View, Inc.

Good day and thank you for standing by. Welcome to the VIEWS first quarter 2023 earnings conference call. At this time, participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to Samuel Meehan, Head of Investor Relations. Have a great day.

Good afternoon, everyone, and welcome to VIEW's first quarter 2023 earnings call. I'm Samuel Meehan, Head of Investor Relations at VIEW. I'm here with Dr. Raul Mopori, our CEO, and Amy Reeves, our CFO. Before we begin, I'd like to remind you that after market closed today, VUE issued a press release announcing its first quarter 2023 financial results. You may access this press release in the investor relations section of VUE.com. As today's discussion includes forward-looking statements, please refer to our press release for a discussion of factors that could cause the company's actual performance to differ materially from those forward-looking statements. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations. These forward-looking statements apply as of today and we undertake no obligation to update these statements after our call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings, including quarterly reports on Form 10-Q. I'd like to remind you that during the call, we will discuss certain non-GAAP measures related to views performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in the press release. Now, I will turn the call over to our CEO, Dr. Rao Mopuri. Rao, over to you.

Thank you, Samuel, and thank you all for joining us this afternoon. In our prepared remarks, I'll address important developments since our last call, and Amy will go into details on the financial performance of the business. I'll cover the macro environment and the real estate industry dynamics as they relate to view in terms of challenges and our opportunities. Then I'll cover how we're navigating this environment, specifically our strategy to reach profitability, including our go-forward cost structure and enhanced go-to-market approach. First, on the macro, the real estate industry is going through significant changes, and our customers are contending with two main issues. One, the office sector has been under stress in every market, and two, higher interest rates and the lack of availability of credit. But GivenView is leading a secular trend, and we're at a very low market share at the moment. Vue's journey is less about the macro, but more about the underlying dynamics that drive the adoption of smart windows. Despite these challenges, there's plenty of opportunity in the market for Vue, and we expect to continue to gain market share through the cycle. Now, turning to the office segment, while the overall demand for office is bad, tenants that are renewing leases or moving to new spaces are demanding that the offices be top-spec, Highly amenitized in order to make it attractive for their employees to come into the office and do their best work Class A office is doing better and Class B and C offices are suffering the worst This flight to quality drives adoption of view smart windows since they provide a superior occupant experience building owners are also under pressure to comply with regulations around climate change and View provides the perfect combination of a better building for the occupants and a better building for the planet Now, regarding other real estate verticals, as we have noted in the prior calls, it's a well-known fact that there continues to be a shortage of housing across the U.S., and we have a significant pipeline of projects in the multifamily sector now. As you know, we are in a number of notable U.S. airports and continue to grow with repeat business in both renovations and terminal expansions in existing airports as well as additional new airports. We also have significant installations in hospitals and medical office buildings across North America. Both of these institutional segments are much more resilient in this cycle compared to commercial real estate. Now, let me describe our go-forward strategy and path to profitability. As we announced on our last earnings call, we took actions that we expect will reduce our annual structural fixed costs by approximately $50 million. We completed these actions in the first quarter of 2023. It's important to note that these savings start to become effective in Q2 2023 and are above and beyond the year-over-year improvements we realized in our first quarter 2023 financial results. I'd like to provide more details into the realigned cost structure of the business and our go-forward strategy. First, regarding our factory fixed costs. As you know, we've had to create a very unique supply chain, moving from an ordinary window to a high-tech, connected smart skin for the buildings. That required us to make substantial investments in capacity and years of iterative process improvement. Through the hard work and dedication of our team, our manufacturing process has now matured and our factory is performing well with high quality and on-time delivery for our customers. In the first quarter of 2023, we adjusted our supply chain, process capacity, and overhead costs and rationalized them to reflect our improved operational performance. resulting in higher efficiency and lower fixed costs. Also in Q1, we made significant strides in transitioning from our smart glass product to being more vertically integrated with the smart building platform, which allows us to optimize for the overall system performance rather than just the components. This change is significant in that it removes inefficiencies across manufacturing and supply chains and allows us to deliver more efficiently for our customers while also reducing our cost of delivery per project. Putting it all together, we believe the current factory and delivery infrastructure we have already built will allow the company to scale to profitability. Second, on to R&D. As we have mentioned on prior calls, we are now in our fourth generation product. That transition was completed last year and has been met with terrific feedback from customers on neutral color, aesthetics, and visual quality. We also recently completed R&D of our next-generation network that is more secure, lower cost, and easier to install. This is an area that effectively tracks Moore's Law in taking advantage of the benefits of continued cost reductions in semiconductors and circuit design. The completion of both of these initiatives allowed us to reduce R&D expenses substantially. Gen 4 is now our mainstream product, and we intend to get to profitability with this product. Now, let me talk about sales and marketing. First, regarding marketing, our customers are the best promoters of our product. With major installations in each of the key U.S. markets, awareness of our product has gone up significantly in the last year. This allows us to be more efficient with our marketing spend going forward. Next, on to the sales effort. While we spent the last few years getting reference installations and building awareness in key markets, we're now focused on what we call platform accounts. These are customers who have large portfolios of buildings and are constantly building and renovating. Instead of treating each building as a separate decision, our customers are increasingly choosing Vue as a design standard across their portfolios. These market leading customers also tend to be more sustainability focused and equally importantly, have the ability to invest in up markets and down markets. Once we penetrate these accounts, we also enjoy significant repeat business. This makes the selling effort a lot more efficient, effectively reducing our customer acquisition costs. So putting it all together, the maturation of our manufacturing processes and ramp up combined with a product that is fully developed and ready for the mainstream and a sales effort that's focused on platform customers gives us a more efficient cost structure. We've also been very thoughtful about the go-forward structure of the business, and today we believe we have the infrastructure in place to achieve profitable scale. Specifically, we plan on holding our fixed costs at this level until we achieve profitability. In total, these reductions represent a significantly lower fixed cost structure to the business and set up lower break-even points for both gross margin positive and EBITDA positive. Turning to the revenue side of the business, last year we did $100 million in revenue, which was a significant milestone for the company. It's worth pointing out that this was achieved prior to the investment tax credit being enacted. Historically, our customers paid a significant premium for smart windows. Going forward, the tax credit removes that premium, making the smart window about the same cost as a traditional window. As a result, the smart window can now be incorporated cost-effectively across a bigger spectrum of our customers' portfolios. We're seeing a significant uptick in customer interest, and we anticipate this momentum will drive our demand growth going forward. As we mentioned on our last call, we have a committed backlog for 2023 that already exceeds 2022 revenues. Today, we are guiding our 2023 revenue outlook to be in the range of $125 million to $150 million, or a growth of 36% at the midpoint of the range. Now on to some details about the investment tax credit. ITC for smart windows was enacted on January 1st, and today customers are able to get a vastly superior window for around the same cost as a traditional window. At the same time, Vue is able to capture higher value and better profit margins per project. This quarter we made substantial progress educating the industry on ITC and putting key operational building blocks in place for our customers. VIEW established an insurance program to support our customers and enable the guarantee of the tax credit for qualifying projects. We believe with these building blocks in place for the investment tax credit, we will see a rapid acceleration of customers benefiting from the smart window ITC. Finally, Today, we announced that we're pursuing $150 million financing. As you know, we closed a $200 million financing last year that was led by RXR and other strategic real estate investors. We're currently in discussions with our existing note holders and shareholders regarding today's announced financing. Given the progress we made this quarter in lowering our structural fixed costs and lower break-even point, our strategy is that with this financing, we get the company to profitability. With that, I'll hand it over to Amy to cover the financials. Amy, over to you.