MicroVision, Inc.

Good day and welcome to the Microvision Second Quarter 2022 Financial and Operating Results Conference Call. If you need assistance, please signal a conference specialist by pressing star then zero. 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. Investors can submit their questions within the meeting webcast by typing them into the Q&A button on the right side of your viewing screen. Analysts who public publish research, may ask questions on the phone line. For analysts to ask a question on the phone line, please press star then one. Please note this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead.

Thank you, Matt. I'm pleased to be joined today by our CEO, Sumit Sharma, and our CFO, Anubhav Verma. Following their prepared remarks, we will open the call to questions. Please note that some of the information you'll hear today will include forward-looking statements such as, but not limited to, statements regarding our product development, testing, and performance, comparisons to our competitors, market opportunity, potential product sales and future demand, business and strategic opportunities, customer and partner engagement, projections of future operations and financial results, availability of funds, as well as statements containing words like potential, believe, expect, plans, and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call and, except as required by law, we undertake no obligation to update this information. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as for all the financial data presented on this call, please refer to the information included in our press release and in our Form 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. This conference call will be available for auto replay on the investor relations section of our website at www.microvision.com. Now, I'd like to turn the call over to Sumit Sharma. Sumit?

Thank you, Drew. Good afternoon, everyone, and welcome to our update on progress made during Q2 and into July. I would like to cover this in three areas. First, I will discuss all that we accomplished through the second quarter and into July. Second, an update on how our progress is being received by OEMs and tier ones. And finally, I will talk about what our 2023 may look like. Let's dive right in. This quarter was one of the most eventful in our company's history. Our team completed our Maven Dynamic Range LiDAR product, delivered automated line, pilot line, that would support serial production in the future and supported OEM engagements. In our design, not only were we able to successfully include all of our target features, but we were also able to incorporate additional enhanced features tailored to the particular needs of OEM. This last point is an important one, as it allows OEMs to tailor our base product for their specific use case. Furthermore, This level of flexibility was previously viewed by OEMs as unachievable based on the limitations of competitor solutions. This is a big win for Microvision. The hard work of our team has put the company in a great place as our potential customer engagements start heating up. Our dynamic range LiDAR, Maven DR, is a game changer. It allows high resolution at all ranges and delivers this at low latency. Respective customers have given us feedback that this represents significantly higher performance than the current LIDAR solutions OEMs have been working with. I will elaborate a bit more about this later in my remarks. Our team also achieved success in completing automation for our pilot production line. This paved the way for supporting serial production in the future. This is an important achievement. While some agreements for LiDAR hardware have been announced by other manufacturers over the past two to four years, they are still not arrived in market. This is because OEMs are being forced to choose between low quality products that can be produced at scale, serial production, or adequate quantity, but in low volumes. With our automation and pilot line being set up for 2023, OEMs are providing very positive feedback on our strategy to position Microvision as a leader, not only on design, but also our capability to deliver serial production orders in the future. With these important points in place, our team remains on track to meet our second half objectives of achieving Class 1 certification and starting sample sales by Q4. This again puts us in line with OEM expectations on timing. We have a product that exceeds OEM expectations combined with the best company pedigree to complete individual OEM customizations and a solid history of demonstrated reliability. We remain on track to complete our fifth generation A6 and have automation that will go from pilot line to serial production. The second area I would like to provide an update on is the feedback we're receiving from OEMs. Throughout the last quarter, we have continued to invest time and resources in helping OEMs understand the strengths of our technology and how it can be customized to meet their individual program needs. These OEMs have indicated they are pleased with the maturity and capability of our solution. We have received positive feedback, including a comment that Maven is, and I quote, the best LiDAR product they have seen to date. As anticipated, OEMs are responding to the quality of the point cloud data that we provide and they witness during live demos. They see the opportunity it provides to build new high-speed safety features on their domain controllers. They're also very interested in our future software solution that could seamlessly enable their L3 features. OEMs are also complementing the low profile design that enables more flexible deployment options, such as behind the windshield, behind the grill, or beyond. This speaks to our business model and strategy of partnering with OEMs, not just selling to them. Looking ahead to the back half of 2022, we are on track to achieve Class One certification. Given our 20 plus years of expertise developing products centered on laser beam scanning technology, The Class 1 certification process is not new to Microvision Team. We have navigated this process before. We developed our LiDAR sensor with safety in mind, incorporating our proprietary technologies like virtual protective housing that ensure safe operation to Class 1 standards. For the third quarter, we are focused on meeting the requirements of OEMs and Tier 1s to support sample sales. We believe this objective is well in hand. We've also started sample sales in Q3 to OEMs and Tier 1s for Q4 deliveries. Our engineering pilot line in Redmond will support sales to OEMs and Tier 1s. I am excited about what Maven DR means for our future. Once implemented in serial production with a strong intellectual property supporting it, I expect this product to be the centerpiece of ADAS L3 and L2 solutions for more than a decade. I am very excited about where we are and how we're positioned for the future. As we move into 2023, we will continue to invest in product execution and innovation. We intend to demonstrate a drive-by-wire demo system based on our LiDAR hardware and our high-speed highway pilot ADAS software. We expect this will fully integrate up to two microvision LiDAR sensors, radar, camera, and ultrasonics on the Microvision Edge computing platform together with our proprietary software running on our demo car. Finally, I would like to summarize how we are positioning Microvision as a high-tech, high-growth company. LiDAR technology will be the centerpiece sensor required to enable ADAS safety and autonomous driving for decades to come. The limitations of camera module and radar technologies is apparent in current products, and a mass adoption of LiDAR is expected. With my meetings with OEMs, I feel confident in this future. We are far ahead of the competition with our LiDAR hardware, as seen in the videos we're publishing. With the help of our advanced LiDAR technology, we expect to expand our software offerings to enable ADAS safety and autonomous driving. Our 2023 demonstrations will expand our company to a full software and hardware solutions company. Before I invite Anubhav to review the second quarter results and projections, I want to acknowledge and thank the Microvision team for their hard work. We continue to set and achieve aggressive objectives on the path towards OEM partnerships. I'm proud of the progress we continue to make, and I'm excited about what is next in 2022 and 2023. Thank you. Over to you, Anubhav.

Thanks, Sumit. As Sumit discussed earlier, we are really pleased with what we accomplished in the second quarter of 2022. The launch of Maven brings together our product that has short, medium, and long-range sensors all combined into one to provide a dynamic view of the road ahead. The 905 nanometer LiDAR optimizes power output while ensuring safety at all times. The low latency point cloud 30 yards enables the OEM ADAS systems to make split second decisions and take actions at high speeds. We believe that this product offers OEMs the following two key advantages. Number one, with the improved sound profile Microvision LiDAR enables flexible deployment options for OEMs to place it inside the cabin behind the windshield. Second, built with materials known to OEM supply chains, Microvision hardware is scalable, sourceable, and inevitably has a lower cost structure. We are very excited about the meetings and the positive feedback received for the demo cars fitted with our product. Additionally, we completed testing for some more complicated highway driving scenarios as well. We remain on track to achieve Class 1 certification and also expanded our R&D and production infrastructure as we ramp up our pilot production lines to start some sample sales in the second half of this year as we outlined. Now before I jump into the next section to discuss the financial performance of the company, I would like to recap that our go-to-market strategy remains the same. We continue to market our product primarily to the OEMs to suit their needs and price points and work with them. Using the estimated number of cars to be produced through 2030, we believe the revenue opportunity for Microvision could still be between two to four billion with a corresponding cumulative EBITDA profile of one to two billion once we're able to secure the series production partnerships with the tier ones and OEMs for our sensor units to be included in their feeds. Now let's discuss the current quarterly performance update. We recognized 314,000 in royalty revenue from Microsoft in the second quarter of 2022. As a reminder, this revenue is attributable to the contract executed in April 2017 with Microsoft for using our technology in their AR display product. This recognition of revenue is directly tied to the number of units produced by Microsoft. Please note that no cash was received for this revenue in 2022 as we received an upfront payment of 10 million at the contract signing in 2017. As of June 30, 2022, we have an unapplied 4.6 million left on the contract liability. Based on Q2 shipments provided by Microsoft, we have reduced our expectations for the remainder of the year. As a result, we now expect to recognize approximately 1.5 million in revenue for the year 2022 against this contract liability with Microsoft. To reiterate, please note that the lower revenue recognized from Microsoft in second quarter has no impact on our cash position or operations as all of the cash related to the revenue payment was received upfront in 2017. Now coming back to automotive LIDAR revenue. As we discussed, we plan to sell a limited number of LiDAR sensors for strategic sales to OEMs and Tier 1s during the second half of this year. At the moment, we do not expect significant revenue from the sale of these LiDAR sensors. In terms of expenses, R&D expenses totaled $7.7 million in the second quarter compared to $7.4 million in the same period last year. Backing out the non-cash stock-based compensation expense of $2.02 million and $2.02 million respectively, cash R&D expense were $5.7 million in the second quarter compared to $5.2 million in the second quarter of last year. 2022 R&D expenses included lower stock-based compensation as compared to last year due to higher stock prices last year. The higher cash R&D expense is driven by higher salary and benefits due to increased headcount, inflation-based salary adjustments for all non-executive employees in the U.S., and higher non-direct labor expenses. SG&A expends total $6.3 million in the second quarter this year as compared to $8.4 million in the same period last year. Backing out the non-cash stock-based compensation expense of $2.1 million and $5.7 million respectively, cash SG&A expense was $4.2 million in this quarter compared to $2.7 million last year. The increase was primarily due to higher headcount and higher business insurance costs due to increased market gap as compared to last year. We continue to invest and accelerate our business development and marketing efforts. As we march towards achieving the objectives we laid out for 2022, we continue to use stock-based performance awards to incentivize our employees. An important component as we invest in our talent pipeline and motivate our employees to share the upside in the growth of the company. Cash used in operating activities for the second quarter of 2022 was 9.7 million. We are very pleased with this number as it came right along our expectations as I outlined last quarter. Sequentially, our cash burn was reduced by 11% backed by strong financial discipline. Amid volatile global macroeconomic conditions, We believe our cash burn remains one of the lowest in the industry as we steadily build the business. CapEx in the second quarter of 2022 was 0.2 million, which is sequentially 72% down. Q1 was higher as it was primarily driven by one-time investments required in retrofitting our test cars to support track testing of our LiDAR sensor and development of the pilot production line. We expect cash used in operating activities for the second half of 2022 to be approximately between 18 and 20 million as we continue to exercise the discipline of prudent investing and using non-cash stock-based compensation to incentivize employees. We do not expect any significant capex in second half of 2022. We expect that tenant improvements for our new locations in Redmond will primarily be financed by incentives to leave our existing premises. While there may be some timing differences between the amount spent and cash received, we do not expect this to be a significant cash burden of the company. We finished the quarter with cash and cash equivalents of 93 million, including investment securities, which gives us a sufficient liquidity position at the end of the quarter. As interest rates have picked up in the year-to-date period, we have shifted our liquidity position to be in the form of one-year treasury bills to capture some yield from the market. Hence, the investment securities with maturities within 12 months have gone from 33 million at the end of December 2021 to 56 million at the end of June 2022. As a company, we have always sought to be very disciplined about using cash to execute our strategic objectives. Based on the current 2022 outlook, our current cash burn rate, and our current liquidity, I feel we are very well positioned compared to our peers whose burn rate ranges three to five times our cash burn, especially given the macroeconomic environments. Now let me give you an update on our ATM facility. The company remains very strategic and focused on shareholder value creation. In 2021, the ATM program was mainly used in the first half of the year when the company raised 68 million of net proceeds, issuing 4 million shares, taking advantage of the strong equity markets back then and strengthening the balance sheet. During second half of 2021, as well as the first half of 2022, There were no sales under the ATM program as the broader LIDAR markets, including most of our peers, experienced weakness in stock prices. We expect to use this ATM facility as a flexible tool to fund our growth plans, especially a drive-by wire that we are planning in 2023. Given our current liquidity levels, we believe that we are well-positioned to invest in the growth initiative that Sumit and I have talked about. Let me summarize the themes from this business call for our investors. Number one, we're confident in our technology and look forward to further testing to help us work towards commercialization of our solution and continued demonstration to OEMs and tier ones so that they may see the superior capabilities and benefits of the Microvision hardware and software. Secondly, We're very excited about the business model that we are working towards. The strategic partnerships that we're looking to execute could help us build a one to two billion cumulative EBITDA business through 2030 with a high growth profile. And lastly, our current liquidity position and 2022 cash-borne outlook positions as well would compare to our peers. With this, I would like to open the line for questions.

Thank you, Anubhav. 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 right side of your viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask questions on the phone line, please press star then 1. Our first question will come from Andre Shepard with Cantor Fitzgerald. Please go ahead.

Hi, good afternoon. Can you guys hear me okay?

Yes, Andres, we can.

Wonderful. Thank you. Good afternoon and congratulations on all of the accomplishments this past quarter. I'd like to maybe start with a couple of macro questions. Given the rising interest rate environment, what impact, if any, do you anticipate that to have on the business?

So let me take this question, Andres. So obviously at this time, if only anything, it gives us an extra yield on some of the investment securities that we have shifted our liquidity position to. So we are fairly confident based on our cash burn rates and our balance sheet strength, we are very well positioned to navigate the next four to six quarters.

Got it. Okay, that's very helpful. And maybe following up, with the continuous supply shortages and bottlenecks. Do you anticipate that to have any sort of impact?

Not right now, because obviously we do not have any direct impact from some of these supply chain shortages, because obviously we feel confident of where we are with our engagements with the OEMs, and hence that's why we do not expect any effects from these supply chains.

Got it, that's great to hear. And maybe in regards to the ATM program, would you be able to give us any kind of sense on timing or how do you anticipate to use it? As you know, the market to raise capital right now is not the best, and so I'm just wondering any thoughts around that, anything that you could share?

Yeah, so like I said, I think ATM programs just offer us flexibility. Given where we are, and maybe I can just tie it up with some of the numbers here, right? So approximately second quarter was 9.7 million use in cash in operating activities. And given we have 93 million, so obviously this gives us a very comfortable position. We use ATM programs as more of a tool or a flexibility which is offered to us compared to some of the peers who raised obviously significant amounts of capital during their IPOs. So we believe this tool to only be used strategically as and when the markets offers opportunity. And I think that's sort of what is illustrated in the last 12 months. We didn't use this ATM facility because obviously we didn't have the strategic need to do this. So hopefully that sort of gives you a perspective of how review the ATM program and where the balance sheet stands today for the company.

Yeah, no, absolutely. That's very insightful. Thank you. And about maybe one last question for me is, you know, I think it's great. You're starting to sell the strategic samples this year is the expectation for revenues to still begin ramping up in, in 2024 or, Or is there maybe an opportunity to ramp those up a little bit sooner, maybe in 2023, maybe even pursuing some non-automotive verticals? Thank you.

Yeah, let me ask you this one.

Go ahead.

Yeah. So, Andres, I think we talked about this before. I think we purchased this pilot line, you know, and that's going to turn into a student production line. Our intention, of course, is once we have these sample sales this year, starting next year, of course, we're going to fulfill the needs for any potential OEM or tier one development requirements. But also since we're going to have extra capacity on the line, you know, we are looking at different options to sell devices in other industrial and other markets. And we are developing those channels and pipelines now as you speak. Got it. Thank you very much.

That's all I have. Congrats again on the quarter. I'll pass it on. Thank you.

Thanks. I will now turn the call back to Anubhav Verma to read questions submitted through the webcast. Thank you.

Thanks, Matt. So I guess we have another question about what are the normal levels of cash you feel are necessary to support the business and plans for the ATM? So probably I'm just going to reiterate some of the points. We used $9.7 million in cash from operating activities, which was a sequential 11% decline from Q1. Again, driven by continued financial discipline. With around $93 million of cash and cash equivalents, we feel comfortable given our burn rate is one of the lowest in the industry, with our competitors having three to five times our annual burn rate. We pride ourselves in being a traditional public company with over two decades of operating in conservative public markets that have successfully navigated quite a few economic cycles, unlike our peers. And, you know, addressing the second part of the question about the ATM, our SPAC peers raise significant amounts of capital at their respective IPOs, and our remaining $70 million ATM program gives us ample flexibility to raise capital as and when as and when needed in response to all our publicly listed peers. The company has not executed in the past one year as broader weakness in the LIDAR sectors as all other SPAC companies in the LIDAR sector have come down significantly in their market valuation for their all-time IPO highs. The next question is, how do you think Microsoft Microvision is going to be impacted by Chipspell? Microvision works on a fabless model. Hence, we're not directly affected by the chip spill as the chip spill is fundamentally focused towards fabs and other chip providers. However, if chip spill does get passed in the house and signed into a law, it will certainly boost the semiconductor chip production and reduce the stress in the supply chain. I think this should bode well for all the players in the automotive ecosystem, including OEMs, tier ones, and us. Submit this one for you. You said that you're on track to achieve class one certification in the third quarter. Is class one certification needed to use LIDAR in public or with potential customers?

This is a good question. So let me just go back to my prepared remarks, the comments, and just elaborate a little bit from there. Uh, we have a 20 plus year history in our technology. You know, our, our team builds class and safety into every product from the ground up. So that's actually a very, very important part of it. And, you know, I'm actually very proud of our culture on, you know, making sure from the ground up things are built, right. Uh, we've been doing demos for customers and all the units we demonstrate our class one safe, meaning that the features are implemented. Since we're in a demo phase, a micro region representative, our VP of BD or myself, are always present there. In most cases, both of us are there. I can say with confidence that our team has done a great job of implementing our virtual protective housing for Class 1. The demos are going incredibly well, actually, and OEMs require that the demo unit is fully conforming to Class 1 standards, and the company representatives are present when we go to these demos. That's part of a foundational piece you have to build out. And I think the question is, what is the classroom certification in Q3? Is that classroom certification needed to use the LIDAR in public, right? So as I just explained, for demo, that's the gap that they've created, right? Or essentially, that's what the regulation allows. When you think about full certification, as moved to sales, that's when you have to actually get the full certification done. You know, FDA approval, you know, go outside third party, you know, whatever other testing you have to do. But for that to happen, you have to have all your features locked in, everything is into the RTL, everything is locked down, and then you submit the final sample that customers will buy. Once we start selling it, it has to have full conformance. Whereas, you know, OEMs and tier ones are very, very comfortable taking those samples. They need it to be class one certified. Because at that point, there's no company representative and they will do their other confidential testing that they will not discuss with us, of course. So I think like to sell a product, you certainly have to have full certification. But to demo product, you have to have the full feature implemented, operating in full safe mode with the company representative available. And this is not just new to us. Every company that's done any kind of deal in LiDAR or anything with a 905 nanometer laser or any kind of laser in the history of time has to go through the same process. So we're very comfortable with this process and I think we have this objective well in hand.

Thanks, Sumit. Now, the next few questions, I think, are all about point clouds. I'm going to summarize them. So let's see. I think, is the point cloud quality posted most recently on the website coming straight from the LIDAR, or is it simulated?

This is a good question. The point cloud that we just released recently, which was about the Nuremberg Drive, it is directly from the LIDAR. It is streaming. There's no post-processing to make it more beautiful. There is no simulated data overlaid. It is just the exact drive. And if you think about if a customer was sitting and witnessing that, that's what they saw. So this is exactly what a point cloud does. And that's why I wanted to actually post that, you know, there's some little bugs here and there that our team is still fixing, but I still wanted them to just post exactly what's coming out because it is very, very impressive. And it, you know, kind of proof is in the pudding. It's easier to see, even for people with no background in, you know, DSP or high-end mathematics, to really see and you can start understanding how much more advanced we are than anybody else. I think, you know, for like an example that I was just talking about recently with somebody, if you think about detection of cyclists, this comes up quite often in pedestrian safety. I think in the video, it just so happened that there were some cyclists on the road in front of us, and you could clearly see, you can see them pedaling, you can see all the details, You can imagine how easy it becomes to segment that, cluster that, and actually identify things and tag them, room drivable, not drivable. So it's actually very, very important to see how well it runs. And this is not even the best it will be. Our team is, of course, continuing to find bugs and fixing it. And a lot of the bugs are based on environmental conditions, based on the device. They learn as they test more. They learn more. And they keep perfecting it to the point that it's pretty darn good. I think the comment, I think what this is also talking about is like if I can talk about versus others. So the reason I'm proud of this is because this is raw. I mean, there's nothing, no post-processing we're doing. What I've seen so far from other folks, of course, is what we believe, and it's pretty clear by just looking at the point clouds, that it's heavily post-processed. So they look beautiful, but the fact that there's no noise in it, the fact that they are, there's certain characteristics that you can look in these data streams, you can tell that it's coming from a simulated point cloud. And I will let you guys go figure out, you know, from everybody's website, who's posting what. But when you see our point cloud, that's what a real point cloud of a high density, high resolution, low latency would look like. And that's that, you know, the resolution that our customers are going to see. And that's the latency. And, you know, we are doing that. There's no playing games with different configurations. Ours is pure. That's the best way I can describe it.

Thanks, Sumit. So I think the next few questions, again, let me summarize it. I think broadly, how is Maven different from the prior product? And is there going to be a new data sheet with new specs?

Absolutely. Actually, if you go back to September 2021, when we were in the Munich IAO show, I think we announced four products. There were the three products that were the StaticView LiDAR, And of course the, the, the, which is called the Maven now, which is dynamic view back then is had much higher specifications. And we talked about, it gave us the flexibility to address different customer needs, but we always believe that Maven is going to take a lot more attention from everybody. And that's exactly what's happened. So in case that there is a customer that wants just a static view LIDAR, we provide that. In those specific case to differentiate the product, the resolution, is listed in the data sheet, as you know, or the summarized data sheet that we have there. The performance in a single field of view is okay, but all three of them are not included. And it's a significant difference as far as the value, one versus the other. If somebody wants just a long-range LiDAR, it is, let's call it our A1 sample, which is what we talked about last year, which is the black body. And the new product, which is the Maven product, is the white cover, as you see. And that has the resolution that we were announced last year. So these are two separate bodies of, you know, all the components, almost all the components are exactly the same. But as you can imagine, the housing and some other features inside are slightly different that allows us to give the higher resolution in all three fields of view in a single product with velocity. Whereas a simplified product, if somebody wants, we can make the A1 sample for them as well. And they could, you know, experiment with that. So this gives us all the flexibility to address all the needs that we're hearing. And, of course, we have a flexible platform, so if a customer wants to take any one of these products and wants to see some slight deviation in a common development kind of phase, which to specify what a common development is, it's the same hardware, but instead of, for example, if they wanted to see low resolution on the corners of the field but much higher in the middle, they wanted some sort of asymmetry in our smart pulsing. In some cases, they want lower power in one region, higher in the other. Whatever they want, we can do that in firmware rather than having to redesign an entire product. And this, of course, is exciting to them where they don't have to wait years for a sample and live with the risk that comes with it. They can, in a common development environment, experiment with the product with us, working with us directly, and then make their decision. So, you know, you just got to be very, very, very flexible for the customer, you know, put their needs first, and we're listening to what they want. And I'm pretty happy to say we're in a really, really good place. So I think that's the key differences, and all four of them give us the same flexibility of working with anybody in the environment they want.

Thank you, Sumit. The next question is about silicon. How does Microvision view chip platforms like Qualcomm and NVIDIA for its design and current architecture?

Okay, so our current design, think about the LiDAR, our ASIC are inside our LiDAR. The ASICs have to be co-located within the hardware. Because, you know, we have some very tight analog signals going back and forth, high speed, high density. So it's very important for our team to control that. So those ASIC cannot be put far away into another box. Our digital ASIC, which of course is the family jewels, again, has to be co-located because everything inside the device that our engineers designed for so many years, they have to have a very tight control of it. And the foundational piece of all of this is class one laser safety. That cannot be moved away into software. So we do this in real-time logic. put it into an FPGA, lock it in, and we can go to an ASIC. You know, some other competitors, you know, they don't have real-time logic. They do it in a NVIDIA platform or Qualcomm, and they have all sorts of other software running that are extremely high power. So when we go to the ASIC with our features running fully pipeline, we have the shot of being the lowest power device, and we've discussed this in several meetings that I've been in, and they totally acknowledge immediately that, yeah, absolutely, the path you're taking, it is going to be the lowest power, and they're actually pretty amazed that all these features are running so well at such high speeds, and that we actually have a history of making these ASICs. This will be a fifth generation ASIC, as you can imagine. So I think if you think about Qualcomm and NVIDIA, those are application processors, meaning that that could be in a second box, which is a domain controller, where a customer could be taking a lot of data and running their software. But inside our design, in the final design that the LiDAR product will be when it goes to server production in the future, That product by itself will only require the ASIC to run, and it could output the point cloud, the header file will have all the objects identified, drivable, not drivable, and it comes to the customer of, you know, if they want us to stream the entire point cloud or just the header file or whatever version of it, but we will not require an application processor inside. And this gives us a big cost advantage because those processors are not cheap. So effectively, when we give a target of pricing and margins in the model that Anubhav has built out, we've sort of baked that in, and we're very confident where we are right now.

Thanks, Amit. The next question is, will microvisions and customers be Tier 1s? Let me take this one. I think our go-to-market strategy remains solid and there has been no changes to it. While we're focused on both OEMs and Tier 1s, we are demonstrating our products and capabilities directly to OEMs. Like I've always maintained, For the series productions, OEMs need automotive-grade optoelectronic devices that will have to be supplied by Tier 1s. The next question is, I think, again, a form of question that Andres referred to, so let me reframe the question. Is Microvision still focused on automotive LiDAR only? will AR, VR market, or other LiDAR applications be considered for expansion? As we stated before, we truly believe we have an industry-leading LiDAR sensor for the automotive LiDAR applications. Hence, we continue to focus our efforts only on automotive LiDAR, given our current cash burn and balance sheet strength. We believe that automotive LiDAR still provides for the largest total addressable market for LiDAR applications and has the appropriate size for us as a company to become a multi-billion dollar business once a series production starts. Now, regarding AR and VR applications, MicroVision's technology that was used in Microsoft HoloLens already demonstrates that we are far ahead in the AR VR space from a technology standpoint. We stand ready to help our customers if they were to approach us for this technology. Additionally, we also believe industrial LiDAR applications will probably be another very attractive market opportunity to go after additional revenue and accelerate growth on top of the automotive LiDAR applications. Next question is I guess again on cash burn. Which areas does Microvision intend to spend their cash on and what are the extra capabilities that the company is looking to gain? I'll take this one as well, Sumit. We continue to expand our engineering team as we work with all automotive OEMs to demonstrate our breadth and depth of our technology. We recently expanded R&D and production infrastructure with the delivery of our automated pilot line and continued construction of our new testing and lab facilities. We intend to expand our team to demonstrate our software capabilities that will enable our drive-by-wire with our LiDAR solutions in 2023. These are primarily the three areas where we would be spending our cash on in the next few quarters to come. I guess we're out of time. We appreciate your participation in our second quarter earnings call and your continued support of Microvision. Thank you.

Thank you. This concludes today's conference. All parties may disconnect and have a great day.