so from our potential partners.
We don't expect customization to be a high risk path for our T.
We also expect multiple production lines will be required.
At our contract manufacturing partner to support customer production sites in North America, Germany, and Asia in this space.
In case of multiple nominations.
<unk>, yes, we want to validate that we have dedicated entering resources for their programs.
I'm very confident in the size of our global team and our capability to add talent as needed to support multiple programmers.
We are heavily engaged in financial due diligence as well.
The continued strength of our balance sheet and capability to fund operations on Google started production is a requirement and all possible nominations.
Management has articulated this to our investors in the broader market clearly the first quarter as you may recall.
Again.
I believe we are well position.
<unk> this item.
Being a publicly traded company on the NASDAQ with no debt control of our expenses and a clearer understanding of how to grow proportionally to meet the needs of multiple potential customers.
Just to summarize my assessment of engagements.
Our technology and products are being well received.
Our solutions offer the highest technology and the smallest form factor with longterm cost ability based on a custom silicon.
I strongly believe we remain on target for our 2023 objectives for strategic sales.
Second.
I would like to update you on a direct and software sales efforts.
These segments will contribute meaningful revenue on our path to mass production for leather products.
In order to start our revenue cycled with mortgage direct sales, we expect to place a large order for move your sensors.
With this inventory and place actually it's accelerating past revenue.
With our team in Germany, and a new team in Detroit, We expect great things in the future.
As you may recall, either partner, but Zeta auto cruise with a production line that was qualified to automotive C sample level.
Custom silicon for Malia sensor was developed and owned by your homework team.
This product and the partnership or part of the idea of acquisition and we expect to provide a mature product to support a direct sales markets.
Having inventory will allow us to expeditiously enter a wide range of mortgage looking for <unk> solutions.
We stood experienced many moving pieces, including macroeconomic factors for direct in software sales.
We have great contacts and a good sales funnel for these segments.
In general I'm very confident that in the future. We will have stable direct sales of our move your sensor and a reference offer suit to generate meaningful revenues.
Third.
I would like to update you on the brought us in the most comprehensive blood our product portfolio that Microvision offers an advantage which represents.
We are a unique like our company.
We offer a long range on any of the glider with unmatched performance Say's Carlson immunity.
We also offer a sequential slash base short range Lidar with unmatched validation performance cost in Silicon majority.
We will remain competitive with a wide range of Rq's every year with a lot of our products.
I believe this will allow us to scale, our business faster than anyone else on the scene.
In addition, we will offer various levels of perception from lighter products.
<unk> the need for additional a R E C U and instead integrate with the computer platforms develop that companies like in video and Qualcomm.
This remains or go to market strategy that I can say with confidence it as a preferred path I've seen N feedback from all <unk> engagements.
This will remain one of our biggest advantages for a long period of time.
This is a testament to macrovision foresight on products.
Beyond that we continue investing modestly and sensor fusion system development.
Represents a future opportunity to expand our <unk> censor sales and supplement with software.
I want to conclude by taking a global team for their hard work that has allowed us to be well positioned for an incredible urinated bus.
Would like I would I would.
Like to now turn over the call to <unk> talk about our financials.
[noise] Thanks [noise].
I'm really pleased with the progress we have made in the first half of 2023.
I'm proud of the company, we're building a micro vision.
Especially with the integration of our teams in the U S and Germany.
Our acquisition has positioned microvision to become one of the most experienced and technologically advanced lidar hardware and software companies in the market.
Over 50 years of combined operating history and 735 backwards.
Talked in detail about our progress on <unk> on the technical front now.
Let me discuss some of the key financial items that the Odm's are looking for in their due diligence on perspective Lidar suppliers.
In particular, it is important for suppliers like micro vision to strove to show strength in the following two areas.
Number one.
Sustainable existing dashboard, allowing a longer financial runway.
Number two.
The ability to scale up operations to handle multiple high volume are accused both in terms of dedicated engineering resources and production capabilities.
One number one.
Microvision continues to demonstrate one of the lowest cash burns out there.
Our love publicly disclosed upgrading history shows that Microvision has been consistently disciplined about deploying capital for growth.
Point number two microvision has a strategic advantage when it comes to quickly and efficiently scaling up operations.
We consider multiple are a few ways, we have the ability to add dedicated engineering resources at the customer's preferred locations and either North America or Germany.
In addition to the majority of our technology is superior technical effects T. Above advantages are also positioning as well with this or excuse.
Our customers and potential partners, including contract manufacturers appreciate microvision strong and deep IP portfolio and our industry experience.
I shall discipline and technical know, how all of which are key differentiators for us.
Thankful to our shareholders for supporting us in presenting a best foot forward with the Oems, India rescue processes.
Now, let's dive into the queue to 20 23.8 shows.
For the second quarter Rerecorded revenues of 329000.
This revenue is both from automotive as well as non automotive customers.
The revenue in this quarter is lower than the first quarter as some of the non automotive customers pushed out the delivery of units.
Expect a momentum and revenue to pick up in the third quarter.
At this time, we're maintaining our 10 to 15 million revenue targets.
Over the past several months, we have invested in our sales team.
By bringing in some highly industry talented veterans, especially in the Detroit area.
I expect some opportunities, especially in the direct sales business to ramp up in the second half of this year as our sales team.
Their energy experienced an energy to work for the company.
To remind investors are direct sales model includes the sale of mosaic to automotive customers and <unk> to non automotive customers and this obviously has a much shorter sales cycle.
Do that and we have placed in order to build new <unk> inventory with <unk> auto cruise to help satisfy the demand for non automotive customers.
We expect this strategic investment and inventory buildup to drive the revenue growth of the company in the near term.
We expect the revenue momentum to pick up and second have this year and into 2024 as our Rfu's progress in software sales materialized.
In 2024, we expect there will be an already revenues associated with RFU winced related to specific customizations required to products Mechanicals.
<unk> and custom software for security.
Coming back to this quarter split of the quarter's revenue is approximately 45% hardware at 55% software.
The customers and the hardware revenue stream include customers in the industrial and agricultural sectors.
Customer in the software revenue streams include major automotive Oems.
Before we move on to your expenses a quick recap on Microsoft.
Received communication from Microsoft that no units delivered in this quarter as a result, we still have an an applied for 6 million balance left on the contract liability.
Our agreement with Microsoft continues to be in effect with an expiration date of December 2023.
Expensive.
In terms of expenses, we had approximately $24 million opex, including R&D and SG&A.
This includes 3.9 million of non-cash stock based compensation and.
And 1.6 million of non-cash depreciation and amortization.
Besides this this also includes about.
$2 million off one time transaction expenses and related integration expenses that are stored in this quarter.
We expect the run right off the expenses going forward to be approximately between 16 and 17 million a quarter.
For the second quarter 16.6 million cash was used an operating activities, which was well in line without 2023 for your guidance.
To remind our investors we continue to show discipline without cash burn being on the expected trajectory.
In these times of uncertainty and vigor macroeconomic conditions Microvision stood out and beat competitor in terms of maintaining what are the lowest burn rates in the industry with a highly talented pool of engineers in both the U S and Germany, and a strong balance sheet.
As expected Capex in the second quarter was point $9 million, what's in line with our expectations.
This quarter. We also received $3 million of incentive payment, we were expecting to help us recover the build out and then an improvement associated with the move into our new headquarters in 2023.
This payment hits the other income line item on the piano.
So let's talk about our cash position.
As of June 30, 20th 20th <unk>, We have made the majority of the payments associated with the idea of acquisition.
We have an expected liability of 2.7 billion euros tell on our balance sheet related to the acquisition.
We expect to pay this to the seller later this year once both parties reconciled and agree to the amounts.
Our total liquidity was 94 million as of June dirty, including cash and cash equivalents and investment securities.
As an update we had announced a follow on capital raised in June two strengthening their balance sheet.
We chose to withdraw the offering and instead proceed with the ATM program.
This was a strategic decision intended to ensure the best possible outcome for the company while minimizing shareholders.
Dilution and fees related to the capital race.
Based on our current operating plan for 2023 and beyond we.
Dissipate that'd be have sufficient cash and cash equivalents to fund our operations towards the end of next year.
Looking ahead.
We are excited about 2023 as in March forward on our part to $10 million to $15 million in revenue this year.
We believe are three product lines, Megan the perception software <unk> non-recurring engineering revenues from Oems.
<unk> the fears of flash based lidar for non automotive customers.
Lastly, mosaic the sale of auto agitation software for automotive OEM validation should be able to drive momentum and 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 will be proving to the market our value proposition as a unique well positioned lied our company.
I would now like to open the lines for questions.
Thank you at this time, we are conducting a question and answer session investors can submit their questions within the meeting webcast by taking them into the queue in a button on the left side of your viewing screen.
Analysts, who published research may ask questions on the phone line.
Who is to ask questions on the phone line. Please press star one.
Our first question does come from Andre Shepherd with Cantor Fitzgerald.
This is an add on for Andre Congrats on the quarter and thanks for taking our questions.
I've got a few here and I just wanted to start with the <unk>.
Recent reported revenue dropped to 300 million I just wanted to check to see how confident you are in reaching.
The mid point of guidance show about 12, and a half million that you're just reaffirmed your range of $10 million to $15 million and how do you guys expect the revenue to be spread out in the back half of the year between three and four Q.
Thanks Outta.
So so yes, I think as I mentioned in my remarks, we expect that the third quarter revenue momentum to pick up.
Primarily because some.
Some of our customers pushed out their deliveries, which were expecting to happen in the third and the fourth quarter of this year.
And primarily the growth is gonna come from the sale of <unk> and do that and we have invested in building up the inventory as I mentioned in my remarks made a setup auto Cruz, where we have placed an order to stack up the inventory that we can use to <unk>.
<unk> the demand in the second half of this year.
Besides that I expect a momentum in the sale of mosaic as well as do some of our automotive customers <unk>.
There we are in the process of installing and implementing that software and their ecosystems for that work. So I I do feel good that we should we are confident about hitting the the guidance and this year based on these factors and lastly, we had invested.
And bringing on some talented industry, <unk> and especially in the Detroit area, which have background wetback or in both an automotive as that is non automotive customers to accelerate the momentum and get the shorter sales cycle, which is again the movie and the mosaic products.
To help us hit the revenue targets that'd be a vanilla for this year.
Gotcha. Thanks on above that's helpful. I just wanted to switch gears to the gross margin and wanted to see what the driver was behind.
The drop in gross margin and how do you expect margins to progress over the rest of the year.
Yeah. So it was gross margin drug was primarily due to economies of scale, obviously as the sort of put more revenue to the final I'll be expected gross margins to be again, what we had described earlier N b expect to hit the target of over 30 per cent gross margins in this year because again the.
Larges are primarily coming from the sale of software and hardware from that standpoint. So yeah. So we do expect to hit our numbers from a gross margin standpoint.
Got it.
Sweet.
And just to switch gears, a little bit I know you talked about this a little bit with Oh, yeah.
<unk> I Wonder if you could give us an update on discussions you're having with an O M or when you might be able to expect your first partnership with an OEM or how you would potentially expect <unk> to eventually materialize.
I'll take that one.
I think it's clearly stated right I think we stay on track for 2023 I think.
It's not just us I think it's you know.
Everybody that's in the mix of it will tell you the same exact thing.
It's pretty clear that they want the nominations to be done this year cause the way you're going to have a very specific timeline for delivery an S. O P. So.
I see.
I stay pretty confident that you know the nominations would be 2023.
Ms <unk>.
These are different Oems have indicated.
Gotcha and after that of course, you know think about it right. We have a core technology done but every vehicle you know think about US you know.
Consumer vehicle versus you know trucking application.
The customizers with the core technology, the same but they need some level of customization on the software side of the harbor side of the thermals. So there's that whole customization part of it but it's not it's.
It's not a full blown develop and drive to the core technology. The same the reason they're picking somebody who's ahead is when they look at the silicon part of it or they can look at the the technology development part of it whereas your level of maturity and they don't want to change that core park, but they wanna customize what they need a lot of it in software too and a lot of it in the NRT is gonna come from validation verification.
That has to be done for their scenarios right. So we have to give them a validated product and of course, they're gonna do their own validation with themselves over the third party.
But on top of that is like there's always some customization on the Mechanicals right. So you know how the amount it you know which side of the connector will connect with the world.
Some other customization of the inside on the thermal side of it because of that right, but I would not quantify this as something.
That starts in your development. So are investors that I've known for a long time. When you think about customization made me think about what we did for Microsoft over there for Sony those are full blown development program right. That's not it we've already funded the core development to a certain point the authorities will cover the customization for each individual and as you can imagine a production line has to be.
Into place for whatever they want and you can't have a single customize line single line. That's gonna make you know low volume high mixed not going to make one park for one one part for the other because each and every one of these product lines and ours, because we're talking about has pretty high volume so you're gonna need multiple lines Donaldson parallel so for all that work to happen in the time on that.
Clearly understand.
Deep into it with our team.
Thousands of hours of already been spent.
<unk> I can assure you that they have a very good understanding of you know how that has to be executed and what the timelines are so that's why I feel pretty comfortable and the <unk> are going to be you know some magnitude, but you know, it's clearly not going to cover all our development cause it is our core technology and we intend to not license it away or give the IP away to anybody.
Gotcha I don't have I don't know if you have something to add to this.
The only thing you're covered at all Sir.
Thanks, guys. That's very helpful. I've just got one last strategy question. So I was wondering if you guys have plans for expansion.
Expansion and not I'm gonna market with I B O F O M revenues take longer than expected to Materialise and if that were the case what segments would you be focusing on and how would you view the trucking market for this purpose like automated trucking.
I think I think if you think about the trucking market, let's let's make a distinction.
This is a pretty important one there.
There are actually two trucking markets. One of course is there are trucking Oems that you know they operate I mean, they have low volume.
They don't have millions of units per year millions of units of outlook right pretty substantial volumes there right.
But they operate just like an old yeah. They go through a <unk> they have very.
Very strict requirements.
That's one piece of business right that will always cause you know that's something of course people have neglected so far right I mean off with US is in play all day, So I'm pretty excited about that actually you know more safety coming to 18 wheelers all over the world that's great.
I think what you're referring to is there's other trucking applications are companies all over the United States and Europe , and even in Asia that by sensors and they're developing their score product, which is a software product right. So if you think about it there's two trucking partnerships. There certainly the you know the the direct sales part.
That's where our team comes in you know we can sell their we can sell sensors that concern deals you deliver hundreds of thousands of parts vendors are scheduled for that.
When you go on the other side now you start looking at like hundreds of thousands parks because in any kind of tracking application right. You are gonna have multiple lidar.
I think our in our in our deck. We talk about you know we show a simulation with real Lidar data that was collected to show what covers you can get around and how many sessions I would take for a typical trucking application it could be depending on some configurations could be from somewhere as many as five to six different lidar and the one that I think that that picture of the demonstrators are more via product.
I imagine if you want the long range front and back you know.
There's multiple in there so it when it comes to the Orient trucking. These are substantial numbers, they're not in the millions.
Really you know they're pushing into.
In the high hundreds of thousands right now for the lifetime and there's multiple trucking partners in the world. There's a 500 of them, but there is some good.
Good good amount of them. So it can be a really good strong business.
But it can take it back onto Ah you know how they are rolling out their process you know how trucking industry is transforming.
I think I think perhaps the foundation of your question was what we you know U S companies like Aurora and others that are developing really.
Automatic trucking, but their core product software and certainly you know I think about that as direct sales you know we have a team to connect with them you won't be there sensor provider right. They may make their truck with contour whomever they make it worse when they own the software, but we want to be specified or be suspect in as a lidar provider for that right. So certainly going to work on that.
As well. So these are both applications, so how did that accelerate <unk>.
Certainly like you know that's why we like to call a direct sales because it's more like kind of a spot sale you can get more clarity. It is a key part of our strategy and that's what we're ordering you know all these <unk> essentials for inventory.
Because we see a part of that you know ahead of us and having inventory I think at this point, we feel comfortable that the phone was developed pretty well I mean.
Just a call.
A year ago, when I bail file for insolvency. It was you know more of you did not have or the the next sensor they used to call. It right. You don't have a lot of Pat it's all for insolvency, but you know we resurrect with the product I really believe in it I think it is you know it's a great product.
Does solve a lot of problem. The short <unk> you know when you need multiple sensors around it so for trucking that's been missing all along Nobody's. After offered that you have cameras your radar, but nobody has been able to give a lidar that can give you 30, 40 50 metre 360 around a truck and a very stable form factor. So I think we're new at that.
The first one in there so yeah, absolutely direct sales will be there in Oregon, So it will be there and but direct sales is our bridge from now.
<unk> startup production for some of these programs we're talking about.
Gotcha. Thanks, that's very helpful. That's all I've got thanks, again for taking our questions and congrats again on the quarter looking forward to the ramp this year I'll pass it on.
Thank you for your time.
<unk>.
Thank you for those questions I will now turn this call back over to <unk> to re questions submitted through the webcast.
Thanks, Mike.
So I think.
One question. We're getting is can you talk us about talk to us about the product portfolio and how it has micro vision as a whole and a strategic rationale behind the product portfolio and how does it differentiate us as <unk>.
To the peers.
Yeah. This is a good question and I think that we talk a little bit about it in April , but probably gonna put a a.
Fewer accidents on it alright so.
Everything that we've been talking about a microvision others talking about is really about the long range Lidar. It is a big deal. It is a really big it is going to be a big winner right. So yeah. That's important.
If you think from an <unk> standpoint, they're trying to deliver not just a long race either in your car, they're trying to deliver a product level three level to level for whatever level. They Wanna go to they wanted to deliver a product with certain amount of safety.
I think the move your product and the Maven product. If you think about having to load our products that are not exactly the same technology. There's two different technology knows it's a huge advantage we have that nobody else has.
You know.
We get into more rf's using <unk> in my opinion, because we have multiple technologies right in some cases, even if they may have made a choice for a long range lager that may or may not be working out and we're promoting our lidar you know just in this area I mean I've been very excited about what we were able to achieve.
With our with our team.
That same promotion restart is showing them pneumonia product and we started getting traction. So this is great because they have multiple needs. It there's very few people out there that can actually provide.
All the <unk> would need at a certain price point at a certain certainty of technology. So.
The important thing if you think about the lighter products only as a standalone.
It's like one of the one stop shop for all the ladder needs that they have in that for a young company like us for the acquisition that we pulled off I think this is a great thing and Nobody's got that everybody's gonna keep talking about the long range Lidar. They are going to go from one victory are one loss of one <unk> one last that's gonna be they're gonna add some floor their business will be there ours is different because we are going to be.
And more or excuse every year I'm pretty confident about that Joseph in Detroit for at least an example for me personally. So I think think about that a lot of our products now, let's take it one step above that.
Perception, we talk about perception is something that every all you have to a certain level once even if they don't want the the the the main perception has morphed into different things for different people at the end of the day. It's how you take the latter data apply some amazing software to it.
You can extract information and features on the fly at frame rate.
This is this is really really hard and you know if you think about it.
In frame rate it is actually identify what's happening, it's extracting that information and they want that in basketball like an object level interface right.
That's that's also very important to them as if that was coming from a.
A sick or Src inside our product instead of some AI <unk>.
Product that is you know sitting between the ladder and the domain controller.
<unk> system cost is lower.
That has also been developed something very mature and that's part of the opposition. That's that's one of the teams that I've been very excited about integrating but all our light our product in my opinion.
Not in my opinion like you know what the market is going to require you're going to need perception and we have that so again different people are taught me different things, but no. None of us has to be genius I just think about it right. If you don't know.
What do you want you want the highest possible technology the smallest form factor the most the lowest power and of course, they can predict for a decade.
That's the point that everybody should know that if you are sitting in the chair. That's the number one can you look at are these guys going to be able to deliver this product at this price at a long period of time can I trust them. So people can try to increase their price point as much as I wanted to ask you as much as the ones with all the talk about software and core products and whatever right.
This is like bread and butter stuff everybody should know that you're you're invested in light of our company Lidar you better have software.
That enables into something better faster cheaper so by adding our perception. We strongly believe that the overall system costs can be reduced and this is just a lot of our products by the way. This is not about sensor fusion. This is just a lot of our products. So if you think about it. These are product. These are you know product lines that complement each other but the procession does not exist by itself it.
[noise] exist inside the lidar, enabling these partnerships.
Somebody can just give a light over the streaming point loss or we can give a lidar with all the features that are described but on top of that perception with object level interface. We will have a huge advantage on top of the fact that we have multiple nodes based on what they need we can give them the right technology instead of trying to shove in a product you know with like eight lidar or movie out when I can just have a maven.
With a dynamic lidar do something very special so that's how you think about that product right now when it comes to sensor fusion, what's that about 12, that's as I said, it's a very modest investment.
Once you have a lighter an amazing life and you have this perception level software the next level above that Orient struggle with.
Is just a demonstration even if like how central frequent can be done how redundancy in the system can be done better than what their teams are doing which are integrating cameras in lidar and radar altogether, but they have a different architecture. So it's like a really great R&D to start demonstrating that.
But it's not already for <unk> sake, because there's a product they are actually longterm, we could probably make a chip with our software running on it that's just inside the domain controller next to the embryo shape. Our next to the Qualcomm chip and it's an accelerator where radar data can come in and.
Are larger data can come in and without object level interface, we could actually have higher level software running inside there.
You know seamlessly takes up the load that the the trip over there and it was running out of resources for so again, reducing overall system call. So this product line. Eventually is also going to complement our lidar. So again, it's building layers and layers of stickiness to our products to our customers in solving the problems efficiently without.
Thousands of engineers. So if you think about it with the 350 or like lots of 400 people. We have in the company after the acquisition and the exercise of capital, we've really built out some great products and I totally get People's frustration like well when are you going to those deals I think like an old shed consistent with like what time is it going to be performing with that.
So and then the last time and resources to move your center I'm I'm, sorry, the mosaic software and music software is unique it's got it's sort of like a you know a.
It's something that precipitated from what the perception that you've had done it's something that's needed for validation any any way for validation and verification and it turns out that that software is something that actually our customers are all your customers.
Also one for their own validation, so it's kind of like a side hustle and it's a pretty nice one it's a great team that'd be have their that's actually supporting them.
Tend to just keep engaging with Oems with that and the benefit we get out of it is that is very central part of our thesis for our product pieces is this perception is very very important long term okay.
Well, if I have the validation software if I had the the reference sweet software there.
I get to learn about the perception features that every williams thinking about ears, and advanced Everquote ink to paper on an <unk> that any of our competitors receipt.
So it's totally worth shareholder money to keep investing in it because it gives us an advantage like.
Once we have multiple agreements done right. This will be moot. Because then we'll realize we're actually fueling our future development with a small pockets that we have these are pretty nominal investments right. Now. So if you think about everybody talks about their lidar, it's all circular right, but if you just actually venn diagram and map it out what they're saying you can decipher exactly what me and and Rob.
Are always able to do when we hear somebody else's earnings call right.
Pretty straightforward, we have a product portfolio that addresses the needs for the Orient and that is gonna remain the big Prize.
Strategic sales is very important absolutely I can fully acknowledged that but that will never be possible unless you have a high volume customer that gives you the economy of scale to reduce the price really make a dent in that market with margin.
Any company that is doing.
Direct sales right now is not that successful because the economy's skills are not their their marches of law massive amount of opex required to keep running it.
It's broken.
Alright, so the business, we built out actually is going to work once we get the strategic deals done that's very very important to get these production lines up and running as we're supporting our OEM customers. What are the offshoot as we can do direct sales. We have software that gives us insight into what is coming around the corner and of course, we have the perception built up to a level that is significantly higher than.
Anybody else is.
Before we started investing significant amount of money and building more we're just focusing everything on getting these OEM deals done.
The long.
Long answer I mean, obviously I feel very passionately about it but I hope that gives you a pretty good understanding of how.
All these products are layered in and the stories the same consistently the same.
Thanks submit I think the second question is also similar.
<unk> says I think you mentioned in talking about the AI chip.
So can you elaborate what's the difference between that and microbes strategy and related question is have you completed the analog and the digital Essex for Macrovision.
As I said before the analogue that's easy when I was first the analog. Additionally, scan luggage because we started the <unk>. The plans are started I think the <unk>. When you say the word complete I think you may have meaning that you know the <unk>.
We do we have the the production mask down and those chips in that's not.
That's not done yet, but that is part of it like you know this is where we are and we have started those chips and our intention is to finish up the <unk>.
On the <unk> side of course, the already existed so that's a lot more mature.
Then I think the question is about.
Let me, let me get that right on what was it the AI chip I think I could understand that actually could you.
Please.
Remarks, you had mentioned that AIG chairs the competition is using versus what the micro vision's value proposition. This.
Yeah, I think this goes back down to how we do perception, how we think about perception system cost is very important yes. They can do prototypes in that can do like little demos and they can have computers all over the place but at the end of the day, if you're gonna put into millions of cars.
All of US know very very cost competitive environment of high technology. The cost competitiveness has to be demonstrated what.
Fascinating and amazing about our perception is think about them is like more classical algorithms that had been developed okay and they've been validated with certain scenarios.
These are more powerful actually you know these are equations think about them. It was like more algorithms like equations.
They are pretty you know.
Pretty straightforward in that sense, but it takes a lot of elegance to get to a point, where you understand the scene and what's happening in it where you can predict what will happen and you can do object level interface much easier.
Is like a nice thing you know I mean I have Adobe Pro now you know I can do Geraghty may I now have photoshop.
All over the place right, but if you think about all yes, [laughter] you can't just put in.
In the middle of everything there.
It's kind of really well controlled I can say with the greatest confidence.
When we talk about perception. It goes a lot further because they realize how it's been executed it is not like Willy Nilly. It's a feature that is gonna be delivered to a specification to a system requirement document. It can be traced it is not you know you know just.
Nobody knows and the Black box, how does what he does they know exactly how it's gonna work.
They're gonna trust it so I'm not a big believer that these AI core boxers that people are delivering right.
Things that in video and Qualcomm already do that's not the best use of shareholder resources to develop right. We have some good to develop it was done really well in Hamburg to begin with it's really you know the main reason why I was very very interested in the <unk> acquisition.
I think that we are in great based on the evidence of that is I mean, I don't know how else to answer this are the evidences based on.
You know the meaning that I've been part of our you know the things that I've seen so far from Oems. So I feel pretty comfortable where we are I can't really comment on what strategy, others are deploying and where they got that information. All I can tell you is everything that I reviewed and I've talked.
Talk to everybody within the company.
[laughter] I don't see anything where perception is going to be some AI box. So you know that's just our experience.
And we're talking to multiple Oems multiple arcade so.
Alright, thanks submit.
Can you give us a little more color on the financial due diligence.
And how should investors be thinking about these risks I think let me take that.
So so I think the first thing is I think perhaps Williams have learned their lessons.
From the past and I think that's why they are conducting a lot more extensive.
<unk> this time on suppliers.
And this involved some extensive modeling to fully model, how the business and the revenue streams woollard wall in the case of multiple wins over the next several years.
They wanted to fully understand how was the company be supporting these programs.
And that includes modeling headcount projection by geography.
And I think if you'll recall I had mentioned based on Odm's needs. The resources dedicated resources might be placed in the <unk> in North America are in Germany. Some modeling that is what we are right now in the face and.
And obviously the cash requirements from Ah see sample into production maintaining the silicon inventory.
Which remain the key critical points of how will this all happened in the next three years and obviously I think what <unk> described was.
The non automotive revenue.
Which is gonna support gastro from this so this is all what's going into the modeling and in the back and this is how we are moving two words going from lowering the cost of capital from equity moving all the way to fixed income base capital based on the income.
<unk> that will be generated and the receivable.
That would be part of the balance sheet, which would ultimately make macrovision a more traditional company with the the the lower cost of weighted average cost of capital is what the <unk> were looking for a model of how this will all happen in the case of multiple are a few ways in the next.
Three years. So this is what the financial due diligence and deals.
With our customers as well as our partners. So this not just Orient our our partners are also evaluating us it as we are modeling this out and helping them prove out Y V are better positioned to evolved from where the company stands today into two years from now from a cost of capital standpoint.
The next question is.
Is micro vision pursuing consolidation M&A opportunities as some of the weaker lidar players Walter.
Yeah, Let me take that question as well so that if you don't mind.
Not at this moment at this moment, we are focused laser focus on organic targets of multiple are a few words and building the business around that.
But if some things.
Come along that are strategic and that accelerate our path to get to get their who wouldn't consider that right. So but yeah. So via word of answer this question or a short long answer short at this 0.4 laser focus on our organic targets for the company.
With this I think we're bumping up against her name.
Thank you again for everybody joining on our second quarter Cole.
We look forward to speaking with you again and tossed you would company updates so on our third critical next quarter. Thank you so much.
Thank you everyone.
Thank you. This concludes today's conference all parties may disconnect and have a great day.