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?