Q3 2023 MicroVision Inc Earnings Call
Good afternoon, and welcome to the Microvision third quarter, 2023 financial and operating results conference call.
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I would now like to turn the conference over to drew Markham. Please go ahead.
Thank you Matthew.
Please to be joined today by our CEO, Sumit Sharma, and our CFO kind of Biopharma.
Following their prepared remarks, we will open the call to questions.
Please note that some of the information you will hear in todays discussion will include forward looking statements, including but not limited to statements regarding our customer and partner engagement product development and performance.
Comparison to our competitors.
Get opportunity and program volume.
Sales and future demand.
And strategic opportunities.
Actions, our future operations and financial results.
Availability of fun as.
As well as statements containing words like potential believe expect plan and other similar expressions.
These statements are not guarantees of 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 quarterly report on Form 10-Q.
Filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward looking statements.
All forward looking statements are made as of the date of this call and except as required by law, we undertake no obligation to update this information.
In addition, we will present certain financial measures on this call. It will be considered non-GAAP under the Sec's regulation G for.
For reconciliations of each non-GAAP financial measures to the most directly comparable GAAP financial measure as well as for all of the financial data presented on this call. Please refer to the information included in our press release and in our form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at IR that Mike.
Provision dot com under the SEC filings tab.
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 Sumit Sharma isn't it.
Yeah.
Thank you drew and welcome everyone to this review of our third quarter 2023 results.
Yeah.
I'm excited to be presenting today and we'll provide color on progress made on our 2023 objectives of secured multiple nominations or lidar products.
Okay.
I will keep my updates insights to allow for more time for questions today.
I'm happy to report that we remain on course on our main 2022 objectives of securing multiple design wins with nominations from Oems.
We remain the only Lidar company that offers multiple technology nodes with highest resolution smallest form factor and <unk> with our Mems based long range maybe.
Well as small form factor short range sequential flash based movie on Lidar product lines.
We continued developing our revenue streams from strategic and other channels and I'm satisfied with the progress so far.
The biggest opportunity for the company remains in strategic partnerships with automotive Oems for Lidar products.
Establishing a predictable level of direct sales from non automotive customer is also very important for all companies to be successful.
I would like to start by updating you on our progress on multiple opportunities or leather nominations target launch timelines and the magnitude of deals we're looking at.
Our teams remain engaged with multiple Oems looking to identify their next slide our partner or expanded safety for their passenger vehicles and commercial truck product lines.
Nominated in 2020 three.
Being ready for startup production as early as 2027.
The combined lifetime volume of all the programs up for nomination in 2023.
For millions of units with accumulated revenues of between $1 2 billion and $950 million over the life of production.
We believe these first nominations would have a lifetime of up to seven years with multiple passenger vehicle models added incrementally to their fleet.
These are predominantly for vehicles with internal combustion engine powertrain.
Based on these engagements we remain confident in the timeline to sustainable revenues from strategic sales opportunities.
In addition to the current nomination cycles that'd be worked diligently to close we are starting to see additional opportunities for 2024 nominations with a new potential list of Oems.
These new opportunities would require limited modification or additional customers that would be covered by <unk> and potential future projects.
This is an important step. So this allows us to establish a stable product line that can address multiple Oems with shared core development costs instead of individual projects where Oems.
We remain very excited about where we are in the nomination process.
As I've mentioned before after successful OEM design win we expect two phases for each engagement.
And the first phase, we expect to customize our core technology to the specifics for the Oems need it under the development agreement while.
While maintaining our investments in core engineering.
And the second phase, we expect to supply parts and the Adas tier one with our contract manufacturing partner under the Master supply agreement with the OEM.
As I mentioned before the continued strength of our balance sheet and capital to fund operations until the start of production is a requirement in all possible nominations.
Management has articulated this to our investors and the broader market as you may recall.
I would like to repeat what I mentioned at our last earnings call.
I believe we are well positioned for this item.
Being a publicly traded company on the NASDAQ exchange with no debt controllable expenses and a clear understanding of how to grow proportionately.
Meet the needs of multiple potential customers.
We're also confident in our long term product outlook that will continue fueling customer engagements.
And our product strategy to focus on lighter products.
With embedded reception software is the right strategy with a lidar product lines.
We are seeing this in our current and new engagements.
With this strategy, we provide a stable hardware and software product to our professional customers with object level interface possible at the lowest power and smallest form factor.
Our embedded reception software will do the heavy lifting and enable our OEM customer software.
This will potentially offer system cost reductions to our customers an opportunity to reduce other sensors like radar and camera modules.
I also see us, making progress in establishing realistic foundation and key target customers for our direct sales.
Our objective is to build a sustainable business.
Unlike others in the market. They are conducting direct sales at low single digit gross margins, we are focusing on target customers in the industrial space that see value in the lidar product.
Partnerships with low single digit gross margins are not the right product strategy. So the expenses are not even cover.
We see an opportunity for our industrial segment to focus on on factory and warehouse automation as well as still qualified safety sensors in the future.
Our focus is building sustainable and profitable revenues, while controlling our burn rate and finding a path to sustainable business as soon as possible.
I want to conclude by thanking our global team for their hard work that has allowed us to be well positioned for an incredible year ahead.
We continue working hard to push across the finish lines on our primary objective of securing long term sustainable revenues.
I would like to now turn the call over to Ana Paula to talk about our financials and Nevada.
Thanks, Amit.
Before I dive into the Q3 results, let me first discuss what our first few potential RFP wins could look like and how they might impact our financial results, especially in 2024 and soon after.
We expect any near term <unk> to translate into the following two revenue stream.
Number one and R E or non recurring engineering revenue from Oems related to the customization of our sensors.
This revenue would likely be payable upon us hitting agreed milestones.
Number two revenue related to the sales of Lidar sensors as the volumes ramp up and possibly multiple location in EU and Asia from the customers in line with their expected production schedule.
Later in 2024, we would work towards potentially securing additional customers for similar products with minimal customization to achieve economies of scale.
In this case the lidar sensor once it achieves the majority and has gone through the <unk> process. We would then be scaling similar products with multiple customers.
Well, let's talk about modeling the expenses with design wins, we would expect our revenue mix to include both <unk> and our <unk> revenue and Cedar production revenue from Oems.
Our blended gross margin of 30 to 40 per ton.
We think all successful lidar companies will trend towards this blended rate as OEM volumes ramp and economies of scale begin to be achieved.
We believe we are well positioned to be a successful light our business and are on our way to achieve these goals.
Upon reaching this point, we would plan to further improve gross margin by offering a perception software to OEM customers along with our hardware.
Now, let's talk about production.
From a business model standpoint, we have always stated that partnering with an established contract manufacturing partner will be most capital efficient and importantly will be required by Oems.
As we navigate the final rounds of artist use with Oems customary visits and quality audits at production facilities have been an important for customer confidence.
And our experience Oem's wanted to multiple manufacturing locations around the globe, including in the EU Asia and North America.
Of course key points in our RFP negotiations et cetera on the allocation of liability and product warranties.
In terms of operating expenses, including R&D.
Microvision has a meaningful strategic advantage when it comes to quickly.
<unk> scaling of operations.
Getting operations with multiple customer wins will not require us to add proportional head count to our engineering teams.
We do not believe that we will need to add more hardware engineers as we expect to just need more dedicated project managers.
Long risk quality and operations team to manage multiple relationships as the increased volumes and enjoy the resulting in gone reasonable scale.
We have the ability to add such resources at Oems preferred locations in North America and Germany.
We see no need to double or triple head count to support Patel.
Potential revenue growth.
That said in the event of increasing volumes, we would anticipate the need to continue to add software engineers to work alongside our dedicated hardware engineering team to advance our product roadmap.
The resulting economies of scale would be expected to add significantly more revenue with limited edition to R&D expense, thereby translating into faster growing operating profits.
Our customers and potential partners appreciate Microvision is strong and deep IP portfolio with the industry experience.
Financial discipline of managing expenses and technical knowledge, all of which are key differentiators for us.
I think both cigarettes, and I covered strategic sales and quite a bit of detail. Let me now talk about our focus on direct sales as well, which will be over and above the strategic sale.
These direct sales channel include the sale of <unk> to non automotive customers and mosaic software to automotive customers.
While revenue from direct sales is not necessarily recurring the associated revenue stream tends to have shorter sales cycle as compared to a strategic sales that have longer sales cycles.
In the near term, we expect the revenue contribution from the direct sales channel to be meaningful and drive high contribution margins.
Especially in the initial few quarters.
In fact in this third quarter alone we saw adjusted gross margins of 80%.
While we're expecting revenue from direct sales to have consistent growth year over year in the near to midterm.
Dental revenue from strategic sales would be significantly higher than direct sales revenue once Oems <unk> production volumes have ramped up.
Now, let's dive into our Q3 results and discuss them in more detail.
For the third quarter, we recorded revenue of $1 million as we have previously indicated revenue in 2023 and for a good part of 'twenty 'twenty four will primarily come from the sale of software and <unk> sensors to non automotive customers.
The majority of this third quarter revenues related to our mosaic software product and it is from a leading OEM.
We expect continued momentum in revenue in the fourth quarter and expect sequential growth to hit our updated 2023 revenue target, though six and a half to $8 million.
Now this revenue is slightly below our previously announced range of $10 million to $15 million.
The reduction in our revenue expectations is primarily related to direct sales with some revenue opportunities appearing to have moved into 2024.
In connection with the integration with that Vale, we have tightened our forecasting processes with some smaller legacy <unk> customers to better estimate their sales cycle and predict revenue from the sale of hardware and software.
These are smaller dollar opportunities, we're beginning to have better visibility into the sales funnel as we integrate the two companies, bringing together our sales force and core leasing them around common platforms and processes.
To further support momentum indirect as we also placed in order to build new <unk> inventory reserve auto crews to help satisfy demand from non automotive customers and drive revenue in 2024 and beyond.
We expect the strategic investment in building, our inventory to drive revenue growth in near term and beyond.
Coming back to this quarter the split of this quarter's revenue is 80%.
And about 20% hardware.
The gross margin profile this quarter resembled that of a typical software business as demonstrated by an 80% gross margin primarily by <unk> mosaic.
While we expect these high gross margins to continue in the next few quarters, we expect the blended gross margins to normalize as the revenue scales up and the mix changes to more strategic sales, including an already.
Expenses in terms of expenses, we had approximately $24 million of R&D and SG&A, which includes $4 $7 million of noncash stock based compensation and 2.2 dollars 1 million of noncash depreciation and amortization.
For the second quarter $24 million in cash was used in operating activities, which included $3 1 million payment to build up the <unk> inventory to support the near term momentum indirect sales.
Removing these onetime items, our cash burn for the quarter is around $17 million, which is in line with previously communicated expectations.
To remind our investors we continue to show financial discipline with our cash burn being within our expectations and on a healthy trajectory.
As expected Capex in the second quarter of 2023 was <unk> 5 million in line with our expectation.
So let's talk about our balance sheet.
As of September 32023, we have made most of the payments associated with the <unk> acquisition.
A liability of $2 7 million euros remainder of our balance sheet as the final expected payment related to this acquisition.
We expect to pay this amount to the seller later this year once we and <unk> are reconciled and agreed in the mountains.
Our total liquidity was $78 million as of September 30, including cash and cash equivalents.
We have one of the cleanest capital structure amongst our peers.
In these times of uncertainty and weaker macroeconomic conditions microvision stood out and beat competitors in terms of maintaining one of the lowest cash burn rate in the industry with a highly talented pool of engineered in both the U S and Germany, and a strong balance sheet.
We have a $35 million ATM on file to strategically raise capital as and when needed.
To date, we have only raised approximately $4 million under this facility that leaves about $31 million available on this ATM facility.
Both these facts are indicators of financial stability to our potential customers and important attributes and the due diligence reviews conducted by Oems as part of the RFP processes.
The ability to strategically and opportunistically raise money via Atms position Microvision very favorably as compared to our peers some of which have had to resort to structured finance transactions to raise capital at significant discounts to their stock price.
We believe that with our current cash on hand, and our ATM facility, we are well situated to deliver to the Oems.
Based on our current operating plan, we anticipate that we have sufficient cash and liquidity to fund our operations to at least the end of 2024.
As described earlier, what's the relationship between revenue and operating expenses that we have modeled out we expect to see reduced needs for additional capital as the company grows and focuses on achieving economies of scale.
To summarize we're really excited about 2024 and beyond.
With our first commercial wins within reach and deep focus on bidding nominations were strongly marching towards proving to the market our value proposition as a unique well positioned lidar company in large and growing automotive and non automotive markets.
With this operator I would now like to open the line for questions.
Thank you at this time, we are conducting a question and answer session and investors can submit their questions within the meeting webcast by typing them into the Q&A button on the left of your viewing screen.
Analysts to publish research may ask the questions on the phone line for analysts to ask questions on the phone line. Please press star one on your phone to enter the question queue.
Please hold while we poll for questions.
Yes.
Your first question is coming from Ondrej Shepherd Your line is live.
Yeah.
Yeah.
Once again your first question is coming from Ondrej Shepherd.
Let's move to the next question please.
Certainly.
Yeah.
I'll now turn the call back to our new PA Verma to read questions submitted through the webcast. Thank you.
Thank you Matthew.
I guess the first question. We're getting is why are you confident that microvision will thank you.
Does it happen in Q4 2023.
Yes, I think that's a good question.
I think the process.
Everybody that would be in it right by night by this time has been informed.
There you go the last phases of it because now you are in the middle of the commercial discussion. So typically the processes. We go through the.
Technical and games engaging early the alignment happens it continues right, but at some point or technically your line you have solutions, they're seeing the samples.
<unk> has seen simulation data all of that work is not the technical work dominant part of Dun you've given them. Your binding offers several rounds that have happened.
And at this phase.
Get into the final phases when they go line item by line item understanding the liability the company, but also really are they getting a fair deal and.
You know the discussions are deep.
As you can imagine for the magnitude of the contract wins would be and these are binding offers for those periods of time, so it's pretty detailed and the non engagement visiting factories.
Coming in seeing our quality processes all of these kind of things take a lot of resources OEM. So they're very selective of who is in the PON route.
There is no certification other things lots of the other terms that people introducing certification those things are already quantified as a supplier they do quality reviews of you.
You just get down to the money right. How much is it going to be for NRT, what's custom versus what's core what they believe it's fair. What you believe is there. So as you get this data you kind of know when you are in the deals that youre negotiating the final items.
So the confidence comes from that exactly where in the process.
And if I could just add.
Yeah, Yeah, if I can add on the financial side.
Obviously financial.
Due diligence is.
One of the key criteria that the Oems are undergoing.
This requires building detailed financial models of how we'll be support them.
And in cases are multiple RF <unk> and I think what what are.
<unk> from our side is to lay out a detailed plan of there was the resources be located and how are the production and operations team work in tandem with the engineering team to ensure that the production and the supply chains are.
Secured an intact, because thats something that they can on absolute default or on so.
Just by the nature of the financial due diligence.
I also feel very good about where we stand and.
RFP process with these customers.
Alright, moving on to the next question.
What gives microvision confidence that they will secure a design win.
As it seems like most slide our companies have all been saying the same thing about capturing a design win.
And if previous ladder companies already have wins are they better positioned to win future contracts.
Yeah, I think I'll take this one.
That's a good question.
Okay.
Yes, all of the larger companies are looking for liability somebody is going to win it and you're going to win a lot right, but let's take a step back before you get into.
This question about was there some incumbents out there how do you position yourself, let me just make it clear.
Somebody recently asking the same thing in kind of a more casual environment and this is the answer that you have to think about.
Before there was the iPhone, there was Nokia and Blackberry, even hear about those companies anymore.
So the right products will always win Okay, and you don't have to believe me of what the right product and if you're a consumer and you have ever bought a car you know what.
Byproduct that there's going to be low power its been a not increase the cost of the carve out thousands of dollars. It's going to give you the safety it blends of where the technology blends away and makes the vehicles more secure.
What we do know from all of these companies, saying simultaneously. There is all these Oems out there looking for Lidar solution that lidar is a product that they need the technology that they need to achieve what the goals they have and the production starts in 2027.
Take many years to qualify what the choices that they are making now are going to last for very long period of time, so they evaluate very deeply alright.
If incumbents at such a big advantage right. It would be all done actually just announcing them lets move on but that's not the case.
Clearly tell you that is not the case.
You have technology solutions that people have out there and there were early to market, but if you look at it as a product it's too big too bulky to expensive I mean, if people are saying that theyre going to drive up the price for customers $1000 in that software and go even higher.
If you know anything about the Oems.
A little bit about it I can tell you that is actually not going to land well, okay. They're all of them look for an option where the technology can be delivered highest end technology can deliver at something thats going to go to millions of units and that's not going to be thousands of dollars in the vehicle right that level of value added right takes a significant amount of compute power. So.
I'm pretty confident in what were saying I mean, clearly like it's not just we wake up and we started saying that things are vetted.
Everybody in the companies involved the board is involved.
Everybody looks at it so we're pretty confident in what we're saying.
And I think like you know folks that I wonder about this you have to take a step back and it's all playing out as you as you know we're not backing away what were saying I mean I have not seen anything come across security says that the decisions are getting delayed for us is it still on track.
We have to deliver samples.
If any kind of nomination happens right some of the samples that get delivered in.
First half of next year early early first half.
They have to make a decision as fast as possible because their launch timelines are not changing.
So we have a very detailed understanding of what are the steps involved to get them and get our technology qualified.
And then gave you is pretty deep so I feel pretty comfortable that better technology is always going to win better products are always going to win and it has to be small sized low power cost competitive.
All of these things in a secure company that they can trust is going to be around for the seven years of the contract to deliver on what they are about the size and if you think about the magnitude of the volume and the Asps like the dollar value that are described in today's call. These are big numbers. These are big numbers that take some serious consideration and discussion.
Thanks, Amit.
The next question.
It doesn't seem like the industrial market overall has been doing well for our companies in general.
Would love to get management's outlook and how they view the industrial market over the next few quarters.
I think I'll start with isn't unwell, perhaps you can add a little bit more to this.
The industrial market as we looked at it we.
We have you know we had a guidance, but more we look at the market I think there's something there so I still believe.
That direct sales is a peer revenue that is very important for a lidar company you need to work on this you will have to solve it any lighter company that does not have this is not going to be able to stand on some legs in the future.
OEM wins are there, yes, you will get <unk>, but it does not cover your core engineering plus on top of that you have significant.
Long contracts said you know once they materialize, there's going be a ramp up period okay.
Direct sales are important because if you have actually develop something that goes into the OEM market like our mobile sensor.
It is ready and it gets harder to addressing sales there you want to ramp it up and you want to actually make a dent into that market that's been stagnant.
Hundreds of millions of dollars worth of revenue can be made there right where you are.
Also cannot have a product that you give away for free or single digit gross margins.
So as we look at it right.
I remain very confident about this thing I think this is important this has to be a substantial layer of revenue year by year. They can count on but youre, saying youre getting an install base outside of automotive right. So you have a.
Multimarket strategy, where you can't meet people should not be promising hundreds of millions of dollars with the revenue because the growth in those market is slow, but it is stable and predictable and you learn a lot more by your product and features if you can be a dominant player in this space right. So I still believe that this is important thing and I think yes, I think the numbers right now.
Everybody is going to get on the earnings call and talk about the economic headwinds and all these things right and I know like investors, sometimes roll their eyes and they don't understand is right because they just want results.
I just want results.
All of US just one results, but the reality is that industrial markets take a little bit longer we have a great team across the team. They have a plan. It's just a slow moving behemoth, but there are ways to make significant revenues in that market and I'm excited about it.
None of us.
Right and I think one thing that I would like to specifically add too wild pursuing revenue, obviously in the industrial market and our strategy, but I want to make sure. Our focus on gross margins is extremely important right. Because I think we're out of the growth at all costs era, where money was free and you know every.
He was growing by just adding cost to the system and I think industrial market is just exactly that pitfall and we have to very carefully tread at what I mean by that is I think what you saw in the Q3 margins as well, we want to pursue opportunities, which translate into a positive gross margin.
Story, because I don't think theres any value of transferring wealth from our investors to these direct sales customers, where we have seen companies, which did that and are doing that actually who.
Through our focus on industrial market, yes, they have very good revenue numbers, but again their margins are really either.
Even in the negative for some of them to I don't think Thats something a business model that the market and the investors would reward in the long run I think this is pretty evident from some of our peers, who are focused on this market and their valuations because the investors want companies to focus on growth that translate.
Into gross margins and ultimately lead to a path our path to breakeven.
And I think that's something that you mentioned, it's really hard to achieve economies of scale because all these direct sales revenue are.
Nonrecurring in nature, and you have to spend a lot to get the same quantum of revenue. So.
Meanwhile, having that said it is extremely important aspect. Because this is also something that the Oems are looking at us because what it does is the focus on this revenue at good margins essentially alleviate the need for or.
Reduces the need for additional capital to grow the business and I think that's sort of why when I mentioned the financial discipline is a very important attribute in some of these financial due diligence because like I mentioned as we are modeling out. The next five to seven years with these Oems. This is also part of the revenue stream, which they understand a draw.
Going to the bottom line as well.
It's moving to the next question rigs.
Regarding lidar.
Oems deliver do excite people to buy a new car is it safety to prevent collisions with cars and bicycles around the vehicle save lives injuries and prevent costs.
Yes, that's a very good question I think you have to think about it.
<unk> got a new vehicle in the future whatever the powertrain is I think most likely it's going to start with the internal combustion engine because those are still dominant for a while.
Passive safety and active safety is going to is a very big part of it.
Certainly.
So many meters. There are 15 20 meters around the car, having a safety cocoon. So you want to see 360 that can add like the mobile sensor.
It goes around it.
And of course also active safety and driving highway speed conditions. So it's all about safety.
First enter into this market is going to be.
I think theres lots of articles recently that were published about that the you know the first commercial applications are in trucking, yeah, yeah, theyre going to make a lot of investments are going to go forward, but as you can imagine.
Penetrating the trucking market with high volumes right is again I'm going to take a long period of time, it's a very very conservative market, but yet with sustainable revenues sustainable volumes, there, but passenger vehicles are significantly more number of them are launched every year. These OEM there in a very competitive market with each other.
So where the interest rates are you know you have to be selling vehicles right for them they have to sell more value and gains us by another vehicle with seven more airbags and you'll say there is definitely pushed through having more adas features they kind of blend away that create this active and passive safety cocoon around the vehicle. So yes, I do believe that safety is going to be.
A key differentiator for not just printer Oems all Oems as they look towards what are they offering their customers and how soon can they bring us technology from there.
Premium segment to some of the other higher value segments within their fleet.
Thanks, Amit.
And I think I guess a related question.
What do you see on the regulatory side that maybe gives you more or less long term optimism about lidar being just there as a safety piece of content required maybe one day for many if not all cars.
This is actually a good question. So as you can see Oems are qualifying the new technology. This shift they take the liability and they are able to through the end cap process deliver right now.
The regulatory part you are talking about if ever there is a body of data that shows that cars that shipped with these features were significantly more safe compared to everything else.
At that time, the regulation will move in and mandate like we did back in the nineties that every car has to have a airbags.
Someday in the future I expect that these Adas features are going to be the dominant safety features they will they will definitely deliver huge amount of.
Factories are safety two vehicles.
And what everybody expects is that youre going to get a regulatory move towards that sometime in the future is that going to be in the next couple of years, probably not because we have a body of data. So no. None of the liner companies that have announced anything might have shipped anything in volume, but just kind of cranking it up slowly right and they don't talk about any of their volumes yet what we're doing is we're telling you that Oems must have enough data now start putting fee.
Forward. These next set of or excuse me for 2023 that have these kind of volumes.
But that is still only scratching the surface I mean 100 million vehicles, if you takeaway China Theres still a significant amount of vehicles that are shipping to get penetrated into their fleet.
That changeover is coming over pretty soon to start delivering that and.
And soon after that as you know of course regulation will step in if you can see a significant advantage.
Two safety.
Thanks, Amit.
The next question is.
What's the sequence with the automotive companies the foreign RFID.
Is it RFID the first phase RFP the second.
And what is sort of the if you could just walk us through the process of design win.
Sure sure.
RFID, the phase where they solicit they have a need.
So, let's say a wide cast a wide net to reach out with all the larger companies that are known entities and they get their requirements on loot requirements and they try to get.
Where is your state of the art technology right now where are you right. What's your production capabilities, what's the maturity level, what's your liability they want to know what product would you be proposing for that.
Typically from that it would be a down select but it will still be a handful of companies.
That get into the or a few the first one on <unk> and then.
There is a deeper dive into.
The various concepts of your technology, they want to know how your technology works they want to get in the middle of it they want to see data they want to understand.
All the different things, but they also want to disclose to you about what they want to do with it what their unique needs are.
We're not selling screws in Blue these are not commodity part how your customer is going to use your technology is slightly different every time and we of course work with them to accommodate them, but that's where a huge amount of technical alignment starts happening.
In parallel of course, we started making some non binding and binding depending on the OEM commercial.
Proposals up really where we're going to be.
From that phase of the RFP to go to another phase, where they even down slightly even further the door even deeper dive and then of course they get.
I mean, you can go on forever, but essentially it starts converging down to like one or two companies, which the last one in you start you know you have like binding offers in detail.
Understanding of what's the thing is going to cost.
And they want to know breakdowns I understand like you know.
What the future would be if they were to pick you.
And then after that as you know they nominate somebody and.
The good point that I see so far is that right now so the volumes that we're talking about they're looking for a sole supplier. So they really want to understand the quality and manufacturing capabilities and partnerships your supply chain.
And understanding that how are you going to be able to like if they pick a sole partner.
How are you going to be able to supply the volume in all the regions that they may want to expand in the future. So this entire thing has to be put together. It's not a you can imagine that the technical part is very detail, but I would say the commercial package and the financial due diligence is probably significantly more involved than even the technical we have a very fortunately a great engineers and they can.
Walk people through they can get the excitement.
Have mastered what they've created so we can get the confidence in the technical side, but the commercial side they need to believe that the company has a plan to be sustainable for a long period of time, we can get to startup production and beyond that and what our strategy were great too.
Make sure that the price we were giving you right now are affordable for them, but also is sustainable for us. So I think that's kind of a general process.
How you get to a nomination Org design with.
Thanks, Amit.
Thank you. The next question is probably I'll take it.
About what our Oems most important requirements, including financial due diligence for these nominations.
So I think I touched based upon that but let me elaborate that.
I think with Williams and looking to do it extensively model, how the business and the revenue stream Kabbalah ball in case of multiple wins over the next several years and this also include the direct sales channel that we talked about.
Earlier.
One.
To project, our head count by geography, and the predictability into how the costs will fluctuate.
Under the volume ranges that they have given us.
This will also this also involves who will maintain the inventory and where will the location speed and how even the the the.
Shipping will happen to.
The different production plants across across the globe because you know.
As I discussed in my <unk>.
Prepared remarks.
Are required to have manufacturing capabilities or production facilities in Asia.
Well to supply to the Asian.
Business of diesel yet.
And I think most importantly modeling how will the company be capitalizing and most importantly, lowering the cost of capital right because as you can imagine as the company starts to generate traction we will be reducing our cost of capital and moving on from equity to debt financing.
And as the company generates cash flow a lot of other options open. So I think what the Oems are looking for is a clear path as to how the company becomes a more traditional company as an entire line of our business and lighter industry becomes more mature more mature and the companys move towards a traditional company with lower cost of capital.
Then just equity.
Yeah.
The next question is are there any automotive requirements that only microvision can provide and none of the other competitors.
I think the way to think about it is that the Oems put together what they need for example.
This question of X number of often right about the dynamic relied on let me just describe.
For example, they will give you a field of view and they'll give you regions of interest of what resolutions. They want at what ranges alright. So if you think about it what theyre actually describing theres a dynamic view lidar right I mean, that's exactly our technology works.
To maintain these high resolutions on these narrower field of view.
In flight, we accumulate all the data and we.
Pump it out so from my vantage point, when I look at a teardown of anybody any of our competitors technology right I'm sure they're done ours as well when I look what's inside.
They're just running a static view right I mean, the four channels of some number of channels that are pointing in different directions. Okay.
Statically, taking whatever noise that they have and the field of view is fixed. So therefore, the resolution to far range is much harder for them to achieve.
They are operators that meant that our smaller aperture size, but they're not even able to reach those kind of ranges. So everybody technically says the same thing, but if I look at it.
From my Vantage point.
A lot of these things have been written with dynamic view lighter in mind, if you think about logia.
<unk> sensor it's Scott.
It says the VIX all in a battery known technology, but customized by.
Our team in Hamburg to actually create something very unique about it right, which gives a cost advantage long term.
So it's what they want but if I have to say as one requirement one requirement that they want somebody to provide.
It's actually cost is something that is small and low power you got to meet it right. So you can see the size of our product. We're talking about the SRA was talking about mortgages are small low power with their asics in there right. It's actually the cost is to say argue scalable can you put a production line and that's not going to cost of $40 million to $50 million and youre trying to amortize that right <unk>.
Production line that can grow at high volumes at a very high quality and deliver that because no OEM wants a product that is going to be $800, a $1000 per unit and somebody trying to drive the price up.
Not getting economies of scale.
We are pricing it aggressively and the reason is because we can achieve economy of scale is a lot easier because the products are truly running on a semiconductor of active align automated line. These got automation exist. So that's like a core benefit we have so I would say.
If there is like a real advantage of technology has all the specs I can talk about it all day I love it.
The real commercial proposal, we're making you can start hitting price targets that they have dreamt about and nobody else has achieved them, yet and we're going to do that add profitable gains for the company. After so much R&D invested to get to this point so.
That's what I'm more excited about that that is our automotive requirement, but it is really a commercial agreement that they feel like it's sustainable.
Thanks, Amit.
And this next one probably I should address is like on the revenue guidance for Q4 2023.
Which markets and products will contribute the most.
And how much will be software versus hardware.
So Q4 2020, we do expect a significant step up in revenue from Q3 levels to hit our range of six and a half.
Two 8 million for the full year 2023, and as I mentioned earlier.
We expect this revenue to come from direct sales.
And this is the high contribution revenue.
Primarily from software. So we are expecting similar levels of gross profits as well.
Next quarter on these on visa revenue as Bob.
And I think.
Maybe this is the right time to talk about 2020 core could potentially look like obviously, we will be providing detailed guidance.
And details.
At our annual Q4 call next year by 2024.
As I had mentioned earlier it would be a combination of NRI.
From Oems and also direct sales of mosaic and <unk> to some of the non automotive customers.
And direct sales our shorter sales cycle revenue.
And I think like I mentioned, we want to make sure the focus to increase the direct sales revenue channel is only done at high gross margins to help drive cash flow and reduced needs for additional capital as the company grows and focuses on achieving economies of scale on the strategic sales asps.
Okay. So I almost think of this as a dance in tandem between direct and strategic sales were direct sales are uplifting the.
Strategic sales revenue channel for the company.
The next question is.
Do the current RF skews cover Oems complete auto mobile offerings or are they limited to specific models and.
And along the same lines or the OEM RF skews projected to cover multiple a multiple year models and do the RFP was tied to OEM to the selected Lidar company for multiple years.
I think I'll answer the last one first right any contract you signed I think you come to an agreement they are going to invest a lot of engineering upon their time to get the product they need get it qualified we'll invest a lot of time. So I think the way you think about you know are the committed to Russell that committed to the contract as long as you perform for the contract we deliver that.
You're going to be a great partner.
And I believe you know where others may have failed in the past I'll delivering on time, but that's not an issue with us because we have a high level of maturity.
Certainly that's a that's a really big advantage that we have.
As long as like is it going to go across I think the question is let me rephrase that I think what I understand is.
Like is it going to go across the entire fleet right. I think we think about it is that you have multiple model years that they had.
We'll have something that will introduce with they have a marketing strategy that goes with it but the volumes that you're talking about right that would be across multiple bottom lines I know when you start getting to millions of units.
It's going to be across multiple model lines. So yes I can.
Absolute confidence that this will be across multiple model lines and depends on how they deliver the product how they marketed what the uptake would be because youre going to create this whole environment for them to be able to get access to that technology at certain price points that would have qualified it as like a qualified part and it has to go into production for them.
And.
You got to deliver on time, you know if they have a production timeline for 2027. They wanted it to be ready on a significant amount of time and you can be the one that ever causes a delay and if anybody did that would be pretty bad that would delay any kind of launches where no. Yeah. That's a very very bad but for us I feel like that we're probably well positioned with our tier one.
One strategy.
Of course, the supply agreements, we tend to sign with a contract manufacturer that the Oems have already looked at and qualified and feel very comfortable with.
So I feel confident that once we are tied together contract is still I mean, it's a pretty significant commitment that we would make on their behalf and of course, they would have to make by picking us as a technology partner.
And we do have a question from Andres Sheppard Andres Sheppard Your line is live.
Yeah.
Mr. Andres Sheppard from Cantor Fitzgerald Your line is live.
Yeah.
Let me address is having some trouble like let's continue and let's see if we can get to somehow.
Yeah.
Right.
The next question is from the outside.
Microvision hiring.
And it kind of promising indicator company ramping up.
But without execution wins in the third quarter was the slope fiscally irresponsible.
Thank you let me take that question.
I think we think of this company not just a quarter to quarter, but our long term business right.
And to build a business you need to have the right building blocks and for that not just engineering, we need to build our operations and our supply chain, which is absolutely very critical to these Oems as I mentioned as part of their due diligence to the.
Recently, we brought on senior executives for building, our operations and supply chain.
And product engineering capabilities as well because these are very critical.
In any of these discussions with Oems because they help us lay out a complete roadmap from where we are today and how do we scale the product in terms of.
The units, which are millions of units from a described and to achieve that kind of pricing, which is sustainable we need to have a very solid plan.
In place to be able to deliver those prices that we are offering to our patel.
Potential customers, which will essentially help us get a competitive edge over the competition. So yes. So I think that's sort of why the hiring the recent hiring initiatives that microvision have been focused on.
For the company and like I mentioned for scaling it is going to be all about.
Scaling similar products, so that when you achieve the economies of scale. So at that point, we would not need to add more hardware engineers, but that would more be project managers, which will be dedicated resources managing the particular OEM relationship that will be tasked with.
Delivering that.
Production schedule to make sure any.
<unk> calls or any associated production.
Nuances.
Customer and we have to deal with are taken care of so that would be the growth in the head count related to that and then on top of that obviously the software engineering team as we integrate more software into our products down the road.
Alright. So the next question is.
At the Investor Day, you stated that all the in flight RF Skus required microvision dynamic view lidar capability and no other vendor has that capability.
If there's still an accurate statement you said no one can catch us.
And that will have multiple deals this year and reported a potential take off 80% to 90% of the market share.
And rest assured good luck, if that's still an accurate statement.
Yes, so the recommended statement.
Everybody is using some sort of spinning prism or a static electrostatic mirror that you cannot change the field of view of the Mems mirror dynamically allocate galbo.
No.
Ultimately firing off multiple pulp sales with a slow moving near you can only collect so if you think about there's dynamic view at the resolution.
The way to do it as a dynamic lighter so that statement is still valid.
From.
I have seen so far.
Right.
Yes.
We still have yet to hear any.
Lidar supplier agreements from Oems.
Our timeline still as management had imagined.
And some investors have lost faith into lighter market has been quiet and if no decisions are made before the end of 2023, that's going to help the cause.
Although obviously, we know that there is not much lighter suppliers can do as it is up to the Oems.
So any specific demand environment or delays that we're seeing.
Yes, I think if you look at the magnitude of the contracts that anybody would be entertaining at this point. These are big numbers that will take some time, but thats a nominate somebody so we can start going by assigning resources because their timelines I mean, one of the things as you know in the early part of the RF skews. The vet out are you able to deliver to the time when they need and if not it doesn't matter. If you have the best technology you're out.
Okay. So that's important to them now again.
Different people will have different reaction to the 2027, but thats realistic that's where all you got right now their software will take a while to develop even though you're ready with your hardware. So but again those are not like you know significantly like into the next decade or anything right. They're all within contained within a typical OEM engagement for these kind of technologies to be incorporated into their vehicle alright.
So as you can imagine.
That.
Timelines they have specific dates they have to build a fleet. They have to collect data we have to deliver reliability. They want to see a control bill.
Once your liability that they wanted to get a fully automated line that.
This whole development is a multi year development and you want to not do it at like thousands of engineers you have to do it.
We started effort so.
I get it I'm a shareholder right I mean I bought shares in the company on my own as well.
It can't grow fast enough for all of us and I get that and I live. It every day and even if like nobody's applying pressure on me or anybody in the company I can assure you apply pressure on myself and everybody in the company feels that anxiety I get it and I promise you we get it.
Oems are Oems I feel confident because the way things are moving this is how people thereabout make big decisions talk but we're going to get rough, especially if somebody's going to sign up for something big enough Microvision and our history has done some big contracts right, but nothing Thats big net.
Never ever anything as big as ever crossed us right.
And there are multiple of them simultaneously is a big moment for us.
I want to make sure that we sign agreements that are sustainable.
That they appreciate what we bring.
And what risks they want us to take and I think a term I like that and have used.
We don't want a transfer of wealth from our investors to our customers to win a project and you can't just throw into your power and just go home because they are asking for something tough.
I just feel like very confidently, we can talk to them. We can described in those situations. We can show them the detailed and they are getting a pretty good deal.
Somebody that is actually going to give them a commercial proposal.
I can give you in the hundreds of dollars here you go but here's the economy of scales I need from you and if you don't achieve that economy of scale, here's what the price is gonna be and somebody could.
The OEM could say, yes, I want a flat pricing from day, one well from day one of the first year volume is low and I'm running negative.
The gross margin my muscles are not going to be happy that right should we have to find a balanced approach and what I can clearly say.
If they listen they talk they are engaged they understand it.
All understand because if the tables return they acknowledge that yes, I understand where you are putting together right and so it's like any deal. When you have big numbers involved you've got to go through it I wish I could give you a lot more flare about it and maybe that's going to get people understanding the process, but.
This is just a lot of money and you got to have a cool head and just get through the process.
Kent.
Have any hyperbole to investors for the market to your employees or to the customers.
And we do and if I can just add to that.
We do have a question from Andres Sheppard from Cantor Fitzgerald Andre Your line is live.
Hey, this is an add on for Andres can you hear me.
Yes, we can hear you.
Sweet cool Ah congrats on the quarter and thanks for taking our question. So I was just wondering if you could quickly walk us through what led to the revenue guidance revision and potentially related to that how long it would take for you to.
Materialize, a potential OEM contract and with that what type of margins would you expect once once that begins.
Great. So let me take that question.
So ananda.
Just to clarify the reduction in the revenue.
Guidance from 10 to 15 to six and a half to a was related to direct sales. So if you'll recall, we had talked about that this year, it's going to be.
The revenue is going to be from mosaic and Athena automobile.
The reduction is primarily attributable to some of the customers, where we saw the opportunities moving into 2024 and this is primarily related to just tightening our forecasting processes at some of these smaller legacy IBM customers to better estimate their sales cycle and predict Rev.
Canoe teens.
<unk>. These are smaller opportunities were now beginning to have better visibility into the sales funnel as we integrate the companies together now in terms of margin.
Obviously Q3, we delivered 8% adjusted gross profit margins, which is again in line with the software our high contribution margin that we had talked about and we expect that to continue in the fourth quarter.
As well.
And obviously in 2024, when we'll provide more detailed guidance it will.
The adjusted gross profit margins would come down to become more normalized as we tend to get more NRT revenue.
From OEM supplier, so hopefully that answers your question.
<unk>.
The guidance on how to model it going forward.
I appreciate it.
And I guess the second part of the question is how long would you say would potentially take to.
Materialize in OEM contract and how would you characterize your progress on that front.
Thank you.
Yeah.
I mean, if you want to take that.
Yes, I think as we mentioned as I mentioned earlier in the call I think we stay on track towards that 23 goals.
So at this point I.
I think it's in the transcript right pretty much.
The details of the negotiation and of course, the timelines for these projects have already been established.
And it's down to just the commercial agreement.
Got you.
Yes.
As we mentioned in the past.
Cool.
And I guess, the very last question, just switching gears, a little bit to the non automotive sector what type of demand.
Would you be saying youre seeing in the mobile sensor for verticals, such as agriculture robotics and these have a shorter sales cycle and we've asked this a few times and we were wondering how you're progressing with potentially securing partnerships with maybe trucking companies or related verticals.
I think I'm going to take this one so if you think about strategic sales I think trucking, let's put it over there and the strategic side, but if you think about the spot sales.
If you have a segment or a market that doesn't see value technology and they're thinking about you know you're going to finance them with single digit gross margins right.
Thats fine others, our competitors kind of take all of that business and driving some of that business, we're going to focus on the market within that segment is a segment that really appreciate the technology, what it can do for them and they understand that.
With high reliability right, it's not the automotive grade product that's already qualified it could be a sales safety product right, which has got one hundreds of millions of what the market with some people out in the world. These are real markets right, but you know where it is not a flash in the pan.
We're choosing to focus on that because you can actually build a sustainable business a successful sustainable business leveraging what's already been created on the mobile platform.
Yeah, I think as we look at our guidance of course as always if you're downgrading anything right. They never want to disappoint people, but at some point if you take a look at it and saying is there a sustainable path that if we enter a market. Some robotics somebody talks about can we put it on you know some robotic that's running around.
A little.
Humanoid robots running around but that's not a sustainable market and it's the only way they can make their market is by having us not make any profit on their behalf and transferring wealth from our investors to them.
I think it's better off if we don't do it, especially in the current environment economic environment with interest rates that high it does not make the most sense for our investors. So yes.
We're focused on it.
Really looking at is turning every rock and understanding how is the business sustainable if you engage with them.
And we do want to grow right growth is important but you got to have growth in profitability. You can have growth with negative gross margin and somehow magically turned the corner on the economy of scale issue.
Got it appreciate the insight thanks again for taking our questions and congrats again on the quarter will pass it on.
Thank you for joining today.
Thanks Carlo.
There are no further questions in the queue.
Alright, so so I think before I move onto the next question I just wanted to wrap up my comment on.
The demand environment. So I think the way I think about this is.
Lidar is in a product or is a technology that is going to be needed.
And at the end of the day, it's all about which company will be successful in building a business around the technology that is going to be ubiquitous and it's going to be around for a very long time, just like the air bags were so I think is just about investors really trying to identify because I think at the end of the day the wound.
The 15 light our companies.
Standing in this in this industry because obviously.
Any thoughts on how any industry growth. So there will be consolidation, but I think it's very important for any successful light our companies to make sure. They are building a business, which is sustainable with a cost structure that is scalable with a foundation that is easy to grow and not having to do with the other way.
Which I think we have seen recently growth grew at all costs, but we are way beyond past at Euro and it's time that all companies realized that the path to good gross margins and a path to breakeven for a new technology. Like this is extremely critical for any successful Lidar company.
Yeah.
Alright, So next question.
I think.
We described and more microvision.
Operating primarily tier one why is that is that something you intend to do across all customers and products.
And is it too has something to do with manufacturing et cetera is that accurate and we want to make sure. We understand the business model and why Microvision has chosen that route and world Microvision provide the recipe and utilize existing manufacturing processes by other companies to build products.
<unk>.
Yeah.
We've raised a quite a lot of money.
Including aveo, Microvision as well to develop a great technology to get to this point and that was done on the backs of our investors. Okay. The only way, we can monetize that and amortize all that R&D and of course no show incredible.
The market that we create something really valuable.
Sell something you can't do that but our license. So you would have no choice.
As to enter this space and become a tier one and thats whats required okay. Because the company long term, even if you add millions of units a year of volume and it was a license model everybody in this market will expected to make a handful of dollars you cannot even sustain the company that you need to do that.
On top of that you would not be able to amortize all you are actually.
Of your investors have put in place put in this we're a high growth company. Therefore, you have to sell something and we're going to sell it lidar and we're going to make money on that one right in certain show our business and if you think about all the lidar is not going to go inside our objective remains the same.
Do I wake up every morning to just have like a single digit growth no of course, not do you want to be a dominant player in this market with a profitable business and get to like the 80% to 90% market share someday in the future and you can only do that if you become a tier one and you actually are willing to work with our partners create supply chain create the engineering discipline required and you can deliver than the finished lidar.
<unk> core technology, you hired the people who spend money.
Different returns.
And that cannot be done by licensing for guess, we intend to stay as the Adas tier one partner to Oems because he can do to invest in developing technology and doing R&D for what they need in our core technology area.
So therefore, we have to build a sustainable business model that allows us to be around for long period of time to enable them and of course. This is the high and the highest end features that are going into new cars in the future in the near future right.
And you have a core technology thats required and you are the only one that's scalable and you're talking about price points asps that are significantly better and charming to Oems in any of your competition you get the right place at the right time and you own your entire IP and you are extremely motivated and talented workforce.
I'm pretty sure that many many people on this call that would love to change places with me and to be managing that company because that makes our life a lot easier. So yes, but it's hard you have to make for some tough times to get to that point, where you can take a breather and they may not come for years, but you have to get through this that you are going to have to make your own Lidar you can't just think like well I'm just going to give it to somebody else.
Even when you buy an iPhone.
I mean, just look at the public filings for somebody that can be like Apple pay or a significant team that actually does that and they sell their phone that they are most dominant product.
Not the actual only.
So we are going to make a lidar and that's where you want to be because youre going to have to invest in R&D to make the current light out there so to deliver that but they wanted to your roadmap because thats simple company. How are you going to do any more features a lower cost.
Our more software in the future because of course software is a big part of it we are going to establish a lot of our business and then of course the clear of software is how you really start monetizing this company, but you'll have an installed base and you can sell them software that runs on a product as you sell additional orders in the future.
If I can just add to that I think the capital markets are already.
They have.
Sort of given their word on company, Florida company that took a licensing route and their valuations are significantly lower.
Because I think you can gave a later farm here because I think it's very important to have a contract manufacturing model. Because this is how we maintain control of technology and obviously the salary share overhead and.
And part of it is also has to do with we are going to provide the liability and the warranty is associated with any product like a tier one o'clock. So I think all the.
Aspects are very important to even build a business because like I said at the end of the day. Our second successful Lidar company will have the entire capabilities from soup to nuts.
In terms of having the design house as well as the production and the supply chain.
Infrastructure in place to be that successful.
In any way.
Hey.
And could you elaborate what were the reasons and why did the customer not to us.
Yes, I think.
Our current part of secure but if you can imagine like we've engaged with lots of Oems some of them did not choose us early part of the year.
And part of it is but we also do is not technology. They all dollars of technologies. There. It's just their timeline that they need the launch timeline and evaluate early on if you are going to be there at the end of it right. Some of them acknowledged that there's another model year coming after that that will be better suited for it because that lines up with your timeline.
But you know this whole manufacturing park security quality.
Confidence suppliers those are pretty important deals for them and some of them. Just had you know like if you know two years ago, we were deeply engaged with them.
Would have been better right, but I think.
But it hasnt shut the door because we are still engaged with Oems right, but they recognize that hey, you know what your Onboarding time is going to be at this point. So the technologies that they are aware of us we didn't even know we gave you.
Net onboard it for them.
But it's really about I would say and this is not just about this is every company.
Every company that announcing a deal in one of the first thing Theyre looking at it.
How close are you to getting things going and not just your work they want to take a look at it they want to see do they believe that you have the supply chain for it do you have a partnership for it do you know how what the automation would be like is it not invention or is it just execution.
So <unk> certainly there is a production line. That's there <unk> is a derivative of that so of course, the great confidence that will get you know how to do this once we can certainly do another production line for that May have been on the other hand, we have 200 millimeter wafers. We have single cabinet tools, we have automated equipment that we risk purchase early on in anticipation of what do you think that's what we've done all the.
Things that are there and the rest as you know ASIC timelines you know all we think but I would not say that ever technology. When it comes to technology. It's clearly that we can work in any place knows that while this is great because I'm. So glad you're there, but its launch readiness is I would say pumping.
Something to the table when I'm, saying that this launch readiness right and we have to be.
Flawless and being able to ready to launch the product.
Great. Thanks, Amit thing and maybe take one last question, we're coming up on time.
What strategies does microvision intend to employ for the rapid scaling of mass production, our maven in Bolivia.
We will be the expected pace of mass manufacturing expansion.
I think it's a good question I think there's actually a really good question.
If you think about it the real benefit we have is we don't have to invent a huge amount of automation to make our products.
We use semiconductor processes and wire bonder die bonds and other automated equipment that are available that would be modified for our needs. So our path.
You've got a production line up and running towards the very specific tack time that a customer would want is much more predictable alright.
But getting a single line qualified a single set of supply base qualify for the Oems. It takes a long time.
So I don't I don't at this moment expect that we're going to have three different factories in three different continents all simultaneously.
We are willing to do that if a customer is willing to pay for it we're going to have a mother factory, where we're gonna start establish our line our process have partnerships, there and we can supply globally their taxes and vast and everything is taken care of logistics timeline all the prices all baked in and then if there is a very specific need that an OEM has where they want us to say well you know what I want you to put our production lines.
To support our North American operations, and I want to decouple It from Asia, absolutely happy to do it as long as your security of understanding what the volumes would be what investments would be what part of tooling. They can cover because clearly out of the factory up and running and we're also going to do it and in Europe, if there's something specific that they want us to do so.
Your independence from any specific region that they may have in mind, we're happy to do that but we're certainly going to start with you know the number one thing as I said to you today. They expect a very competitive price competitive price comes from key partners that are in Asia, Okay. Because a lot of the semiconductor equipment comes in Asia has been deployed in Asia and you know the best process Engineers.
Or in the U S. But also in Asia. Some very very good process engineers are there so we need to trust our partnerships.
Partnerships are contract manufacturing partnerships for that.
So we're going to start with that and we're going to look at expansion as and when the volumes are real.
Right. Thanks, Amit I think that's.
That's all the questions.
With this I would really like to thank all our shareholders for joining us on this third quarter call. We look forward to sharing more updates with you in the near future. Thank you again.
Thank you goodbye.
Thank you. This concludes today's conference all parties may disconnect and have a great day.