Vuzix Corporation

Greetings and welcome to the VUSIC's fourth quarter and full year ending December 31st, 2024 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.

Thank you, operator, and good afternoon, everyone. Welcome to the Vuzix fourth quarter and 2024 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 legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, March 13, 2025. Musix assumes no obligation to update these projections in the future as market conditions change. This afternoon the company issued a press release announcing its financial 2024 results and filed its 10-K with the SEC. So participants in 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 measure 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, 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, after which we'll move on to the question-and-answer session. Paul?

Thank you, Ed. Welcome to the Vuzix Q4 and full year 2024 conference call. In recent years, the wearable computer and AR industry has seen significant changes, progressing in maturity and acceptance. External factors such as COVID-19 have shown the role of these enterprise smart glasses in improving workplace efficiency. As the industry has developed, Vuzix has continued to invest and adjust its strategy to align with the future direction of the market. On the technology front, Vuzitz has been discussing ours and the industry's progress on waveguides and the micro displays that drive them for years. We're now approaching a pivotal moment which should increase adoption greatly. Innovation in these technologies has finally enabled the development of all-day wearable smart glasses with high performance displays and industry first. As we've long emphasized, our waveguide optics work seamlessly with a variety of third parties supporting enterprise, medical, and our OEM business including military and defense sectors, and now with the broader consumer markets following on. Despite the noise and pace of change in the industry, Vuzix remains focused on its pursuit to develop the best mousetrap to solve and support the enterprise and other markets we address as they unfold. We continue to enhance the performance the features that matter, and of course the cost competitiveness of our waveguides, arguably the most critical component of AI and AR smart glasses and other wearables. Our commitment to investing in and advancing our core waveguide technology has led to one of the most significant developments in Vuzix's recent history, the establishment of a strategic partnership with leading ODM supplier, Quanta Computer. This collaboration, besides highlighting the credibility of what Vuzix has created over the years, has facilitated the development of multiple smart glasses reference designs based on our WaveGuide technology and is proving to help open up the markets in general for us. Our partnership with Quanta, reinforced by their $20 million multi-phase investment, underscores our shared vision of revolutionizing the AR and AI industry. Through this collaboration, Vuzix is poised to supply millions of cutting-edge and cost-competitive waveguides for AR and AR-driven smart glasses to Qantas' extensive OEM client base. The first $10 million tranche of this investment was received in September of 2024, and we remain on track to meet the milestones required to unlock the remaining two $5 million trenches as anticipated. At CES 2025, we introduced our Ultralight Pro AR smart glasses platform designed for specific enterprise verticals and market use cases. These binocular, full-color, see-through glasses powered by Qualcomm's AR1 processor fill a critical gap in the current market. The response has been overwhelmingly positive, and we are already receiving inbound interest from OEMs and white-label partners. Ultralight Pro AR Smart Glasses platform was also awarded Best in Show by Wearable, the authority on wearable technology. Further at CES 2025, we introduced the Ultralight Audio Smart Glasses platform, a new upgrade to the base Ultralight platform which integrates dual speakers and noise-canceling microphone for enhanced audio and voice interaction. And more recently at Mobile World Congress in Barcelona, Micro OLED, a Grenoble based maker of AR smart glasses and their active look software platform along with the semiconductor company STMicroelectronics announced a reference design for AR smart glasses based on the ultralight audio smart glasses platform from Vuzix featuring Micro OLED's active look software. This reference design supporting the active look ecosystem will enable third party eyewear manufacturers to create diverse smart glasses models for sports, in outdoor applications that require mission critical information in real time and on the move. Our Z100 ultralight AR smart glasses platform, launched at CES 2024, is aimed at building an ecosystem attracting early adopters and laying the foundation for our OEM and white label business. In November, we strategically reduced the price of the Z100 to accelerate adoption among ecosystem partners, effectively OEMs and early adopters. This move has led to increased demand and follow-on orders for this AI-powered smart glasses. The Z100 is being selected for its all-day wearability, seamless heads-up display integration, and competitive pricing, which supports high-volume sales. The Vuzic Z100 smart glasses are being focused on white label and OEM customers, and we are actively fielding multiple RFQ opportunities based on this platform. As we have previously indicated, we have been steadily pivoting towards the ODM slash OEM side of our business, forging strong development and supply partnerships throughout the industry. We have strengthened our presence in the defense and industrial sectors, where our differentiated solutions are meeting mission-critical demands. Our partnership with Thales, Garmin, L3Harris, and others yet to be named demonstrate our ability to deliver differentiated higher margin solutions that align well with both our customers' needs and Vuzix's long-term growth strategy. In the enterprise software ecosystem, our acquisition of Mobiant in November of 2022 is allowing us to expand our offerings within the logistics vertical with end-to-end solutions. We expect these new solutions will be white-labeled and or OEMed, and in some cases, carry the Vuzix brand. We have multiple customers that are employing Mobilium by moviant software and have moved from the proof of concept stage to formal rollouts. We are listening to our growing customer base and evolving our Mobilium software beyond picking and packing workflows to deliver end-to-end enterprise solutions that extend beyond warehousing and logistics as well. In parallel, We continue to engage with our stable of ISV partners to drive broader adoption of smart glasses in the enterprise sector. We've been working with these ISVs for some time now, as you all know, and they are seeing the business opportunities finally coming to fruition also. Together, we aim to deliver intelligent, all-day wearable solutions, integrating hardware and software to drive tangible business outcomes and productivity. As we have repeatedly stated, the primary differentiator for Vuzix is our ability to make a quality waveguide in volume at an affordable cost. With our proprietary technologies, we can process in a timely fashion hundreds of waveguides per single run, while the bulk of our competitors are capped at a dozen waveguides or so on an industry standard 300 millimeter wafer, requiring a much more time consuming process. This advantage comes from custom design process and equipment, extensive experience, and developed IP, enabling us to quickly design and manufacture smart glasses and add new features. To bolster this edge, our patent portfolio has grown by 50% in the past two years to over 425 patents and pending patents, covering a wide range of optical, waveguide, and wearable computing technologies, solidifying our AR industry leadership. Our ODM slash OEM business has the potential to start ramping up meaningfully. With Quanta as our partner and with our major computing firms scaling production, our ODM slash OEM business will grow. We anticipate an increase in our reference designs and OEM customer count and are actively involved in multiple projects with Quanta that have potential to create significant business opportunities for both entities. Monta's extensive scale and expertise in electronic product manufacturing combined with Vuzix proprietary waveguides and smart glasses technology form a powerful alliance. We foresee that this collaboration will result in high volume production of our waveguides and AR components, ultimately reaching millions of units and driving substantial revenue growth for Vuzix. Moreover, we are engaging in various stages of discussions with several other ODMs who are already designing or interested in designing and manufacturing AI slash AR smart glasses for widespread consumer use. In 2025, Vuzix anticipates significant growth in customer wins across our OEM and enterprise businesses as the industry stabilizes and expands. We expect multiple design wins for both consumer and enterprise OEM products where Vuzix will supply optical waveguides and display engines. In the defense and security markets, we foresee multiple programs with current OEMs and defense contractors leading to production engagements and orders for customized designs. In enterprise, we are nurturing numerous customer wins that are being supported by measured success that exceed customer benchmarks by an order of magnitude. In parcel processing, for example, Moviance's newly introduced Mobillium application running on Vuzic smart glasses is seeing parcel scanning to bin placement speeds clocked at a fraction of the current methods from frontline workers. For new workers where turnover is high, we are seeing scan to bin placement improvements of upwards of 250% in some instances. In a typical warehouse with 80 pickers, each picking 300 items per day from pallets, a 15 to 20% improvement in efficiency would enable the same workforce to pick an additional 3,600 to 4,800 items per day, significantly increasing daily throughput without adding staff. To summarize, as a result of these fully demonstrated KPIs, key performance indicators, which stand up on their own, we expect these customers will be placing follow-on orders that have the potential to effectively consume all of our existing M400 inventories. And as a result of our anticipated conversion of our existing M-series inventory into cash, Vuzix is well on its way to introducing next-generation purpose-built products based directly on the customer feedback in the field and our network of ISV partners and resellers. We have also recently received a commercial order for Vuzix Shields, which consumes our remaining inventory and planned production of this first-generation model, and we are currently responding to RFQs that will effectively consume our remaining M4000 inventory. Let me add, Vuzix enters 2025 with a strong financial foundation. As of year end 2024, we had approximately $18 million in cash and cash equivalents, reflecting our disciplined cost management and capital raising efforts. This includes $8.2 million raised through our at-the-market facility in Q4, providing additional flexibility to support our growth initiatives. Additionally, we are making strong progress towards meeting milestones required for the remaining $10 million investment from Quanta Computer, which will further reinforce our liquidity position. Finally, as the aforementioned business unfolds, we expect a large portion of our finished inventories to be converted to cash. Grant will now take you through our financial numbers. Grant?