Microvision, Inc. Q1 FY2021 Earnings Call

Welcome to the MicroVision First Quarter 2021 Financial and Operating Results Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Lindsey Stibbard. Please go ahead.

Thank you. Good afternoon, and welcome everyone to MicroVision's first quarter 2021 financial and operating results conference call. Joining me on today's call are Sumit Sharma, Chief Executive Officer, and Steve Holt, Chief Financial Officer. The information in today's conference call includes forward-looking statements, including statements regarding exploration of strategic alternatives, sale of our product verticals or technology, sale or merger of the Company, or completing any such strategic transaction; maximizing shareholder value; managing costs; potential customer orders; future royalties; progress under and benefits of existing contracts and license agreements and the negotiation of future agreements; customer product launches; advantages of our technology; litigation; business execution; projections of future operations and financial results; availability of funds; product development applications and benefits; availability and supply of products and key components; commercialization of our technology; future product roadmaps, potential product sales, potential impact of products in the market, ongoing development of technology, scalability of technology and designs, expected performance of products, comparisons with competing products or technology, market opportunities and future demand; as well as statements containing words like opportunity, potential, possibly, intend, believe, goals, paths, expects, plans, will, could, would, likely, and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements. We encourage you to review our various SEC filings, including our Annual Report on Form 10-K filed on March 15, 2021, as well as various other SEC filings made from time to time in which we discuss risk factors associated with investing in MicroVision. These risk factors could cause results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update this information. The financial numbers presented on the call today are included in our press release and in the 8-K filed today. Both are available from the Investor Relations section of our website. This conference call will also be available for audio replay in the Investor Relations section of MicroVision's website at www.microvision.com. And now I'd like to turn the call over to Sumit Sharma. Sumit?

Thank you, Lindsey. Good afternoon everyone. The last fourteen months have been incredibly busy and productive at MicroVision. Today, I will cover some of the important achievements from our Automotive LiDAR product development and their potential impacts, our target areas of execution going forward that we believe will increase shareholder value and provide a business update. First, I want to thank our employees for their continued dedication and execution. Multiple times in our Company’s history, our team has performed exceptionally and delivered products based on our technology that we believe were far ahead of global competitors. Our employees are incredibly smart and talented, and I am continuously humbled by their dedication to make MicroVision a success. Let me start us today by updating you on our first-generation long-range LiDAR A-Sample and the potential impact it could have. I believe this sensor could offer a much higher level of performance compared to any LiDAR currently available or announced in the market. Our team successfully completed our A-Sample hardware and development platform on schedule. Our A-Sample hardware, as seen in the pictures shared in the press release earlier this week, is targeted for potential customers, partners, and parties interested in a strategic transaction and can be mounted on top or behind the windshield inside a test vehicle. We designed this hardware to support automotive level, moving platform testing from the ground up. Our robust design also allows us to target this hardware for initial sales in the second half of 2021, following completion of internal and external testing. I will elaborate on this a bit later on this call. We expect our sensor to meet or exceed current target OEM specifications. MicroVision's LiDAR sensor is expected to perform to 250 meters of range. It is also expected to have an output resolution of 10.8 million points per second from a single return at 30 hertz. LiDAR companies communicate product resolution in different ways as you may know. I think looking at points per second is the most relevant metric to compare resolution performance of competing LiDAR sensors. We believe our sensor will have the highest point cloud density for a single-channel sensor on the market. Our sensor has also been designed for immunity to interference from sunlight and other LiDAR sensors, using our proprietary scan-locking intellectual property. Our sensor will also output axial, lateral, and vertical components of velocity of moving objects in the field of view at 30 hertz. I believe this is a groundbreaking feature that no other LiDAR technology on the market, ranging from time-of-flight or frequency-modulated-continuous-wave sensors, are currently expected to meet. Let me elaborate a bit more about the potential importance of this feature. The capability of future active safety and autonomous driving solutions to predict the path of all moving objects relative to the ego vehicle at 30 hertz is one of the most important LiDAR features. This is significant since these active safety systems are tasked with determining and planning for the optimum path for safety. Providing a low latency, high-resolution point cloud at range is an important first step. However, having a detailed understanding of the velocity of moving objects in real-time enables fast and accurate path planning and maneuvering of the vehicle. Sensors from our competitors using either mechanical or MEMS-based beam steering time-of-flight technology currently do not provide resolution or velocity approaching the level of our first-generation sensor. Additionally, flash-based time-of-flight technology has not demonstrated immunity to interference from other LiDAR, which is a big issue. This potentially limits the effectiveness of these sensors to be considered as a candidate for the optimal LiDAR sensor or as the primary sensor to be considered for active safety and autonomous driving solutions required for 2024-25 OEM targets. LiDAR sensors based on frequency-modulated continuous wave technology only provide the axial component of velocity by using the Doppler effect and have lower resolution due to the length of the period the laser must remain active while scanning. With the lateral and vertical components of velocity missing, lower accuracy of the velocity data would make predicting the future position of moving objects difficult and create a high level of uncertainty. The core function of active safety hardware and software is to accurately predict what will happen and adjust in advance of a dangerous event. These missing velocity components could potentially mean a larger error in the estimated velocity compared to the actual velocity of objects and predict incorrect positioning. Let me share an example. An ego vehicle moving at 60 miles per hour, and a target vehicle moving at 25 miles per hour relative to the ego vehicle, covers approximately 11 meters in a single second. Our sensor updates position and velocity 30 times per second, which would enable better predictions at a higher statistical confidence compared to other sensor technologies. If the target vehicle suddenly starts changing its position relative to the ego vehicle, an active safety system would do a much better job if it had more precise position and velocity data of the target vehicle. This could mean the difference between active emergency braking stopping short of an accident versus a potential collision. A sensor that can provide an accurate and detailed picture of position, resolution and velocity of all objects relative to the ego vehicle at a faster frame rate would enable better active safety systems. Delivering safe mobility at the speed of life requires a sensor that is fast in data output, has high resolution so it can classify objects, has an appropriate cost for large volume scaling, and provides precise velocity and range of objects to predict what will happen in driving conditions all of us experience day-to-day. When evaluating LiDAR specifications from various sources, it is important to consider the context of actual risks in the driving experience all of us have. I would also like to provide a fuller picture on what our product roadmap could look like and why this is important for our value. We expect MicroVision’s long-range LiDAR sensor will have two versions in the future. Our first-generation sensor is the first product in this roadmap. A future generation sensor would be a more advanced version and could have the same hardware layout as our first-generation sensor. A future sensor could also include our proprietary software that would provide features needed for a standalone sensor used for active safety applications. I want to expand a bit on the importance of this future product and the value this could represent to our shareholders. Having what I believe to be the best-in-class first-generation sensor gives us a huge step up against competition. It also provides our very capable team with a hardware platform to further increase value for potential partners and our shareholders. In the short term, I expect our team to continue focusing on internal and external validation of our first-generation LiDAR sensor and any potential confidential evaluation from customers or partners. In the long-term, I believe a future sensor could provide features like Active Emergency Braking, Active Emergency Steering, Pedestrian Active Emergency Braking, and Active Lane Keep, among a longer list of higher-level ADAS features with MicroVision software running on our edge computing. I believe a LiDAR sensor with embedded software that does not require a massive amount of external computing will ultimately reduce the cost of systems for OEMs, thus potentially accelerating the adoption of vehicles with autonomous driving and active safety systems. I expect that key features in our first-generation sensor like highest resolution, full velocity components, and immunity to sunlight and other LiDAR could allow an incredible opportunity for us to add significant value with our software for a greater sustainable strategic advantage. I believe future products built with our software, sensor performance, edge computing, and scalability would be valuable to OEMs, Tier 1 automotive suppliers, and companies that are focused on mobility as a service and, therefore, of value to our shareholders. As we remain focused on exploring all potential opportunities to increase the value of our Company, a portion of our team will continue building towards this roadmap. I look forward to reporting on our progress. Another major advantage of our technology is its capability to demonstrate scalability. To demonstrate this, we successfully developed and installed our long-range LiDAR sensor pilot line in Redmond, Washington. This pilot line is sophisticated. It includes six custom active alignment stations that our team developed working with our automation partners to enable scalability and performance. Our team has launched multiple pilot lines in the past for our display, augmented reality, and interactive display products. I am very proud of our team’s ability to apply their expertise and complete this pilot line on time given the challenges with a global pandemic. This pilot line will allow us to validate designs and manufacturing processes in-house in faster cycles. We expect limited quantities produced from this line will support exploring potential partnerships. This pilot line will also enable us to take our designs, process maps, and control plans and launch a new highly automated production line to support expected initial sales inventory in the second half of 2021 through a contract manufacturer. This future production line in Asia will eventually have the capacity to produce between 12,000 to 15,000 sensors per year starting sometime in 2022. The purpose of this second line is to show the next level of scaling. The ultimate capacity of this production line can be adjusted to meet volumes as required prior to mass production in the 2024-2025 timeframe. We continue to work to mitigate risks to our plan due to COVID and other supply limitations. A key element to show scalability of our technology comes from being able to scale our highly reliable and cost-effective solid-state beam steering system for automotive use. This month, we launched our fifth-generation MEMS to a 200-millimeter wafer size with our MEMS fab partner. This is of course not a new effort for us. We have launched our MEMS to scale in the past with our third-generation that were used in a Sony product and our fourth-generation MEMS that was part of our April 2017 contract and are currently in production. Advancing our fifth-generation MEMS to the fab is a big step for this program that will allow us to demonstrate to potential partners our capability to meet future price targets. I am extremely proud of our team to have achieved this key objective with all the challenges faced through 2020. I would be remiss if I did not mention that our long-range LiDAR sensor is designed and developed internally from our proprietary MEMS-based laser beam scanning technology. This intellectual property has been developed and proven in various programs for more than two decades. Our differentiated sensor is built on a large body of intellectual property, including more than 400 patents. I believe this provides us with a competitive moat in hardware and software for years to come and a very important sustainable strategic advantage. I would now like to briefly update you on our exploration of strategic alternatives. I believe our technology and products are at an inflection point in multiple verticals. I want to emphasize that the Company remains committed to exploring all strategic alternatives to maximize shareholder value. In October 2020, we set the objective to complete our LiDAR product and said having hardware that can be productized would be an important step for evaluation by potential interested parties. We completed that objective in April as planned and are prepared to support any potential evaluation of our technology and capability to scale. As I shared earlier today, I believe our sensor technology is differentiated by features that will potentially be recognized as disruptive in the market. I have shared with you that I believe consolidation in this space will continue and signs of this are starting to become public. I believe MicroVision needs to continuously build value with our products, roadmaps, and partnerships, while also exploring strategic alternatives. Given the continued consolidation in the market, I believe this is a pragmatic approach as we seek to maximize shareholder value. I want to emphasize our primary focus will remain continued validation of our first-generation LiDAR sensor and support any customized evaluation data from potential partners. Finally, we ended the first quarter with $75.3 million of cash and cash equivalents. As Steve will share, our cash requirement and plan for growth are under control providing a sustainable runway. This allows us to explore all our options from a much stronger position to maximize shareholder value. I sincerely believe our Company now is in one of the strongest positions in our history to be successful. We are in a solid financial position and potentially have a disruptive new product in a market segment expected to have global impacts. The work required on the road ahead is hard. I am truly energized every day as I think about our future and remain profoundly optimistic in our path. Now let me turn the call over to Steve to discuss the first quarter's results.

Thank you, Sumit. Good afternoon, everyone. For the first quarter, revenue was $479,000, a 21% increase over last quarter’s revenue of $395,000. All of the first quarter’s revenue was royalty revenue and attributable to our April 2017 customer. We’re pleased to see an increase in royalties over the fourth quarter and look forward to our customer’s continued success with sales of their product. As I have pointed out before, royalties related to our April 2017 customer will be credited against the non-refundable prepayment the customer made in 2017. Once the prepayment is exhausted, the customer will begin making cash payments for royalties due. At the end of Q1, the balance of the prepayment stood at $7.3 million. The $7.3 million is on the balance sheet as a contract liability. Our first quarter cost of revenue included a $5,000 credit related to the reversal of a warranty accrual. The result is a first quarter gross profit of $484,000. In comparison, gross profit was $395,000 in the prior quarter. Operating expenses were $6.7 million in the first quarter, up from $4.0 million in the prior quarter. In the first quarter, we put in place an employee incentive plan to retain and motivate our team. The expense recognition for this incentive plan increased our operating expenses by approximately $1.2 million in the first quarter. Total non-cash compensation for the quarter was $1.6 million. This expense was a non-cash item. Other causes for the increase were the Company’s portion of payroll taxes on employee stock option exercises and vesting RSU awards. There was also increased spending on labor and benefits due to an increase in headcount, and an increase in materials and subcontractors for the development of our first-generation LiDAR sensor. Our headcount at the end of March was 57, up from 47 at the end of December. For the first quarter, our net loss was $6.2 million or $0.04 cents per share. This compares to a loss of $3.6 million or $0.02 cents per share in the prior quarter. For the first quarter, cash used in operations was $4.5 million, which compares to cash used in the prior quarter of $4.2 million. Again, the non-cash compensation I referenced a minute ago was the primary factor causing the cash usage to be so much lower than operating expenses. Cash and cash equivalents at the end of the first quarter was $75.3 million, up from $16.9 million at the end of the prior quarter. The increase was the result of the proceeds from the two ATMs completed in the first quarter and we discussed those on our last earnings call. I’d like to now turn to the second quarter and give some thoughts on our spending and cash usage as we move forward through this year. I expect an increase in operating expenses in the second quarter. As I mentioned earlier, we initiated an incentive program that uses equity to retain and motivate team members. Those programs will continue through this year, and the expense recognized in Q2 will be similar to the $1.2 million recognized in Q1. I then expect the expense related to that program to decrease to about $1.0 million in Q3 and $800,000 in Q4. Additionally, in April, the company signed a three-year employment contract with Sumit as CEO. The agreement eliminates any cash bonuses and instead primarily uses equity for CEO compensation. The agreement was designed to align CEO compensation with long-term shareholder interests. The agreement grants Sumit 1.2 million shares over three years and will likely generate non-cash compensation expense of approximately $7.5 million this year. About $5.3 million will be recognized in Q2, and then about $1.1 million in Q3 and $1.1 million in Q4. Again, this expense is a non-cash item. As for cash expenses, we expect we will continue to add headcount at the pace of around 10 to 12 people per quarter for the remainder of the year, primarily in our engineering organization as we further advance our first-generation long-range LiDAR sensor and prepare to start production. Additionally, we expect to backfill some of the support positions that were eliminated in our February 2020 headcount reduction. Taking those items into consideration, along with other spending, we see Q2 operating expenses in the $13 million to $14 million range. Given that much of the increase is in non-cash compensation, we expect cash used in operations to be in the $5.0 million to $5.5 million range, up $500,000 to $1.0 million from the $4.5 million used in Q1. Additionally, you may have heard about tightness in the supply of silicon chips. To mitigate risk of supply shortages, we have ordered inventory for some long-lead-time components that are expected to arrive in Q3, but if they should arrive before the end of Q2, we could see another $1.0 million to $2 million of cash used in operations in Q2. As Sumit said earlier, development is progressing well and to ensure the supply of components needed to meet our plans, we concluded it was prudent to place orders for those long-lead-time components. Before we open the call up to questions, let me add my appreciation for our engineering and G&A teams. The engineering team, just days ago, completed the A-Sample hardware and development platform on schedule. This feat was something that some said they couldn’t do, much less do on schedule. And they were supported by a top-notch team in our G&A areas that were able to support the engineering effort and maintain the public company, compliance and controls that are so necessary to our success. We are very fortunate to have so many outstanding people working at MicroVision.

We will now open the call for questions.

Hi. Thank you for taking my questions. Congratulations on successfully delivering the A-Sample for the LiDAR product. You've achieved a significant milestone, which is impressive work. Naturally, people are curious about what the next milestone will be. You've mentioned several times that you expect to have product available for shipment in the third or fourth quarter. Do you anticipate having multiple shipments by then? If so, what would the timing look like? Would you be able to make announcements regarding this, even if you can't disclose customer names? You mentioned on April 17th that you had one or more OEM customers sampling the equipment. Can you share any thoughts on the roadmap for news flow for the remainder of the year in that regard?

That's a good question, Glenn. So I think the way to think about it is, I think Steve and I have both mentioned that these are initial quantities, so we're looking at only a couple of hundred. And think about them in the terms of, you know, more like direct sales, if somebody wants to buy and do moving platform testing, and then the gang of sensors for their fleet or whatever, you know, a range of options that comes to us, right? Now, there's a lot of companies out there are not going to be available publicly because, you know, at that point, it's been validated by us and external parties, and it would be something we would offer and provide. I don’t see as something, but I think the initial quantity part is an important point to remember.

I think what we said was, you know, we're working to get the production line up in Q3, Q4 timeframe. We'll be doing our internal and external verification, reliability testing, compliance testing, and being and then, you know, plan to sell those initial quantities in the later part of the year. So that's – that's sort of what our thinking is for this year in terms of getting the product out there for sale.

Okay.

I am going to add, Glenn. If you think about our April 2017 customer, right, we – that contract you don’t need introduction. Therefore, we always have – there is a proof-of-concept that we are in that space and we are providing parts. The Automotive LiDAR, creating reputation for long time is important. So therefore, this line, the objective, visual scalability is very important, actually. And I think I mentioned this in the last call as well, that it's equally as important technology. And we're at in a very good position for that.

Right. In the past, you've said, you know, that the getting the product completed would kind of derisk the story potentially for potential acquirers. And you kind of hinted – talked about that a little bit in your prepared remarks. But I wonder, you know, was there kind of a lull in negotiations, while people waited for you to finish this and do you expect now that it would pick back up or just any color or clarity on that degree?

Yes, I think, you know, we were clear that having the ability to prove what we were trying to – what we were saying we could do was critical in progressing things along and so, you know, I don’t really can't comment on that process any further than that.

Okay, thanks. And the April 2017 customer, there was a, you know, large technology company that won a very large DOD contract in the last six weeks or so. You know, I guess, can you – whether or not you can comment on anything about that, or how it would affect you if it's related. I imagine you can't comment, but I thought I'd ask.

Yes, we can't comment on that. Sorry.

Okay. Sure. And so – and just Steve on the expenses for the components because that's the only kind of cash you know, the major part of the – most of this is non-cash related to the stock comp stuff. But the $1.0 million to $2.0 million, you said it could come in Q2, but if it comes in a little early, that was $1.0 million to $2.0 million, and otherwise, I guess that would come in Q3? Making sense…

Yes, the target, I guess I'm trying to say we're thinking Q2 cash used in operations would be in that $5.0 million, $5.5 million range. But I wanted to tell, there could be $1.0 million to $2.0 million of inventory should arrive early. That'd be a good thing, I guess. But, you know, inventory purchases go to cash used in operations. And so, I just wanted to put that out there as a caution that, if it arrives on certain quarters, one day versus the next, it could be a $1.0 million to $2.0 million swing down how many units arrived?

Sure. Okay, great. That's it for me. Thanks, and congrats again.

Thanks.

Our next question will come from Kevin Dede with H.C. Wainwright. Please go ahead.

Good afternoon, gentlemen. Thank you for taking my questions. Steve, you mentioned that headcount increased from 47 to 57 at the end of the quarter. Sumit, you brought up software development for the second generation. I am curious about how you're planning to adjust headcount to meet the challenges associated with that initiative.

I believe the numbers we provided last time indicate how we anticipate ending the year. We have collaborated closely on this, and there are no changes to report. I added a bit more detail today regarding the value and how to approach this step-by-step. Everything you mentioned is already included in those figures.

Yes. I said today, Kevin, we're looking to add 10 to 12 people a quarter and this is probably the pace we've seen this year.

Yes. You spoke, though, you address support staff? And I guess, I'm just wondering, what you're going to have to do on the software development side?

Yeah. We'll be adding people in the engineering team in production areas and support staff. And that's all of those areas are in that 10 to 12 people per quarter.

Can you help me understand the valuation perspective regarding the nearly $2.9 billion market cap and possibly a 20% premium? I'm curious about how you think that compares to alternatives. I know you mentioned frequency modulation, and I'm interested in your insights on that.

I'm not going to comment on valuation, but consider this. We've discussed a lot today. If you have a disruptive product that meets the needs of the market, there are various technologies and companies with different solutions. The market will determine comparative valuations. Our responsibility is to manage data technology and ensure people recognize its value. Whether details are specific or broad, it will depend on their perspective. The numbers are relative and ever-changing. I am optimistic about the company and see potential for growth, as I always do. It's important for everyone to understand the significance of our innovation and why it's valuable. A disruptive product in a competitive market can be difficult to assess.

Yes. No, absolutely. That's why I asked for your view. Thank you for taking that...

Yes, I’m optimistic about our situation, even though our feelings might fluctuate based on events. It's essential to understand that we have a disruptive product, and that’s the key point we need to emphasize. That's all.

Thank you. Can you explain the qualification cycle for auto OEMs and the time it typically takes? I would like to compare that with your development timeline. You mentioned that full manufacturing is expected to start in the 2024-2025 timeframe at volume, and I want to ensure I understand how long their process takes.

Yes. So, currently we have production lines capable of creating A-Sample, which is the initial phase where we test sample design and conduct reliability assessments. This could be made available for direct sales to anyone. However, the better response to your question is that if an OEM expresses interest, there are specific stages like B-Sample, C-Sample, and others that represent their development cycles. Each decision is made step by step. There are standard features in the market that everyone is familiar with, along with qualifications set by organizations like NHTSA, NCAP, and Euro NCAP. Each OEM, however, has their own proprietary elements because they are competing against one another. Therefore, it’s a complex question to answer. The key point is that these development phases involve assessing the technology's maturity, the company’s readiness, and the robustness of the supply chain. Considering that this is a safety-critical device with a potential lifespan of 15 years, they must ensure they can support it adequately throughout that period. Regarding qualification, once a target for the 2024-2025 model years is established, it becomes clearer what decisions will be made and how those are valued. As for the production line, think of it as a demonstration of our capabilities. No one else in the world can demonstrate that level of scalability. The concept of perfect LiDAR encompasses not just the features but also scalability, long-term costs, and reliability, all of which we are validating. This production line is another testament to our ongoing successes over the past 20 years. We’re well-positioned to showcase this. However, individual OEMs dictate the schedule, and there are no universal steps beyond the basic progression from A-, B-, and C-Samples to mass or serial production.

Okay. I can speak for myself, and I believe Glenn shares this perspective as well, as we've both experienced various cycles. We understand that the production aspect can be challenging to align with how it contributes to the creation of a complete vehicle. From what I gather, there is the OEM qualification process and an intermediary step, and I was trying to grasp a rough understanding of how this all fits together.

Alright. Well, alright, so the thing is, to think about A-Sample product, obviously, it's on an FPGA. Alright, to make an ASIC, the timelines are known. So those are all compounded in. And obviously, for us, from a timeline standpoint, those milestones are probably more important, because that's the biggest cost reduction, right, get to operations. So some of the features that may be in an application processor, like velocity for our first-generation product, putting in our SOC, really reducing costs, we have a lot more flexibility for that. So as far as you're thinking about, like, timeline for that. The first thing is, who's the Tier 1, is it any company, I'm not imagining MicroVision example, any companies that's going to be providing? Are there going to be a Tier 2 supplier or they’re licensing to somebody else? Those are things that have to be figured out with the OEM. So the question is hard to answer because of that, but scaling of our technology, the timeline, whoever does it – we have to do it or somebody else has to do it. Those are the ones that have to be checked off first and then the decision on how to commercially do it? Right. So they are the two separate things, but the milestones are kind of set. Any design that would have an FPGA need Analog ASIC, Digital ASIC, or SOC, in our case, right or what level of application software is in that. You know, we do something very unique or we are endeavoring to put it all inside SOC and not have to require in huge amount of computing, that's actually very important. And we have a line insight to that. So just demonstrating that is the steps ahead. Or it will be required for something like…

Thank you for the information. Regarding the ultimate road test platform, how many sensors of the MicroVision type would you think a vehicle would require?

So that's already general. If you observe a lot of numbers in the total addressable market, the software is a less significant factor. However, if any of us are going to start, they need to be reportable. You can't have the maximum number of sensors, but there can be more than one. There could be up to five sensors, which could include combinations of hybrid Pilot, traffic jam pilot, and parking features. For instance, I recently read that GM is targeting 30 EV models within a four to five year timeframe. How many of those will include these kinds of features? These aspects will become clearer as companies progress. But only a handful of sensors are required to achieve higher levels of functionality. For example, if a car needs forward collision warning and active lane-keep, our LiDAR sensor has a wide field of view and the added benefit of two additional fields of view, ensuring unique resolution at range. If a rear warning is necessary, there will be an additional sensor. The specific features offered in those vehicles will heavily influence sensor requirements. In general, a long-range LiDAR is critical for real active safety, and there may be additional flash-based or other types of LiDAR or sensors needed for lower-speed maneuvering that can work together or independently. It’s essential to have as much awareness of the surroundings as possible in the vehicles for the first-generation product. At this point, it's unclear if all of us have access to the same marketing data, and that data encompasses a wide range of sensor numbers. Yes, but generally speaking, there will definitely be more than one sensor.

Okay. Thank you, Sumit. Thank you. Thank you very much. Thanks for taking my questions.

Sure. Good talking to you.

Thanks, guys.

Our next question will come from Ty Bordner who is a Private Investor. Sir, please go?

Yes. Hi. Can you guys hear me?

Yes. Very fine.

Okay. Congratulations on to you and the whole team on all the progress made over the last 14 months. I got a quick question for Steve and then I got another question. Steve, last year, you guys had to declare publicly in one of your SEC documents an estimate for the 2017 royalty customer? Do you have to do that again this year?

Yeah, yeah. You're talking about under ASC 606, the revenue guidance?

Yeah.

You project out what your deferred revenue and contract liability recognition is going to be for the current year and that's in our 10-K that we filed back in March, $3.2 million and be in Q when we filed that.

Okay, I must have missed that. Sorry about that. Thanks. I have a question about the software, actually two questions. Sumit, you mentioned the development platform, which I assume is a software platform. Is that platform used to collect, analyze, and process the data received from the hardware, or does it allow the hardware to be configured based on different types of SOV or resolution, or is it both?

It serves both purposes. It's a development platform because, similar to A-Sample, it's a space where you can test and implement various ideas. A-Sample has its own trajectory, but if someone wants to try something unique, it won't disrupt our A-Sample users since there’s a group interested in exploring those options. Our hardware and software platform allows for this flexibility. Essentially, our team's adaptability enables us to provide what’s needed. If anyone expresses interest in something unique, that flexibility will be available.

Okay.

But we certainly don't want to take like somebody's request and like upset the entire team, if there was more than one people there, right? So, it gives our team more flexibility.

Understood. That makes sense. It allows for some agility. Regarding your comments about the potential next generation of software, I perceive that as more of an embedded software approach, which would be fully integrated with the hardware. This would handle tasks internally that otherwise might require outside processing, likely resulting in higher latency and potentially less efficiency. Is that what you mean when discussing this type of software and its future possibilities?

That is correct. We've always focused on not producing any me-too products. Many investors hear competing companies emphasize 'software', but we have consistently maintained that we create hardware, specifically LiDAR hardware, which operates at the edge computing level. Numerous mobility companies possess substantial software suites and are working on higher levels of automation, such as level four or five, which belong to a different market. The primary market in total addressable market (TAM) is level three, where most vehicles are heading. We aim to develop a solution that has embedded software capable of working with ECU without the need for massive computing power, like a five or eight kilowatt water-cooled computer, which is impractical for real cars. While such computers are useful for developing moving platforms, they are too costly for practical applications. If a LiDAR sensor is high enough in resolution, has a fast enough frame rate, and can process significant amounts of data, which our sensor can, it has the potential to serve as a primary sensor. Currently, no one can definitively say how effective any sensor is. The offering I discussed today is a crucial component of our narrative. We have our first-generation product, which is a hardware piece. I refer to it as a future generation, without specifying a number, because it aligns with our roadmap and illustrates its value. Every aspect needs to be examined to truly understand the value of LiDAR, its impact, and the disruption it might bring. We aim to demonstrate what is achievable with our technology. If anyone can predict the future costs of a complete sensor suite or system being reduced, we anticipate that increased adoption will follow due to more affordable solutions. We want to engage in that conversation and inform others of our contributions.

Sure. So ultimately, that you're painting a picture and telling a story about, how you know, MicroVision could provide that software. And ultimately, that is just really to reduce the cost of the overall system solution that sounds like to me and more efficient as well.

The way I look at that, let me just show the little bit higher thought, right? There's lots of micro companies out there. In today's call and the last call I talked about consolidation is common sense, right? You're not going to have massive. Two hands worth of LiDAR companies, automotive, they will condense down. And everybody wants to know who's going to be at the final table. Is they going to be specs, is it going to be scalability, right? You can imagine that, all the valuations say, whoever is going to win is going to win big, right? These revenues are multiple years out, why the valuations valid, because people are making the bet, maybe they're making the bet, potentially that who's going to be at the final table or who is going to win, right? Do you want to show the components of why you have something that projected out that far, as a very serious chance of being a contender? And so started David and Steve today and we're just going back and talking about airbags. I think when airbags came out in the early days, it didn't exactly but when they became regulation there's only a handful of companies that were there in the world that was supplying all the airbags. So, yes, you want to show that it is much more high-tech compared to airbags as far as what this will be required to do. So it's in our best interest to make sure that people understand not just the high-resolution and those specs. It's beyond that, because that data stream, but what do you do with it? What if the software and you forget something and you can actually do something actionable? And there's lots of testing and other videos on YouTube, I'll let you guys find that out. Just go take a look at it, right. And they show you actual accident situations how fast that happen. Just start to imagine, a computer has to do it faster than a human that was driving that. It was interesting videos. And I love watching them because it kind of blows your mind or puts in perspective for me, why it's important. Why all the things that our team is driving for. I mean some of the best people in LiDAR work at MicroVision now. They do some real good work. So that's the top level answer I can give you is it's really about the consolidation, how we converge. And if you think about our software is a meaningful part, because ultimately that overall system part has to reduce.

Okay. Great. Well, Thanks. One final question, can you tell us how many entities that requested the A-Sample? Is that a fair question?

We’re not going to comment on that.

Okay. Alright. Thank you very much.

Thanks.

Our next question will come from Jim Groninger, who is a Private Investor. Please go ahead.

Thank you for taking the question. My question is, how if the, a buyer or a partner has an automotive company as one of its members of its group, and you want to work with them. And then the second group comes in, I'm thinking of like Microsoft, decided they wanted to go in the LiDAR business and they're going to work with GM. The second group could be Google and interest from Ford, because they had some money in the board that used to work there. Is your LiDAR going to be constricted because of that little slightly premium relationship with the one partner? Is it going to be a select – restricted to single automotive manufacturer, will you still be able to do business with many more auto manufacturers?

Let's – let's take that question generic, right? Because I think it's like very speculative, right? A lot of things you're asking about. But let's make it generic.

Fine.

I think let's say there is, OEM one, OEM two, right, I think there's general some pockets of people that maybe interested or they want to evaluate. The benefit we have is everything we have is homegrown, it's proprietary to us. We've grown this all from ourselves. We own it all. Somebody has acquired the Company, they own it, right? Then it's of course unique to that one person. And our job is you guys can imagine what it is right now. But in the case that, if somebody or multiple people want to partner, there's no restriction. It's all that we own it. It's what value will be – there's no restriction one versus the other. Because you know, when Takata sells airbag, probably not an example that, the Takata is no longer around. But when a company sells an airbag to company OEM A and then to B, it's about commercialization they want scale, globally. So I think like that – that's specifically I think about right, we never talked about OEM general specifications of any other product vertical, nobody talks about that. In automotive, some generic ones, they made public. So yeah, we can comment on that. But the key configure, right, so this is a unique industry. So I think about it that it's just you are at the company, you have to roll it out. And it depends on what the commercial options available there. But there's no restriction because you own everything.

But you could be making restriction in who you ultimately decide to partner with? If they – if they are the best buyer.

It's really hard to speculate on, because I mean, I'll comment on, because it would be speculative is what anything would be who knows. But I mean, the fact is, it's all ours. And, you have to give them a compelling reason why this is going be a paradigm shift for them. That's about all we can probably say. So I think like, you're trying to draw conclusions. I'm just saying, it's impossible to even get to that point, because there's various scenarios. It could be – everybody wants the best economy of scale, obviously, right. And ultimately, what combinations that maybe or may not be it's impossible to comment on. I am telling you very honest answer. Its because I don’t know, I don't have a crystal ball to say what people think. But then, if there's like there's two companies, if it's our product, we can trade with anybody, of course. We own it, all right. We choose who we work with, right? We will sell to any, or investor – or any pocket of customers that feels confident that this is what they want. Absolutely.

Okay. Great. Terrific job by the way for all of you. Appreciate it.

Thank you.

Our next question will come from Adam Jones, who is a Private Investor. Please go.

Hey, Sumit. It seems like you're transitioning from successful development to focusing on sales and marketing. This was highlighted in a recent job posting for a Brand Marketing Manager. I'm curious about a couple of points that you could clarify. One point is about how you're planning to convey the brand and product story to customers, investors, and employees. I would like to know your perspective on how you see this story developing and what kind of return on investment you anticipate generating.

Let's take a step back and put this into perspective. We've received many questions about this. Considering we have a new product and are entering a new market, it's important for us to communicate effectively with shareholders to ensure everyone understands the impact we've created. While it may not seem like a big deal, it's crucial for us to convey the right narrative. We naturally need to grow into this role. Communicating with investors is essential, although we have a small team, which limits our capacity. When our investors seek more information about technology, it's not just general marketing; it's a fundamental part of building value in the company. If we have something valuable, we need to communicate that effectively. People need to grasp what we offer, and while I can express my enthusiasm, it requires more than that to convey the full story. There’s a substantial difference between discussing concepts and illustrating the business impact step by step. We've received a variety of questions from our retail investors, indicating a desire for more information. It's all part of creating value, and having someone to help tell our story is beneficial for the company.

Great. That's really my only question.

Yeah. I'll just add that. That will do corporate communications, company presentations, website, work things like that. So those are all key roles, that role is going to do.

It indicates where your website updates take too long. We are a tech company and need to behave like one, which aligns with their expectations.

So but in terms of marketing or working with potential customers, I believe it was in the 10-K. You mentioned that that's the Executive Management Team. Is that still the case? Are you guys mixing those inroads directly?

Yes. This is more of trade expo that we go into. There's a bunch of work to be done to have a floor show. Steve and I can't do that. I mean, I just see…

I know that.

You have to get and you have to have your sensor out there. If end up going to see that or any expos that you go to just imagine, there's a bunch of work to be done to present it to the market. So we always are excited to come visit us and we always welcome you, so want you to have a good experience because this is something new.

I guess so maybe I was just getting hung up a little bit on the semantics within that, where it talks about customers or senior stakeholders and maybe some of the differentiations you make in terms of who does what within the realm of the business.

Maybe so.

Yes. Maybe so. Yes.

Okay. Congrats on reaching a successful milestones in April.

Thank you.

Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.