Q3 2024 MicroVision Inc Earnings Call
Speaker Change: Good afternoon, and welcome to the Microvision Third Quarter 2024 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. At the end of today's presentation, there will be an opportunity to ask questions via a chat line.
Speaker Change: 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 1 on your telephone keypad during that time.
Speaker Change: Please note, this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead.
Drew Markham: Thank you, Mike. Good afternoon. I'm here today with our CEO, Sumit Sharma, and our CFO, Anubhav Verma. Following their prepared remarks, we will open the call to questions.
Drew Markham: Please note that some of the information you will hear in today's discussion will include forward-looking statements, including, but not limited to, statements regarding our customer and partner engagement,
Drew Markham: Cash, Liquidity, and the Impacts of our Convertible Note Financing, Market Landscape, Opportunity, and Program Volume and Timing,
Product Development and Performance.
in comparison to our competitors.
Drew Markham: Product Sales and Future Demand, Business and Strategic Opportunities, Projections of Future Operations and Financial Results, Availability of Funds, as well as statements containing words like intend, believe, expect, plan, and other similar expressions.
Drew Markham: 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.
Drew Markham: 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.
Drew Markham: 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.
Drew Markham: In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G.
Drew Markham: 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.
Drew Markham: please refer to the information included in our press release and in our Form 8K dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC Filings tab.
Speaker Change: This conference call will be available for audio replay on the investor relations section of our website. Now I would like to turn the call over to our CEO, Sumit Sharma.
Sumit Sharma: Thank you, Drew, and welcome everyone to this review of our third quarter 2024 results.
Sumit Sharma: I would like to start by providing an update on our engagements for industrial opportunities, our value proposition to our customers.
and our view on long-term value proposition for our investors.
Sumit Sharma: Second, I will update you on the strategic sales with seven RFQs still in flight and why I believe this is an important component of our value proposition and the disruption I believe we will provide long-term.
Let's dive in.
Sumit Sharma: Sales into the industrial segment represents the strongest opportunity for us to establish a strong annual recurring revenue stream.
Sumit Sharma: There are multiple potential customers in multiple tranches classified by volume that will help us establish strong ARR.
Sumit Sharma: Core products we will offer in this space have fully integrated LiDAR hardware and perception software on board running at low power.
This will remain a big differentiator for this space.
the same LiDAR software with differentiated perception software
Sumit Sharma: for each segment will allow customers to reduce system costs and time to ramp up.
Sumit Sharma: We provide them with software and their individual custom interfaces. We should allow them to take our SmartLidar solution and interface directly with their domain controllers.
Sumit Sharma: eliminating the need for intermediate ECU which adds cost and complexity integration and tends to overload them with software development.
i
Sumit Sharma: For the industrial segment, we expect to start with Movia-L as our primary hardware product, and shortly followed by our Movia-L safety-rated sensor.
Sumit Sharma: Over the following years, we expect to add additional Movia derivative sensors to the product portfolio, so we will expand on the product roadmap in the future.
Sumit Sharma: all along expanding the segment specific perception and localization software that is part of the solution.
Sumit Sharma: This go-to-market strategy represents our best opportunity to establish annual recurring revenues and favorable margins based on our software differentiations and provide a strong baseline to larger revenue opportunities.
Sumit Sharma: from Automotive Lidar expected to ramp in the later part of this decade.
Let's talk about our strategic sales opportunities.
Sumit Sharma: I believe the best long-term high-volume opportunity for our technology remains with automotive OEMs for passenger vehicles for L2 Plus and L3 ADAS safety.
Sumit Sharma: We remain engaged in seven RFQs with automotive OEM for passenger vehicles.
Sumit Sharma: I expect our integrated hardware and software solution will also be key differentiator product for this space.
Sumit Sharma: Our MAVEN and the future Mobius product are primarily focusing on OEM engagement for passenger vehicles.
Sumit Sharma: The unique selling point to be competitive in this space remains cost to OEM, power, size, and the level of sophistication in onboard perception software.
Sumit Sharma: I remain strongly confident that we will be the dominant technology partner to OEM in this space in the future.
Sumit Sharma: To win the space, we need to think about potentially winning multiple projects with multiple OEMs in the future.
Sumit Sharma: As OEMs realign their individual product strategies, we remain patiently engaged with them.
Long-term, their system cost needs to be competitive.
Sumit Sharma: Companies with ASPs in the thousand plus range will not be competitive.
Sumit Sharma: All our technologies have been built for cost scaling with custom silicon and the lowest cost sequential flash LiDAR.
and MEMS scanning technology.
Sumit Sharma: We need to patiently work with OEMs for adoption and continue to do so.
Speaker Change: I'm going to keep my prepared remarks brief today as we receive a large list of questions from our shareholders. I would like to address that at the main narrative again.
Speaker Change: I would like to now turn the call over to Anubhav to talk about our financials.
Thanks, Sumit.
Anubhav Verma: I am pleased with what we have accomplished as a company since the last quarterly update.
Anubhav Verma: We have successfully positioned the company for long-term growth by pursuing significant revenue streams and partnerships from non-automotive industrial channels in the short to medium term.
Anubhav Verma: This is critical, as all serial production revenue in automotive will be material only with economies of scale, which won't happen until later this decade.
Anubhav Verma: B, bolstering the balance sheet with the convertible note facility from a strong financial partner.
Anubhav Verma: We have further streamlined our cash burn and extended our runway into 2026.
Anubhav Verma: With significantly reduced cash burn, strong balance sheet, and focus on industrial, we believe we have improved our timelines to achieve cash flow breakeven.
Anubhav Verma: The capital raised to a convertible note comes at a very strategic time for us, given the visibility of near-term revenue in the industrial space.
Anubhav Verma: We ran a competitive process to select institutions for this round of capital raise and received term sheets from multiple investors.
that reinforced the market perception in microvisions technology.
Anubhav Verma: The size and terms of the convertible note are also reflective of the micro-vision's market position and strong credit profile to emerge as one of the last standing LiDAR companies with the lowest cash burn.
This is a two-year, $75 million fixed convertible note facility.
Anubhav Verma: The first tranche of $45 million was funded at a closing price of $1.33 as of October 14, 2024, with a $30 million tranche available for future drawdowns subject to certain limitations.
Anubhav Verma: This is a 0% interest coupon facility and matures on October 1, 2026.
Anubhav Verma: with the lender having the option to require the company to repay the notes starting January 1, 2025 up to 1.8 million monthly.
Anubhav Verma: prior to April 1, 2025 and up to $3.5 million monthly on and after April 1, 2025, plus a 10% premium.
Anubhav Verma: The conversion price or the price at which the notes could be converted into common stock is fixed at $5.96 or approximately $1.60.
Anubhav Verma: The aggregate value of the notes that could be converted into the shares at this price ranges from $33 million to $40 million.
Anubhav Verma: The range is dependent on how does the stock price on the date S3 registration statement goes effective compare against the initial close price of $1.33.
Anubhav Verma: The remainder of the $45 million principle, which is $5 to $12 million, will be converted into shares at 10% discount to the share price on the date when the F-3 registration statement goes effective.
We believe high-growth economic incentives are aligned with the company.
Anubhav Verma: as they get to convert their principal into stock if the stock price sees momentum due to the near-term commercial winds and other industry factors, thereby riding the upside with all other shareholders.
Anubhav Verma: This makes the overall cost of capital for this convertible facility quite attractive.
Anubhav Verma: We believe that the growth coming from this convertible is higher than the cost of capital and will put us on a trajectory which will lead to cheaper ways to finance the business until free capital generation.
Now, let's review our Q2 financial performance.
Anubhav Verma: For the third quarter, we reported revenue of $0.2 million. This revenue was lower than our expectations as an existing customer pushed out its delivery of sensors from Q3 to Q4.
Anubhav Verma: This expected revenue from the sale of our sensors was delayed because the leading agriculture equipment company pushed out their delivery schedule.
Anubhav Verma: From an extensive standpoint, while our revenues came in lower than expectations, we're pleased with our third quarter OPEX performance.
for the third quarter, we had approximately 15 million off.
Anubhav Verma: R&D and SG&A expenses. This includes 2.4 million of non-cash charges related to stock-based compensation expense and 1.4 million in non-cash charges related to depreciation and amortization.
Anubhav Verma: For the third quarter, $14.1 million cash was used in operating activities, which is in line with our previously communicated expectations.
Anubhav Verma: The Q3 cash used in operating activities came down by 25% quarter over quarter.
Anubhav Verma: In line with our expectations, our expenses have trended down sequentially since Q1, primarily due to the reductions in force we implemented to focus the company on Maven and Movia and away from Mosaic and SensorFusion.
Anubhav Verma: Keeping in mind the current view from the automotive OEMs regarding their start of production timeline, we have decided to further scale down some of our ASIC programs and dependence on third-party contractors related to automotive work.
Anubhav Verma: We believe that our new fixed expenses of R&D and SG&A annual run rate will now be in the $48-$50 million for the next year, 2025.
Anubhav Verma: We think streamlining the cost structure in response to the automotive start of production dates related to projects is the right move and helps the company to scale faster with industrial revenue in the near term.
Anubhav Verma: We will resume some of these ASIC programs at the right time when we see the momentum for automotive revenue building up in 2025.
As expected, Q2CAPEX was zero in line with our expectations.
Now let's talk about our balance sheet.
Anubhav Verma: We have significantly bolstered our balance sheet as a result of the recently announced convertible loan financing.
Anubhav Verma: Post the financing, the company now has a total liquidity of $234 million with the following three components.
Anubhav Verma: 1. Total cash and cash equivalents of $81 million after giving effect to the net cash proceeds of $38 million from the first tranche of the convertible note.
Anubhav Verma: Number two, 122.6 minutes availability as of 9.30 under its current at-the-market ATM facility led by Deutsche Bank, Mitsuho, and Craig Halle.
Anubhav Verma: And number three, 30 million of the remaining capital commitment under the convertible loan facility.
Anubhav Verma: With the new ongoing OPEX run rate of 48 to 50 million, we believe we have further extended our runway into 2026 with our current liquidity profile.
Anubhav Verma: Microvision continues to stand out in the marketplace having one of the lowest cash burn rates. This further positions the company as the leading contender to be on the path to achieve cash flow break-even faster than all its peers.
Anubhav Verma: We did not sell under the current $150 million ATM facility in the third quarter.
Anubhav Verma: We believe we're on track for eight to ten million revenue this year.
Anubhav Verma: The Q4 revenue is expected to come from, number one, sale of LiDAR sensors to automotive, OEM, and non-automotive customers. And number two, NRE, or one-time development fee for customization projects for customers in both automotive and industrial.
Anubhav Verma: Since some of the components of the expected revenue streams are related to NRE, revenue recognition is subject to customer approvals.
Anubhav Verma: From a cash burn standpoint, our new annual OPEX, including R&D and SG&A, is expected to be $48 and $50 million in next year. To summarize, we're really excited about 2025 and beyond.
Speaker Change: Operator, I would now like to open the line for questions.
Speaker Change: Thank you. At this time we are conducting a question and answer session. Investors can submit their questions within the meeting webcast by typing them into the Q&A button on the left side of your viewing screen.
Speaker Change: Analysts who publish research may ask questions on the phone line. For analysts to ask questions on the phone line, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. 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 questions.
and Anubhav Verma.
Speaker Change: Our first question comes from Casey Ryan with West Park Capital.
Casey Ryan: Good afternoon, everybody. Thanks for the update. I had a few questions. I think everyone's happy you're focusing on the industrial market.
Casey Ryan: Two questions. Do ASPs have to change to get the market moving for you from current levels, let's say?
Casey Ryan: The second part of the question is, I think in previous comments you talked about 10 to 30,000 units being available, maybe in 2025, but can you talk about what you think the reasonable unit TAM might be, not guidance or anything, but just sort of a sizing of what the opportunity could be in 2025?
Do you want to take it? Okay. Go ahead.
in the $1,000 to $2,000 range.
And the range is primarily...
driven by the software offering.
Casey Ryan: that these industrial customers are looking for, which, by the way, is lower than the ESP if, you know, obviously, we do not get the volume because, you know, the customers that we are targeting are looking for volumes in the ranges that you described, but typically
That would be the AFP for this particular application.
The second part of your question is the range.
Casey Ryan: The range for the volumes, because we have a few customers.
Casey Ryan: which are looking to roll these sensors into their fleets, which could again be their new robots or new vehicles.
Casey Ryan: and could also be a case of retrofit for their existing inventory. So we do believe that this number would be reasonably in the range that you described between 10,000 to 30,000 units for next year.
Okay, good. Great. That's very helpful.
Speaker Change: I think on the 2Q call, I think maybe you guys had referenced sort of thinking that the non-automotive opportunity could be $8 to $10 million maybe in calendar 24, but it sounds like maybe that shifted a little bit and bled into 25.
and Anubhav Verma.
and what this customer could consume, I guess.
Speaker Change: So, I think that's a great question, I think, and I think, KC, you picked on the right metric on the balance sheet. And I think that's sort of also why this capital raise comes in at this time, right? Because we are...
Speaker Change: beginning to build inventory to service or to prepare for the revenue commitments for next year.
Speaker Change: I'm a bit hesitant to give you a quarterly run rate because the ramp is actually gonna be dependent on.
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma,
Speaker Change: So, that would be obviously something which is dependent on the customer. From a revenue recognition standpoint, we obviously only recognize revenue when the sensors are delivered to the customer.
Speaker Change: but I do believe that the numbers that I described for the total number
Speaker Change: with maybe, you know, the ramp really happening mid-2025 next year to maybe Q3 when the revenue builds up. But again, like I said, the ramp is typically driven by the customers in this case.
Right, okay, I think that makes sense.
I think that makes a lot of sense.
Speaker Change: How many, so sort of the one customer that we're talking about and sort of talking, you mentioned that it's in the ag space.
Speaker Change: Let me ask you, just for all of us investors thinking about how big the opportunities can be outside of automotive.
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Anubhav Verma, Anubhav Verma,
multi-customer opportunity within the segment.
Now, let me take that.
Speaker Change: So I think when you think about this opportunity, let's think about just microvision in general, right? Think about in tranches. The top tranche
Speaker Change: is customers that need more than 100,000, less than a million annually. This is primarily our strategic sales to automotive OEMs. Right, so there's a bunch of customers in there. I would say a bunch of potential customers in there and we continue working on them.
The next tranche is, let's say, annually...
More than 20,000, less than 100,000.
Speaker Change: And there you probably have customers that you can, the number of customers you can count on, two hands.
Speaker Change: right and there's a very varying amount of segments that they work in
but
Speaker Change: You know, that can aggregate to something big, but again, it does not get as big as the first crunch. Crunch number three is customers that have more than a thousand, less than ten thousand sensors per year.
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Anubhav Verma, Anubhav Verma,
Speaker Change: And in this category, of course, there's like a massive group of people, right?
Speaker Change: But if you add them all up, they will probably come up to about 50 to 75% of the tranche above them.
Speaker Change: And the last branch is, of course, like more than one and less than a hundred. So this is like, you know, how we think about like, as you know, we engage with different customers, right? We put them in different places and they all have different needs. When you think about the Mobya L safety rated sensor, for example, it comes with some standard software. So we don't customize it, but it's going to be standard software that's qualified.
Speaker Change: and that allows them to get up and running very, very quickly.
Speaker Change: Because as you go to the lower tranche, as you can imagine.
Speaker Change: you'd probably end up with more salespeople than engineers, because to address so many customers, to get to those big revenues that we would need, you would need quite a lot of team. So we've developed a product that allows us to say there's a standard product, you can buy it, and here's the map pricing, and we work pretty hard to incorporate all the different interfaces and all the things they need down below.
Speaker Change: The middle tranches is where the interesting part happens, where we have the opportunity to upsell software. And the software is something custom that they would need, so the hardware is exactly the same.
Speaker Change: to get to like any kind of like, you know, future break-even target with industrial by itself. You know, we have to have a visibility of how do you get to some annual run rate that's respectable first. And from there, you know, how you would have growth. Does that answer your question, Casey?
Yeah, actually that's
That's a very helpful framework, so
Speaker Change: Just to be more efficient with everyone's time, I guess the last question I'm just wondering about capacity and like I understand it might not be an issue today, but sometimes when people are talking about what their ability to support is, it's helpful for investors to understand, you know, how many sensors could you produce? I understand you have multiple products, but
What's the, you know...
Speaker Change: What's the flexibility around production and, you know, if orders outpace what you expected or something, would there be any issues on the other side of the house in terms of fulfilling those orders, I guess?
Speaker Change: There will be no concern about operations. I think our current capacity is, you know, I'll average it out about 45,000 units a year.
Speaker Change: and that's on a single shift. You know we can certainly ramp it up. If you can think about if you were actually shipping that many units so if you think about the production line that was developed for automotive qualified by Bayo that we acquired through the transaction.
Speaker Change: which is a fully qualified PPAP line, very high quality work.
Speaker Change: that we can cover with this capacity. And as I mentioned, the Movia L product that runs on that production line. There's no other product that runs on that production line.
Speaker Change: The hardware remains the same, the differentiators, the firmware, and the software that gets put. So you can do a low-volume, high-mix product without having to do a lot of configuration management except the software that has to run in there. So it gives us the flexibility to address multiple customers and get to a decent ramp rate.
Okay, great. That's very helpful.
Speaker Change: Yeah, it sounds like you're making terrific progress, so we'll look forward to see how things develop the rest of the year and into the new year, so thank you for your time.
Thank you.
Speaker Change: I will now turn this call back over to Anubhav Verma to read questions submitted through the webcast. Thank you.
Thanks, Mike.
Anubhav Verma: So, the first question is, management mentioned on the latest conference call, 15 ongoing non-automotive RFQs, trying to get a sense of where we are making inroads or seeing a greater appetite for our solutions.
Anubhav Verma: Please further describe the composition of those, such as, you know, five for AMR or warehousing, or ten for heavy equipment. Are they primarily in agricultural and heavy equipment, or is there more interest in warehouse and forklift applications?
and Anubhav Verma
Speaker Change: I think, you know, for all of us, we need to keep in mind the way I described the different tranches of how we think about all the different customers and how we sort them out. I would say primarily.
Speaker Change: A lot of the focus right now is AMR, warehouse management, and other industrial applications, but there is motion involved in the robots.
and therefore these are higher volume applications.
Speaker Change: nothing compared to automotive would be but still pretty pretty high volume so we're focusing on that first
Speaker Change: Thank you. Next question, what are the main use cases for Microvision's product with these new industrial business opportunities? What problems are they solving?
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Anubhav Verma, Anubhav Verma,
are these through demos and RE-agreement samples.
Speaker Change: If you think about what the problem is, that's a great question, actually, you know, we have technology, but we have to understand what problem are we solving? Is it a big enough problem? So, if you think about, you know, forklifts and other kind of equipment have been around for a long period of time, people's work in close proximity to them, you know, in all this space.
Speaker Change: It's hard for those OEMs to actually provide technology, you know, with safety, because most of the focus is always going to be on the automotive kind of application with as much higher volume. So, the kind of systems that have been able to field.
Speaker Change: You know, they don't have the kind of capabilities and the kind of safety that is required nowadays.
Speaker Change: And as you can imagine, you know, everything is getting somewhat automated, so safety is one of those things that's expected, even in an environment where things are moving at a slow pace, but the payload is pretty high.
Speaker Change: to get some level of safety. So, as you think about the perception that was developed, the perception techniques that were developed for automotive can be adapted and applied to address these spaces with the same exact sensor.
Speaker Change: The real benefit is, think about, it's no longer a LiDAR sensor.
The hardware looks like a LiDAR.
Speaker Change: but the software inside it makes it a pretty incredible solution, where the solution goes directly, the LiDAR when it's mounted, that
Speaker Change: and things like stopping and recognizing an object in the path, something cantilevered, things that would be very hard for a 2D sensor to infer from a scene that a full 3D sensor is allowing them to create safety kind of magically. So, for example, can you imagine
a forklift with a full payload, moving at full speed.
Speaker Change: and the user does not notice that there's something on the ground that can actually get jammed up and you know you could
[inaudible]
with a 3D LiDAR, all those things.
Speaker Change: and the software effectively you can stop the forklift independent of you know
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma,
Speaker Change: Conceptually, you always think about, yeah, this is how it's going to work.
Speaker Change: But I saw it working live and I was amazed that they were completely jamming down on the
The Accelerator, Full Blast, and...
Speaker Change: you know our sensor actually brought it to a you know low speed and kind of nudged it next to it so
Speaker Change: As you're asking, like, you know, how do we actually engage?
Speaker Change: We start off with making custom software, custom development samples that we give them, that we, you know, give them interfaces as well, communication interfaces, work with them.
Speaker Change: to create these demos so their executive team can see how well it will integrate into their product roadmap.
Speaker Change: And from there, of course, we just talk about, you know, how commercial rollout will happen, what their timelines are.
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Sumit Sharma, Anubhav Verma,
Speaker Change: They look for a partner that's going to be around for seven or eight years, because whatever technology they incorporate, they rely upon it. They cannot have switchovers every so often. So that's the focus area.
Speaker Change: Thanks, Sumit. And if I can just add NRE agreements, because obviously, as I mentioned, part of our Q4 guidance as well, this is the project in which we are actively performing the work for our customer. And when we get the approval, that sort of, you know, also triggers a rapid recognition. So just in line with the way we believe about the 2024 guidance.
Speaker Change: All right, next question. As investors parse the business aspects of these potential new partnerships, what's the best way to understand the hardware and software margins on these prospective deals?
Speaker Change: Can we talk about the return on investment for both customers, meaning how is industrial autonomy shifting the business models in warehouse logistics, farming, mining, etc., and how do they value this technology in their own businesses?
and Anubhav Verma. Thank you. Thank you.
Speaker Change: Yeah, if you think about margins, I think Anubhav, I'm going to have you, you know, talk about that so people can model it correctly.
Anubhav Verma: But the opportunity we have is, clearly, quite a lot was invested to create the hardware. We've spent, since we've taken over the acquisition, we've spent quite a lot of money to transition this product.
Anubhav Verma: ready for production for the industrial space. It's taken us over a year. Quite a lot has been invested.
Anubhav Verma: So, of course, we would like to recoup our costs in there. So the Harvard margins are going to be your typical Harvard margins that customers expect. Some of them, or almost all of them, listen to our earnings call and read it. So this is something that they already know.
Anubhav Verma: Our big differentiation comes in with the level of software that they want. We're building upon a body of work that was done and we do something derivative for them. But in some cases, the derivative projects are small. In some cases, the derivative projects are pretty massive. And then, it comes down to, we would rather have...
volume commitments from them and happy to amortize.
you know, the R&D cost over the volume.
Anubhav Verma: So the software volume is, of course, the big part, right?
Anubhav Verma: because what we're helping them do is take away costs from their system when they don't need an extra ECU and cables and their software team to create the application.
Anubhav Verma: We provide them the software that goes directly to the main controller. And it is to a high level of qualification because the team is very capable of coming from a discipline of automotive software.
Anubhav Verma: to have well-qualified software to be provided to them. So I think it gives us an opportunity. I would say that what's exciting to me is
Anubhav Verma: We have software content in here and it's a problem that they need solved and we can get them up and running years in advance of their team actually being able to deliver based on somebody else's sensor without the software existing right now.
Speaker Change: The overall solution margins, I think, could be favorable, and Anubhav, I'll leave it to you how you'd like the market to model it.
Anubhav Verma: Yeah, no, I think the way to think about this is the value proposition for the customers is really twofold. A.
Anubhav Verma: with our solutions, they can actually deploy their robots faster, so which helps them in turn collect revenues faster if these companies are actually using the...
Anubhav Verma: are in the warehouse distribution or logistics business where they can deploy more robots.
Anubhav Verma: efficiently, and obviously, you know, at their end can typically grow their top line faster with more of these robots coming in the supply.
Speaker Change: The second aspect is the cost, because obviously, as Sumit mentioned, when there is a downtime, it actually costs money for these providers, not just in terms of idle time or the opportunity cost.
but also the loss of inventory.
Speaker Change: which I think which happens when, you know, pallets can crash over and which, again, leads to downtime, etc. So the way our customers are looking at this solution or the business problem that we are solving is helping them.
deploy these robots faster.
Speaker Change: and secondly, reduce their cost of operating these robots as well, which is sort of what our customers are looking to extract from our solution, which in turn helps them.
Speaker Change: Now, in terms of margins for us, like Sumit described, you know, I would like to sort of, you know, obviously...
have a more detailed guidance once sort of we have.
Speaker Change: visibility into 2025 and the ramp, which I think Casey also asked about, but like Sumit described, the way to think about this is hardware would have a
standard margin, but the software would
Speaker Change: using a standard product perception software and then really customizing it for the particular application and then amortizing it over the piece price of the customer.
Speaker Change: Next question. How does Microvision balance pursuing high-volume, long-term automotive contracts with generating near-term revenue through industrial LiDAR applications?
Speaker Change: I think let me take that question. I think this is a very interesting question because
I do believe that any company...
Speaker Change: which solves this problem will be the last standing LiDAR company given the state of the industry we are in, because obviously, as we have been discussing over the past few many calls,
Speaker Change: The OEMs really have only low-volume projects and really are requiring all LiDAR companies
to put an investment on their own end.
Speaker Change: at their own dime until the volumes really ramp up and take off until the later part of the decade, given where the lights are.
adoption is in their economic cycle.
Now, obviously, this makes the LiDAR companies
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Anubhav Verma, Anubhav Verma,
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Anubhav Verma, Anubhav Verma,
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Anubhav Verma, Anubhav Verma,
Speaker Change: in the absence of high volume projects. Because what the OEMs want is their suppliers to have longevity and the visibility to be around for a long period of time and be able to withstand these economic cycles.
Speaker Change: that go on. So, the way we believe that we have positioned the company well is executing on this near to short-term industrial applications while we continue pursuing the automotive. And like I said, some of the industrial factors I described others, the competition is going to turn out because obviously that's sort of how the economic cycles are playing out, but ultimately that's how we believe that we're going to be the last standing line of the company given our strategy to execute on these opportunities and wait for the automotive revenues to ramp up in the later part of the decade.
Speaker Change: Next question, what is Microvision's strategy for navigating the evolving landscape of Tier 1 suppliers in the automotive industry? How do you plan to leverage relationships with Tier 1s to secure high-volume LiDAR contracts?
Speaker Change: Are any automotive RSQs still expected to be awarded this year, or will they be in 2025?
I'll take that.
Speaker Change: So, I'll start with the last section first. Are any of the RFQs planned to be awarded at the end of this year? You know, we're in November right now, and I would, you know, cautiously optimistic, but I would say that the OEMs are working on their inner strategy.
They're adjusting.
Speaker Change: what they need and how they want to incorporate it, but.
Speaker Change: But this also goes into your question about Tier 1, and I'm going to, I think I mentioned this a couple weeks ago when we had our Q&A session.
Anubhav Verma
Speaker Change: Just to remind everybody, so I was in a meeting with an OEM.
Speaker Change: and they clearly indicated that it'd be great that if a tier one would provide a solution and you know you should partner with it and you know we said okay we're open to that and immediately the answer was well yeah but we don't like those guys because you know they charge too much and it's you know really you guys are the inventor of it and you know we get better service from you directly.
Speaker Change: So this paradox exists with the OEMs, not the Tier 1. We will collaborate with any Tier 1 as a directed by agreement that an OEM would like us to do.
Speaker Change: But as you can see that the tier ones, if you just follow the news, they're retrenching in other technologies that is their core technology. So they are not looking to take on, you know, bigger projects.
Speaker Change: but the real issue is that if you were to think about just the LIDAR, right? Every LIDAR company gets up, every CEO gets up and they talk about, you know, how important it is, how much they're going to win.
But this is my take on it.
Speaker Change: You've got to think about, not just the LIDAR, you've got to think about the solution that they're providing. So I think I've talked about this maybe a little over a year ago, so I'll remind investors.
Speaker Change: If you think about it, it's a vehicle. When you're a customer, you don't care.
Speaker Change: what the technology inside is. What you care about is the NCAP rating. Do you have a five star NCAP rating in the product and what's the piece price?
Speaker Change: To deliver that, Tier 1s and OEMs look at LiDAR, radar, camera modules, ECUs, and put together a system that's affordable so they can deliver at a very certain cost. So just the latter story is not complete.
Anubhav Verma
Speaker Change: This is where the trade-off comes in, where people always ask the question, well, what do you think about imaging radar and what's going to happen there? Look, I'll give you my take, and this is not just my take, this is coming from talking to
Speaker Change: Quite a lot of people. Imaging radar is not a threat to us. It is a rather large piece of hardware that is very hard to integrate into a car. Antennas are complicated, and it's nowhere near the performance LIDAR gives them at lower cost. Okay?
Speaker Change: So, from a vantage point of, you know, how a lot of get adopted, you could actually think about the problems that OEMs are solving, what is a acceptable level of L2, L2+, or L3 features they want to incorporate, and what volumes in each one of those they can incorporate.
Speaker Change: One thing is completely common. Anybody that's trying to sell a LiDAR that's a thousand dollars, a thousand dollars plus to the passenger vehicle, that's just hokey. There is no tier one that's interested in that. There's no OEM interested in that. So what we focus ourselves is, you know, solve the problems for scale, that at some point, if they want us to scale the product.
Speaker Change: That's how the rollout is going to happen. That's how the investors think about it. That when you think about this OEM space, these are all the forces at play. And we will work with tier one, we'll work with anybody. But there's other things in play beyond just the LIDAR or a choice that an OEM has to make.
Speaker Change: Thanks, Sumit. For model year 2028, do you anticipate the automotive OEMs will be selecting LiDAR partnerships in the near future?
Speaker Change: We understand that it's their timeline, but based on your knowledge of the product development negotiation cycle, give us your best estimate on that timeline at this moment.
Speaker Change: Yeah, I think typically a automotive OEM cycle for any kind of development is three years.
Speaker Change: So as 2024 is ending, 2025 is coming, this is about the right time to have to make the selection.
Thank you.
Speaker Change: That goes in there, but what they really want is that they get sensors.
Speaker Change: from us that have the final quality point cloud and perception that they need. And then, you know, they have a lengthy period of time where they, you know, they take those B samples and they have to do a lot of validation testing, meaning that they have to drive these built cars around different roads all over the world.
Speaker Change: to collect enough data to make sure they can validate that the solution, not just the LIDAR, the solution they're providing meets and exceeds the expectations that has been set forth by them.
Speaker Change: So, from a vantage point, yeah, you know, the products, you know, will take about three, two and a half years.
but a majority of that is the OEM's validation cycle.
and Anubhav Verma.
Anubhav Verma: You know, we work very closely to get to that final RTL, final ASIC, final image quality. So when we show things right now, they can see what the final point cloud could be and how stable it is and how much manufacturing has been placed. And that's what the schedules are dictated by is how much time do they need to develop. So, and it comes down to if every OEM is doing a slightly different variant of a feature.
Anubhav Verma: They will have their own timelines to go develop, you know, their part of the software and their validation planning.
and Anubhav Verma.
Anubhav Verma: Thanks, Sumit. What is Microvision's perspective on the current competitive landscape in the LiDAR industry? How do you differentiate your technology, solutions, and business model from other key players?
Speaker Change: We see competitors facing financial challenges which seems to place Microvision in a strong position. How does the company intend to convert disadvantage into profitability?
Yeah.
Speaker Change: How do we intend to convert to profitability? What I'm excited about is scaling. A great question that was asked by Casey is.
Speaker Change: Somebody comes to knock in, can you actually get to a certain volume, you know, to start going from where we are to start getting to like maybe 40,000, 50,000 units a year? That's really good scaling.
Speaker Change: and that's only possible because the products have been designed with mass replication as the bottom core. You have to start with the understanding, I may have to replicate something. Our differentiation is, when I think about the future Movia-L, think about Maven, I think about in terms of wafer.
Speaker Change: To steer the beam for MAVEN, I think about a MEMS wafer. I don't have to think about prisms. I don't have to think about electrostatic mirrors. You know, there's MEMS mirrors, but we do electromagnetic, which is much more robust.
Speaker Change: We can actually scale, and we've done that. I mean, we shipped hundreds of thousands of units to Sony. We did, you know, quite a lot of volume with Microsoft, as you all guys know. So, we know we can scale that. And, of course, on the other side is the sequential flash product, the Mobia product. That also can be scaled. It just comes down to the amount of silicon.
So.
Speaker Change: For me that's you know like that's the number one thing I think about that you know how would you actually scale it and you know is there a competitive landscape.
Speaker Change: everybody else that's out there talking right you know look at their steering how do they steer the beam how do they actually get the laser to the points there is then on the other side is
Speaker Change: What wavelength are they using? We use 9 to 5 nanometer lasers, Vixels and, you know, etch-a-matic lasers all combined. So.
Speaker Change: Again, this is in a space that can be scaled. Other people that are doing 1550 nanometer, huge cost there.
Speaker Change: They're not very clear about, like, really, how are they going to get to the hundreds of dollars, you know, sub $1,000 for an automotive OEM.
and for industrial space, right?
Speaker Change: You can't charge, you know, $5,000, $6,000, $7,000, $8,000, $20,000 per sensor and think about it in kind of scaling. There's a, you know, there's a niche market there.
Speaker Change: If you think about those layers, those tranches I'm talking about, imagine the higher up you go, the economy scales have to kick in. So our competitive advantage to everybody is I can scale at price points that are very competitive actually.
Speaker Change: and we will enable them faster. Whereas others will have to do a lot more sales job, as in like, you know, what value they have, because their price price is so high for an application and they're going to struggle with it.
Speaker Change: And if I can quickly just recap because I think the strategy is important as well because
Speaker Change: to convert this advantage to get the scarcity premium, which will ultimately end up happening for any company that survives or is the last standing LIDAR company, will command that premium.
The way to get there is diversifying your revenue streams.
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Especially now that we have.
an institutional investor with us as well because I think
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Anubhav Verma, Sumit Sharma, Anubhav Verma,
And I think the way to think about this is...
Speaker Change: What revenue will support each and every Lidar company's cash burn until they turn the corner and become cash flow positive? I'm just assuming 30% gross margin.
I think all investors should be looking at.
you know, almost multiplying the cash burn by three.
Speaker Change: is what is the revenue potential or the revenue quantum needed for lighter companies to be cashflow breakeven. And that's sort of how all the large financial institutions would be looking at this industry as this industry gets more mature and the time to cashflow breakeven gets closer and closer.
Speaker Change: Next question. Can you discuss the types of customizations OEMs typically request for LiDAR solutions? What are the implications of these customizations on microvisions development, timelines, and cost?
Optimization, so let's start from the middle up.
Speaker Change: The real customization starts with the interface. Every vehicle, you think about it.
Speaker Change: It's got its own language. Every OEM has got its own language, how different things plug in together and talk.
and Anubhav Verma.
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma, Anubhav Vema, Wonanlay V optional
Speaker Change: There's a quite a lot there, you know, a lot of people have to work on that because, you know, you have a beautiful point cloud, you have beautiful perception, but it has to be able to talk directly to their system. And there's quite a lot of safety and security and, you know, stack that we have to go through.
Speaker Change: There's not that much customization on the hardware, because when we work on anything, like for example, you know, for the longest time I said, you know, well, Microvision Maven product is gonna do up to 14.7 million points per second. Not every customer wants that. So some of them want, you know,
Speaker Change: only in a region of interest, much higher resolution. They want lower in the sides, lower up in the upper two quadrants, upper left and upper right. Because that's just really pointing in the sky most often to save power. And that's a configuration that difference that's done in the firmware that allows for them to get.
Speaker Change: with the same scanning that we're doing, but they get their customized point cloud in there. Again, software customization.
Speaker Change: But there's very little hardware customization, if any, you know, mounting holes and, you know.
Speaker Change: brackets and connections right perhaps there but I would say 80% of everything even maybe 90% of everything is really in the software side internal and of course middleware
Speaker Change: And how much is the competitive advantage pieces of Maven revolved around dynamic view? Now the OEMs have requested the company to make it simpler.
Speaker Change: and this feature no longer seems to be a game changer. So what is left that keeps?
making Maven superior and outlast any other LiDAR product.
Speaker Change: yeah listen the dynamic view LiDAR if you actually take a look at it and if you know what you're looking at
There's nothing out there.
that can actually fill in the point cloud.
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Uniquely Encoded Pulses.
That's a unique feature to begin with.
Speaker Change: So here we have all these different high-density work that's been done.
Ultimately, the OEMs decided that
Speaker Change: Great, but our software can't handle what, I mean, we didn't develop the Dynamic View LiDAR just on our own volition. I mean, we always thought it was the right thing to develop. But we had OEMs that said, you know, they would want to see it, right? So we developed it, we've seen it. But on their side, it's just a massive amount of data and their team would prefer more fixed pixels. We could do fixed pixels, right? I mean, we were a display company for the longest period of time.
Speaker Change: And, you know, we're very good at fixed pixels. So, the latest demos that you may have seen the videos that we put up, those are fixed pixels. And they look really dense and really well done also. So, it actually gets down to what they put in the specs we're also able to achieve.
Speaker Change: So what's the differentiation? Well the differentiation still remains it's a very high quality point cloud. It is low in profile.
Jean-Pierre Couleur.
Speaker Change: And the cost, I mean, that's actually number one, that it is a predictable cost as they go to scaling. So, even as they get in the Maven product, as I think about the future, and, you know, what they're asking for is a significant amount of performance, right?
Speaker Change: to be able to get into the target prices that they have, that's very, very compelling. So I think like, you know, the technical people on the call are investors. Like sometimes, you know, they don't value this, but I would say our capability to maintain cost for our customers.
Speaker Change: Scaling on silicon, it's actually a big differentiator, right? We can always do the dynamic view LiDAR. We demonstrated to them, we have it. If their teams ever needed it for a special application, you know, we can be that one-stop shop LiDAR shop that can do it.
Speaker Change: On the Mobia side, we have our current Mobia sensor. It's kind of large. It was designed at a different time. It's good for trucking, I think. It's definitely good for industrial. But pretty soon, you're going to start seeing some marketing work we're going to do of what the future Mobia S is going to look like. And this thing is...
Speaker Change: I would say a couple of Snicker fun-sized bars next to each other. I mean, it's tiny.
Speaker Change: and you can imagine putting it into a car where it's not so obscene, you know, it would not be taking big portions of the car and it could give you a 360 degree cocoon, something that even a corner mounted radar, 180 degrees or 270 degrees can't do.
Speaker Change: All right, and this is this is going to be a game changer essentially because it'll be higher volume
Speaker Change: And that product, as well, has the same principles of how it advances, where...
Speaker Change: We have a certain high-resolution problem that's been created. It's differentiated.
Speaker Change: and the perception software is already provided to them. That allows them to, even in the automotive space, to incorporate these features faster and at lower cost. So cost may not sound sexy to people, but it's actually probably the most important variable.
Speaker Change: The technology exists there. And I can talk to you about, you know, our technology is better than somebody else. But it's technology at cost is a real metric if you think about it. It can be delivered at a cost. So if you go buy a car, is it only available in a car that's $100,000? Or can you actually incorporate this in a car that's gonna be 40 grand someday? So...
Speaker Change: That's one of the differentiations that we control, which is the overall cost of the system. We can help reduce that.
Speaker Change: Thanks, Sumit. The next question is, the Mobileye CEO, during their company's recent earnings call, seemed to suggest that imaging radar may eliminate the need for LiDAR in the future.
Speaker Change: Possibly all LiDAR, but most likely, in any case, short-range LiDAR such as MoVIA. How does microvision view these comments, and what impact this potential shift could have on MAVEN and MoVIA's future?
Yeah.
I think, you know.
He's running a, you know...
Thank you very much.
Speaker Change: company that's got like you know billions of dollars in market cap you know they have done billions of dollars with the revenue respect him
Speaker Change: If you've ever seen an imaging radar, pretty large and chunky, and the number of channels that they would have is in the thousands, whereas the number of channels we're providing is in the millions.
Speaker Change: So the overall density of the point cloud and power at the low cost.
Speaker Change: and the low profile, you know, the small side of the LiDAR, it makes it pretty compelling. You know, I think
Speaker Change: I do believe it was Mobileye also, I don't know who this was, I believe it was the CEO in the last call saying, time of flight LIDARs.
I mean, they got out of the lighter business, right?
Speaker Change: The time-flight lidars are at a point in the cost point that really is very, very compelling and competitive.
Speaker Change: right so clearly where we are imaging radar the only thing that provide is velocity well there's plenty of radar that may not have this massive pipeline of points
Speaker Change: compared to a radar, but it's nowhere near, it's orders of magnitude less than what a lidar is already providing.
Speaker Change: Velocity could be done, and again, you can fuse radar and LiDAR, align these clusters, and assign the velocity that a radar sees to a high-density cluster from a LiDAR.
Speaker Change: You know, some of those radars can be as cheap as $40, $60, right? So they are on the cheaper side of it. So we get velocity that can be done at a very low cost compelling matter.
and we know quite a lot of radars are sold.
Speaker Change: But if you really want to do safety and you want to do these kind of high-speed hybrid pilot applications or, you know, low velocity urban applications, you're going to need a measurement device that's small and cheap, incorporated in the car, make it affordable, and it's giving you a direct measurement on millions of points in the field of view.
So I respectfully believe that LiDAR
Speaker Change: It's, I mean, very, very competitive for the solution that is needed. And it is unclear if Imaging Radar is gonna have the inroads that they want or the features. If it was the same features side by side, I don't believe that Imaging Radar can do it without a lot of help.
and Anubhav Verma.
Anubhav Verma: Thanks, Sumit. We do have more questions, but I guess we're coming up on the top of the hour, so maybe I'll take one more question.
Speaker Change: What steps is Microvision taking to attract more analyst coverage and increased visibility amongst institutional investors? So let me take that question. So I think this convertible financing is actually
Speaker Change: I believe it's a very transformative step in Microvision's evolution, because what we have done successfully as part of this process, like I mentioned, attracted several financial institutions which submitted their term sheets.
Speaker Change: And we ended up selecting the partner based on their track record.
Speaker Change: And what I think this does is it has actually improved our visibility.
Thank you very much.
Speaker Change: their portfolio companies and their investing companies to track their return and performance.
Speaker Change: And I think that's sort of what I believe has been a very interesting
Speaker Change: which I think came out as part of the process as well. What I described is as this LIDAR industry becomes more mature and the crowd is thinning, the focus on running a very steady business.
with a clear sight.
Speaker Change: and big revenue numbers being thrown around is going to be the key. So execution is going to be the key no matter what.
and I think what I described earlier at the company.
Speaker Change: which would be able to come out successfully and will command that premium, that scarcity premium, and all others have sort of whittled out.
Speaker Change: It's going to be the revenue mix and the diversification of revenue.
Speaker Change: of the portfolio, which in turn even bolsters confidence among the new and existing customers as.
Speaker Change: you have multiple streams as a business as you have multiple streams of revenues supporting
Speaker Change: Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma, Anubhav Verma, Sumit Sharma,
and Anubhav Verma.
Speaker Change: such a reputed institution was able to partner with us on as a single investor I think what investors should also appreciate as a single investor putting in this quantum of capital to work is again a sign of confidence and a vote of trust in the company's future and the sector.
Speaker Change: With this, what I do promise is for next quarter, we would be including some of these questions as well. And again, we thank you for your time and we look forward to speak with you next year as part of our Q4 earnings call. Thank you, everybody.
Speaker Change: Thank you. This concludes today's conference. All parties may disconnect and have a great day.