Vuzix Corporation

Ladies and gentlemen, please stand by while we wait for your colleagues to finalize their logins. Once again, ladies and gentlemen, our conference will be getting started momentarily. Please stand by. Thank you. Thank you. Greetings and welcome to the VUSIC's fourth quarter and full year ending December 31st, 2022 financial results and business update conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, please go ahead.

Good afternoon, everyone, and welcome to Vuzix's fourth quarter and 2022 full year ending December 31st Financial Results and Business Update Conference Call. With us today are Vuzix CEO Paul Travers and our CFO Grant Russell. Before I turn the call over to Paul, I would 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 the legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, March 1, 2023. Muzix assumes no obligation to update these projections in the future as market conditions change. This afternoon, the company issued a press release announcing its final 2022 financial results and filed its 10-K with the SEC. So participants on this call who may not have already done so may wish to look at those documents as the company will provide a summary of the results discussed on today's call. Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the company's form 10K 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, who will give an overview of the company's operating results and business outlook. Paul 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. Paul will then return to make some closing remarks, after which we'll move on to the Q&A session. Paul.

Thank you, Ed. Hello everyone, and welcome to the Vuzix Q4 and full year 2022 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. It bears repeating that the use of augmented reality by most business organizations and ultimately consumers remains the wave of the future. Despite the technical challenges encountered when making AR glasses, In their uneven and unpredictable adoption curve seen to date, most entities around the world are realigning their future strategies around AR glasses with AI. The expected ubiquitous use of AI across applications in areas such as education, e-commerce, healthcare, communications, defense, security, and more fit hand to glove with AR smart glasses. Examples like visual search, language translation, voice control, the list goes on and on. This marriage of technology will accelerate the need and use cases for lightweight wearable displays. Vuzix is an AR smart glasses, optics, and display engine pioneer. The company was built from the ground up over the last 25 years to deliver on the larger promise of AR and as such is well positioned to participate in this emerging market. Vuzix, as a recognized leader in smart glasses, now also offers OEM solutions that utilize Vuzix optics, wave guides, and display engines. Over the next three slides, I'd like to first give you some color on our 2022 results, followed by our 2022 achievements, which collectively were significant. This will then allow me to paint the bright picture we see for 2023 and beyond, speaking of which, Our first quarter of 2023 is lining up to be one of our best in a decade in terms of revenue. In fact, based on current Q1 2023 shipments and confirmed orders received to date, we will achieve over $3.5 million in product shipments, already exceeding each quarter's revenue in 2022. Our overall smart glasses product revenue did decline modestly in 2022 compared to the previous year. primarily due to the challenging macro environment and some customer rollout hiccups, although Blade revenue rose year over year as a result of strong customer acceptance of Blade 2. Moreover, smart glasses demand for businesses related to our largest key accounts, which are being serviced together with ISVs and directly by Vuzix, also grew with warehousing and logistics and healthcare remaining two of our key market verticals. We were also successful in expanding our sales channels, through the addition of numerous new distributors across select markets in 2022. Last but not least, our product revenue in 2022 included sharply higher sales of waveguides, several magnitudes greater in fact, versus 2021 levels. Engineering services sales increased substantially in 2022, rising 250% versus the prior year. We planted a lot of seeds in a short amount of time, and witnessed widespread account growth with both existing and new defense customers such as L3Harris, as well as on the commercial side. One of the more exciting developments in our OEM business has been around our Ultralight platform and the doors it has already opened, which I'll touch on more shortly. Our competitors are spending literally billions of dollars investing in the future of the AR industry. To get this right and stay ahead, Vuzic needs to invest its precious dollars wisely and remain focused on our success. In 2022, we had a number of noteworthy achievements as an organization as we continue to invest in our core competencies in the future. we made significant advancements in our core technology behind closed doors to our waveguide manufacturing processes that fortified Vuzix's position to play a critical role in an industry that is expected to ultimately represent many billions of dollars of revenue annually from consumer OEMs and the like. Most people have no idea of the value of what we have built here at Vuzix around our waveguide intellectual property and production capabilities. For the broader markets to be successful, waveguide manufacturing in volume and at price points that can meet the market requirements are critical and Vuzix investments in this area have uniquely positioned us to deliver on this need. This is a cornerstone capability to achieving success in the broader market and so far we have not seen any competitors anywhere close to what Vuzix can currently deliver. As part of our waveguide manufacturing expansion we entered into a lease for an additional 12,000 square feet of manufacturing space adjacent to our existing plant and kicked off upgrades to our waveguide manufacturing capabilities. This new facility is designed to support our latest waveguide technologies, increase our unit capacity, and significantly lower the unit cost to manufacture our waveguides for ourselves and ultimately our OEM customers. On the micro-display front, we entered into a series of agreements with Atomistic, a France-based firm With a novel material science technology related to the development of next-generation micro-light emitting diodes, the combination of atomistic technology and Vuzix see-through waveguides will ultimately deliver full-color, high-resolution AHD solutions. We formalized within our corporate structure an OEM design and manufacturing group, which offers customers one-stop shopping for their advanced and customized waveguide and display engine solutions needs. from design assistance to high volume cost-effective production capabilities. We successfully developed and integrated miniature AR imaging systems and transferred this technology from the R&D lab into a functional industrial design and product assembly of the Vuzix Ultralight Smart Glasses OEM platform. The Vuzix Ultralight OEM platform was introduced at CES and it was an eye-opener for many large consumer electronics and IT firms at CES due to its sleek, all-day fashion-forward modular design that is highly customizable and can be supported by hundreds of mobile phone-ready applications. Out of the box. In the fourth quarter, we also acquired Moviant, a revenue-generating SaaS solution provider that supports SAP, traditional handheld hardware used in warehousing as well as using smart glasses. The Movient solution has already proven to be very sticky for end customers, which are attracted by the simplicity of use and performance of the offering. The Movient acquisition also broadens our go-to-market strategy for customers and ISVs within the warehousing and logistics market verticals. On the operational side, we invested in staff and infrastructure to help our company scale and to take advantage of the opportunities at hand in the market. We continued to invest in R&D and advanced our smart glasses product lines. At CES 2023, we demonstrated specific enterprise use cases for two new products, the Vuzix Shield and the Vuzix M400C, which were in development during 2022. Finally, on the technology and IP side, we increased our patents and patents pending to 278, up 37 from 241 a year ago. Again, our first quarter of 2023 is off to a very strong start, and we're bullish on our full year prospects for 2023 as well, as we believe we are well positioned to achieve continuing record revenue from our collective product and OEM engineering services. As our business expands, the revenue generating opportunities are growing with it. We are seeing increased deployments in warehousing and logistics, expanding healthcare from existing ISVs and multiple new customers. Further engagements with blue chip customers early in their deployment cycles. Further expansion of our sales channel in specific regions. Increased SAS revenue from removing an acquisition. Additional and larger engagements from defense firms. Paths to production for multiple U.S. defense firms. Signing of new agreements by OEM and white label firms. Development of contracts and initial deployments of ultralight-based products and more. The formalization of our OEM design and manufacturing platform in 2022 helped streamline our OEM efforts to respond to RFIs, or requests for inputs, and formal RSQs, requests for quotes, for our waveguide-based solutions and in most cases display engines to go with them. To deliver on the growing needs for waveguides for these OEM programs and Vuzix's own products, our new and expanded manufacturing facility will bolster advanced capabilities from metrology to capacity. The facility will focus on the advancement of higher index materials, advanced glass substrates, and unique formulation technologies, all designed to further address Vuzix and our OEM customer needs. Vuzix, with our manufacturing operations located in Greater Rochester, New York, is well positioned to ultimately be a key supplier to prime defense contractors in needs of wave guides and wearable display technology for a variety of applications. The current geopolitical environment also bolsters the need for U.S.-based suppliers such as Vuzix to offer solutions for outfitting U.S. defense forces along with their Humvees and aircraft with heads-up display, optics, and waveguide technology that are made in the USA. We believe our OEM offerings will help Vuzix foster business relationships with key defense contractors that will continue to yield follow-on and new OEM programs over the course of 2023 and beyond. As mentioned briefly, the Vuzix Ultralight Smart Glasses OEM platform was introduced at CES and it captured the attention of everyone who saw it. The ability to pack compelling AR technology inside a fashionable industrial design was unexpected until Vuzix made it happen. These glasses were unheard of until now and are appealing to broad market players ranging from the fashion and sports brands to some of the largest internet search and social media companies out there. At CES, we showcased a variety of ultralight smart glasses models ranging from single color frames, multicolored frames and sunglass versions, the ability for white label or co-brands to customize the ultralight smart glasses OM platform and turn our design into SKUs is very exciting for the AR, AI smart glasses marketplace. There are multiple critical characteristics that are needed to be successful in the broader markets And the Vuzix ultralight platform was designed to cover them all. 64% of the population wears glasses. This must be addressed for the smart glasses category to be successful. And Vuzix has IP around prescription-based wave guides that we feel should be able to drop right into the current supply chain for prescriptions. People won't wear glasses that are heavier than 50 grams. And the Vuzix Ultralight Platform comes in at approximately 35 grams. People want and need to have choices. Think about picking out your last pair of prescription glasses or sunglasses. Some people spend hours of time on this endeavor. The Ultralight Platform, as a platform, is designed to be tooled into as many different SKUs as our OEM partners can imagine. People are vain and need fashion-forward glasses, too. There is no way around this. Our ultralight platform is near indistinguishable from conventional fashion glasses. Think about the AR competitors today. Nobody is clamoring to wear a HoloLens or Magic Leap down the street as a fashion statement. And a one-size-fits-all pair of glasses just doesn't appeal to the broader market. People need multi-day battery life, and the ultralight delivers up to two days of operation on a single charge. The AR smart glasses must deliver a compelling experience and plug and play with the smartphone as an accessory. And here again, the Ultralight is designed to integrate right into the messaging systems of a smartphone. And with the available SDK, we expect many cool applications will be in the offering. Zuzix Ultralight delivers an array of information to the heads-up display of wearers wirelessly, including turn-by-turn navigation, language transcription, language translation, Powered by Google, text notifications, and with the addition of AI for visual search and more, the application space becomes endless. Again, the AR smart glasses market has been waiting for a breakthrough in the industrial design to deliver compelling technology that is low weight, an informed factor that everyone can appreciate, and the Musix Ultralight platform delivers just that. As a result of all of the above, we are now engaged with a number of consumer electronic and fashion brands focused on the ultralight OEM platform. Although it can take time for all these OEM projects to move into production programs, contributions to the top line are expected to ramp over the balance of this year as programs from consumer OEM customers alongside U.S. and allied defense homeland security customers come online and move through the process. The underlying trend towards enterprise-wide rollouts from numerous key Fortune 100 accounts is a very exciting development for Vuzix and the enterprise smart glasses industry in general. Industry awareness of smart glasses and enterprise is pervasive. Customers are committing to deploying smart glasses-based solutions across their company, and we're very bullish about the growth of our enterprise business in 2023. Unlike some of the Carl Sagan-esque market research reports predicting more stars than grains of sand on the beach, Deloitte, one of the world's largest and most respected professional services firms, has been in the trenches working with enterprise organizations as they look to wearable technologies to solve problems in supply chain and elsewhere. In their 2022 research report, they expect 75% of enterprise organizations over the next five years will be adopting wearable and mobile technology something Vuzix is finally starting to see firsthand. A case in point, just yesterday, Rider Systems Inc., commonly known as Rider, who specializes in fleet management, supply chain management, and transportation management, started an ad campaign that aired on CNBC during Squawk Box and other shows. This ad was about their approach to ever better, their main slogan, and how important it was for their customers' experience It was great to see them showcasing the Vuzix M400 as a cornerstone for the advanced technology around their e-commerce and inventory management solutions. Vuzix smart glasses are going to work across enterprise in a multitude of environments and configurations, whether it's healthcare, where we have customers deploying the Vuzix Blade, M400 and M4000s as their go-to device of choice, to warehousing and logistics in Industry 4.0. We recently standardized the operating system level across our family of smart glasses with the general availability of Android 11 operating system for the Vuzix Blade, Vuzix M400, Vuzix M4000, and the Vuzix Shield. The advancement to Android 11 enables a variety of key benefits, including increased security, improved user experience, easier integration with a variety of third-party mobile device management, software packages, and enablement of advanced Android features within third-party apps. And as you might imagine, Vuzix has in development several next-generation smart glasses solutions that will keep us at the forefront of the competition. During Q4 2022, Vuzix closed the acquisition of Movient. a SaaS-based SAP solution provider, which is now a Vuzix-owned company. As previously mentioned, Moviant's warehouse workflow solution and architecture are unique in that it does not require an online connection or middleware to operate. The core Moviant team brings more than 40 years of experience related to SAP system-level architecture, mobility, project management, and implementation of SAP software suites. The Moviant solution was developed in a close collaboration with a very large aerospace and defense customer and is currently deployed in numerous of their locations across the US, Europe, and has recently gone live in Canada as well. The Moviant solution is currently supporting handheld scanners and mobile phones, which represent a logical transition to Vucic smart glasses. We see this as a significant market opportunity to support traditional warehousing hardware and our plan is to introduce Vuzix smart glasses as an upgrade for hands-free picking into these environments. Strategically, we believe that Movient's underlying technology and architecture can be packaged into APIs that could be used by Vuzix ISVs and the likes to enhance their current software offerings and help expand existing market and open up new markets for smart glasses across warehousing and logistics. In terms of Movient's revenue generation, we expect a low to mid seven-figure revenue contribution in 2023 with good gross margins and minimal impact on our net operating costs. I'd like to now pass the call over to Grant for his financial review. Grant?

Thank you, Paul. As Ed mentioned, the 10-K we filed this afternoon with the SEC offers a detailed explanation of our annual financials. I'm just going to provide you with a bit of color on some of the full year as well as quarterly numbers. For the year ended December 31st, 2022, FUSIX reported $11.8 million in total revenues as compared to $13.2 million for the prior year, a decrease of 10% year over year. Sales of engineering services for the year increased 250% to $1.3 million from $0.4 million. Smart glass revenues decreased 18% compared to the prior year due to larger volume Sales discounts, negative foreign exchange comparatives, and to a smaller extent, lower unit volumes. For the three months ended December 31st, 2022, Vuzix reported $2.9 million in total revenues versus $3.3 million in the prior year's fourth quarter. Current economic uncertainties and continued geopolitical tensions we feel resulted in the deferrals of some customer purchases in Q4. For the full year ended December 31st, 2022, there was an overall gross profit of 1.5 million or 13% as compared to 1.6 million or 12% for 2021. The improved gross profit percentage was a result of decreased depreciation and amortization expense in 2022 versus 2021 as more of our current manufacturing equipment became fully depreciated and an 8% expense reduction in unapplied manufacturing overheads. Research and development expenses for 2022 rose 9% to $12.7 million as compared to $11.7 million for the 2021 period. The increase was largely due to a rise of $0.6 million in external development expenses, primarily related to our Blade II and Shield smart glasses, and a $0.4 million increase in wage costs due to additional personnel hired in 2022. Sales and marketing costs For all of 2022, row 32% to $8.1 million from $6.1 million in 2021, an increase attributable to a $1.7 million rise in wage expense due to headcount increases and a $.4 million increase in trade show expenses. General and admin expenses for the 2022 decreased 7% to $21 million as compared to $22.5 million for the 2021 period. The decrease was primarily due to a $1.3 million decrease in non-cash stock-based compensation, primarily related to the company's LTIP, which was implemented in the first quarter of 2021. For the full year ended December 31st, 2022, the net loss was 40.8 million or 64 cents per share as compared to 40.4 million or a loss of 66 cents per share for the full year of 2021. Now for some balance sheet highlights. Our cash position as of November 31st, 2022 was 72.6 million. And we had a net working capital position of 76 million. Net cash flows used in operating activities was $24.5 million for the year ended December 31, 2022, as compared to $27 million for 2021, a reduction of $2.5 million. Cash used for investing activities in 2022 was $21.2 million, up significantly from $4.9 million in the prior year. The increase was primarily a function of the strategic investments we made in our future, including $16.3 million related to our technology license with Atomistic and $2.3 million related to the acquisition of Movient. We also invested $1.7 million for fixed assets in 2022 that included manufacturing equipment and product mold tooling. We will continue to make investments to drive our development and growth in 2023, including over $5 million for the purchases of fixed assets, primarily around expanding and improving our waveguide manufacturing capabilities. During the year ended December 31st, 2022, the company repurchased 464,672 shares of our common stock at an average cost of $4.32 with the bulk of these purchases taking place in Q4. Looking forward to the To the balance of 2023, we are confident we have the resources to execute our business plan and further invest in our future. With that, I would like to turn the call back over to Paul.

Thanks Grant. Vuzic's investments in our future are paying off in spades. We have diversified our product portfolios and with our wave guide products hitting the market, we have formalized our OEM group and they are opening up multiple new revenue streams for the company. More and more enterprise organizations are embracing wearable technology, and 2023 will see this momentum accelerate. And as Grant just said, we have all the resources we need to execute on our plans. With that, I'd like to turn the call back over to the operator for Q&A.

Thank you. We'll now be conducting our question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. Our first question is coming from Matt VanVleet from BTIG. Your line is now live.

Good afternoon, guys. Thanks for taking my question. I guess first on, Paul, the comment you made around a couple of the hiccups with some rollouts with customers. Wanted to maybe get a little more detail there. I know Grant mentioned some geopolitical issues maybe having some impact, but wanted to hear maybe more details on what those hiccups have been. And maybe more importantly, sort of how things have trended over the last two months in relation to some of those. Were they just delays or are you still working on some of those deals and then how that maybe impacted the pipeline, which sounds positive, but just curious on maybe what impacts you estimate some of those issues had on the forward pipeline as well. Thank you.

Yeah, so, you know, the fourth quarter when you're in the logistics industry where you're moving boxes around, it's not a good time to actually be potentially putting hiccups in your supply chain. A lot of these deployments are brand new. They're just getting started. In some cases, they're actually rolling out. They're in multiple places. Some of the companies that we work with were like, look, we're going to wait until the first quarter to do this and the second quarter. Part of the reason why Q1 is as strong as it is is some of that happened, but some of that got pushed also after Q2. Quite frankly, it doesn't look bad either for Q6. Everything's kind of coming along nicely. You know, the other things, you know, it's just the world was in the fourth quarter with, you know, the markets going the way they were. People worried about making sure that they had capital availability and stuff. They were just decisions that pushed things a little bit. It's not lost business at all, and to the contrary. You know, guys like Ryder and the like, I mean, these guys are just moving forward. It's strictly timing related.

Okay, that's helpful. And then when you look at the potential of the OEM business, in particular the WaveGuide component of that, as you talk about large consumer electronic companies and other tech companies, I guess how should we think about maybe over the longer term what the potential mix of business between OEM sort of component manufacturing versus full complete ships glasses coming from musics if you have kind of a general thought or a couple different scenarios would love to hear that and I guess sort of wrapped within that have the large-scale sort of layoffs and cutbacks at some of these large tech companies and they've talked about maybe concentrating on what more of their core business looks like today and Is that impacting the potential for the OEM business to grow over the next couple years?

First on the ladder, you know, I personally think there was a lot of hiring that was overdone during the pandemic period. I will say that it's made maybe some opportunities for Vuzix from an acquisition of new talent a little bit. I don't believe that those letting people go at Herb Vuzix, in fact, In some cases, less staff mean they have to be more efficient. So in those areas where they're letting people go that are part of the supply chain and stuff, we're seeing the need for our products starting to grow. So kind of a mixed bag there, but primarily I think it helps . As far as the mix between product OEM solutions versus pieces and parts, I have to say that the reason why we built Ultralight is so we could have a platform. that you could then get rebuilt into, you might imagine, a bunch of different brands. I mean, you go into a sunglass hut today, right? There's 500 different pairs of sunglasses out there. And so this platform most likely is going to be with somebody else's plastics and brand on it. And they have these look and feel that they all have. They're very proud of the brands that they've built. Those guys are going to be buying pieces and parts from Vuzix. But these guys aren't software companies. They don't know how to make electronics. They don't know how to make waveguides. This whole idea of an integrated waveguide with a prescription, these are all things that Vuzix brings to the table. So the pieces and parts won't just be a waveguide. It's probably going to be a bunch of stuff in there. Some of it will be licensed, and some of it is literally going to be us supplying into the supply chains. Now, in some cases, We have folks that we're talking to right now that want their white label brand on what we're doing. They love it just, they don't even want changes to it, maybe just subtle things like a nose bridge or something. And in those cases, we're talking reasonably high numbers, but that's something that is really a white label Muzix product that has their name on it. And those numbers could be significant, but I don't think they can be anything like it's going to be when you're in this supply chain for prescription glasses. And it's just part of turning that crank. There are billions of glasses sold annually. And in order to be in the broad markets, and by the way, I didn't mean to throw Magic Leap or HoloLens under the bus there. It's just kind of obvious. They're great big heavy things. People aren't going to wear them to the beach and enjoy sitting out and catching a suntan. You need glasses that fit the world today. And that's what this platform is all about. One more, roll forward a little bit, a comment is in the defense side of the business. In those cases, it's going to be engines, wave guides, and sometimes modules. I don't think you'll see Vuzic selling a full-up solution because it's going to be part of what some of the large defense contractors, part of their systems that they're supplying into the US defense markets. That's a long-winded answer. There's a lot of stuff going on around our OEM side of our business. Quite frankly, in the long run, this could be the tail wagging the dog at Musix. I mean, our product business is doing well. It's growing. But you could really see some significant growth coming out of this side of our business in the comparison. I mean, we see billions in the enterprise. So you get the point anyway.

Yeah, no, very helpful. And then, Grant, quickly one question on Movian. You talked about a seven-figure contribution in 2013. What kind of growth does that represent or, you know, how much revenue was allocated to that pre-acquisition and just kind of making sure we understand what you guys are bringing to the table there?

Just one sec. I mean, you know, last year they did $200,000, $70,000 of it. you know, when they were part of USICS. You know, next year we're looking at a couple of million dollar contribution from them. I mean, you know, over the last several years, they've been in a developing mode, you know, working with their customers and, you know, they're getting ready for some good deployment. So it should be a nice contributing factor next year.

Okay. Thank you very much. It means 2023, by the way, for next year. We're all doing that a little bit here. Sorry. Yeah, it's okay. Go ahead.

Thank you. Next question is coming from Christian Swath from Craig Callum. You're live. Is that live?

Hey, great. Thanks, guys. So I just appreciate the color of the different, you know, product revenue opportunities modules, you know, just wave guides or product sales. You know, XC acquisition, you know, what type of product sales growth rate should we be thinking about? Is the target broad range in 23?

I think we're going to see a fairly consistent move through 2023 where each quarter should beat the previous quarter. And we'll have a, I think a really nice 2023 and 2024, I think is going to start to kick into overdrive because that's where all these guys start rolling out on the OEM side, especially. that really starts rolling out into the market. But I will also say our expectations on the product side, we've been working for a long time with some of these folks in supply chain. And in that side of the business, I mean, you know, we're talking about many thousands of units worth of deployment. So, I mean, 23, 50%, I guess, would be an easy LADA.

Okay. Okay. Fabulous. And then, you know, as we begin to ramp, you know, and get ready for these other potential OEM type of ramps. Should we expect, you know, engineering services to have a good year in 23? Or am I thinking about that wrong?

The bulk of the revenues, I think, is going to be choppy because that's the nature of engineering revenues, right? I mean, you're doing something, you do a lot of work, you deliver in a quarter, and then, you know, they're evaluating, and then the quarter and a half later, you're rolling on the next piece to kind of get into the production. So, But we have a bunch of those things that are happening, Christian. So I would suggest that you'll see continued choppy growth, but it will get bigger and bigger over time, upwards of 1% to 200%.

Okay. That's perfect. And then my last question, you know, kind of given that, you know, back of the envelope outlook for revenue and the capital investments, you know, we're making, you know, what should we, what is the fair assessment that we should assume for cash burn this year?

It should be similar to 22, I think.

It shouldn't be any worse. Our plan is to do better than, you know, lose less cash.

I'm sorry, forgive me, 100%, because the revenue side's climate.

I mean, we're still making some big investments, you know, in 2023, as mentioned, you know, on the call regarding, you know, expansion of our waveguide capabilities and manufacturing. And, you know, as you dig into the cave, there are some further investments we're making related to our atomistic technology licenses.

Okay. All right. Great. Thank you. No other questions. Thank you.

Thank you, Christian.

Thank you. Next question is coming from Jim McElroy from Dawson and James. Your line is now live.

Yeah, thank you. Good evening. In the K, it talks about the atomistic agreement being, I don't know, amended or changed. And my question is, what was the genesis of that? And then Secondly, does that change the cash obligations or timing that you have with Atomistic?

It really doesn't. I mean, I think we've got a bit more of a window on one piece of it, but for the most part, it doesn't change anything. There's no extra cash needed. It's just there was a way for us to get some more technology that we could bring on board, and we thought that that was important. So we made some modifications around it to do that.

And so the change was around getting the additional technology. Is that right? Yep. That's 100%. Got it. And so when does that investment, that partnership with Atomistic, when does that turn into a product generate or a revenue generating product?

That's a good question, Jim. Let me say that between now and when it does, there should be a lot of data points that we're going to be able to share along the way. I've been saying that, but things are starting to come together now. We're, knock on wood, about ready to file the intellectual property pieces on this stuff that we need to do, and we'll be able to share a whole lot more coming up. I will say that they are doing around some other things that we're also doing may bring revenue generation sooner rather than later, but there's a A lot in the air that I'd rather not talk about just yet on this one.

Okay. So is it reasonable then to think that this is a 20, let's put it this way, not a 2023 impact? Okay. Okay. All right. That's it for me. Thank you.

Thank you. Next question is coming from Jack Vanderaart from Max and Group. Your line is now live.

Great. Hey, guys. I appreciate the update. It was great. It was also great to – I was at CES this year, so it was great to test out your latest products and the new platform at CES. A couple questions. I was wondering about the multiple OEM purchase orders you announced in early January of this year. There was a press release with the three defense firms and the one commercial customer. I know you mentioned, you know, some of those orders were at least partially shipped in 2022 and I think the rest would be in 2023, but just a couple related questions here. Um, did you give any more color around maybe the size of these deals or just relative to, if you can't give a, you know, talk about the size of the deals themselves, maybe just talk about how much percentage wise shipped and was recognized in the fourth quarter versus what you expect in the first quarter of 23. And then are these shipments included in that at least 3.5 million of product revenue you've locked in in the first quarter?

Thanks. There's precious little versus of defense revenues in that 3.5. There's precious little. Not all of it shipped in the fourth quarter either, though. These are programs that will contribute throughout 2023. And the size of them range from 50 grand to, you know, 200,000 to 300,000 kinds of numbers.

Got you. Okay. That's helpful. And then it sounds like there is a follow-on and expansion order opportunity for, I guess, for all four of these particular customers?

Yes. And, by the way, the four is we have a reasonably large number of defense companies that are coming to Vuzix either buying our standard waveguides and engines or having us build custom waveguides and engines for them, and we anticipate that this number will, I don't know if the account number will grow, I expect it will, but more so the amount of business that we're doing with these customers will grow through 23.

Okay, great. And then just another follow-up question on the acquisition of Movient, Aside from a strategic perspective, which is a great addition, it sounds like it's also a low seven-figure revenue contributor to 2023. I know another analyst asked a question on this, but can you just maybe talk about the seasonality of that business and particularly what you expect in the first quarter from that?

It's not really very seasonal. This is SaaS-based revenue. Once you start billing, it's a quarterly revenue stream that comes in. I don't think it is seasonal at all, frankly. It does take time to implement in a new facility, so there'll be engineering components that we will build for up front, and those things come and go over time, but it's engineering services and then SAS-based revenues that just keep rolling.

Okay, great. Well, I appreciate the update, guys. I'll hop back in the queue.

Yeah, Doc, just to elaborate a little bit more on that, You know, these guys have been, every single place they've installed their stuff in has been a success. In fact, not just a success. It's replacing many of the things that are in those facilities. And as they grow, the number of customers we expect to fully ramp through this year, that helps. Not just this year. This is the beginnings, I think, of a, I mean, you know how big supply chain is. I mean, it's The number of companies that could utilize this thing is pretty significant.

Got it. I appreciate the added color. Thank you.

Thank you. We reach the end of our question and answer session. I'd like to turn the floor over to Paul for any further or closing comments.

Thank you, Kevin. I would like to thank everyone for your interest and participation on today's call. We look forward to speaking with you again in May when we report our Q1 2023 quarter results. Have a nice afternoon, everybody. Thanks again.

Thank you. That does conclude today's teleconference or webcast. Let me just connect your line at this time and have a wonderful day. We thank you for your participation today.