Vuzix Corporation

and welcome to the VUSIC's fourth quarter and full year ending December 31, 2021 financial results and business update conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this call is being recorded. Now, I would like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin.

Good afternoon, everyone, and welcome to Vuzix's fourth quarter and 2021 full year ending December 31st Financial Results and Business Update Conference Call. With us today are Vuzix CEO Paul Travers, CFO Grant Russell, and COO Pete Jameson. Before I turn the call over to Paul, I'd like to remind you that on this call, Management's prepared remarks may contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question and answer session. Therefore, the company claims the protection of the safe harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors including but not limited to general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel, as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, March 1, 2022. USICS assumes no obligation to update these projections in the future as market conditions change. Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most direct comparable financial measures calculated and presented in accordance with GAAP can be found in the company's Form 10-K annual filing at sec.gov, which is also available at www.vuzix.com. I'll now turn the call over to Vuzix CEO, Paul Travers. We'll give an overview of the company's operating results and business outlook. We'll then hear from Pete Jameson, our Chief Operating Officer, who will provide some operational comments. Pete will then turn the call over to Grant Russell, Vuzix CFO, who will provide an overview of the company's fourth quarter and full year financial results, after which we will move on to the Q&A session. Paul?

Thank you, Ed. Hello, everyone, and welcome to the Vuzix Q4 and full year 2021 conference call. On this call, we're going to review our results and recent developments and then give you some perspective on where we see things headed. You hear it everywhere. Augmented reality is the future of computing. The metaverse is one of the most talked about tech topics in the world and most major corporations are realigning their future strategies around all of this. Vuzix has been an augmented reality smart glasses pioneer from the beginning. We have been building Vuzix to a leader in this space And the enterprise portion of the industry is finally reaching the inflection point where growth should accelerate. We're bullish on our outlook for 2022 and even more so thereafter. We believe we have the technological wherewithal and the financial resources to deliver on near-term and long-term initiatives that we expect should unlock significant shareholder value. For the full year, SmartGlasses revenue increased 27% year-over-year to $12.8 million, representing approximately 98% of our full year revenue total of $13.2 million. The M400 remained our workhorse, accounting for the lion's share of our SmartGlasses sales. Turning to our fourth quarter results, total revenue of $3.2 million was largely driven by smart glasses sales and was incrementally higher than the preceding third quarter and consistent with the quarterly growth trend we have been seeing over time. During the fourth quarter, we furthered our engagements with key customers and ISVs and expanded our global sales channel in Europe. We also made further progress on the OEM side after a period of inactivity due to COVID-19 and delivering pre-production units for a waveguide-based HMD system to a global Tier 1 aerospace firm and entered into a non-recurring engineering agreement with Verizon centered around the Vuzix Shield 5G connectivity in professional sports training and gaming. Our smart glasses sales in the fourth quarter and 2021 as a whole were driven by repeat business and larger orders from customers as well as the rollout of our global channel partner program across all major market segments. In 2021, we made a number of advancements as an organization. On the technology side, we invested in and advanced our core competencies in waveguides, display engines, and optical solutions. We also improved our IP position, which increased to 241 patents and patents pending, up 57 from 184 a year ago. And we also bolstered our optics know-how, which we believe is keeping us ahead of most of the competition. our ongoing investment in our core technology positions Vuzix to play a critical role in an industry that is expected to ultimately represent many billions of dollars of revenue annually. We took initial steps towards the creation of a SaaS-based solution offering with the launch of our Vuzix Custom Solutions Group and remain focused on delivering more value to our customer through smart glasses and software solutions and are actively driving a number of key initiatives that should transform our company from being primarily a smart glasses supplier to a diversified supplier of smart glasses, SAS-based solutions, and OEM components and products. On the operational side, which we will go into more details on later in the call, we invested in staff and infrastructure that will enable our company to successfully take advantage of the opportunities at hand. We continued to invest in R&D and successfully introduced two new products at CES 2022, the Vuzix Shield, a first of its kind, and the M400C. I will share more on both of these new products shortly. And lastly, we increased our cash position by $84 million during the year to roughly $120 million as of December 31st and ended the year with a working capital position of roughly $132 million. As of March 1st, with 10 months to go in the year, we believe we have a healthy sales pipeline, promising OEM relationships, and multiple strategic opportunities in our expected plans. In enterprise, we are focused on driving smart glasses adoption and solution selling with our core customers. And on the OEM front, we are leveraging the advancements we have made related to micro displays, wave guide manufacturing, and their optical performance. In 2021, our core smart glasses product revenue grew 27% year over year with an uptick in order frequencies and size. We are seeing growing customer acceptance with larger deployment sizes, and as a result, we expect our core smart glasses revenue in 2022 to accelerate and grow significantly over 2021. The shift towards quoting for larger orders coming in from repeat customers for execution of enterprise-wise deployments within their organizations is very positive. A prime example of this is occurring with some of our larger engagements within logistics. As a reminder, a typical customer begins with the 5 to 10 units for a pilot to evaluate the platform. Then there would be a follow-on orders for 10 to 50 units to perform additional evaluations. This has been happening for the last three to four years, frankly, and COVID effectively brought most of this activity to a halt on the logistics side of our business. With the introduction and high acceptance of the M400, what we are seeing now, especially in logistics, is a migration towards actual site rollouts. which typically ranges anywhere from 200 to 400 units per site. No more testing, no more pilots, but rather formal enterprise-wide rollouts. One of our Fortune 50 customers with whom we are engaged is evaluating several use cases to save money, drive efficiencies, and support their business operations. This customer recently placed a $400,000 follow-on order during Q4 to support just one use case in just one of their facilities. As for the potential business reviews, this customer has well over 100 facilities that would need this solution for this one use case, and you can do the math. Another Fortune 50 customer initially introduced our smart glasses into one warehouse earlier last year to support training and remote maintenance. The initial introduction was successful, and they subsequently expanded to 40 more warehouses during the fourth quarter. They have recently placed another follow-on order in Q1 to expand the usage of Vuzix smart glasses to even more participants in more of their worldwide facilities. Our expectation for 2022 is that top-line revenue growth for our smart glasses will have multiple drivers, including significant deployments by some of the world's largest companies. In terms of market segments, logistics will drive significant revenue expansion in 2022 for Vuzix, followed by healthcare and then Industry 4.0. We're also seeing considerable momentum and expansion opportunities related to our global channel program, which we introduced over the second half of 2021. In terms of product mix, we expect the M400 to continue to be our workhorse and enterprise. We also see growth and improved margins with our upgraded blade series. And finally, we expect contributions to the top line from new smart glasses that will be hitting the market in the first half of this year, including the Shield and the M400C. On the acquisition and investment front, Vuzix continues to be engaged, looking at several companies that could broaden our service offerings across key market segments and broaden our technical capabilities and know-how. As a result of internally driven initiatives and potential acquisitions, we expect SaaS solutions revenue as a percentage of smart classes revenue to increase over the balance of the year. As we look at our OEM business group, we expect 2022 to be an active year for follow-on programs and new customer engagements. Revenue related to our OEM programs was down year-over-year in 2021, but this comparison is not a good indicator of where our OEM business is headed as we feel COVID delayed customer decision-making. Vuzix now has standard OEM display engines and waveguide offerings with high-brightness projectors and 40-plus degree field-of-view solutions. We also have introduced developer kits that make it easy to integrate and design in our waveguides for almost any given OEM solution. As you all know, we have been working closely with our long-standing Tier 1 aviation customer and are already supplying pre-production devices. We're also expecting to be employed in a new product design win that will feature Vuzix proprietary optics and waveguide technology inside. These product design wins should represent the potential for many millions of dollars of revenue for Vuzix on an annual basis and for years to come. As a US-based manufacturing company, Vuzix is well positioned to ultimately offer, in conjunction with key prime defense contractors, solutions for outfitting US ground troops, Humvees, and aircrafts with heads-up display optics and waveguide technology that is made in the USA. There's been a lot shared in the public domain regarding the US Army's IVAS program and some of the challenges they are facing. We believe this has helped Vuzix to foster business relationships with key defense contractors that will yield new OEM programs and follow-on programs over the course of 2022. Although it takes time for these projects to move into production programs, contribution to the top line will increase over the balance of the year as these programs come online and move through the process. I would like to remind everyone that 10 years ago, Vuzix entered into a 10-year non-compete related to the US military market as the result of its then sale of its defense OEM products and related engineering services business. The expiration of this non-compete in June will allow Vuzix to actively solicit business in this market and other areas without the need to pay third-party commissions to the holder of the original non-compete. Over the last 10 years, and especially over the last 12 months, Vuzix has achieved some strong advancements related to our optical display engines and improvement in waveguide manufacturing quality, which we can now convert into substantial increased production scaling capabilities. Our core technology is well suited for the U.S. military and foreign defense markets, and we look forward to formally reentering and supporting this segment of the market after the expiration of this non-compete. The Vuzix M400, with its ergonomic design, 4K camera, 8-core CPU, and nearly limitless number of wearable options is our workhorse in the enterprise market and has emerged as the go-to device of choice in healthcare, logistics, and Industry 4.0. Use of the Vuzix Blade smart glasses continues to grow in enterprise within healthcare and Industry 4.0. As we sell through the remaining inventory of the Vuzix Blade, we expect a sales backlog towards the end of the second quarter. As a result of ongoing demand and qualified enterprise programs, we will be introducing a follow-on program later in the year. This follow-on product will feature our latest advanced waveguide optics, a larger field of view, and have the ability to run Android 11 out of the box. We believe a follow-on waveguide-based product will answer the call for many of our enterprise customers that love the Blade's form factor but required an upgraded Android OS to support their application architecture. There are numerous potential volume deployment opportunities in the sales pipeline related to the blade for 2022, and we expect to commence volume production of a follow-on waveguide-based product later in the fiscal year. Four years ago, when we showcased the Vuzix blade at CES, it represented a significant advancement in the AR industry and demonstrated that smart glasses don't have to be big and bulky, and could be lightweight and even considered fashion-forward compared to other solutions in the market. We knew, even back then, that in order to make the technology disappear, we had to advance our display technology and focus on micro LEDs. At CES in January, we showcased the Vuzix Shield, which featured a much smaller industrial design than our Vuzix Blade, and we were able to add more CPU power, two superior cameras for stereo vision, and a binocular micro-LED display with a much larger field of view. We are particularly proud of the Vuzix Shield, as it is the first of its kind in the world today, and its performance, albeit monochrome, is far advanced versus the competition, and not just in Vuzix's opinion. YOL Development, one of the world's top research analyst firms around display technology, had the opportunity to desk drive the Shield at CES. Let me paraphrase their published remarks. Besides Samsung's, if there is another booth that looked as crowded as in any other CES year, that would be that of Vuzix. I was excited to try the company's new Shield AR glasses. The device is powered by Jade Bird Display's green 640x480 .13-inch microLED panel. This little beast, the size of a grain of rice, can crank up to 4 million nits, and it shows. I was able to stare directly at a bright light and still clearly see and read text on a 3D image that was comfortably floating about one meter, three feet, in front of me. Vuzix Shields feature two displays and wave guides with a full stereoscopic effect. This was by far the most convincing visual experience of any type of AR glasses so far. Besides being comfortable to wear, With good weight balance, the image was crystal clear with no haze nor artifacts. Between the display, the waveguide optics, and the projection module, Vuzix have done a remarkable job optimizing performance and quality. Vuzix Shield smart glasses have garnered interest from several big consumer companies interested in our optics and waveguide technologies. as well as enterprise customers that require a more traditional eyeglass form factor and capabilities afforded to them by the Shield to solve operational challenges. Volume production of the first Vuzix Shield model is expected to commence in the second quarter this year, with enhanced versions being introduced when components are available, including ultimately full color. Alongside the Vuzix Shield at CES, we introduced the Vuzix M400C, which is our second generation USB-C based Windows PC and phone compatible smart glasses that take full advantage of the robust design and camera afforded by the Vuzix M400, including IP67. We have shipped a limited number of initial production units of the M400C to a Windows mobile computer manufacturer, and we anticipate their first volume production orders will be received during the first half of 2022. As most of you know, there are several consumer tech companies with large budgets and R&D teams trying to enter the AR smart glasses arena. The barriers to entry to overcome related optics in displays is super challenging. Vuzix has been working on solving these problems for over 20 years, and we're not only getting it done, but building real products that feature some of the best optics and waveguides on the planet. Over this past year, Vuzix has made significant strides on our waveguide technology with our most recent waveguides having significantly reduced forward light, also known as eye glow, by as much as 80%. We have tripled our waveguide efficiency for higher brightness and more efficient battery usage. We are now capable of employing high-index substrates and polymers, supporting single-layer designs and much larger fields of view. Our display engines that drive into our waveguides as shrunk to the size of a pencil eraser with monochrome available now and full color in development. We have gone far beyond prototypes here, and in fact, in the first half of 2022, we will start shipping the world's first micro-LED-based smart glasses, utilizing some of the advanced waveguide capabilities and, again, the smallest display engines ever built. Again, there are only a few waveguide manufacturers in the world today, and only one U.S.-based waveguide manufacturer, and that's Musix. There is one other U.S.-based waveguide company, but they are not a manufacturer. Rather, they are simply licensing their tech primarily to Asian third-party manufacturers. Last year in May, Snap acquired WaveOptics, a waveguide supplier for more than $500 million. And in November, the only other U.S. waveguide company, the licensing company, raised money at over a $500 million private market valuation. These comps in the market are indicative that there is tremendous value being assigned to waveguide suppliers that haven't even begun to scale. Muzix has been working on solving the challenges to miniaturize displays and couple them with waveguides longer than every company out there. Muzix is not only getting it done in our R&D labs but transferring this technology from the lab and designing and building real products that arguably feature the best optics and waveguides on the planet, developed and manufactured by Vuzix, right here in the United States. We are far beyond just a waveguide manufacturing company. As it relates to value and growth, we have many uses for the capital of Vuzix, and we are putting that capital to work to accelerate our growth as fast as we can. That said, one investment area that we see is the company itself. We believe, based on these private company comps of just waveguide companies, let alone everything else Vuzix is leading the industry on, the market is significantly undervaluing our company. The Vuzix board agrees with management assessment, and as a result, we are investigating the repurchase of up to $25 million worth of our common stock. I would like to now introduce to everyone Vuzix Chief Operating Officer, Pete Jamieson. I have known Pete for quite a few years, and I have to say I don't think Muzix could have found a better fitting person to help us grow through the fast-paced, accelerating business we are starting to see. Pete has a history of building technology-based operations from the ground up with growth in the hundreds of millions in revenues. He also has significant firsthand knowledge of the smart glasses industry, so he uniquely understands the amazing opportunities and challenges we face. Pete knows how to navigate the waters of high-tech growth companies, which is exactly where Vuzix is at. So without further ado, let me introduce you to Pete. Pete?

Thanks, Paul. Some of you may know me from my time in the early days of AR, and it's great to be back in an industry that is really starting to have a profound impact on the way we work, communicate, and interact with digital content. I've been a big fan of Vuzix's leadership team and technology for years, And as you might imagine, I'm super excited to be part of the company and to bring my background knowledge of AR imaging and business operations to the table. I joined the Vuzix team a year ago to help contribute to the success of a company that has already established itself as a leader in the AR glasses space. My primary focus at Vuzix is on the execution and refinement of our business strategy and plan, and in turn to drive continued growth of our business and success for our customers. In 2021, we embarked on a number of initiatives to expand our operations, our physical presence, and our capabilities, not only on the technology and manufacturing fronts, but also across core competencies and customer touchpoints. Let's take Europe as an example. A few weeks ago, we announced the opening of a third-party logistics operation at Base Logistics in the Netherlands. Brexit and COVID-19 had caused serious challenges to the supply chain, and the arrangement with Base Logistics not only significantly improves our level of service to current European customers and partners, but positions us to deliver on the increasing demand from the region. We also added to our European sales team in 2021 with an expanded physical presence in the region, which also helped to fuel sales growth. In 2022, we will continue to expand this physical presence by adding additional key personnel to the European team and by opening a new Vuzix European regional office, allowing us to further support and grow sales. During the second half of 2021, we introduced a global sales channel program, which has allowed Vuzix to efficiently increase our customer reach, support, and sales force by partnering with established third-party distributors that have a knowledgeable and extensive reseller network. As a result, we've witnessed accelerated growth in Europe in 2021. We will see this program expand internationally in 2022 as we are seeing significant customer pull in Latin America and in Asian markets with untapped opportunities across the region, including South Korea, India, and China. On the marketing side in 2021, we overhauled our digital presence, experience, and reach for our customers, partners, and investors, including a completely new corporate website and shopping experience that is search engine optimized and optimized for lead generation and information flow across multiple regions, languages, and currencies. We have also renewed our focus on marketing and communication of whole product solutions by maintaining and building a very close working relationship with our ISV partners across key market segments to better support end customers' use cases and drive further adoption. We are taking the same approach with our global sales channel to ensure that all our distributors and their reseller networks are trained experts when it comes to Vuzix smart glasses. In 2021, we made further investments in our OEM and engineering services to create more standardization in our product offerings and engagement with third parties to better meet the increasing market demand for our heads-up display technology and products from multiple government agencies and the Department of Defense. We've coupled this with streamlining our processes and manufacturing capabilities to meet this increasing customer interest in our waveguides, projectors, and AR imaging systems. I'd now like to pass the call over to Grant for his financial review.

Thank you, Pete. The 10-K we are filing with the SEC offers a detailed explanation of our annual financials. So I'm just going to provide you with a bit of color and some of the numbers. For the full year ended December 31st, 2021, Musix reported $13.2 million in total revenues as compared to $11.6 million for the prior 2020 year, an increase of 14% year-over-year. Sales of products rose by 27% to $12.8 million in 2021, driven by increased sales of our M-series smart glasses, primarily the M400. Sales of engineering services, primarily for defense contractors for the year ended 2021, decreased 75% to $0.4 million from $1.5 million in 2020. These customers, we feel, temporarily slowed their ongoing development projects due to COVID, and most have recently indicated they intend to take them back up in the near future. For the three months ended December 31st, 2021, Vuzix reported 3.3 million in total revenues versus 4.2 million in the prior year's period. In total, product sales for the quarter ended December 31st, 2021 fell 15% as compared to the same period in 2020. Engineering services declined to point 2 million in Q4 2021 versus point 5 million in the prior years period for the reasons discussed earlier. For the full year ended December 31 2021 there was an overall gross profit of 2.4 million net of a point $5 million inventory obsolescent provision. that was recorded in Q4, which was primarily related to end-of-life components for our existing blade 1.5 product line. The net gross margin for 2020 was $1.9 million, net of inventory provisions of $1.3 million. On a product cost-to-sales basis only and before inventory obsolescence provisions and manufacturing overheads, direct product costs were 49% of sales in 2021 as compared to 54% of product sales in 2020. The overall improvement primarily due to product mix changes. Manufacturing overhead costs, much of which is relatively fixed, rose by 0.8 million to 2.4 million or 19% of product sales for the year ended December 31st, 2021 as compared to representing 16% of product sales in 2020 due primarily to additional manufacturing management, supply chain, and QA personnel. Research and development expenses for 2021 rose 54% to $11.7 million as compared to $7.6 million for the 2020 period. The increase was largely due to a $2.5 million increase in salary-related expenses, of which $0.9 million was related to non-cash stock-based compensation, and an increase of $1.2 million in external development expenses, primarily related to our new Shield smart glasses. Sales and marketing costs for all of 2021 rose 51% to $6.1 million from $4 million in 2020, with the increase attributable to a $1.1 million rise in salary-related expenses, of which $0.4 million was related to non-cash stock-based compensation. an increase of $0.6 million in sales, consulting, and marketing fees, and a $0.6 million increase in advertising costs. General and administrative expenses for 2021 increased to $22.5 million as compared to $6.9 million for the 2020 period. The increase was primarily due to a $13.5 million increase in salary expenses, of which $12.7 million was related to non-cash stock-based compensation, primarily from the company's new long-term incentive plan, or LTIP, which was implemented in the first quarter of 2021, and as a result of a $0.9 million increase in legal expenses. I would like to take a moment to point out that the large stock compensation amount recorded and related to the company's LTIP options only vest upon the achievement of predetermined market equity capitalization, revenue, and EBITDA milestones. and if the participants are currently employed by the company when the milestones are achieved. They are not the equivalent of traditional incentive stock options, which is simply just by the passage of time. The fair value of options granted under this LTIP program were calculated by using a Monte Carlo simulation for the equity market condition tranches and the Black-Scholes-Merton option pricing model and the performance-based revenue and EBITDA tranches. Further, For the valuation of the equity market condition, Francis, a Monte Carlo valuation model utilizes multiple input variables that determine the probability of satisfying the market conditions stipulated in the awards. These models require highly subjective assumptions as inputs. And in this regard, I would like to point out that since management in our fourth quarter revised the determination of the fair market value of the market capitalization milestone awards, what it first determined as of March 31st, 2021. This is being reported as an accounting error. And as a result, in our 10-K, we are disclosing and treating this change as an accounting error and material weakness in our internal controls for this rather unique and highly complex transaction. That said, our financial statements as of December 31st, 2021 and December 31st, 2020 are correct and present fairly in all material respects, our financial position, results of operations and our cash flows for the periods presented in this annual report on form 10-K in conformity with GAAP. While the potential rewards and the LTIP are significant upon their achievement, they will only be awarded if the target market capitalization Revenue and EBITDA milestones for Vuzix are achieved during the term of the plan and providing the participant stays employed with the company. The market cap targets run from $2 billion to $10 billion. The revenue milestones provide awards for the company achieving revenue targets ranging from $25 million to $1.5 billion. And the operational targets require achieving EBITDA percentages ranging from 0% to 16% of revenues. All these LTIP stock options which are exercisable at $19 a share, will only become vested with the achievement of each applicable milestone target. And we feel it will be a big win for all Vuzic stockholders if all these targets are ultimately reached. In total, there was $17.3 million in non-cash stock-based compensation expense booked in 2021 as compared to $2.8 million in 2020. For the full year, December 31st, 2021, The net loss was $40.4 million, or $0.65 per share, as compared to $18 million, or a net loss of $0.53 per share for the full year of 2020. Now for some balance sheet highlights. Our cash position as of December 31, 2021 was $120.2 million, and we had a net working capital position of $133 million. Cash used in operations, excluding changes in our working capital, was $20 million for the year ended December 31, 2021, as compared to $12.5 million for 2020. Cash used for investing activities in 2021 was $4.9 million, up from $1.4 million in the prior year as we spent more on new product tooling, manufacturing equipment, and a new display chip design project in 2021. Investments in patents and trademarks rose $0.6 million in 2021 versus $0.5 million in 2020. With that, I would like to turn the call back over to Paul.

Thanks, Grant. And with that, we'll now turn the call over to the operator for Q&A.

Thank you. And ladies and gentlemen, at this time, we will conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press the star key followed by the number 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Matt Van Villette with BTIG. Please state your question.

Hey, guys. Thanks for taking the question. Good afternoon.

Maybe wanted to touch on CES and maybe just the general return. A lot of trade shows out there, as you make appearances there and you're talking to the attendees, I guess how much of an actual business development and sales driver mechanism do you feel like has returned? Maybe give us any kind of either qualitative or particularly quantitative results from CES in particular, and whether you feel like you're generating orders from customers that are ready and willing to buy in attendance.

CES was a very unique CES, Matt. In fact, it was sort of bizarre. I will say that the Vuzix booth was packed the whole time. It was very busy like normal. I think you probably heard the old guy kind of echo that sentiment. So business was good for Vuzix when we were there. We go to CES for two reasons. One is just definitely meet with select key customers and accounts, and we did that, although to a lesser degree than normal, I would suggest. The bigger reason why we go, though, is it's a launch point for people to share their new products for the year. It's sort of like the big party of this is the thing coming, the latest and greatest. And usually that's accompanied by a fair amount of press that comes to report on all of that. And this was a pretty disappointing component of CES. Most of the press that we saw were smaller guys. They had smaller followings. They were from Europe and the likes. The bigger press folks, and it's really sad, Matt, because the Shield is an amazing new device. It blows people away when they put it on, and there were very few press people that had the opportunity to wear this guy at the show. So we're looking forward to giving the Shield in the hands of some of these folks as the year unfolds. So, you know, I guess the bottom line was it wasn't ho-hum for Vucic's. It was a good show. I think it could have been a lot better had the press showed up.

And then you spent a fair amount of time in the script talking about the logistics and supply chain verticals and really starting to see some traction there. I guess maybe help us think a little bit more about the overall deal flow that you've been seeing. What kind of indications or sort of preliminary commentary are you getting from some of your customers so that you can be prepared for future orders and be able to fill those quickly? Maybe just help us think about what you're expecting for the year from that vertical in particular.

Yeah, it's a super exciting vertical for Vuzix in that it was probably the number one vertical when we first started making smart glasses. Frontline workers is one thing, but the whole idea of an industry that's been 50 years stuck with handheld barcode scanners and the likes, right? I would suggest that practically every major retailer today that has a brick and mortar and or that does lots of distribution centers and the like are using our glasses in some fashion. So the bulk of the Fortune 50 guys that are in that bucket are using our glasses here. the kind of comments that we're getting are, you know, we're using it on the floor now. It's two shifts, not around the clock, but dual shifts back to back. It's working great. We're in this center. We're moving into that center. And by the fall of the year, we plan on deploying a bulk of these things. So it's fantastic. And it's other places that we've been years working with them, and they're finally rolling out. If you look at our history, all you've got to do is take a look. You'll see press releases with some of these guys. I love name dropping. I like to be able to share these things. We can't in a lot of these cases, but we will be able to share that more as this year unfolds. It's impossible when these guys are rolling out in so many facilities that, you know, to keep it a secret. It's just going to be the way it is. And it is... We've talked about revenues for 2022 in the past. I would suggest that this is really fortifying where Vuzix is going in 2022. Our baseline is great. This is going to add a lot to the baseline.

And then maybe one last one. On the healthcare segment, I think that was a big winner through COVID. Are you still seeing the same level of adoption from new facilities, from new medical professionals, Trying to enable that not only advancement, but maybe some distance between patients and doctors. Just curious in terms of the overall, I guess, pace of adoption that you're seeing the last several quarters versus at the height of the pandemic. Thanks.

It just continues, Matt. I mean, go look at companies like Rods and Combs. Every time you turn around, there's another facility. There's another hospital. There's another company that is using their stuff to aid in surgery. Another good one is Pixie. Pixie Medical with knee surgery. They keep doing more and more. They've expanded into the United States. Their business is rocking right along. Medacta, similar boat. They just keep expanding and growing with the use of our products. Guys like Ohana One. It's a group of maybe 1,000 deployments that they were thinking. They're significantly expanding how they're going to be deploying with our glasses and the networks that they're building and by adding into the Ohana One and remote support surgeries for especially third world countries and places that really need the help. So we just see this thing as a continuing move of business and growth for the company. It's like many of these areas where finally they figured it out, smart glasses are becoming the device of the future. And the research analysts have talked about this for a long time. They talk about billions in revenues. And for Vuzix, it's really starting to unfold in the enterprise space. Medical is one example. Yet again, the logistics and supply is another one.

All right, great. Thank you.

You bet.

Our next question comes from Christian Schwab with Craig Hallam. Please state your questions.

Hey, good afternoon, guys. Thanks for taking my questions. So I guess there's some pretty substantial revenue in EBITDA targets for the company on the equity awards that you kind of talked about. Can you give us an idea of when you would expect to see, you know, I know percentage-wise revenue has been growing here, but when we begin to see, you know, a much more substantial top line driven by, you know, we don't have to relist every growth driver again, and customer who's adopting the technology. But can you just give us a better clarity of how you expect, you know, kind of the hockey stick of revenue to look like over the next few years?

Yeah, I mean, I think one of the charts that we showed, it did have, you know, growing top line revenue in 2022. Not that we give hard guidance on the year, but that arrow is the reason why it's there and the line is there is we should see a nice jump, Christian, this year over 2021 for sure. In fact, it's practically in the bag with some of the stuff that's happening with our friends in the supply chain side of the business. So 2022 will be great, and we just see it continuing to grow from there. I mean, you think about how big the supply chain industry is. The one account that we talk about, that is one use case, and they've got other use cases which is probably an order of magnitude bigger. You've got companies that are barcode scanning companies that went around forever that do billions in revenues, and this technology is sort of being slotted into that place in a bunch of different areas with some of the clients that we're talking about. I think you're just going to see it continue to grow, and I think 2022 will be a nice clip, well over 2021.

Great. Thank you for that. And then, you know, as you kind of look at the ramp of the revenue on a go-forward basis, is there a plan as far as you're concerned when you'll return to or be in a situation to generate cash on a yearly basis? from operations?

Well, it's for sure, Christian, that's on our mind. I mean, where we sit right now, our burn is maybe $20 million on an annual basis. We've got cash and cash equivalents of $132 million in the bank right now. That's like five or six years' worth of run time for the company. The top line is important. The bottom line is important. We're also in a race here. There's a lot of companies that want to play in this space. We're winning, and we're going to invest to make sure that views expand hits those long-term incentive plan bullet points. That's where we want to be. The company believes that that's not an unreasonable plan and that we ought to be able to achieve those goals. And so I think you'll see us continue to grow top-line revenues. I think you're going to see us continue to invest. And I think people will start to finally ascribe the true value that Buzix has. I mean, just look at some of these private waveguide companies. All they do is make a waveguide. They're worth a half a billion dollars today. Their revenues are practically zero. Yet Vuzix's waveguide technology in many cases is superior. We're able to make them in high volume, especially with some of the things we're doing on the plant floor now. We're setting ourselves up to win big time in the entire AR smart glasses space.

Great. And then my last question is just a point of clarity. You guys are not announcing today a $25 million buyback of, of shares, you're saying you guys have been contemplating that? Did I hear that right? I'm sorry.

Yeah, that's right. I mean, look, the board feels like management does. The company's significantly undervalued. It takes a little bit of time to figure out exactly how you implement these things, yada, yada, but I will tell you it is an incredibly serious investigation at this point in time. The odds are quite high that this will end up moving forward. sooner rather than later.

Great. No other questions. Thanks, guys.

Yep.

Thank you. Our next question comes from Jim McElry with Dawson James. Please state your question.

Hi. Thank you. I'm still a little bit confused about the jump in G&A for the quarter. I understand for the year. But there was just a significantly... big jump in G&A this quarter versus, you know, any of the prior three quarters. Is that the long-term incentive plan, or is there something else that accounted for the $7 million change?

Grant, do you mind taking that one? I can tell you, Jim, that a significant portion of it is the LTIP program.

Yeah, it's pretty much all related to the LTIP program.

I mean, you know, we did disclose, you know, we made a change in the way we estimated it. We're reporting that as an error. But we booked the catch-up adjustment in Q4, which, you know, was, you know, net-net was, you know, ended up, you know, increasing the quarter by, you know, about $5.5 million. And the other elements of the increase were, you know, related to, a lot was related to legal because we've been doing, you know, using legal counsel to help us look at some, you know, some possible transactions. And, you know, they accumulate pretty quick, and some of these entities were outside of North America. So it just, we took time and money.

Otherwise, there was no substantial changes otherwise, except for those two. Thank you. That's it.

That LTIP is non-cash, right, just to confirm on that again.

Absolutely.

Okay.

Thank you. And ladies and gentlemen, this does complete the Q&A session. I would now like to turn the call back over to Paul Travers for closing remarks. Thank you.

Yeah, thanks very much, everybody. Exciting times of musics. We're looking forward to the future and sharing more, especially as 2022 unfolds. Have a nice evening, everybody.

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