MicroVision, Inc.

Good afternoon and welcome to the Microvision First Quarter 2024 Financial and Operating Results Conference call. At this time, all participants are in a listen-only mode. At the end of today's presentation, there will be an opportunity to ask questions via a chat line. Investors can submit their questions within the meeting webcast by typing them into the Q&A button on the left side of your viewing screen. Analysts who publish research may ask questions on the phone lines. For analysts to ask a question on the phone line, please press the star key followed by 1. Please note, this event is being recorded. I would now like to turn the conference over to Ms. Drew Markham. Please go ahead.

Thank you. I'm pleased to be here today with 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, including but not limited to statements regarding our customer and partner engagement, market landscape, opportunity, and program volume, product development and performance, comparisons to our competitors, product sales and future demand, business and strategic opportunities, projections of future operations and financial results, availability of funds, as well as statements containing words like intends, believe, expect, plan, and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the 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 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 8-K, 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. The conference call will be available for audio replay on the investor relations section of our website. Now, I'd like to turn the call over to our CEO, Sumit Sharma. Sumit.

Thank you, Drew, and welcome, everyone, to this review of our first quarter 2024 results. Let me start off by updating you on our progress on multiple RFQs in flight. which remain our primary focus to get automotive partnerships in place while adjusting to the OEM realities. Finally, I will provide an update on the broader view we are working on for partnerships and licensing. We believe that the best long-term opportunity for our technology in our company lies with automotive OEMs focusing on ADAS features in passenger vehicles. This segment will have the highest demand in millions of units and is spread across several OEMs in North America and Germany. As I shared last time, to win and dominate in this space, a company needs, first, LIDAR cost to scale in the low hundreds of dollars, second, smallest sensor size, third, highest resolution and range with lowest power, fourth, sensor integrated perception software, and finally, a company operates as a financially stable tier one LIDAR supplier. I believe with conviction that our technology offering with Maven, Movia, and Perception Software are aligned with OEM needs for existing RFQs and newly expected RFQs in 2024 that we are starting early engagement on. I understand the frustration and anxiety of our shareholders on the speed with which we can provide OEM validation of our technology. Context is important. There's a big demand opportunity in this segment, but a wide range of challenges to meet OEM commercial requirements for successful passenger vehicle nomination. All OEMs evaluate our technology and how it fits into their individual specifications. In all cases, we need to exceed their technical requirements. Our team's experience and effectiveness is also a strength that OEM often compliment us on. They find our cost structures compelling, given that we talk about wafer technology instead of rotating prisms and mechanical galvo steering. In each RFQ, OEMs require significant customization of hardware, firmware, and perception software. Their timelines for customization and qualification are long and would require several hundred engineers for several years. Commercially, we would want them to cover the cost of this customization but they expect these large costs to be amortized over a large volume of units to be shipped over five to seven years and be borne by our investors and the risk of final volumes not being realized while flat volume pricing is provided year after year. Any potential project we could take on would limit our ability to part of any other potential feature nominations. Some OEMs want to see our manufacturing strategy proposals to commit to factories in Asia and North America for volumes that would not justify two factory locations. Some OEMs explicitly want a factory in the U.S. To be clear, they would not accept a NAFTA country but only a U.S. contract manufacturing factory while expecting cost structures that are only possible from Asia. Others will only review proposals from Asia while a small group wants to see a diversified operation strategy with multiple continents. Again, the expectation is that we will fund this with our investors. All OEMs want varying levels of perception features, some running within the LIDAR, some running in their ECU, some claiming they need no perception but want our source code. Some OEMs want the LIDAR in roofline, Others want them integrated in headlamp, and some others are only looking at behind windshield integration. They want our core LIDAR to be flexible enough to fit into all their locations. They are aware of the tradeoffs in each location, but will require updates to the core hardware. Some OEMs only want to work with us as a LIDAR Tier 1 with contract manufacturing agreements in place. Others prefer a traditional Tier 1 with a diversified product portfolio and profitability. with us in a partnership with them, and a smaller group wants to see our Tier 2 strategy, even if the volumes do not justify any licensing model. OEMs do work very closely with us and are willing to compromise their needs, but in general, there's a wide area we need to navigate on each RFQ. In addition, we often see OEMs that have nominated other LiDAR companies in previous years actively working to evaluate us as an alternative even though other projects have not gone into production. Additionally, other LiDAR companies that may have been awarded nominations for 30 to 50,000 sensors and instead represented they were fleet-wide adoptions in their public comments on order books complicate market communication. But that is out of our control and I expect public markets to take care of that. I believe this is context for our shareholders to understand why providing certainty on timing on any deal is hard to predict from micro vision. With OEM startup production timelines moving out later in this decade and aligning to regulations that will be rolling out while the global product strategies are changing by region and power trains, there are just too many variables that we face as we work with them to secure nominations. But let's not forget that these are the biggest opportunities in automotive technology space. with multiple OEMs and multiple regions with millions of units expected in the future. This is the best alignment to our technology and products. Getting through this complicated set of variables is first. To find our first partnerships remains our primary focus and I believe represents the best way possible to build shareholder value. Based on vast experiences with April 2017 OEM, we know that we must only agree to contract terms to support the long-term health of the company as well as the interest of our shareholders.