Q4 2023 MicroVision Inc Earnings Call
Good afternoon, and welcome to the Microvision fourth quarter and full year 2023 financial and operating results conference call. At this time all participants are in a listen only mode. At the end of todays presentation, there will be an opportunity to ask questions via chat offline.
Investors can submit their questions within the meeting webcast by typing them into the Q&A button on the left side of your viewing screen.
Analysts, who publish research may ask questions on the phone line for analysts to ask a question on the phone line. Please press star one on your telephone keypad.
Note. This event is being recorded I would now like to turn the conference over to drew Markham. Please go ahead.
Thank you Paul.
I'm pleased to be joined today by our CEO Sumit Sharma, and our CFO Alibaba in the fall.
In their prepared remarks, we will open the call to questions. Please note that some of the information Youll 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 comparisons to our competitors' market landscape.
Opportunity and program volume.
Product sales and future demand business and strategic opportunities projections of future operations and financial results.
Rail ability of Sun as well as statements containing words like potential believe expect plans 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 reports on Form 10-Q. These 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 that will be considered non-GAAP under the SEC regulation G.
For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure as well as for all the financial data presented on this call. Please refer to the information included in our press release and in our form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at IR.
<unk> Dot Microvision dot com under the SEC filings tab.
This conference call will be available for audio replay on the Investor Relations section of our website.
Now I'd like to turn the call over to our CEO Sumit Sharma Sumit.
Thank you drew and welcome everyone to this review of our fourth quarter 2023 results.
I am certain everyone is anxious to hear about our progress in securing strategic automotive customers.
I will start off by updating you on our progress on multiple RF queues.
Second I will cover the state of the competitive landscape and advantages our technology provides.
Third.
I would like to lay out the opportunity that we see in this space and why all of US are fully committed and what our vision remains for our company.
Let's start with an update on RF skews towards design wins.
We currently remain engaged and nine Arctic views with multiple Oems located in Europe, and North America.
The vast majority of these are for passenger car program with an expected target startup production from 2027 with the largest volume programs starting in 2028.
These are the high volume nomination opportunities.
There are multiple small opportunities that our earlier programs.
Sure.
Oh.
As I've mentioned before.
Yes that have made some early nominations or other solutions are actually looking for new technology partners that would operate as a lidar tier one for these.
The higher volume programs.
The total volume of all these programs than the multiple millions of units or maven and <unk>.
S and mobile <unk> products.
The Lions share of current RF skus are for Megan and product.
Later, this year or may even be sample with all asics in place.
Which we called <unk> and we'll be ready for OEM integration.
The focus being on Adas level, three and level, two plus with high speed highway pilot and urban driving capabilities.
With one lidar per vehicle monitored on roofline, the lowest profile highest resolution and lowest cost are of key importance.
The highest volume opportunity is for <unk> as a product.
Well, yes is the next generation of our flash based sensor and is a derivative of the <unk> architecture, <unk> and chipset with a flight or field of view and a smallest form factor.
With a small form factor it is capable of being embedded in the car body without any aesthetics break.
And provide a lighter cocoon around the car for the first 15 meters at lowest cost.
Each car could require between three to five mobile as lidar sensors, depending on the highway pilot or urban driving safety features.
Ammonia El product line, its focus on industrial space and trucking.
Mobile is the legacy product that was part of the <unk> acquisition, including <unk> and in mature production line that allows potential customers lowest risk paths to getting our mature sensor.
All products are targeted to include a perception software running on arm core processor within the sensor.
This is a big deal for product lighter product as this will enable us to monetize our perception software who has software license mechanism that will increase contribution margin.
We will talk more about this later in the year.
And all are accused we continue to meet and exceed all technical requirements.
We have a technical team that can deliver mature products.
I would say our combined teams in Redmond in Hamburg are the most experienced and delivering lidar products and for such a software for over a decade.
Our team in Hamburg remains the only team that has delivered a lidar product with albeit that went into production.
Our new partnerships for manufacturing.
Have passed OEM qualifications and quality reviews.
We have automation paths that are credible and can be put into place to meet their be simple needs this year and support price targets.
We can demonstrate to potential customers that we can fund our core development and the customer funded custom development is within their target ranges.
The industry wide challenges that we continue to work.
Work with us proving our capability to operate as a lidar tier one with adequate cash runway and investor confidence to execute a supply agreement upon nomination.
As you May recall capital raising was a focus for US last June and continue working on this.
We are also being conservative about the types of deals or engagement.
I don't believe it is in the long term interest of our shareholders to sign deals that look like we are subsidizing previous poor choice. It in Lidar partners that were made in the past by having to take on more risk while being the most mature partner.
But for the right volume deal we plan to take such risks.
So to conclude this section we have made great progress towards secured nominations with our technology maturity.
Here to work with each OEM to find a solution to becoming a lidar tier one that will be acceptable to them to secure long term supply agreements.
All the others have announced low volume nominations, we do not believe that any lag our company has been able to achieve tier one status and maintain long term supply agreements following nominations.
Second.
I would like to take some time and update you on the changing industry landscape, we are navigating on our path to securing nominations.
I believe this is an important piece of context for shareholders to understand.
The seismic change of advanced sensors being added to passenger vehicles is real and continues as evidenced by the high volume opportunities in these rfps.
It will arrive earlier with passenger vehicles with internal combustion engines and eventually evs.
Based on what we have seen there is nothing slowing down the demand for high tech low cost lidar sensors for the future.
Because I've been saying for several years active safety systems and passenger vehicles with Adas level, three and level two plus will be the dominant force to drive scale and costs.
Although yes and technology companies focus on level four are scaling back plan and reevaluating business models.
And finally, MS trucking remains as one real opportunity for autonomy.
But this would be a low volume business at best.
Important to support but not the core path to profitability.
For us to be successful in broader lidar space, we need to focus on projects that are significantly higher in volume than those offered by <unk> L for opportunities.
Therefore, microvision remains primarily focus on passenger vehicle opportunities.
Another area of change as a tier one landscape.
Almost all traditional tier ones.
We're in the Lidar space are announcing their exit.
But also I think there are rotating prism technology is not reliable and scalable and traditional tier ones did not have the backing of investors our talented staff to create the most innovative sensor technology and software.
This has created a greenfield for technology companies like us.
Oems are actively engaging with companies like ours to explore partnerships.
This is the area of transformation on risk.
There is a vacuum left by the exit of traditional tier ones that we need to accelerate to establish ourselves as a reliable and trustworthy tier one lidar partner.
Neither companies that got early nominations raised a lot of money on promises and failed to deliver two OEM program and even low volume scenarios.
They have a mature technology and specifications or understanding of how to scale.
This has muddied the water a bit for any company involved in the new RFP, including incumbents.
But we have to we have a level playing field moving forward in all our skus.
We continue plowing through this landscape.
On this topic I would like to say both move in and move your product arrived just in time to meet all your needs.
I would say we're in the best shape.
Our competition raised billions of dollars in a matter of three years has rolled through most of it.
And little to show for technology.
We have invested slowly and wisely over the long period of time and at the most mature team and product offerings.
The need for perception software it would also become a decision driver.
Yeah.
In the past the need to support elsewhere features drove software development, which is significantly more expensive and not easy to deliver as a qualified product.
In the meantime, our team in Hamburg focus on developing critical reception software and taking it through OEM qualifications.
The software landscape has changed and competitors have invested in development that are not relevant while microvision hasnt advanced advantaged with our sensor embedded perception software ready with mature kpis.
In conclusion, our path to securing nominations requires us to navigate all these changes they get oem's comfortable with our capability to deliver on passenger vehicle programs at the Lidar tier one.
What's involved in becoming a lidar tier one.
We need to own our own technology with significant IC.
We have this fully covered.
We need strong technical and operational team in place to deliver on contracts.
We have this in place and can deliver multiple nominations.
This is embedded in qualified by Oems.
We need contract manufacturing partnerships.
Our automotive qualified by Oems.
We have been displaced as well.
We need an automation path for product for our products, we deliver the cost targets for high volume sensor sales.
Again, we have this in place.
Finally, when you can show demonstrable financial runway to be able to take on large supply agreement at the time of nomination.
We need to get that last point in place to become a lidar tier one we've got multiple OEM nominations for passenger vehicles.
Finally, let's take a larger view of the landscape, but understanding why we continue to focus on this space and drive hard.
I believe can be successful in the lidar space for the next 10 years. There are five key things that accompany must master.
Number one.
Cost of scale in the low hundreds of dollars.
Number two smaller sensor size.
Number three highest resolutions with the lowest power.
Number four sensors.
Sensor integrated perception software.
And number five our company operates as a financially stable tier one lidar supplier.
These are the big things in our space that will not change over the next decade in any RFP or nomination.
Customers are going to want highest technology lidar with a high level of perception software integrator at costs that are in the hundreds of dollars.
Our sensor and pace.
Additional for perception software license, which translates to a high contribution margins.
As of today Microvision has already solved for the first four items in all three of our products.
No Lidar company can say this with confidence our show evidence of an accept microvision.
Nothing will beat our maven and product and cost performance size and power.
Nothing.
Nothing beats, our mortgage as product and cost side performance in majority of perception software.
In conclusion, there's an ocean of demand for sensors and software out there with multiple reliable OEM partners.
We have the technology lead with our products and the opportunity for strong gross margins and I would say.
It will last for a long time.
Investments made to develop products today will run for a long period of time without redesign required thus, having a much lower cost of customer acquisition, while having a high lifetime value to customer.
Traditional tier ones have stepped out of the space and create an opportunity for us to step in to become a key partner to Oems directly.
Multiple competitor strategy to basically make it as being exposed as we speak.
This is truly a greenfield out here for us to dominate and we intend to do so.
I would like to now turn over the call to envelope to talk about our financials on a boat.
Yes.
Thank you so much.
Now, let me summarize with the current state of affairs in the auto mobility and aid at industry from a financial perspective.
Auto Oems tier ones and aid as companies in particular lidar companies have been under a lot of pressure lately.
There are primarily two reasons for that.
Number one the problem of solving for full autonomy as Ford and above is significantly more challenging and expensive to execute than all the hype built up over the past several years.
Hence there is a clear reset within the industry as well as investors.
Tech companies Oems and capital markets now are gearing to back more investing in more realistic and near term Adad LTE plus an L. Three solutions.
Number two Oems are also under significant pressure on their transition from ice which is internal combustion engines to EV products due to the hyper competitive price wars, which are a direct result of the high interest rate environments.
And market share expansion battles.
Major auto Oems are carrying historically high levels of inventory.
They are therefore, becoming ultra cost conscious as well as aggressive about including new Adas and safety features enabled by lidar in their upcoming models in the next four to five years.
The Oems are striving to command pricing that is attractive to the end customers with advanced <unk>.
<unk> and Lidar enables safety features in the upcoming models.
Regardless of the delays in EV adoption, having Adas and safety features is critical for Oems to expand and even maintain their competitive positions amongst each other.
This business problem for Oems translates into the high demand for Lidar sensors to enable L. Two plus LTE features or Adas safety at lower prices with more mature technology.
All of these factors have essentially forced the established tier one out of the lidar market as they do not have the risk profile to allocate hundreds of millions of dollars in R&D, which is essentially the CAC or customer acquisition costs.
In developing the technology and responding to these extensive OEM RF skus.
This is evidenced by recent public statements by many tier ones, including Magna <unk> Continental and Bosch announcing their shift in priorities related to lidar.
The lack of established tier one presence in turn has influenced Oems as they have to move their internal production timelines to the right.
Well, especially after some of the early Lidar winners failed to deliver on their commitments.
The Oems are being extra cautious spending more time and efforts on thorough diligence before picking their light our suppliers or replacing existing ones in case of nonperformance.
Please keep in mind, the automotive OEM industry is a slow moving industry that is highly focused on safety and intense qualification processes. So they are now looking for suppliers, who have mature technology at the best price and hence the lowest risk to execution.
And strongest balance sheet to become a lidar tier one supplier.
This has also led to the collapse of a few lidar companies and the ongoing consolidation of the industry in the past 18 months.
It has now become very apparent that the only way to become a successful line of our company is to operate as a tier one in order to capture that huge demand in the later part of this decade and early next.
Now with all these broader trends how does microvision stand to be the company that will remain one of the last few successful lidar companies able to capture this huge demand.
The fact that we're now actively engaged in nine RF skus, including some of that previously announced as one by others.
We believe microvision product portfolio meets all of the following criteria.
Number one the most mature product for both long and short range Lidar No company has both products.
Number two one of the best form factors and sizes number.
Number three perception software inside the silicon.
And number four and most important at the most competitive long term price.
We're now in the process of.
Establishing our credibility as a tier one player in the lidar industry.
Now, let's address this question in a bit more detail, what does becoming a high growth tier one me from a financial and a business model perspective.
It really means three things number one the ability to maintain lower customer acquisition costs and generate increasing profits with more hardware volumes.
Number two we run a lean business with strong balance sheet that is K level number three improve.
Improve improve operating leverage through the software revenue stream, so let's talk about number one.
Microvision has already spend R&D dollars over the last several years to bring the products to the level of maturity, where they stand today.
In other words, we do not have to spend hundreds of millions of dollars to develop next generation of products.
We have 300 engineers and we need them to technically respond in detail for all of these are accused scale.
Scaling operations with multiple customer wins will not require us to add proportional head count to our engineering teams.
We see no need to double or triple head count to support potential revenue growth.
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.
That is what will enable our business model do have lower go forward customer acquisition cost and scale operating profits rapidly with higher volumes.
We as a management team have been predicting for a long time know that this moment will come which will shake up the industry.
Now given financial resources are limited any lidar company that is investing in new products are saying it is investing in newer generations of the same product is again growing going to cycle that is an affordable as Oems need solutions that are matured today not in the future.
We're number two financial discipline is key.
As we work towards building and establishing Microvision has a strong tier one partner to Oems. We believe that we would be one of the last company standing to capture the lidar market.
Our financial discipline of having a burn rate between $65 million to $70 million a year is one of our greatest strengths.
Lastly, during the times when our competition has finally realize the importance of financial Prudence, having raised three quarters of $1 billion and burning through half of it in just two years.
From a business model standpoint, we have always stated that partnering with an established contract manufacturing partner will be the most capital efficient way to execute.
As we navigate the final round of these RF skus with Oems customary visits and quality audits and production facilities have been important for building customer confidence.
We have successfully passed such qualification with it.
Now finally number three and the most important one having software revenue stream.
The key to a valuable light our business is supplying customers hardware with software integrated inside the silicon.
To be valued as a high growth tier one lidar solution provider scale is achieved by securing additional customers for similar products with minimal customization and the software, which allows us to achieve economies of scale for the hardware.
As we've continued to strengthen our balance sheet, we are establishing our tier one status amongst Oems.
Now, let's dive into our numbers.
First let me take some pride in micro versus core values of leading by example, and predicting industry trends and behaving like a mature public company I'm.
I am pleased to report that we reported revenue in line with our guidance for the fourth quarter. We reported revenue of $5 1 million. This translates into full year 2023 revenue of $7 3 million that came in between our revised guidance range of six 5% to $8 million.
Revenue in Q4 was primarily attributable to the Microsoft contract signed in 2017.
We recognized $4 6 million of revenue from Microsoft representing the remaining contract obligation on our balance sheet.
No new cash was realized against that revenue.
This revenue there is no additional liability that remains under this contract as it expired at the end of December 2023.
The remainder of the revenue came from our direct sales channel from the sale of our hardware and software.
To remind investors, we revised our guidance from $10 million to $15 million to six to $6 $5 million to $8 million in November last year as part of the Q3 2023 results.
This was a result of some opportunities in the direct sales channel.
Hearing to have moved into 2020 for it.
Across the board, we believe automotive Oems are witnessing historically high levels of inventory, coupled with the rising interest rate environment, causing Oems to be a bit more cautious in taking on new projects and moving timelines to the right.
This has slowed down the sale of mosaic as a validation software too.
But having said that we believe there continues to be a strong demand for lidar products evidenced by several large deals in place as described by summit earlier.
From a gross margin profile the momentum continued and this profile this quarter resembled that of a typical software business as demonstrated by our 90% adjusted gross margin in Q4, 2023, and 80% gross margin on an adjusted basis in FY 2023.
We continue to differentiate ourselves significantly from our peers, who either have been upside down negative gross margins or near zero margin in both industrial and automotive verticals.
As we have stated earlier, we expected we expect these high gross margins to normalize as the revenue scales up and the mix changes to more strategic sales, including <unk>.
To support momentum in direct sales last fall in 2023, we also placed in order to boost new mobile inventory reserve our accruals to.
Satisfy demand from non automotive customers.
We expect this investment in building our inventory to drive revenue growth in near term and beyond.
We're beginning to see medium to long term partnerships with significant multiyear revenue opportunity even in the industrial sector.
Especially in forklifts and warehouse automation applications.
Again, our business model is to be efficient and not go after 700 800 customers in the industrial verticals and that is not a sustainable business model.
We want direct sales to generate operating profit. Unlike some of our peers, who are focused on revenue with a low gross margin profile.
Well, let's talk about expenses in terms of our expenses, we had approximately $24 million of R&D and SG&A in Q4 2023.
Keep in mind. This includes $4 6 million of noncash stock based compensation and $1 6 million of noncash depreciation and amortization.
For the fourth quarter $16 6 million cash was used in operating activities, which is in line with our previously communicated expectations of a cash burn of between $65 million to $70 million on an annual basis.
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 full year Capex was $1 9 million again in line with our expectations.
Our balance sheet as of December 31, 2020, we have made most of the payments associated with the <unk> acquisition.
A liability of approximately $2 million remains on our balance sheet as the final payment relating to this deal.
A final agreement has been reached with the seller and we expect to pay this amount in the next few months.
Our total liquidity was $93 million as of December 31, including $74 million of cash and $19 million of availability under the current ATM facility.
On the basis of the annualized Q4, 2023 cash burn rates of $16 million.
We have our financial runway of one four years and are fully funded.
Q1 2025.
We have one of the cleanest capital structures amongst our peers.
Microvision.
<unk> stand out and beat competitors in terms of maintaining one of the lowest gas burn rates in the industry with a highly talented pool of engineers in both the U S and Germany, and a strong balance sheet.
We continue to have a $35 million ATM facility on file to strategically raise capital as and when needed.
To date, we have only reached approximately $16 million under this facility and have $19 million available.
The address the ability to strategically and opportunistically raise money, we have atms positions 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.
And what Youre looking at.
To contract and I was wondering also if you could comment on China's most recent legalization of level III testing and how that affects the company and its potential prospects.
Yes.
Some of you would like to take that.
I think.
Let's talk about the last comment first I think if you think about the utilization in China.
Ultimately I would say that I said that pretty consistently.
Just look at the team that we talk about in our multiple earnings call. Our focus remains Europe and North America I personally believe looking at actual things that people are working on real companies. That's more of a high focus I think what's happening in China is some new early products will get delivered at very low volume, but there is no real programs that are high volume and we.
Continue to focus on the high volume programs, because they have the more legitimate path.
Two.
Get a company on a.
Good footing so.
I mean somebody will ask about the D O D. What impact does that have somebody will say what's in China.
Like that one shadow out there, but again nothing demonstrable has ever been done by that market early or what happens anywhere else.
Anything that goes into cars in China first of all I would have to go through a lot of regulatory.
The hurdles before they're allowed to ship into Europe, and North America. Those are the bigger automotive markets, what can ship into China market is going to be pretty chaotic and noisy because there's lots of other Chinese partner as well and it's unclear what margin somebody could extract out of it being a a western company alright, there's a handful of small niche.
Techs that are out there, but again I leave it up to the other.
Lidar company that announced then and talk about that to give more clarity in there Andy.
Analysts to dive into it.
As far as the first part of the question I'm thinking about maybe you can help me out with that one.
Yes, so the focus of the Oems have been targeting are based in EU and North America.
Gotcha.
I appreciate that that's very helpful and I guess lastly, if we could switch over to the financials. I was wondering if you could go over the gross margin a little bit on how it works for the quarter as there was a large jump to over 80% when I look at it and is this due to the cost of goods sold for the Microsoft agreement being virtually nonexistent or can you give a little bit more color on this.
Yeah, that's right on them because I think we had guided to this.
Last quarter or two that we expect high contribution margins in Q4, because this is essentially the.
The royalty revenue that we get from Microsoft.
So obviously influence to the bottom line.
So again I think this is an important aspect right because I think the focus on gross margins is going to be a key focus.
Because we believe that companies, which demonstrate.
Gross margin.
Better gross margin profile would be the more valuable companies in the long run because I truly believe that revenue and pursuing growth at all costs that era is over and the focus will be for a successful company to continue to protect their gross margins.
Got you and then just as one last quick follow up to that question I was wondering what type of gross margin trajectory you are expecting going into 2024.
Yeah. That's a great question. So so obviously I don't think it will be 80% gross margins.
2024, we believe as the revenue mix changes to more hardware.
This year, we expect the gross margin trajectory to be more.
In the 30% to 40% range.
Going forward for 2024.
But I guess that I would like to provide more detailed guidance.
As part of incorporating these RFP wins because that will.
Impact the trajectory of the revenue and the gross margin profile. So I would I want to be in a position of a you know a lot more detail is in the second half or maybe towards the middle of the year.
For 2024.
Got you that's very helpful. Thanks for taking our questions I'll pass it on.
Thank you Ron.
Thank you. The next question is coming from Kevin Garrigan from West Park Capital. Your line is live.
Yeah, Hey, guys. Thanks for taking my questions.
Youre nine Rfps that you noted I'm, assuming some RFID that you were in progress into our acute and I know you said you just talked about a potential Q1 announcement, but how many others are kind of in the late late stages that you think may actually be awarded in 2024.
I think I would say like these are all all the minor RFU alright.
RFID that could progress, but it's not.
Okay.
We want to be very clear and crisp about what our accuser in where to keep everybody's attention RFID may convert I may not convert but as you can imagine everything that anybody else's announcing they are all in the same set of it but we wanted to keep the focus on the RF skus.
Again like for example last year our customers.
Told us when the decision was going to be it was going to be and they reaffirmed it before the last earnings call and at our Oems right. So ultimately they feel comfortable in moving their decision timeline.
As far as were concerned based on what we have the best knowledge. We have on hand, clearly stated the decisions for these nine rfps are expected.
In 2024 and the early part.
294, let's say first half or so in the middle of the year probably sooner.
We encourage you about it because ultimately anything we say that we havent writing right now they could shift because under both try to point out and I've been as well we're looking at a much more holistic expense that they have incurred in the past they have to take on risks with other partners that they have taken is that havent delivered anything.
Certain of these rfps that we're in right now to be honest with you.
Quoting Cobra awarded to others, but clearly a year after it.
Opening right up you know, even if I'm getting a product that's lower profile lower power. The questions are how can you make it bigger so it can fit in this whole. So clearly what others are saying right is not getting delivered and we have to navigate that we want to make sure that we are in these are a fuse.
We support their investigation a deep level.
<unk> the benefit of our technology and win that so a decision will be whatever it will be but of course.
Even when they are launching are there startup production is targeted for we expect that 2024. He can't go any longer than that right because new models would be needed to be launched as soon as possible I.
I hope that answers your question.
Yeah, no that makes a ton of sense and let me ask you. This.
You now have all the pieces that you kind of need for series production, but any any kind of pushback that you're getting from Oems and how are you kind of addressed them. Yet is it mainly just kind of pushback surrounding the balance sheet.
Yes, I would say in every discussion it's all about well.
Clearly abaca technology, clearly have the team quality systems.
Software that you can execute on it great, but do you have the balance sheet to take on a supply agreement that you can imagine you take on a big supply agreement they want to make sure that you can deliver that you take on other nominations, you're engineering focus and you burned through a bunch of cash, whereas that theyre going to cash going to come from right.
You know you have to show that there is investor confidence we've been working on systems last June.
And that we are able to raise capital to take on this big.
Contract right I mean, some of these contracts that people are announcing in all of our companies that are dealing with OEM directly are announcing.
You can call it.
Billions of dollars hundreds of millions of dollars. It does not matter they want to make sure you can deliver there is going to contribute to supply because these contracts over the years.
So every line of our company.
I tend to be very very direct and honest with our investors. So they can evaluate to make their decision.
Everybody's in the same bulk everybody is getting the same message you know in one case, we actually confirm that this is what you're telling us, but what about some of the other things that you have done.
And the point blank answer listen if they had the same exact thing how they choose to talk to the market is there.
Their prerogative, but but.
Clearly that the Oems are requiring deserve everybody's because they don't want to take on any more financial risk with companies, making promises not delivering on supply agreements.
Yeah got it got it okay perfect. Thanks, guys.
Thank you and I will now turn the call back over to Andrew have pharma to read questions submitted through the webcast. Thank you.
Thanks, Paul.
Alright so.
The first question is does Microvision still feel it will have multiple OEM design wins in Q1 2024.
Can you provide an update and color where this milestone stance.
So what do you want to take that.
Yes, I think with as much confidence that youre going to hear in the call I think we.
Like we are in the right place.
You have to ride the tide with the Oems you cannot advance that you can.
Get the conclusion that quickly, but everything is in the commercial space everything is about.
Really about the runway and really about can you become a tier one.
And a small tier we're not like the big tier ones. If you think about the big tier ones, but.
They had multiple lines of business with them in over decades that were developed right and those tier ones are publicly announcing that letting go like 30000 here 80000, there 18000, there in different parts of the world So tier ones are.
Completely retrenching backwards and what Oems are looking for it as the next wave of technology companies that can actually execute on their own path.
And this is not a new model I think the one name that will always come up about this is this is how they did it about 15 years ago with mobilized so whenever a new technology comes in they start looking directly because that technology provider to transform themselves into a tier one and collaborate with them over a long period of time and that's why I mentioned in my prepared remarks about greenfield that.
Golar as soon as possible take it start.
Capturing as much confidence in business as you can.
That's how you take market share early so yeah. So we feel we're on the right path.
But yes now you are in the commercial and you are at the discretion of how much confidence you have with these Oems that youre Pat over multiple years is something that can rely upon with financial discipline.
Thanks, Amit.
The next question.
<unk> do you anticipate any NRT revenue before the nomination and what kind of revenue would be fair to expect from NRT than one let me let me take this question.
So right now at this point in time, what we are seeing is.
Two kind of deals one is the nomination projects led the supply agreements as Sumit mentioned.
These are spread over multiple years and extending into in fact, the middle of the decade.
Middle of the next decade rather.
To 2033.
These are some of the nomination projects that are out there that we are part of the second kind of projects are b sample only development contracts.
Where the Oems.
Are requiring the lidar suppliers too.
To put the risk of development because they are either not happy with their current partner or unsure about their timeline. So they want to do a de risked Pat.
Now obviously between the two projects we are choosing to go for the nomination projects only because we're not an engineering services company.
We're being strategic to date projects.
That involve millions of units and volumes because again our goal is to get to the profitability that I described earlier and Thats a tier one model.
So we're only pursuing opportunities that have a guaranteed nomination because in the end it's going to be successful companies will be all about economies of scale now development NRT here and there may add short term revenue.
And some of the peers are choosing to take these projects with small volumes.
Each their own and we have seen these latter company suffered negative margins in pressure because of that we do not want to do that because I think you mentioned you've heard from us that we want to make sure the gross margin profile.
<unk> remains impressive because we really want to be a high growth lidar tier which is valued.
Typically as a hardware software business and to do that it's very important to pursue the right kind of projects.
We do not want to commit the same mistakes.
Some of the others have done it so hopefully that.
Or is the kind of projects that we're going after.
Alright. So next question is management mentioned continuing to service ice vehicles is this a continuing trend with RF skus and other business opportunities as the EV space has seem to cool off lately.
Shareholders recognize the state of the auto industry is raising questions.
Our Oems have committed to in this environment and what are their design cycles going to be now.
Can you. Please provide color on the current OEM thinking and trajectory of Adas solutions rig.
Regarding lidar.
Some in the industry believe lidar sensors, only apply to LTE and beyond our Oems still considering lidar sensors for attitude dual class.
So when do you want to take that.
Yes, that's a long question I think I forgot the first apparently because I had planned but let me just start.
Two plus does right now would require lidar and thats, where potentially the demand is coming from so as you look at the volume that they're talking about I would say, it's not even scratched the surface I mean, we've talked about millions of units right and you know I mean somewhat that people on the call I'm sure our investors in Microvision for long period of time, I mean, I've only been CEO for a handful of years.
So if you start from that point onward.
Our volumes that have never been discussing the history 30 year plus history of this company. So this is the right space. So and then from there it's significantly more growth because it's not even scratching the entire fleet that gets launched every year. So we have great upside there so that only happens the target pricing theyre doing is if there's economies of scale available and they're gonna break millions of units.
And they recognize that so they are expanding as we talk.
Well the first part of the question was about you know a lot about the OEM timelines and just write down did I get that right I mean, that's actually really.
I forgot what the first part of the question was could you repeat again that can actually break the question down because there's a really long question.
So I think it was about I think the first part of the question was between ice and EDI are you seeing the RF skews more focus towards ice or E D.
I think they have picked a year that they want to launch these products, okay and they have already announced publicly they're evs are towards the back end. So we are a nice you know in all of their models. They were talking about I, just see a bunch of ice projects upfront.
Part of it is they have to deliver software with our perception, we can probably accelerate their path.
But like any Oems they pick a model here they pick and they get all their suppliers lined up to start with the central choices first so first off but they forget all the supply chains are lined up what I would say dominantly ice engines are no back on the table.
Yeah.
Right and I think the design cycles, and I think maybe you talked about the design cycles already maybe if I can add one more thing right because I think so but you mentioned, yes. The demand there I think I would like to point out once you get these millions of sensors out there in the field I think what.
<unk> automatically pops up is the after service market as well right. Because obviously you imagine the sensors out there on the feed and since we have made those sensors, we would be the go to default to.
Any any repairs et cetera. So that's also the adjacent market, which again as I keep saying, it's a traditional model of hardware and software combined with just add to the revenue opportunity here.
Alright. The next question is.
Management and the way that the company is not pursuing a R anymore because it has no control over the end product or the end markets here.
Here, we are though trying to get placement and an OEM end product.
<unk> ourselves in a similar situation.
How would you characterize it.
I'll take that.
I would say that that actually is not the right assessment.
In the case of automotive Lidar Theres multiple global Oems.
Engaged in it and they're talking about it and talking about their features multi.
Multiple companies that are saying the same thing because they deal with the same Oems.
A R.
I think there's one contract that we had and that went against that did not go to the high volume than we expected and since then.
Very few consumer electronic Oems have actually stepped into it I think one big one in cupertino steps into it but not where they are with a mixed reality sensor right at $3500 a pop. So I think it's not the right. The fair assessment, saying that we don't control. It in this case, we control our sensor, but somebody that controls even more complicated platform.
And that's their core business are engaged and theyre talking publicly about how important this is to them.
And they are awarding billion dollar contracts. According to people as you know.
So we are in the right place I would say with our technology.
Even with our Mems based technology.
It's something very special it is the right.
Place at the right time.
Flash based Lidar I think if you really take a time to read through our prepared comments, we gave a lot of context, having a wide portfolio. So we're not like a one trick pony in the case of a one trick pony in this case you actually have a wide array of products that you can address the market with and you have high contribution margin with software, which you had no opportunity anywhere else. So.
I would argue very strongly and I think.
I really believe that most of the investors would agree with me. After reflection. This is the best place to be it has the best opportunity. This company has ever had in its history.
Thanks, Amit.
Without going too deep please elaborate a bit on what type of industry settings are hardware and software suite offerings are suited for in the near term.
Let me take that question because this is about the direct sales opportunity for the non automotive.
Customers.
I think investors need predictable revenue right, we're beginning to see medium to long term partnerships with significant multi year revenue opportunities in the industrial sector now keep in mind. They do not are they are not as long as going into the next decade like the Oems, but these are three to four year deals that we are big.
We need to see from some of the forklifts warehouse automation applications agricultural applications et cetera.
And I think this gives us the biggest bang for our Buck because again, our business model is to be efficient and not go. After 700 800 customers selling 345 sensitive each of them in fact, we.
We believe the best way to capitalize on this opportunity is to go after these.
234 year multiyear deal with <unk>.
Industrial automation.
Companies, where they can use.
There are our mobile sensor into there.
And to their robots and forklifts and the automation applications et cetera, again I keep draw.
Driving the point of having our gross margins because again.
One of the reasons why we are we have been successful in command.
Such a position in the market is because of being financially prudent and having a strategy to make sure. The gross margins are protected capital raising is done right. All these things truly add to creation of long term value for our shareholders. Unlike others, who changed revenue at low to negative gross margins.
Does that that model is going to work anymore.
Given where we are in the current economic cycle.
Alright next question is what happens to drive by wire and sensor fusion you Didnt mentioned anything on the call today, what's the plan on that.
I'll take that one.
Thank you.
We have a team in Germany that worked on it and of course, our team here also contributes to that grew a little bit.
But.
There is no real big plan for sensor fusion. So we've actually taken the sensor fusion part of it and really wound it down that people have been allocated to other programs to be able to secure some of these are acute but we really don't have a plan with sensor fusion long term given the environment that you clearly see that anybody that's been working on all four is scaling back so customers were more than a deck.
Paid out.
To be fair to really make a dent into what you have to make a significantly higher investment that we're willing to make.
On pure R&D on something that other people that have 1000 engineers working on it are scaling back so our main focus remains our perception software.
But one benefit I see is a team that knows how sensor fusion with work they know what our customers' requirement would be advocacy perfecting.
The perception of software part of it they kind of noticed problems that have to be solved. So I think we're going to have a good team working on and focusing on our perception software I.
I think the question did not get asked about mosaic, but let me just say.
<unk> is a product stays valid we're still selling it.
Promoting it.
The people that are interested but we're not making any more other investments in it to mature it any further.
And again, it's part of financial discipline, because if we're not seeing we had a year ago. When we talked about it we had it very high hopes for all the revenues that we thought that we had pipelines do an economy does its own things that we can't control that.
But we are readjusting the focus of the company based on the situation that we see ahead.
And sensor fusion is something that our team did but as a R&D project. It was never a product that was going to go without any big partnership and given the fact that market for that has really reduced.
I think it's the right move for us.
Thanks, Amit.
What are microvision plans to a team.
Yes.
1940 <unk> certification.
Similar to our one of our competitors, who announced the certification what steps are in place for this certification.
That's a good one and that's a really good question and actually that's an important question.
So we are ISO 9000, now I think you can go to our website and it's a it's there but as we talk about eventually to become a lidar tier one even though we're working with contract manufacturers or internal development processes.
And supply chain controls and everything have to conform to ICF.
We intend to do that but given the timelines that you need this for us the qualifications that will start over the next several years.
We will get it done in time before any of these contracts, but the first thing is before we make that investment is to make sure you secure a big enough project and if you think about anybody else out there that got ICF. It.
It would be interesting to know what volume that they did that with millions of dollars you have to spend to get that qualification, but if you had done it early Greg congratulations what youre shipping.
As an option to a car.
Low volume.
<unk>.
I think the way we're spending money is yes, it's going to cost.
$1 million to actually get that qualification, but you want to do it for the right time and as we think about the <unk> closure of these rfps that we're focused on that would be the right time to initiate it and actually Williams know our plants, we've actually given that we're in writing and they acknowledge that yes, it would forget about that.
That timeframe before see sample after be sample as adequate and sufficient and of course, you know working with consulting and outside you have an estimate of what was going to cost with time, it's going to take and given the fact that we have such a mature process that we inherited from <unk>. The only team that actually qualified and automotive lidar.
We see our path, but that's not something that's going to impede us long term.
Thanks, Amit.
So this is related to the Microsoft agreement what is the status of the agreement if renewed was it on the same terms.
The December 2023 marked the conclusion.
And let me take this one.
So yes, the Microsoft contract expired as at the end of December.
2023 at this point in time, we have no visibility into any future revenue from Microsoft.
Can you provide more detail on cash runway into what date.
And thus the company ambition it will have to issue shares in 2024.
Let me take this one because it's an important one.
Liquidity look.
I can detail out the calculation. So our liquidity is $93 million, which I described is made up of.
$74 million of cash and cash equivalents at about $19 million in in ATM availability, and if our cash burn, which I provided to be $65 million to $70 million.
Annual basis, it's roughly translates into.
Q1 of 2025 on approximately one point.
Three four years.
While I cannot share of exact plans what I will say is we have shown a very disciplined history of capital raising the ability to strategically and opportunistically raise money. We are Atms position us very favorably as compared to our peers. I think you have seen in the past some of the peers had to resort to us.
Structured finance overnight deals at significant discounts damaging the stock price.
Even until now.
We will continue to strategically evaluate all of the capital market instruments to preserve and create long term shareholder value available, including equity and debt to strengthen the balance sheet and again establish our credibility as a tier one.
Tier one.
Players because I think you have heard us talk about that.
Quite a bit in this call.
And I think this is sort of why we believe that we will be one of the winners in this in this lidar industry because of visa.
Sure.
I guess, we are running out of time, but maybe I'll take another question.
Last question Sumit.
Level four highway pilot are there any updates you can provide about the level for highway pilot trucking OEM previously mentioned on the slide deck.
I think like we said.
When you think about autonomy I think you know because again, we're trying to keep everything consistent of exactly where the market is gave everybody the data that they need to make their decisions.
Level four was all everybody talked about it's still there, but it's much more diffused I would say, there's only a handful of people focused on it with the timeline that they have.
We're happy to support.
Again for the right deal.
But.
Again, it's a problem that is a pretty big problem that those guys are working on and have defined a viable business model.
The case of trucking writers.
How do I described but I think one of the other companies that are already public described it as.
Hub to hub transit that Theyre doing.
We're starting to explore business models for that.
Effectively they need lidar with their software as the dominant <unk>.
Central piece of.
That product line, but it is enabled by our lidar and other long range Lidar that reach out to Mike you know half a kilometer or something like that so trucking is a space that we want to you want to focus on.
It's like anything else I sell a sensor we do some software and the rest is really up to them in the case of a.
Passenger vehicle.
At the same story, but since such high volume is needed that the sensor to the lidar sensor actually turns to be a very key supplier partners have to work with in the case of the economy.
In trucking there is still a key supplier, but their timelines to figure out their business model right could determine how much money when it comes into the company from the sale of products. So.
You know we support them their Oems, it's a small world you want to support them as much as possible, but you got to be really mindful about where your resources are because we said we show financial discipline.
If I have Eric.
350, plus people in the company.
We don't want to increase Opex based on the level four we certainly want to increase opex based on large projects that may be coming with a level three level, two plus but if we can support them with existing products, we're happy to do so.
Thanks, Amit I think we went 10.
Longer than our scheduled time, but again I think everybody I, thank everybody for jumping on the call for our.
Annual update we look forward to speak.
Speaking with you again for our Q1 call.
Thank you so much thank you thank.
Thank you bye bye.
Thank you. This concludes today's conference all parties may disconnect and have a great day.