Q3 2023 View Inc Earnings Call

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Okay.

Speaker 1: Greetings and welcome to View Inc's third quarter 2023 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation.

Greetings and welcome to view, Inc. Third quarter 2023 earnings call at this time, all participants are in a listen only mode.

<unk> and answer session will follow the formal presentation.

Speaker 1: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Samuel Meaghan, head of investor relations at VIEW. Thank you, Samuel. You may begin.

As a reminder, this conference is being recorded its now my pleasure to introduce your host Jamie Let me hit head of Investor Relations W. Thank you Samuel you may begin.

Speaker 1: Good afternoon, everyone, and welcome to VUE's third quarter 2023 earnings call. I am Samuel Meehan, head of investor relations at VUE. I'm here with Dr. Rao Mulfuri, our CEO , and Amy Reeves, our CFO .

Good afternoon, everyone and welcome to views third quarter 2023 earnings call I.

Samuel men head of Investor Relations at view.

I'm here with Dr <unk>, our CEO and.

In <unk> our CFO.

Speaker 1: Before we begin, I'd like to remind you that after market closed today, VUE issued a press release announcing its third quarter 2023 financial results, which you may access in the investor relations section of VUE.com.

Before we begin I would like to remind you that after market close today.

Issued a press release announcing its third quarter 2023 financial results.

Which you may access in the Investor Relations.

Patients section of your Dot com.

Speaker 2: As today's discussion includes forward-looking statements, please refer to our press release for a discussion of factors that could cause the company's actual performance to differ materially from those forward-looking statements.

As today's discussion includes forward looking statements. Please refer to our press release for a discussion of factors that could cause the company's actual performance to differ materially from those forward looking statements.

Speaker 2: These four-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations.

These forward looking statements involve risks and uncertainties many of which are beyond our control and could cause actual results to differ materially from our expectations.

Speaker 2: These forward-looking statements apply as of today, and we undertake no obligation to update these statements after our call.

These forward looking statements apply as of today and we undertake take.

Take no obligation to update these statements after our call.

Speaker 2: For a more detailed description of certain factors that could cause actual results to differ, please refer to our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings, including quarterly reports on Form 10-Q .

For a more detailed description of certain factors that could cause actual results to differ please refer to our filings with the SEC.

Including our most recent annual report on Form 10-K, and subsequent filings, including quarterly reports on Form 10-Q.

Speaker 2: I would also like to remind you that during the call, we will discuss certain non- GAAP measures related to views performance. You can find the reconciliation of these measures, the nearest comparable GAAP measures , in the press release.

I would also like to remind you that during the call we will discuss certain non-GAAP measures related to abuse performance.

You can find the reconciliation of these measures the nearest comparable GAAP measures in the press release.

Speaker 2: Unless otherwise stated, our comments during the call refer to non-GAP results of operation.

Unless otherwise stated our comments during the call refer to non-GAAP results of operations.

Speaker 2: Now, I will turn the call over to our CEO , Dr. Rao Mulpuri. Rao, over to you.

Now I will turn the call over to our CEO, Dr. Rahm operate Ralph over to you.

Speaker 3: Thank you, Samuel, and thank you all for joining us this afternoon.

Thank you Samuel and thank you all for joining us this afternoon.

Speaker 3: During the call, we will address the results in the quarter but also uplevel the conversation to provide context around where we are and where we're going.

During the call we will address the results in the quarter, but also up level the conversation to provide context on where we are and where we're going.

Speaker 3: Over the past year, with the dual realities of challenges in the real estate industry and the capital markets, we've continuously evolved our product, our operations, and our market approach.

Over the past year with the dual realities of challenges in the real estate industry.

And the capital markets with continuously evolved our products our operations and our market approach.

Speaker 3: to sustain our business, serve our customers, and importantly, continue to build long-term value at VIEW.

To sustain our business serve our customers and importantly continue to build long term value at view.

Speaker 3: I'm grateful for the support and belief from our customers and capital partners. And I'm proud of the VUE team for focusing on the mission, being learning oriented, being nimble and resilient, and delivering key outcomes for our customers and the company.

I am grateful for the support and belief from our customers and capital partners and I am proud of the Vue team for focusing on the mission being learning oriented being nimble and resilient and delivering key outcomes for our customers and the company.

Speaker 3: The Q3 results are a testament to that. Now, let me provide a quick recap of the key announcements and results we reported today.

The Q3 results are a testament to that.

Now let me provide a quick recap of the key announcements in results we reported today.

Hey.

Speaker 3: First, in the third quarter, we showed continued progress on our path to profitability and significantly improved gross margin. We grew revenue 61% year over year in the quarter.

First in the third quarter, we showed continued progress on our path to profitability and significantly to gross margin. We grew revenue 61% year over year in the quarter.

Speaker 3: Gross margin was positive without the impact of the future production outlook adjustments that Amy will describe in detail.

Gross margin was positive without the impact of the future production outlook adjustment that Amy will describe in detail.

Speaker 3: Second, we're executing on our plan to reduce structural fixed costs and to lower the required revenue break-even points in the business.

Second we're exiting including on a plaque on a plan to reduce structural fixed cost and to lower the required revenue breakeven point of the business.

Speaker 3: The third quarter results show a steep decline year over year in both our factory fixed costs as well as our operating expenses.

The third quarter results show, a steep decline year over year in both our factory fixed cost as well as our operating expenses.

Speaker 3: Combining the improved gross margins and lower structural fixed costs, we're making significant progress in reducing our quarterly cash burn.

Combining the improved gross margins and lower structural fixed costs, we're making significant progress in reducing our quarterly cash burn.

Speaker 3: Going forward, we remain laser focused on cash management and growing the business to achieve profitability.

Going forward, we remain laser focused on cash management and growing the business to achieve profitability.

Third in October we were pleased to announce a senior secured credit facility from an investor consortium comprised of strategic real estate investors Cantor Fitzgerald, Rx, our ensign and affiliates.

Speaker 3: Third, in October , we were pleased to announce a senior secured credit facility from an investor consortium comprised of strategic real estate investors, Cantor Fitzgerald, RXR, Anson, and Affiniate.

Speaker 3: These strategic investors are leaders in the real estate industry, and we're excited to partner with them to unlock the next stage of news growth.

These strategic investors are leaders in the real estate industry, and we're excited to partner with them to unlock the next stage of <unk> growth.

Let's discuss our journey to gross margin and a little more detail.

Speaker 3: Let's discuss our journey to gross margin in a little more detail. We made significant improvement to our.

We made significant improvement to our gross margins year over year.

Speaker 3: This was a result of VUE team's focus, hard work, and continuous improvements made in several key aspects of our business.

This was a result of view team's focus hard work and continuous improvements made in several key aspects of our business.

Speaker 3: Anyone who knows a manufacturing-oriented hardware business with a new product category knows that this is a major inflection point in the business and proves out the unit economics, which in turn forms a basis for profitable growth in the future.

Anyone who knows a manufacturing oriented hardware business with a new product category knows that this is a major inflection point in the business and proves out the unit economics, which in turn forms a basis for profitable growth in the future.

Speaker 3: For this milestone to materialize, several things needed to be delivered.

For this milestone to materialize several things needed to be delivered.

Speaker 3: First, continuous improvements in product architecture and material selection.

First continuous improvements and product architecture and material selection.

Speaker 3: Our fourth-generation product has all the key characteristics needed to scale to a high-volume mainstream product.

Our fourth generation product has all the key characteristics needed to scale to a high volume mainstream product.

Speaker 3: Second, delivering on the key factory metrics while optimizing production and delivery costs and meticulously managing the supply chain.

Second delivering on the key factory metrics, while optimizing production and delivery costs and meticulously managing the supply chain.

Speaker 3: Third, continuing to scale the business with high-quality, profitable projects.

Third continuing to scale the business with high quality profitable projects.

Speaker 3: And fourth, unlocking value for both our customers and VUE with our fully integrated smart building platform and the investment tax credit.

And fourth unlocking value for both our customers and view with our fully integrated smart building platform and the investment tax credit.

This journey is never a straight line to success, given all the inputs and moving parts.

Speaker 3: This journey is never a straight line to success, given all the inputs and moving parts.

But the trend line is clear.

Our financial performance continues to improve with scale and this provides confidence towards the path to profitability.

Speaker 3: As we zoom out and look at the cost structure of the entire business, we're committed to reducing quarterly cash burn and getting the business to cash flow positive.

As we zoom out and look at the cost structure of the entire business, we're committed to reducing quarterly cash burn and getting the business to cash flow positive.

Speaker 3: We took additional actions in October to further lower our structural fixed costs, including reductions in factory fixed costs and operating expenses.

We took additional actions in October to further lower our structural fixed costs included reductions in factory fixed costs and operating expenses. These.

Speaker 3: These actions are expected to reduce our cost structure below the already realized year-over-year savings that were reported in our Q3 2023 results.

These actions are expected to reduce our cost structure below the already realized year over year savings that we reported in our Q3 2023 results.

Speaker 3: We're able to make these cost improvements because we have made great progress to date on the product, our market approach, and the factory operation.

We're able to make these cost improvements because we have made great progress to date on the product our market approach and the factory operations.

Speaker 3: On the product, as I've mentioned before, we completed the release of our mainstream Gen 4 product.

On the product as I've mentioned before we completed the release of our mainstream Gen four product.

Speaker 3: We recently completed the upgrade of U-Net and the software and we fully released our multifamily offering. The maturity of the product means we're able to reduce R&D spend substantially.

We recently completed.

Update of <unk> and the software.

And we fully released our multifamily offering the.

The maturity of the product means we're able to reduce R&D spend substantially.

Speaker 3: On the factory side, we're performing well across key operating metrics, which allow us to reduce overhead and production costs.

On the factory side, we're performing well across key operating metrics.

Which allow us to reduce overhead and production costs.

Speaker 3: We are delivering exceptional products to our customers with on-time shipments to large flagship projects across the country.

We are delivering exceptional products to our customers with on time shipments to large flagship projects across the country.

Speaker 3: As part of our focus on reducing quarterly cash burn, we made the strategic decision to rationalize our capacity ramp until we are cash flow positive.

As part of our focus on reducing call quarterly cash burn we made the strategic decision to rationalize our capacity ramp until we are cash flow positive.

Speaker 3: Consistent with this rationalized capacity plan and greater focus on our strategic accounts, and given the current demand dynamics, we're updating our full-year revenue outlook to be in the range of $110 million to $120 million, representing 13% year-over-year growth for 2023. Now

Consistent with this rationalized capacity plan and greater focus on our strategic accounts and given the current demand dynamics, we're updating our full year revenue outlook to be in the range of $110 million to $120 million, representing 13% year over year growth for 2023.

Now turning to our customers in the market.

Speaker 3: while the real estate industry continues to deal with the headwinds of office segment challenges and high interest rates.

While the real estate industry continue to continues to deal with the headwinds of office segment challenges and high interest rates we.

Speaker 3: we see multifamily residential development being a bit more resilient at the macro level.

We see multifamily residential development being a bit more resilient at the macro level.

Speaker 3: Our dual value proposition of sustainability and delighted users combined with the affordability of smart windows with the investment tax credit plays well to the needs of the real estate developers in this segment.

Our dual value proposition of sustainability and delighted users.

And with the affordability of smart Windows with the investment tax credit plays well to the needs of the real estate developers in this segment.

Speaker 3: With these benefits, we continue to make progress in product evolution, awareness, and growth in the multifamily market.

With these benefits we continue to make progress in product evolution awareness and growth in the multifamily market.

Speaker 3: Just today we announced that VUE has been selected for 1890 Cobb Avenue in Brooklyn, New York.

Just today, we announced that view has been selected for 89 Dekalb Avenue in Brooklyn, New York.

Developed by our XR.

Likewise developers nationwide are showing interest in view to differentiate their portfolios in a crowded market.

Speaker 3: As we continue to grow in this market, we expect that the multifamily residential segment will be a key driver of demand, enabling VUE to reach profitability. With that, I'll hand it over to Amy to cover the financials.

As we continue to grow in this market, we expect that the multifamily residential segment will be a key driver of demand, enabling view to reach profitability.

With that I'll hand, it over to Amy to cover the financials.

Over to you.

Speaker 4: Thank you, Ralph and good afternoon. Everyone. I will be covering the financial results for the 3rd quarter of 2023.

Thank you Ralph and good afternoon, everyone I'll be covering the financial results for the third quarter of 2023.

Speaker 4: As we get started, please note that unless otherwise stated, my comments refer to non-GAAP results of operations as described by Samuel at the beginning of the call. Please refer to the non-GAAP .

As we get started please note that unless otherwise stated my comments refer to non-GAAP results of operations as described by Sami at the beginning of the call.

Please refer to the non-GAAP reconciliations in our press release.

Speaker 4: For the quarter, we reported revenue of $38M, which represents a 61% year-over-year increase from Q3 2022.

For the quarter, we reported revenue of $38 million, which represent 10% to 61% year over year increase from Q3 2022.

Speaker 4: Primarily due to growth and our smart building platform revenues driven by a continued and strategic shift to this line of business.

Merrily due to growth in our smart buildings platform revenues driven by a continued and strategic shifts to this line of business.

Speaker 4: SmartBuilding platform is our fully integrated smart window platform and given the customer reception and inherent advantages to this product offering, we expect this to be our primary product offering on a go-forward basis.

Smart building plat form as a fully integrated smart window platform and given the customer reception inherent advantages to this product offering.

We expect this to be our primary product offering on a go forward basis.

Our revenues are better.

Speaker 4: Our revenues are benefiting from repeat purchases from existing customers and traction in the multifamily residential market.

<unk> from repeat purchases from existing customers and traction in the multifamily residential market.

Speaker 4: Additionally, the growth that we saw in our smart glass revenues was driven by a favorable product mix shift to our higher price and higher margin products that are typically shipped towards the end of these projects.

Additionally, the growth that we saw in our smart glass revenues was driven by a favorable product mix shift to our higher priced.

Higher margin products are typically shipped towards the end of these projects.

Speaker 4: And we have fewer early-stage smart glass projects with ITUs in production following the shift to smart building platforms.

We have fewer as we had fewer early stage smart glass projects with Ikea and production following a shift to smart buildings platform.

Speaker 4: Moving forward we anticipate smart glass revenues to decrease and be a much smaller part of our total.

Moving forward, we ended the day smart.

Smart glass revenues to decrease and be a much smaller part of our total revenues.

Speaker 4: While we grew revenue year over year, our Q3 2023 non-GAAP cost of revenues decreased 13% from Q3 2022.

While we grew revenues year over year, our Q3 2023 non-GAAP cost of revenues decreased 13% from Q3 2022.

Speaker 4: Reflecting the benefit of our lower fixed costs in the factory and the field and favorable product mix within and across the three major product options.

Reflecting the benefit of our lower fixed costs in the factory in the field and favorable product mix within and across the three major product offerings.

Speaker 4: Partially offset by $6 million of charges for our changes and estimated future per unit IGU cost.

Partially offset by $6 million of charges for changes in estimates.

Teach your per unit costs.

Speaker 4: As we have been discussing throughout this year, our lower fixed cost of revenues in the factory in the field were driven by our cost savings initiatives put in place during the second half of 2022 and earlier this year.

As we have been discussing throughout this year, our lower fixed cost of revenues in the factory in the field, we're driven by our cost savings initiatives put in place during the second half of 2022 and earlier this year.

Speaker 4: Revenue growth, coupled with our lower cost of revenues, resulted in continued significant improvement in gross margins.

Revenue growth coupled with our lower cost of revenues resulted in continued significant improvement in gross margin.

Speaker 4: This quarter, our growth margin increased by $21 million as compared to Q3 2022.

This quarter, our gross margin increased by $21 million as compared to Q3 2022.

Speaker 4: and increased sequentially from Q2 2023 by over $9 million.

And increased sequentially from Q2, 2023 by a $5 million.

Speaker 4: Operating expenses, you incurred 8 million dollars and non gap research and development expense and Q3 2020.

Turning to operating expenses, you incurred $8 million and non-GAAP research and development expense in Q3 2023.

Speaker 4: a decrease of 42% or $6 million from Q3 2022.

A decrease of 42% or $6 million from Q3, 2022.

Speaker 4: This decrease was primarily driven by the completion of certain R&D projects as well as the realization of cost savings initiatives we have put in place.

This decrease was primarily driven by the completion of certain R&D projects as well as the realization of cost savings initiatives, we have put in place.

Speaker 4: We anticipate the R&D expense will continue to reflect lower spending as compared to prior periods for the remainder of this year and into 2024 as we focus on cash profitability.

We anticipate that R&D expenses will continue to reflect lower spending as compared to prior periods for the remainder of this year and into 'twenty four as we focus on cash profitability.

Speaker 4: We incurred $16 million in non-GAAP SG&A expenses in Q3 2023, which decreased 20% or $4 million compared to Q3 2022, reflecting lower spend on legal fees following the completion of a restatement, as well as lower sales and marketing expenses.

We incurred $16 million and non-GAAP SG&A expenses in Q3, 'twenty, 'twenty, three which decreased to 20% or $4 million compared to Q3, 2022 reflecting lower spend on legal fees. Following the completion of the restatement.

It's one of the lower sales and marketing expenses following our cost savings initiatives.

Speaker 4: During the quarter, we noted a continued decline in economic and market conditions including a continued and sustained decline in our market capitalization, rising interest rates, and a prolonged outlook for a continued slowdown in the real estate market.

During the quarter we.

He noted as we noted a continued decline in economic and market conditions, including a continued and sustained decline in our market capitalization rising interest rates and a prolonged outlook for a continued slowdown in the real estate market.

This combined with the limited amount of additional financing we secured in our revised projections for our future operating results culminated in a $170 million impairment charge to write down the value of our property and equipment.

Speaker 4: This combined with the limited amount of additional financing we secured and our revised projections for our future operating results culminated in a $170 million impairment charge to write down the value of our property and equipment.

Speaker 4: Additionally, following the revisions to our outlook for future production, we determined that our estimated future cost of IGU production would be higher on a per unit.

Additionally, following the revisions to our outlook for future production, we determined that our estimated future costs of ICU protection would be higher on a per unit basis, and recorded and recorded $6 million of charges this quarter.

Speaker 4: and recorded six million dollars of charges this quarter.

Speaker 4: $4 million to increase our warranty liability and $2 million to increase our contract loss accrual.

$4 million to increase our warranty liability and $2 million to increase our contract loss accrual.

Speaker 4: We have further reduced our factory fixed costs as we focus on strategic volume growth with higher quality projects with favorable economics, and we are running the factory with this rationalized capacity model.

We have further reduced our factory fixed costs as we focused on strategic volume growth with higher quality projects with favorable economics, and we are running the factory with the scrap rationalized capacity model.

Speaker 4: It is important to note that these charges do not result in higher cash outflows per factory cost.

It is important to note that these charges do not result in higher cash outflows for factory costs.

Speaker 4: For the third quarter of 2023, we reported a $30 million improvement in adjusted EBITDA with a loss of $23 million compared to $53 million in Q3 2022, reflecting the impact of higher revenues, improving growth margins, and lower operating expenses.

For the third quarter of 2023, we reported a $30 million improvement in adjusted EBITDA with a loss of $23 million compared to $53 million in Q3, 2022 reflecting the impact of higher revenues, improving gross margins and lower and lower operating expenses.

Yeah.

Now turning to cash we ended the quarter with 15 up $51 million of cash and cash equivalents compared to $80 million as of June 32023.

Speaker 4: We ended the quarter with $51 million of cash and cash equivalents compared to $80 million as of June 30, 2020.

Speaker 4: Cash used in operations for the third quarter of 2023 was $32 million.

Cash used in operations for the third quarter of 2023 was $32 million.

Speaker 4: A $19 million improvement compared to the third quarter of 2022, and a sequential improvement of $15 million from the second quarter of 2020.

In $19 million improvement compared to the third quarter of 2022, and a sequential improvement of $15 million from the second quarter of 2023.

Speaker 4: On our last earnings call, we said that we anticipated cash burn would improve in the second half of 2023.

On our last earnings call, we said that we anticipated cash burn would improve in the second half of 2023.

Speaker 4: driven by leverage from higher revenues with the lower fixed cost structure following our recent cost savings initiatives.

Driven by leverage from higher revenues with the lower fixed cost structure. Following our recent cost savings initiatives.

And what you're seeing in these results in the third quarter.

Speaker 4: On October 16th, we announced the closing of a $50 million senior secured credit facility from an investor consortium comprised of real estate investors.

On October 16th we announced the closing of a $50 million senior secured credit facility from an investor consortium comprised of real estate investors.

Speaker 4: Initial net of proceeds from this facility were $10 million and we anticipate additional draws of $37.5 million over the next two quarters subject to meeting certain covenants within the agreement.

Initial net proceeds from this facility were $10 million and we anticipate additional draws of $37 $5 million over the next two quarters.

Subject to meeting certain covenants within the agreement.

Speaker 4: We believe cash on hand, in combination with the projected draw from the credit facility, should be sufficient to fund our currently anticipated operating and capital requirements into, but not through, the first quarter of 2024.

We believe cash on hand in combination with a projected draw from our credit facility should be sufficient to fund our currently anticipated operating and capital requirements into but not through the first quarter of 2024.

Speaker 4: This time frame gives us runway to continue to execute our business and demonstrate reduction in cash burn as we look to finance the business to cash flow positives.

This timeframe gives us runway to continue to escape execute our business and demonstrate reduction in cash burn as they look to finance the business to cash flow positive.

With that operator, we will turn it over for questions.

Speaker 1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone.

Thank you we will now be conducting a question and answer session.

I'd like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue for.

Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.

Speaker 1: Our first questions come from the line of Graham Price with Raymond James. Please proceed with your question.

Our first questions come from the line of Graham price with Raymond James. Please proceed with your questions.

Speaker 5: Hey, good afternoon, guys, and thank you very much for taking the questions.

Hey, good afternoon, guys and thank you very much for taking the questions.

Speaker 5: First of all, well done on gross margin turning positive, excluding the $6 million charge.

I guess first of all well done on gross margin turning positive excluding the 6 million dollar charge.

Speaker 5: I did want to get some clarification on, I guess, why that would impact the current quarter if it's tied to future per-unit costs, and then maybe more broadly, you know, realizing that you have yet to get guidance for 2024, but just directionally, how do you see margins progressing from here, and then maybe talk a little bit about where you see the longer-term margin profile kind of shaking out.

They did want to get some clarification on I guess why that would impact the current quarter. If it's tied to future per unit costs, and then maybe more broadly.

You know realizing that you have yet to give guidance for 2024, but just directionally. How do you see margins progressing from here and then maybe talk a little bit about how where do you see the longer term margin profile kind of shaking out.

Yeah.

Speaker 3: Yeah, so Graham, this is Raul. Let me take the second question, and I'll hand it to Amy to explain the $6 million charge, second part of the question. So.

Yeah. So Graham this is Rob let me take the second question and I'll hand, it to Amy to explain the $6 million charge.

Second part of the question.

So.

Speaker 3: On gross margins going forward, as you know, our margin line hasn't been a perfect straight line, but the trend line is clear.

Gross margins going forward as you know our margin line hasn't been a perfect straight line, but the trend line is clear.

Speaker 6: Um, we have the, we have the product.

We have the we have the product.

Speaker 3: architecture, the materials, which is foundational to margins, as you know, in any hardware company.

Architecture, the materials, which is foundational to margins as you know in any hardware company.

And then as a manufacturer we also have the right production metrics and the supply chain all worked out so basically the.

Speaker 3: you know, the invention and engineering are complete. And what's in front of us is scale.

The invention and engineering are complete and what's in front of us is scale.

Speaker 3: And to achieve scale, obviously, we need a certain number of minimum projects to get there. We have the unit economics worked out. We have the business model proven, and we're going to focus pretty heavily on the multifamily sector, although we still have a really good, healthy airports business. We have a healthy institutional business and growing, but importantly,

And to achieve scale, obviously, we need a certain number of minimum projects to get there. We have the unit economics worked out we have the business model prove that.

And we're going to focus pretty heavily on the multifamily sector. Although we still have a really good healthy airports business, we have a healthy institutional business and growing but importantly.

Speaker 3: There's still office builds, life science, and renovations going on. But as a growth area, we worked very hard at it and lucky that we've been able to get the product completed and be ready for multi-family.

Theres still office builds life science, and renovations going on but as a growth area.

<unk> worked very hard at it and lucky that we've been able to get the product completed and be ready for multifamily specifically.

Speaker 3: Within that, the relationships we've built over the last three, four years with installation in some key markets, and obviously our backers being active in this market is really helpful to us going forward.

Within that the relationships, we built over the last three or four years with installation in some key markets and obviously, our bankers being active in this market is really helpful to us going forward.

So.

Speaker 3: The best way I would address kind of how this coming quarter looks and going forward is we have all of the right cost structures in place, including the lower breakeven points. And now it's about growing in that segment. And it'll be on a quarter-to-quarter basis potentially bumpy, but the long-term trend is to use the positive contribution to get to profitability.

The best way I would address kind of how this coming quarter looks and going forward is we have all of the right cost structures in place, including the lower breakeven points and now it's about growing in that segment and it'll be on a quarter to quarter basis potentially bumpy, but the long term trend is.

To use the positive contribution to get to profitability.

Speaker 3: And as far as 2024, as I said, we're pretty heavily focused on the multifamily sector and we're not yet guiding for revenues next year.

And as far as 2024 as I said, we're pretty heavily focused on the multifamily sector and we're not yet guiding for revenues next year.

Speaker 4: But I think we'll do that in the next call. With that, Amy, do you want to address the $6 million question? Yeah, Graham. So we have two liabilities on our balance sheet that require us to project future cost of manufacturing on a per-unit basis.

But I think we'll do that in the next call.

With that Amy do you want to address the 6 million dollar question, Yeah. Graham. So we have to liabilities on our balance sheet that require us to project future cost of manufacturing on a on a per unit basis, our first one.

Speaker 4: First on the warranty liability, we took $4 million charge. As we've explained in the past, with the fixed nature of our manufacturing costs, our unit economics can vary significantly with volume. And so given the reduced outlook that we have for future production requirements, those unit economics for our future warranty replacement are now expected to be higher than we previously estimated.

Warranty liability they took $4 million charge.

As we've explained in the past with the fixed nature of our manufacturing costs. Our unit economics can very significant I think it was.

Volumes and so given our reduced outlook that we have for future production requirements. Those unit economics for our teacher warranty replacement are now expected to be higher than we previously estimated.

Speaker 4: Now, on the contract loss accrual, we estimate we have to record a liability for the total amount of costs that would be in excess of a contract revenue price, and that total cost includes the cost of manufacturing.

Now I know on the contract loss accrual where estimate we have to record a liability for the total amount of costs that would be in excess of our contract revenue price and that total cost includes the cost of manufacturing.

Speaker 4: So essentially what we have is a higher percentage of our factory fixed costs that are being allocated to the smart building platform projects that are currently being maintained.

So essentially what we have is a higher percentage of our factory fixed costs that are being allocated to the smart buildings platform projects that are currently being manufactured.

Speaker 5: Okay, understood. Thank you both for the color on the items. And I think, Raul, you touched quite a bit on my second question, but obviously we're still seeing a lot of pressure in the commercial office market. I was wondering if you could talk about some of the other end markets, which you did a little bit, airports, healthcare, obviously multifamily housing, and maybe specifically...

Okay.

Understood. Thank you both for the color on the items that I think Ralph.

Well you you you touched quite a bit on my second question, but obviously, we're still seeing a lot of pressure in the commercial office market.

I was wondering if you could talk about some of the other end markets, which which you did a little bit airports health care, obviously multifamily housing and maybe specifically.

Speaker 5: the impact from interest rates that your customers are experiencing in each of those markets.

And the impact from interest rates that your customers are experiencing in each of those those markets.

Speaker 3: Yeah, I think our business can be broadly broken into, let's say, infrastructure and, you know, government spending and, let's say, private sector. My comments, obviously, the interest rates and the dynamics apply to the private sector. So, let's focus on that for a moment about what's going on with our customers' businesses.

Yeah, I think our our business can be broadly broken and to let's say infrastructure and <unk>.

Government spending and let's say private sector.

My comments, obviously, the interest rates and the dynamics of play to the private sector. So let's focus on that for a moment about what's going on with our customers' businesses.

Speaker 3: One lens is, how are their economics looking? And this is a generic answer. Obviously, every project is different. But they have a trifecta of issues that our customers are facing.

One lenses how are the economics looking and this is a generic answer obviously every project is different but they have a trifecta of issues that our customers are facing number one construction costs are still somewhere around 10% to 20% higher than they were before the pandemic, let's say if you take the base.

Speaker 3: Number one, construction costs are still somewhere around 10 to 20 percent higher than they were, you know, before the pandemic. Let's say if you take the baseline of about three years ago. And that's driven by a variety of factors, you know, probably, you know, labor cost is the biggest one. But clearly, cost to build is higher than it was.

Lino for about three years ago, and that's driven by a variety of factors probably in our labor cost is the biggest one.

But clearly cost to build is higher than it was then.

Speaker 3: The second is cost of debt, and which a lot of our commercial customers take on debt, at least during the construction phase, and then they either refinance or sell the property after they stabilize it. So cost of debt is a very important metric for them in total cost and their own returns. And as you know, interest rates are about double where they were. So their cost of debt is twice.

The second is cost of debt.

Debt and which a lot of our commercial customers take on debt at least during the construction phase and then they either refinance or sell the property. After they stabilize it so cost of debt is a very important metric for them in total cost and their own returns and as you know interest rates are about double that.

They were so their cost of debt is twice.

Speaker 3: On the revenue side, for a while the leases and rents were going up, especially in the multifamily segment. And now the rents are a little bit more in threat. And it's either an unknown or a potential stabilization of rents. So when you take the three factors together, it's a less competitive time or it's a less lucrative time to be building. Having said that, there's still a very heavy housing shortage.

On the revenue side for a while the leases and rents were going up, especially in the multifamily segment and now the ramps are a little bit more in track and it's either an unknown or a potential stabilization of France. So when you take the three factors together, it's a less competitive.

Time, or I'd say, it's a <unk>.

Less lucrative time to be building, having said that there is still a very heavy housing shortage.

Speaker 3: And there are haves and have-nots. There are customers that are able to finance in this segment, in this timing, and there are customers that are able to still build. And some of our development customers, instead of building four or five projects a year, they may be building two or three.

And there are haves and have not there are customers that are able to finance in this segment in this and this timing and the customers that are able to still build and some of our development customers instead of building four or five projects a year. They may be building two or three.

Speaker 6: And then geographically, there are submarkets that are very hot and people are continuing to build. So with all those, while the macro is depressed, there's still enough business for us to go after in the multifamily segment.

And then geographically there are submarkets that are very hot and people who are continuing to build so with all of those while the macro is depressed theres still enough business for us to go after in the multifamily segment.

Speaker 3: Specifically, if you look at our value proposition, we help our customers differentiate their properties, right? So in a tighter market environment and a flight to quality where they're trying to one-up each other to gain that tenant or get a little more rent, we provide an important amenity. You know, we are long-term and sustainable for them with their goals for, you know, building more efficiently, you know.

Specifically, if you look at our value proposition, we help our customers differentiate their properties right. So in a tighter market environment and a flight to quality, where theyre trying to one up each other to gain that tenant or get a little more around we provided an important amenity, we are long term and sustainable for them.

With their goals for building more efficiently.

Hum.

Speaker 3: providing a path to net zero, saving a little bit of energy. But importantly, this is an amenity users love. That's actually the main reason we're being successful in this segment. We have very strong user affinity.

Providing a path to net zero saving a little bit of energy, but importantly, this is an amenity users love that's actually the main reason were being successful in this segment were very strong user affinity.

Speaker 3: Now, the Inflation Reduction Act and the tax credit on the smart windows makes smart windows now affordable. They're either same cost net of the tax credit, but in a few cases, we're actually saving them a little bit of money. So that's why we're bullish and focused on the multifamily sector.

And now the inflation reduction act and the tax credit.

On the smart Windows make smart windows now affordable, they're either same cost net of the tax credit or in a few cases, we're actually saving them a little bit of money. So that's why we're bullish and focused on the multifamily segment.

Speaker 3: To your question on other segments, airports, as you know, primarily they're owned by cities or local counties. There's a lot of investment going on in airports across the United States, perhaps partly because for decades there have been an under-investment in infrastructure in general and specifically airport facilities. But secondly, as you know, you know, passengers have gone back up to pre-pandemic levels.

To your question on other segments airports says you know primarily they're owned by cities are local counties.

There's a lot of investment going on in airports across the United States, perhaps partly because for decades that ive been in undressed investment in infrastructure in general and specifically airport facilities.

But secondly, as you know.

Passengers have gone back up to pre pandemic levels.

Speaker 3: Airlines are demanding that the facilities be built to a better standard because a better on-the-ground experience provides a better in-the-air experience, and airports are building and renovating pretty much across the board. We are in about 15 U.S. airports and growing, and we have significant repeat business where they're building another terminal or renovating in that space.

Airlines are demanding that the facilities to be built to a better standard because it better on the ground experience provides a better in the Eric's variance.

And airports are building and renovating pretty much across the board.

We're in about 15 U S airports and growing and we have significant repeat business, where they're building another terminal or renovating in that space.

Speaker 3: Healthcare also is facing some of the same financial challenges, but there are hospitals and medical office buildings being built.

Health care also is facing some of the same financial challenges, but there are hospitals and medical office buildings being built.

Speaker 3: And then finally, in the office sector, you know, while everyone talks about work from home, I think you're seeing major employees or employers are bringing people back to work, maybe at least three days a week, in some cases, five days a week. And obviously, you know, they're filling up their existing footprints.

And then finally in the office sector, you know while everyone talks about work from home I think youre seeing major employees are.

Employers are bringing people back to work maybe at least three days a week in some cases five days a week.

And obviously, they're filling up their existing footprints.

Speaker 3: But importantly, the key subtrend to note, which really makes a big difference for VUE, is the flight to quality is most evident in this sector.

But importantly, the key sub trend to note, which really makes a big difference per view is the flight to quality is most evident in this sector. For example in New York City. There are $150 per foot offices that are fully under $50 per foot office is not too many blocks away that are empty.

Speaker 3: and they're $50 perforate offices, not too many blocks away, that are empty.

Speaker 3: And what it does show is every employer is obviously not only, you know, having a strong desire or a requirement to bring employees back.

What it does show is every employer.

Is al obviously, not only does having a strong desire or a requirement to bring employees back but they are using their facilities their buildings.

Speaker 6: but they're using their facilities, their buildings, as amenities to create a type of environment and culture that they want to bring their employees back.

As amenities to create a type of environment and culture.

They want to bring their employees back to so in that sense, even though on a per square foot basis, it's a higher cost to build a spec building to.

Speaker 3: So in that sense, even though on a per square foot basis, it's a higher cost to build a better spec building, to get into a lease with a better spec, those are getting more traffic.

Get into a lease with a better stack those are getting more traction, which means you should see even if there isn't a newbuild renovation of these old tired properties in order to reposition them for a more modern and more leasable environment.

Speaker 6: which means you should see, even if there isn't a new build, renovation of these old tire properties in order to reposition them for a more modern and a more leaseable environment.

Speaker 3: And we already have done renovations over the years, we continue to have renovation business in the right markets with the right locations, and that'll continue to be a segment. But make no mistake.

And we already have done renovate issues over the years, we continue to have renovation business in the right markets with the right locations.

And that'll continue to be a segment, but may make no mistake, we're heavily focused on multifamily as a segment for us to get to profitability.

Speaker 3: We're heavily focused on multifamily as a segment for us to get to.

Profitability.

Speaker 5: Okay, understood. And then maybe last one for me, I wanted to ask about the Mississippi factory.

Okay understood and then.

Well last one for me I wanted to ask about the Mississippi factory.

Speaker 5: I think you're still running at less than 10% utilization, so just as a way to get some extra revenue in the door in light of, I guess, the revised growth outlook, would there potentially be a possibility of, for example, leasing out some of that space or maybe partnering with another manufacturer?

You're still running at less than 10% utilization so.

Just as a way to get some extra revenue in the door and in light of I guess the the revised.

Growth outlook.

Could there potentially be a possibility of for example, leasing out some of that space or maybe partnering with another manufacturer.

Speaker 3: Yeah, good, good question. Obviously, Graham, we're always looking at how can we cut our structural costs and while we're ramping thoughtfully to get to profitability. I mean, this is a purpose built facility.

Yeah. Good good question, obviously, we're always looking at how can we cut our structural costs and while we're ramping thoughtfully to get to profitability. I mean this is a purpose built facility we.

Speaker 3: We have about $400 million of hardware. If you go inside and look at the facility,

We have about $400 million of hardware if you go inside and look at the facility.

Speaker 3: You know, it's a large infrastructure, industrial tech combined with, you know, semiconductor technology.

It's a large infrastructure.

Industrial Tech combined with semiconductor technology. So it's purpose built to make smart windows, its not really capable of b in broken up and used for other purposes.

Speaker 3: So it's purpose-built to make smart windows. It's not really capable of being broken up and used for other purposes.

Speaker 3: Our goal is to fully fill this facility as we ramp up, and as you noted, at a fraction of the full capacity, we will be cash flow positive. So we've cut our cost structure quite a bit and continue to look for ways to be more and more efficient. I think breaking it up and using it for other uses is not one of them, but using the facility we have thoughtfully and ramping our business appropriately is what we're focused on.

Our goal is to fully fill this facility as we ramp up.

And as you noted at a fraction of the full capacity, we will be cash flow positive.

So we've cut our cost structure quite a bit and we continue to look for ways to be more and more efficient I think breaking it up and using it for other uses is not one of them, but using the facility we have thoughtfully and ramping our business appropriately is what we're focused on.

Yeah.

Got it understood.

Speaker 5: Got it. Understood. Thank you for taking my questions. I'll jump back into the queue.

Thank you for taking my questions I'll jump back in the queue.

Thank you Graham.

Speaker 1: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Raul Mulperry for any closing comments.

Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Rob I'll parity for any closing comments.

Okay.

Thank you all for joining the call today.

Speaker 3: VIEW continues to make progress on our path to profitability.

View continues to make progress on our path to profitability.

Speaker 3: and our third quarter results demonstrate our steadfast focus on cash management and reducing cash burns.

On our third quarter results demonstrate our steadfast focus on cash management and reducing cash burn.

Speaker 3: We've taken the right actions to lower our structural fixed costs and lower the required revenue break-even points for the business.

We've taken the right actions to lower our structural fixed cost and lower the required revenue breakeven point for the business.

Speaker 6: Importantly, we continue to make progress on delivering high-quality products at scale, keeping our promises to our customers, and moving the industry forward.

Importantly, we continue to make progress on delivering high quality products at scale, keeping our promises to our.

Tumors and moving the industry forward.

Speaker 3: We look forward to speaking with you again when we report the full year 2023 results.

We look forward to speaking with you again, when we report the full year of 2023 reserve builds.

Thank you.

Speaker 1: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.

Okay.

Okay.

Yeah.

Speaker 7: Transcribed by https://otter.ai

Uh huh.

Okay.

Okay.