MicroVision, Inc.

Welcome to the Microvision First Quarter 2021 Financial and Operating Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. You may submit online questions at any time today using the window on the webcast. Please note this event is being recorded. I would now like to turn the conference over to Lindsay Stibbert. Please go ahead.

Thank you. Good afternoon and welcome everyone to MicroVision's first quarter of 2021 financial and operating results conference call. Joining me on today's call are Suma Sharma, Chief Executive Officer, and Steve Holt, Chief Financial Officer. The information in today's conference call includes forward-looking statements, including statements regarding exploration of strategic alternatives, sale of our product verticals or technology, sale or merger of the company, or completing any such strategic transaction, maximizing shareholder value, managing costs, potential customer orders, future royalties, progress under and benefits of existing contracts and license agreements, and the negotiation of future agreements, customer product launches, advantages of our technology, litigation, business execution, projections of future operations and financial results, availability of funds, product development applications and benefits, availability and supply of products and key components, commercialization of our technology, future product roadmaps, potential product sales, potential impact of products in the market, ongoing development of technology, scalability of technology and designs, expected performance of products, comparisons with competing products or technology, market opportunities, and future demand, as well as statements containing words like opportunity, potential, possibly, intend, believe, goals, pass, expects, plans, will, could, would, likely, 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 various SEC filings, including our annual report on Form 10-K, filed on March 15, 2021, as well as various other SEC filings made from time to time in which we discuss risk factors associated with investing in microvision. These risk factors could cause 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 it's required by law, we undertake no obligation to update this information. The financial numbers presented on the call today are included in our press release and in the 8-K file today. Both are available from the investor relations section of our website. This conference call will also be available for audio replay in the investor relations section of Microvision's website at www.microvision.com. And now I'd like to turn the call over to Suma Sharma. Suma?

Thank you, Lindsay. Good afternoon, everyone. The last 14 months have been incredibly busy and productive at my provision. Today, I will cover some of the important achievements from our automotive LiDAR product development and the potential impacts, our target areas of execution going forward that we believe will increase shareholder value, and provide a business update. First, I want to thank our employees for their continued dedication and execution. Multiple times in our company's history, our team has performed exceptionally and delivered products based on our technology that we believe are far ahead of global competitors. Our employees are incredibly smart and talented, and I'm continuously humbled by their dedication to make MicroVision a success. Let me start us off today by updating you on our first generation long range LiDAR A sample and the potential impact it could have. I believe this sensor could offer a much higher level of performance compared to any LiDAR currently available or announced in the market. Our team successfully completed our ASAMPLE hardware and development platform on schedule. Our ASAMPLE hardware, as seen in the pictures shared in the press release earlier this week, is targeted for potential customers, partners, and parties interested in a strategic transaction and can be mounted on top or behind the windshield inside a test vehicle. We designed this hardware to support automotive level moving platform testing from the ground up. Our robust design also allows us to target this hardware for initial sales in second half of 2021, following completion of internal and external testing. I will elaborate on this a bit later on this call. We expect our sensor to meet or exceed current target OEM specifications. MicroVision's LiDAR sensor is expected to perform 250 meters of range. It is also expected to have an output resolution of 10.8 million points per second from a single return at 30 hertz. LiDAR companies communicate product resolution in different ways, as you may know. I think looking at points per second is the most relevant metric to compare resolution performance of competing LiDAR sensors. We believe our sensor will have the highest point cloud density for a single channel sensor on the market. Our sensor has also been designed for immunity to interference from sunlight and other LiDAR sensors using a proprietary scan locking intellectual property. Our sensor will also output axial, lateral, and vertical components of velocity of moving objects in the field of view at 30 hertz. I believe this is a groundbreaking feature that no other LiDAR on the market, ranging from time of flight or frequency modulate continuous wave sensors, are currently expected to meet. Let me elaborate a bit more about the potential importance of this feature. The capability of future active safety and autonomous driving solutions to predict the path of all moving objects relative to the ego vehicle at 30 hertz is one of the most important LiDAR features. This is significant. These active safety systems are tasked with determining and planning for the optimum path to safety. Providing a low latency, high resolution point cloud at range is an important first step. However, having a detailed understanding of velocity of moving objects in real time enables fast and accurate path planning and maneuvering of vehicles. Sensors from our competitors using either mechanical or MEMS based steering time of flight technology currently do not provide resolution or velocity approaching the levels of our first generation sensor. Additionally, Flash-based time-of-flight technology has not demonstrated immunity to interference from other LiDAR, which is a big issue. This potentially limits the effectiveness of these sensors to be considered as a candidate for optimal LiDAR sensor or as a primary sensor to be considered for active safety and autonomous driving solutions required for 2024-25 OEM targets. LiDAR sensors based on frequency modulated continuous wave technology only provide the axial component of velocity by using Doppler effect and have low resolution due to the length of period the laser must remain active while scanning. With the lateral and vertical components of velocity missing, lower accuracy of the velocity data would make predicting the future position of moving objects difficult and create a high level of uncertainty. The core function of active safety hardware and software is to accurately predict what will happen and adjust in advance of a dangerous event. These missing velocity components could potentially mean a larger error in estimating velocity compared to actual velocity of objects and predicting incorrect positioning. Let me share an example. An ego vehicle moving at 60 miles per hour and a target vehicle moving at 25 miles an hour relative to the ego vehicle, covers approximately 11 meters in a single second. Our sensor updates position and velocity 30 times per second, which would enable better predictions at a higher statistical confidence compared to other sensor technologies. If the target vehicle suddenly starts changing its position relative to the ego vehicle, An active safety system would do a much better job if it had more precise position and velocity data of the target vehicle. This could mean the difference between active emergency braking stopping short of an accident versus a potential collision. A sensor that can provide an accurate detailed picture of position, resolution, and velocity of all objects relative to the ego vehicle at a faster frame rate would enable better active safety systems. Delivering safe mobility at the speed of light requires a sensor that is fast in data output, has high resolution so it can classify objects, has appropriate cost for large volume scaling, and provides precise velocity and range of objects to predict what will happen in driving conditions all of us experience day to day. When evaluating LiDAR specifications from various sources, it is important to consider the context of actual risks in the driving experience all of us have. I would also like to provide a fuller picture of what our product roadmap could look like and why it is important for our value. We expect MicroVision's long range LiDAR sensor will have two versions in the future. Our first generation sensor is the first product in this roadmap. A future generation sensor would be a more advanced version that could have the same hardware layout as our first generation sensor. A future sensor could also include our proprietary software that will provide features needed for a standalone sensor used for active safety applications. I want to expand a bit on the importance of this future product and the value this could present for our shareholders. Having what I believe to be the best in class first generation sensor gives us a huge step up against competition. It also provides our very capable team with a hardware platform to further increase value for potential partners and our shareholders. In the short term, I expect our team to continue focusing on internal and external validation of our first generation LiDAR sensor and any potential confidential evaluation from customers or partners. In the long term, I believe a feature sensor could provide features like active emergency braking, active emergency steering, pedestrian active emergency braking, and active lane keep among a longer list of higher level ADAS features with microvision software running on our edge computing. I believe a LiDAR sensor with embedded software that does not require massive amounts of external computing will ultimately reduce costs of the system for OEM, thus potentially accelerating adoption of vehicles with autonomous driving and active safety systems. I expect key features in our first-generation sensor, like highest resolution, full-velocity components, community sunlight and other LiDAR, would allow an incredible opportunity for us to add significant value to the software for a greater sustainable strategic advantage. I believe future products built with our software, sensor performance, edge computing, and scalability would be valuable to OEM, Tier 1 automotive suppliers, companies that are focused on mobility as a service, and therefore of value to our shareholders. As we remain focused on exploring all potential opportunities to increase value of our company, a portion of our team will continue building towards this roadmap. I look forward to reporting on our progress. Another major advantage of our technology is its capability to demonstrate scalability. To demonstrate this, we successfully developed and installed our long range LiDAR sensor pilot line in Redmond, Washington. This pilot line is sophisticated. It includes six custom active alignment stations that our team developed working with our automation partners to enable scalability and performance. Our team has launched multiple pilot lines in the past for our display, augmented reality, and interactive display products. I am very proud of our team's ability to apply their expertise and complete this pilot line on time given the challenges with the global pandemic. This pilot line will allow us to validate design and manufacturing processes in-house in faster cycles. We expect limited quantities produced from this line will support exploring potential partnerships. The pilot line will also enable us to take our designs, process maps, and control plans and launch a new highly automated production line to support expected initial sales inventory in second half of 2021 through a contract manufacturer. This future production line in Asia will eventually have the capacity to produce between 12 to 15,000 sensors per year, starting sometime in 2022. The purpose of the second line is to show the next level of scaling. The ultimate capacity of this production line can be adjusted to meet volumes as required prior to mass production in 2024-25 timeframe. We continue to work to mitigate risks to our plant due to COVID and other limitations. The key elements to show scalability of our technology comes from being able to scale our highly reliable, cost-effective, solid state beam steering system for automotive use. This month, we launched our fifth generation MEMS to a 200 millimeter wafer size with our MEMS strap partner. This is, of course, not a new effort for us. We have launched our MEMS to scale in the past with a third generation that was used in Sony product and our fourth generation MEMS that was part of our April 2017 contract and are currently in production. Advancing our fifth generation MEMS with the FAB is a big step for this program that allows to demonstrate to potential partners our capability to meet future price targets. I'm extremely proud of our team to achieve this key objective with all the challenges faced in 2020. I would be remiss if I did not mention that our long range LiDAR sensor is designed and developed internally from a proprietary MEMS-based laser beam scanning technology. This intellectual property has been developed and proven in various programs for more than two decades. Our differentiated sensor is built and a large body of intellectual property, including more than 400 patents. I believe this provides us with a competitive moat in hardware and software for years to come and a very important sustainable strategic advantage. I would now like to briefly update you on our exploration of strategic alternatives. I believe our technology and products are an inflection point in multiple verticals. I want to emphasize that the company remains committed to exploring all surgical alternatives to maximize shareholder value. In October 2020, we set the objective to complete our LiDAR product and said having hardware that can be productized would be an important step for evaluation by potential interested parties. We completed that objective in April as planned and are prepared to support any potential evaluation of our technology and capability to scale. As I shared earlier today, I believe our sensor technology is differentiated by features that will potentially be recognized as disruptive in the market. I've shared with you that I believe consolidation in this state will continue, and the signs of this are starting to become public. I believe Microvision needs to continuously build value with our products, roadmaps, and partnerships, while also exploring strategic alternatives. Given the continued consolidation in the market, I believe this is a pragmatic approach as we seek to maximize shareholder value. I want to emphasize our primary focus will remain continued validation of our first-generation LiDAR sensor and support any customized evaluation data for potential partners. Finally, we ended the first quarter with $75.3 million of cash and cash equivalents. As Steve will share, our cash requirements and plan for growth are under control, providing a sustainable runway. This allows us to explore all our options from a much stronger position to maximize shareholder value. I sincerely believe our company now is in one of the strongest positions in our history to be successful. We are in a solid financial position and potentially have a disruptive new product in a market segment expected to have global impacts. The work required on the road ahead is hard. I'm truly energized every day I think about our future and remain profoundly optimistic in our path. Now let me turn over the call to Steve to discuss first quarter results. Steve?

Thank you, Sumit. Good afternoon, everyone. For the first quarter, revenue was $479,000. a 21% increase over last quarter's revenue of $395,000. All of the first quarter's revenue was royalty revenue and attributable to our April 2017 customer. We're pleased to see an increase in royalties over the fourth quarter and look forward to our customers' continued success with the sale of their product. As I've pointed out before, royalties related to our April 2017 customer will be credited against the non-refundable prepayment the customer made in 2017. Once the prepayment is exhausted, the customer will begin making cash payments for royalties due. At the end of Q1, the balance of the prepayment stood at $7.3 million. The $7.3 million is on the balance sheet as a contract liability. Our first quarter cost of revenue included a $5,000 credit related to the reversal of a warranty accrual. The result is that the first quarter gross profit is $484,000. In comparison, gross profit was $395,000 in the prior quarter. Operating expenses were $6.7 million in the first quarter, up from $4 million in the prior quarter. In the first quarter, we put in place an employee incentive plan to retain and motivate our team. The expense recognition for this incentive plan increased our operating expenses by approximately $1.2 million in the first quarter. Total non-cash compensation for the quarter was $1.6 million. This expense is a non-cash item. Other causes for the increase were the company's portion of payroll taxes on employee stock option exercises, investing RSU awards. There was also increased spending on labor and benefits due to an increase in headcount and an increase in materials and subcontractors for the development of our first-generation LiDAR sensor. Our headcount at the end of March was 57, up from 47 at the end of December. For the first quarter, our net loss was $6.2 million or $0.04 per share. This compares to a loss of $3.6 million or $0.02 per share in the prior quarter. For the first quarter, cash used in operations was $4.5 million, which compares to cash used in the prior quarter of $4.2 million. The non-cash compensation I referenced a minute ago was the primary factor for causing the cash usage to be so much lower than the operating expense. Cash and cash equivalents at the end of the first quarter were $75.3 million, up from $16.9 million at the end of the prior quarter. The increase was the result of proceeds from the two ATMs we completed in the first quarter, and we discussed those on our last series call. I'd like now to turn to the second quarter and get some thoughts on our spending and cash usage as we move forward through this year. I expect an increase in operating expenses in the second quarter. As I mentioned earlier, we initiated an incentive program that uses equity to retain and motivate team members. Those programs will continue through this year, and the expense recognized in Q2 will be similar to the $1.2 million recognized in Q1. I then expect the expense related to that program to decrease to about $1 million in Q3 and $800,000 in Q4. Additionally, in April, the company signed a three-year employment contract with Sumit as CEO. The agreement eliminates any cash bonuses and instead primarily uses equity for CEO compensation. The agreement was designed to align CEO compensation with long-term shareholder interest. The agreement grants Sumit 1.2 million shares over three years and will likely generate non-cash compensation expense of approximately 7.5 million this year. About 5.3 million will be recognized in Q2 and then about 1.1 million in Q3 and 1.1 million in Q4. Again, this expense is a non-cash item. As for cash expenses, We expect we will continue to add headcount at the pace of around 10 to 12 people per quarter for the remainder of the year, primarily in our engineering organization as we further advance the first-generation long-range LIDAR sensor and prepare to start production. Additionally, we expect to backfill some of the support positions that were eliminated in our February 2020 headcount reduction. Taking those items into consideration along with other spending, we see Q2 operating expenses in the $13 to $14 million range. Given that much of the increase is in non-cash compensation, we expect cash used in operations to be in the $5 million to $5.5 million range, up $500,000 to $1 million from the $4.5 million used in Q1. Additionally, you may have heard about tightness in the supply of silicon chips. To mitigate the risk of supply shortages, we have ordered inventory for some long lead time components that are expected to arrive in Q3. But if they should arrive before the end of Q2, we could see another one to two million of casks used in operations in Q2. As Sumit said earlier, development is progressing well, and to ensure the supply of components needed to meet our plans, we concluded it was prudent to place orders for those long-term lead time components. Before we open up the call to questions, let me add my appreciation for our engineering and G&A teams. The engineering team just days ago completed the ASAMPLE hardware and the development platform on schedule. This feat was something that some said they couldn't do, much less do on schedule. And they were supported by a top-notch team in our G&A areas that were able to support the engineering effort and also maintain the public company compliance and controls that are so necessary to our success. We're very fortunate to have so many outstanding people working at MicroVision. And with that, we'll now open the call for questions.

We will now begin the question and answer session. To ask your question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. You may submit online questions at any time today using the window on the webcast. At this time, we will pause momentarily to assemble the roster. Our first question today will come from Glenn Mattson with Ladenburg-Dolman. Please go ahead.

Hi. Thanks for taking the questions. Congratulations on getting the A sample out for the LiDAR product. So, you know, you set a milestone and you hit it, and that was, you know, terrific work. I guess then people start thinking about what the next milestone is, and you kind of hinted multiple times that there would be product available for shipment in 3q or 4q so you know i guess is your expectation that you would have multiple shipments by then if so when would the timing be like would you be able to announce them maybe not announce the customers but that you know you similar april 17 contract that you got a customer or two or three at oem you know that are that's sampling the equipment any any thought on the kind of road map for the news flow over the rest of the year on that front?

That's a good question, Glenn. So I think the way to think about it is, I think Steve and I have both mentioned that these are initial quantities. So we're looking at only a couple of hundred. And think about them in the terms of more like direct sales if somebody wants to buy and do moving platform testing and they need gang of sensors for their fleet or whatever a range of options that come through this, right? There's lots of companies out there, are not going to be available publicly, because at that point it's been validated by us and external parties, and it would be something we would offer people to buy. I don't know if Steve has to add something, but I think the initial quantity part is an important point to remember.

Yeah, I think what we said was we're working to get the production line up in Q3, Q4 timeframe, we'll be doing our internal and external verification, reliability testing, compliance testing, and then plan to sell those initial quantities in the later part of the year. So that's sort of what our thinking is for this year in terms of getting the product out there and for sale.

If we think about our April 2017 customer, that contract is running in production, therefore we always have There is a proof concept that we are in that space and we are providing parts. The automotive LIDAR, creating reputation for a long time is important, so therefore this line, the objective to show scalability is very important, actually. And I think I mentioned this last call as well, that it's equally as important as technology. And we are actually in a very good position for that.

Right.

In the past, you've said, you know, that getting the product completed would kind of de-risk the story potentially for potential acquirers. And you kind of talked about that a little bit in your prepared remarks. But I wonder, you know, was there kind of a lull in negotiations while people waited for you to finish this? And do you expect now that it would pick back up or just any color or clarity on that would be great?

Yeah, I think, you know, we were clear that having the ability to prove what we were trying to, what we were saying we could do was critical, you know, in progressing things along. And so, you know, but we totally can't comment on the process any further than that.

Okay, thanks. On the April 17 customer, there was a, you know, large technology company that won a very large DOD, uh, uh, uh, contract, uh, in the last six weeks or so. Um, you know, I guess, can you, I, you know, whether or not you can comment on, on, on, on anything about that or, or how it would, uh, affect you if, if, if, uh, if, if it's related, I imagine you can't comment, but I thought I'd ask.

Yeah. Yeah. We can't, we can't comment, uh, on that, uh, Glenn. So I'm sorry.

Okay. Sure. And, um, So, and just, Steve, on the expenses for the components, because that's the only kind of cash, you know, the major part of the – most of this is non-cash related to the SOCCOM stuff. But the $1 million to $2 million, you said it could come in Q2. But, you know, if it comes in a little early, that was $1 million to $2 million. And otherwise, I guess that would come in in Q3. Yeah.

Yeah, the target, I guess I'm trying to say we're thinking that Q2 cash used in operations would be in that $5, $5.5 million range. But I wanted to know there could be $1 to $2 million of inventory should it arrive early. That would be a good thing, I guess. But inventory purchases go to cash used in operations. And so I just wanted to put that out there as a caution that if it arrives early, You know, on a certain quarter, one day versus the next, there could be a $1 to $2 million swing, depending on how many units arrive.

Sure. Okay, great. That's it for me. Thanks, and congrats again. Thanks.

Our next question will come from Kevin Deedy with HC Wainwright. Please go ahead.

Good afternoon, gentlemen. Thanks so much for taking my questions. Steve, you mentioned headcount going from 47 to 57 at the end of the quarter. And Sumit, you mentioned, I guess, development, software development for the generation, the second generation. I'm kind of wondering how you're teeing up headcount to address the challenges you might find with that initiative.

I think that's, in the numbers that Steve gave last time, how we would end up the year, I think, you know, we've worked very closely. It's accounted for, so there's no changes. I gave a little bit more detail today of what's valued, right, how you think about step-by-step, but I think everything we've said is already accounted for in there.

Yeah, I said today, Kevin, we're looking to add, you know, 10 to 12 people a quarter. That's probably the pace we would see this year.

Okay, yeah, you spoke, though you addressed support staff, and I guess I was just wondering, you know, what you were going to have to do on the software development side.

Yeah, we'll be adding people in the engineering team in production areas and in support staff, and that's all of those areas are in that 10 to 12 people per core.

Yeah, got it, got it. Thanks. Okay, thanks. Can you help me – sort of put valuation perspective gentlemen at what almost 2.9 billion market cap and maybe a 20 premium I'm wondering how you think that might size up against alternatives I know you spoke to Summit you spoke to frequency modulation and I I'm just wondering how you guys look at that

I'm not going to comment on valuation, obviously, but just think about it. The thing that we said, we talked about a lot of detail in the call today. Specifically, you have a disruptive product that's able to do something that the final application needs, and there is a spectrum of technology and companies out there. Their solution does not mean, regardless of what the comparative valuation is, I'll let the market decide that. Our job is what we control. We take our technology, we make sure people understand the value of it, as deep as they want to go, as broad they want to go, an impact it's going to have. So I think, like, you know, numbers, like you're saying, right, I think, you know, it's all relative, you know. Of course, I'm very optimistic about the company. I think there is room to grow. I always do. But, you know, it's something that it's important for everybody to get to see. Why I put so much time to talk about the innovation, why it's so valuable. You have a disruptive product in a hot market. Excuse me. That's... That's hard to pin down, right?

Yeah, no, absolutely. That's why I asked for your view. Thank you for taking it.

Yeah, no, it's optimistic. I mean, you know, to go up and down in our moods or our, you know, based on, you know, what happens, it's really, you know, like what we have is disruptive, and that's the point we have to make. That's it.

Okay, fair enough. Thank you. Could you help me understand the OEM, the auto OEM's qualification cycle, and maybe the time involved, just so I might be able to compare that against your, I guess, time to development? Because you suggested, I guess, full manufacturing in the 24, 25 timeframe at volume. I just want to make sure I understand how long it takes them to... Yeah.

So we have a production line that can make A sample, which is the first step, except this A sample design will go through reliability and other things, and it could be available for direct sales to anybody, obviously. Beyond that, the real answer to your question is that if, let's say, an OEM was interested in something, you have stages, B sample, C sample, and so on, which is their development cycle. So whenever they make a sourcing decision, right, they do it step by step. There are always in the market standard features that everybody's aware of. And standard qualification of what MIPSA wants and what NCAP wants and what Euro NCAP wants, those are standard. But then OEMs, each OEM, because they're competing in the same market with each other, they have their own confidential things behind that. So it's a hard question to answer, but the point is those phases is what they stake out. They look at the maturity of the technology. They look at the maturity of the company. They look at the maturity of the supply chain. It's a safety critical device that's going to have a 15-year tail. They want to make sure they can support it for that long. So those are all the things that go into it. So as far as the qualification, once they have a target in 24, 25 model years, It's backtracked and it's pretty well known what the decision will be and how you would go and how they're devalued. So the production line, the way to think about it is, you know, it's a demonstration, obviously. There's nobody in the world that can actually demonstrate that level of scalability. You know, the whole concept of, excuse me, the perfect LIDAR, I'm using bunny ears on the phone here, that the perfect LIDAR is not just about the features. It's also about scalability, long-term cost, reliability, proving all of those things. And this production line will... Yes, let us allow it to show off what we've done all the time. You know, as I wanted to emphasize, over 20 years, it's not the first time we've done this. We've done this multiple times successfully. So I think we're in a good position to demonstrate that, but really that schedule is controlled by the individual OEM. There's no general steps except what's generally known that there's after ABC and, you know, so on samples to mass production or serial production.

Okay, well, I speak for myself, but I'm sure Glenn falls into this as well. You know, we've been around through a bunch of those cycles, Summit, so we understand it. I guess it was just, you know, on the production side, right? It's just kind of hard to fit where you are and how that folds into what, you know, actually goes into a finished, complete vehicle. Because, I mean, as I understand it, there's a, There's certainly the OEM qualification, and there's the intermediary. And I was just trying to make sure that I had a rough idea of how to think about it.

All right. So the thing is, if you think about an ASAMPLE product, obviously it's on an FPGA. To make an ASIC, the timelines are known. So those are all compounded in. And obviously, for us from a timeline standpoint, those milestones are probably – More important, because that's the biggest cost reduction right there, is get.asic. So some of the features that may be in an application processor, like Velocity, for our first generation product, putting it into our SOC, really reducing cost, we have a lot more flexibility for that. So as far as you're thinking about timelines for that, The first thing is, who's the tier one? Any company, I'm not gonna use micro regional example, any company that's gonna be providing, are they gonna be a tier two supplier, are they licensing to somebody else? Those are things that have to be figured out with the OEM, so the question's hard to answer because of that, but scaling of our technology, the timeline, whoever does it. If we have to do it or somebody else has to do it, those are the ones that have to be checked off first, and then decision on how to commercially do it, right? So they're two separate things, but the milestones are kind of set. Any design that would have an FPGA needs analog ASIC, digital ASIC, or SOC in our case, right? Or, you know, what level of application software is in there? You know, we do something very unique where we are, you know, endeavoring to put it all inside our SOC and not have to require a huge amount of computing. That's actually very important. And we have a line in sight to that. So just demonstrating that is the steps ahead. or it will be required for something like that.

Thank you so much for the... Okay. Well, thank you very much for the color. In an ultimate on-the-road test platform, how many sensors, the microvision type, would you suspect any one vehicle would need?

Let's talk about it in general. So you see a lot of numbers in TAM, there's software, there's lots of things mixed in. But if any of us are going to have these cars, they have to be affordable. So you can't have a massive amount of sensors. But they definitely want more than one, right? There's up to five sensors, one could imagine. But they're a combination of highway pilot versus traffic jam pilot versus parking. So depending on the feature. So recently I read that GM said that they have 30 models targeted for EV in, you know, four or five-year time frame, for example. How many of them are going to have these kind of advanced features? Those are the things that are going to become clear as any company moves through this. But there's just a handful of sensors required to get to those higher level of sensors. Now, if a car needs forward collision warning and active lane key, for example, our ladder sensor obviously has the wide field of view that's required, but has the added benefit of two other fields of view, so it gets resolution at range. So it's very unique in that sense. But if a rear warning is required, then there will be another one. So it's really dependent upon the kind of features that they're offering in those vehicles, on those target vehicles. So a general answer is a long-range LIDAR, which is the important one, which is going to do the real active safety. That's required. And then there's other potentially flash-based or some other kind of LIDAR or sensors required for lower-speed maneuvering. that work in concert or they work individually. But certainly it could be more than one, let's be honest, because getting as much awareness as possible of your surroundings in these vehicles would be very important for the first-generation product. So it's unclear at this point that all of us have the same marketing data that's available and it's got wide ranges of numbers in there, and they all account for different numbers of sensors required. Yeah, but in general, right, definitely more than one.

okay thank you summit thank thank you very much thanks for taking my questions pleasure good talking to you thanks guys our next question will come from ty boardman who's a private investor please go ahead yeah hi can you guys hear me okay congratulations on uh to you and the whole team on all the progress made over the last 14 months um I got a quick question for Steve, and then I got another question. Steve, last year you guys had to declare publicly in one of your SEC documents an estimate for the 2017 royalty customer. Do you have to do that again this year?

Yeah, yeah. You're talking about under ASC 606, the revenue values. Yeah. You project out what your... deferred revenue and contract liability recognition is going to be for the current year. And that's in our 10K that we filed back in March, 3.2 million, and it'll be in the queue when we file that.

Okay, great. I must have missed that. Sorry about that. Okay, thanks. Right, right. Got to read the footnotes. I got a question on the software. Actually, I have maybe two questions on the software. I mean, assuming you've spoke about the development platform, which I assume is a software platform. Is that is that a platform that is going to is used to collect, analyze, slice and dice the data that's received from the hardware? Or is it a software platform that actually allows the hardware to be configured, you different types of FOV or resolution or stuff like that, or is it both?

It's both. It's a development platform because, like, you know, we have our A sample. Anything you want to put on there, you want to have someplace that you can, you know, test it out, put it on. And, of course, our A sample's got its own path. Potentially, if anybody wants to do something unique that they want to test for themselves, we would not upset our path of our A sample because, you know, there's a group of people that potentially maybe wanting to look at that. So our hardware platform that I'm talking about, software hardware platform, we would do that. So it could be, it depends, I mean, it's flexibility, right? It gives our team the flexibility of where's the right place to provide what's needed, right? If anybody asks, any potential person interested in asking something unique, that flexibility would be there. Okay. But we certainly don't want to take somebody's request and upset the entire thing if there was more than one people there, right? So it gives our team more flexibility.

Right, right. Makes total sense. Makes total sense, right? Let's you be a little bit nimble. And then regarding the software comments you made today for the potential, you know, next generation, future generation. I mean, I guess I heard that the, I view that more as embedded software. That's sort of just completely integrated with the hardware and the software to do a bunch of work that would have to be done outside, meaning, you know, higher latency probably and maybe not as efficient. Is that what you're referring to there when you talk about that kind of software in the potential future version?

That is correct. So, you know, we've always focused ourselves on – well, first of all, we don't do anything meet-to-product, so I think, you know – Most of the investors, when they listen to other competing companies, everybody talks about quote-unquote software. So we're very specific. It's consistent with what we've always said. We make hardware. There's a lot of hardware, and anything would be at the edge computing level only. So there's companies out there that, of course, or mobility companies that have significant software suites. They're doing another level of automation, much higher, level five, high level four, or level four, let's say. That's a different market. The big market in TAM is in level three. That's where most of the cars are going to be. And having something with a better software that works with the ECU without requiring massive computing, like five or eight kilowatt water-cooled computer, that's not reasonable. Those are okay for development cars, moving platform development cars, but computers are very expensive, so you cannot imagine a real car ever having them. So if a LiDAR sensor at high enough resolution fast enough frame rate and can process lots of data, which our sensor can. Our sensor has somewhere between 1.5 to 2 gigabits per second, so massive pipeline of data. It processes that at edge. That allows you to somehow show the features validation independently. Then you can actually consider potentially for a primary sensor. Right now, nobody can say if any sensor will be primary or not. That software that I described today, it is actually a big important part of the story. Now, we have our first generation, I want to be clear. We call it first generation because it is a product, a piece of hardware. And I call it a future generation without giving a number because it's on the roadmap. It's showing you guys what the value is and every one of these things don't have to be turned over. If you want to really know what the value of it is, what the impact is, what disruption you've actually caused, you have to turn over and you have to show people what's possible with our technology and leverage in what it does. Now, if somebody had a path of that future cost of that full sensor suite or that system could be reduced, I mean, one could project that potentially adoption is easier because you have more affordable solutions. So it's important for us to actually be part of that conversation and let them know what we have actually achieved.

Sure. So ultimately, that you know, you're painting a picture, telling a story about how, you know, Microvision could provide that software. And ultimately, that is just really to reduce the cost of the overall system solution, it sounds like to me, and more efficient as well.

The way I look at it, let me just go a little bit higher for us, right? There's lots of library companies out there. Today's call, the last call I talked about, Consolidation is common sense. You're not going to have massive, two hands worth of LIDAR companies. Automotive, they will condense down. And everybody wants to know who's going to be at the final table. Is it going to be specs? Is it going to be scalability? You can imagine that all the valuation is saying whoever's going to win is going to win big. These revenues are multiple years out. Why are these valuations valid? Because people are making the bet, maybe they're making the bet, potentially, that who's gonna be at the final table, who's gonna win, right? So you wanna show the components of why you have something that projected out that far has a very serious chance of being a contender. And I was talking to David and Steve today, and we're just going back and talking about airbags. I think when airbags came out in the early days, same exact thing, but when they became regulations, There's only a handful of companies that were there in the world that were supplying all the AirBads. So yes, you want to show, and this is much more high-tech compared to AirBads as far as what this will be required to do. So it's in our best interest to make sure that people understand not just the high resolution and those specs. It's beyond that because that data stream, what do you do with it? You put it through software and you infer something and you can actually do something actionable. And there's lots of MIPSA testing and other videos on YouTube. I'll let you guys find that out. just go take a look at it, right, and they show you actual accident situations, how fast they happen. Just try to imagine a computer has to do it faster than a human that was driving that. These are interesting videos, and I love watching them because it kind of blows your mind. It kind of puts your perspective for me, why it's important, why, like, all the things that our team is driving for. I mean, some of the best people in LIDAR work at Microvision now. They've done some real good work. So that's the top-level answer I can give you. It's really about the consolidation, how we converge, and you can think about our software. It's a meaningful part because Ultimately, that overall system cost has to reduce.

Okay, great. No, thanks. Final question. Can you tell us how many entities have requested the ACE sample? Is that a fair question?

We're not going to comment on that.

Okay. All right. Thank you very much.

Thanks.

Our next question will come from Jim Groninger, who is a private investor. Please go ahead.

Thank you for taking the question. My question is how if a buyer or a partner has an automotive company as one of its members of its group and you want to work with them and then a second group comes in. I'm thinking of like Microsoft decides they want to go in the lighter business and they're going to work with GM. The second group could be Google and interest from Ford because they had somebody in the board that used to work there. Is your LIDAR going to be constricted because of that little slightly premium relationship with the one partner? Is it going to be restricted to the single automotive manufacturer, or will you still be able to do business with many more auto manufacturers?

Let's take that question generic, because I think it's very speculative, a lot of things you're asking about. But let's make it generic, and I'd like to provide an answer. I think, let's say there is OEM 1, OEM 2, right? I think you can just say general, some pockets of people that may be interested or they want to evaluate. The benefit we have is everything we have is homegrown. It's proprietary to us. We've grown this all from ourselves. We own it all. Somebody wants to acquire the company, they own it, right? Then it's, of course, unique to that one person, right? And our job is, you guys can imagine what it is right now. But in the case that if somebody, you know, multiple people want to partner, there's no restriction. It's all that we own. It's what value will be. There's no restriction one versus the other because, you know, when Takata sells the airbag, or probably not a good example because Takata's no longer around, but when a company sells an airbag to company OEM A and then they are not supportive of selling to B, it's about, you know, commercialization. They want scale globally. So I think, like, you know, in that specific case, think about it, right? We never talk about OEM general specifications specifically. of any other product vertical. Nobody talks about that. In automotive, some generic ones they made public. So, yeah, we can comment on that. But they keep some secret, right? So this is a unique industry. So I think think about it that it just, you know, you are the company. You have to roll it out, and it depends on what's the commercial options available there. But there's no restriction to us. We own everything.

But you could be making a restriction in who you ultimately decide to partner with. if they are the best buyer?

It's really hard to speculate on because, I mean, or comment on because it would be speculative is what anything would be, who knows. But, I mean, the fact is it's all ours. And, you know, you have to, you know, give them a compelling reason why this is going to be a paradigm shift for them. That's about all we can probably say. So I think, like, you know, you're trying to draw conclusions. I'm just saying it's impossible to, You can get to that point because there's various scenarios. Everybody wants the best economy at scale, obviously. Ultimately, what combination that may be or may not be, it's impossible to comment on. I'm trying to give you a very honest answer, actually. It's because I don't know. I don't have a crystal ball to say what people think, but Dan, if there's two companies, if it's our product, we can trade with anybody. Of course. We don't license anything from anybody. We own it all, right? We choose who we work with, right? We will sell to any pocket of customers that feels confident that this is what they want. Absolutely.

Okay. Great. Terrific job, by the way, for all of you. Appreciate it.

Tom Dean, thank you.

Our next question will come from Adam Jones, who is a private investor. Please go ahead.

Hey, Sumit. It looks like you're moving from successful development to marketing now, sales and marketing. And a lot of that was laid out in a recent job post for a brand marketing manager. I'm wondering about a couple of points in that. Maybe you can illuminate. One of those points was about bringing the brand and product story to life for customers, investors, employees. I'm wondering how you see that story, how you see it unfolding, and what kind of ROI you expect it to generate.

I think I'll take a step back and put it in perspective. We've received a fair amount of questions about this. If you think about it, we have lots of communication to be done. We have a new product, new market. it would behoove us to, you know, that's value to the shareholders, obviously, because you want to make sure that everybody has a fair understanding of the impact that we have created here. So I think, like, you know, one position there, I don't think it's that big of a deal because it helps us make sure that people know the right story. You know, it's not going to organically grow into it, so it's kind of important that that's done. you know, communicating with investors and investors have some things, right? I mean, you know, we have a small team here. We can't have, you know, we can't have, you know, I think some of you said like, hey, we want more, want to understand more about the technology. These kind of things, right? And it's not marketing in general. If you think about it, you know, I think one thing you said, that's what I'm saying, maybe I'll adjust. We're not pivoting to marketing. It's just part of a normal company building value. If you got something valuable, if you don't get the message out, how do you know that you have, you know, not that value on the table? And I don't know any other way, right? People need to understand what this is. And I can describe it as my enthusiasm, right? But it takes more than that to tell the real stories step by step to understand how to solve it. So I can talk about the concepts and what the business impact is, but it takes a lot more than that. And I think to share, we've gotten many questions from our retail investor base, wide range of them. And it was like, yeah, that'd be nice to do, except you can't have that with the resources we had so far. So I think that's a, I think it's just part of the value that you have to create when you have something valuable. And, you know, I think a role of that person to help you tell the story, I think it's beneficial for the company. Great. That's really my only question.

Yeah, I'll just add that. Go ahead, Steve. Sorry. Yeah. That role, you know, do corporate communications, company presentations, websites, work, things like that. So those are all the roles that that role is going to do.

And a challenge to have a tech company where your website updating takes too long, right? So we're a tech company, right? And we have to act like a tech company. And that's just aligning to what is expected.

But in terms of marketing or working with potential customers, I believe it was in the 10K you mentioned that that's the executive management team. Is that still the case? Are you guys making those in Roge directly?

Yes. This is more if there is Expo that we go to. There's a bunch of work to be done to have a floor show. Steven, I can't do that. I know that. But you have to have your sensor out there. If we end up going to CES or any Expo that we go to, just imagine. There's a bunch of work to be done to present it to the market. Some of you always are excited to come visit us and we always welcome you. So I want you to have a good experience because this is something new.

I guess so maybe I was just getting hung up a little bit on the semantics within that, you know, where it talks about customers or senior stakeholders and maybe some of the differentiations you make, you know, in terms of who does what within the realm of the business.

Yeah. Maybe so. Yeah, maybe so.

Okay. Congrats on reaching a successful milestone this April.

Thank you. Thank you.

You're welcome.

Our next question will come from Gio Rule, who's a private investor. Please go ahead. Gio, your line may be muted.

Sorry about that. Yeah, I was muted there. Good afternoon, gentlemen. Smith, I was looking at the pictures of the LiDAR unit yesterday, and the one with the cover off, there was a lot of talk. sort of among various shareholders that that's a very big ASIC. And we were wondering, is that something that was a proprietary design of MicroVisions, or did you go to someone else and use their part or partner with someone else in designing that? Can you give us a little bit of color about the internals of that thing?

Yeah, so it's got, you know, the analog, the screwed analogs, obviously, that drive all the analogs out of it, the MEMS and the lasers, and then there is our FPGA-based, you know, where our magic sauces, of course, are our family jewels in the digital, which we're turning to NASIC in the future, but it is an FPGA level. And there is a third board on top, which, you know, houses a processor, an external processor for, you know, again, it's a platform, right, because you want to have everything there, so if you are required to create something, you're not scrambling, so it's part of it. Is it getting used or not used? That's, you know, we're not going to comment on, right, because it It's unclear what long-term. As I said, our first generation product, our intention would be to not have that. That's a significant cost to have any kind of application processor with GPU and big CPU in there. Our bread and butter is we are very good at actually putting it into our SOC. That goes up to the DSP level, right? And that's why products that we make are great features, and yet they have competitive price points that we can do. Right, Gio? So think about that A sample, it's serving the purpose it's supposed to be, which is a developer platform, so we have multiple, just preparing for anything may or may not come, you have everything there so you can respond quickly and you don't have to keep developing new hardware. That's the best way to think about that.

Okay, that makes sense to me. Thank you.

I just want to add a little note, right? I mean, probably don't want to The reason why I wanted to put that picture out there, right, I think it kind of got a little annoyed. I don't know, I shouldn't get annoyed so easily. But people are saying that, you know, Microvision, they don't know what they're doing in hardware. They've never done hardware, what business they have. And that kind of just, you know, rubbed me the wrong way. And I'm pretty sure it rubbed a lot of people that work here the wrong way. So it's kind of important to show you guys, like, the guts of it. I mean, obviously, they don't want to talk a lot about what's inside. I mean, a lot of things were left covered. But to show, like, you know, there's real hardware, just like the housing top and bottom. Yeah, anybody can do that. There's actual stuff in there, right? So I hope, you know, I mean, it's just a brief look into it, right? But I think there's quite a lot in there.

You know me. I'm always up for talking about the tech, so.

Sure. Thank you.

Our next question will come from Jeff Porter, who's a private investor. Please go ahead.

Gentlemen. Good afternoon. Congratulations.

Thanks, Jeff. Thank you.

Following up on Gio's question, there appears to be, and I don't know if you can comment on it or not, but there appears to be an NVIDIA Jetson Xavier NX component. Can you comment on whether that is that and what it enables?

Can you comment on what it enables? I think you can see logos and stuff like that. Just think about that as an incidental choice. We could have another sound there if you wanted, right? We just picked one that made sense for what we're doing, but there's nothing more to really comment on that. So I think the point about the first generation I really want Jeff as a takeaway is it's our intention. So think about it. Let's say there were two products. One is going to be your first generation, which is going to have a very specific price target. The other one has got software, probably got more to it, more innovation. Therefore, it's going to have a different price point. So these things are like future things. But our current hardware has to start thinking through what the different options would be for that and to demonstrate that we talk about scalability, absolutely when you do things at the factory. But also your designs are scalable, that when somebody looks at it, that it's like it's not another 10-year invention. All the key ingredients of, you know, all ranges are very good, actually. Trust me on that. They think through multiple steps ahead of how they would wanna scale. That's what's impressive about them. So think about that as an incidental choice right now. We can show what we want, but if our business benefit is to put it inside our SOC, of course we're gonna do that. We can provide a feature at the lowest cost. So I wanna be clear. It's incidental, that's how you think about it, because it has to give us an advantage. If everybody's got the same chip, of course that's gonna limit some things, but there's some features that people wanna put in that are not required. Right, and this is public data. So, you know, somebody could do active lane key, for example. That's a pretty big important feature. It takes priority over anything else for lots of folks. This is, you know, public comments some people made. So, again, think about that chip as an incidental choice that we made, and we could use somebody else's chip if they liked. We're agnostic to it, is what I want to say.

Okay, okay. One additional question, and this relates more to display data. Can you talk about the current state of direct green laser diodes as opposed to, say, 10, 20 years ago when the company was founded?

I think green lasers, fortunately, there's more than one partner in the world that has green lasers now. I think they're not supply limited. They all have their own IP. They're mature processes. I think it's more demand limited, so I think as the market starts opening up, green laser is not going to stop any kind of rollout of any kind of artifacted display or any products that we have, whether display only or AR. I think the green laser diodes are much more common now. Not common, there's only a handful of them, but they're not ARC anymore.

Okay, so they're more prevalent now than they were 10, 20 years ago.

Oh, yeah, absolutely. Yep. I mean, if you think about, you know, our attractive display, I think, you know, we worked on that for a long time. Obviously, you know, that's part of the supply chain, things that we had to open up, and we had, you know, worked on that, and, you know, pretty confident that that would not have had any impact.

Okay. All right, that's all I have, gentlemen. Congratulations again.

Thank you so much, Jeff.

Thank you. In addition to some of the questions today. We also received quite a few questions were submitted. We've run over on time. I've just gone through the list of them and I think we hit most of the stuff that was covered in the questions that were asked today. So I think in the interest of time and not being redundant on questions we've already answered, maybe just go to your closing comment.

So thank everybody for joining. I think it is a good time. I think we really have to think about Continue to build value while you explore anything. You can do those two things simultaneously. And I definitely want to emphasize that strategic alternatives is something we focus on very seriously, but we also look at every opportunity to increase shareholder value. And we will continue to be prudent, as Steve described, how we're moving forward, and focus on the areas that enrich the value of the company the most. So thanks for joining. I really appreciate all the effort and the energy and the emotion everybody's putting in. Thank you for that.

Conference has now concluded. Thank you for attending today's presentation.