Good day, and welcome to the MicroVision First Quarter 2023 Financial and Operating Results Conference Call. Please also note that this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead.

Thank you. I'm pleased to be joined today by our Chief Executive Officer, Sumit Sharma; and our Chief Financial Officer, Anubhav Verma. Following their prepared remarks, we will open the call to questions. Please note that some of the information you'll hear in today's discussion will include forward-looking statements, including, but not limited to, statements regarding our product development and performance, comparisons to our competitors, market opportunity, product sales and future demand, business and strategic opportunities, customer and partner engagement, projections of future operations and financial results, availability of funds as well as statements containing words such as potential, believes, expects, plans 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 SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual 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. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as for all the financial data presented on this call, please refer to the information included in our press release and in our Form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC Filings tab. This conference call will be available for audio replay on the Investor Relations section of our website. Now I'd like to turn the call over to our CEO, Sumit Sharma. Sumit?

Thank you, Drew, and welcome, everyone, to this review of our first quarter 2023 results. We started the quarter with the closing of our transaction of Ibeo assets and have been working diligently on integration and expanding customer engagements for our new product portfolio. We've made great progress and positioned the company well to achieve the business milestones I presented in our previous investor call. So let's dive into updates on our progress. We remain on target for full-year revenues in the range of $10 million to $15 million from our expanded product portfolio. Our go-to-market strategy remains unchanged, and our team is executing on it. We have restarted the momentum of sales for the combined company with direct sales and royalties from lidar hardware from non-automotive OEM sales. With the current MOVIA sensor indirect sales, we expect to fulfill a market demand for stable sensors to enable the development of software applications that deliver safety, security, and smart city management for our potential customers. We remain on track to bring to market an industrialized product based on MOVIA to address various channels with a more cost-competitive industrial solution. This new product leverages the sensor developed and qualified by Ibeo's team and is optimized for cost and performance for the industrial segment. We also expanded sales of our MOSAIK validation software suite with a new OEM customer. This product line is just starting its growth cycle, and we're excited about how it will develop deeper engagement with OEMs. OEMs and Tier 1 spend hundreds of millions of dollars annually validating various sensors in their vehicles, and we intend to become the dominant player in this segment. Now let's talk about strategic sales for automotive OEM and RFI and RFQ in flight for MAVIN and MOVIA. As I recently updated on our Investor Day in April, we are engaged with OEMs for technology and partnership review for sensors targeted for roof line and behind windshield integration for MAVIN dynamic-view lidar and in-body integration for MOVIA sensors. These are the highest volume RFQs in flight with top global OEMs, and our technology is well received. We remain on target for our 2023 milestone of OEM partnerships. As I've mentioned before, the process is long with deep review of technology, manufacturing, integration, safety, and business stability. We remain on target to complete RFQs in the second half of the year, as I've stated before. To support future MAVIN revenue streams, we look to launching our analog and digital ASICs, new contract manufacturing partnerships, and completing a B-sample design by the end of the year. This B-sample design will incorporate all the features required in the smallest form factor and would be the candidate to meet requirements for multiple OEMs. Beyond our current 2023 engagements, we are starting to see RFIs for 2024 RFQs from OEMs as well. As I've stated before, some of the deals announced in the past from our competitors are not for the entire fleet. OEMs are active in sourcing more advanced lidar solutions for larger projects. ADAS systems that require small object detection need the highest resolution at all ranges in the lowest profile sensor with an integrated thermal management system. MAVIN meets all these requirements. We are also receiving requests for MAVIN with full perception one box solution, which proves the acquisition thesis. We have the technology and the talent to enable these partnerships. We are also seeing RFI and RFQ engagement for MOVIA sensor for high volume now. For a wide field of view, short-range lidar, the simplicity and the price point MOVIA can provide will be unparalleled. These RFQs also involve the current generation MOVIA sensor and proposals for a miniaturized version using the current developed ASIC. With multiple lidar required per vehicle, this is a great opportunity for us to expand our lidar offerings to OEMs. I wanted to conclude my prepared remarks by reiterating two key points. First, we are focused on generating revenues from software and hardware sales and remain focused on our business goals for 2023. Second, strategic sales of MAVIN and MOVIA sensors are the biggest revenue opportunities for MicroVision, and I believe we are in great shape for our 2023 objectives of multiple OEM agreements. I want to conclude by thanking our global team and their hard work that has allowed us to be well-positioned for an incredible year ahead of us. I would like now to turn the call over to Anubhav to talk about our financials. Anubhav?

Thanks, Sumit. I'm really pleased with what our combined teams have accomplished in the first quarter of 2023. The joining of forces with Ibeo has positioned us well to become one of the most experienced lidar hardware and software companies in the market. With over 50 years of combined operating history and 735 patents, MicroVision is uniquely positioned to win. I'm pleased to report that MicroVision had a solid first quarter 2023 with revenue coming in ahead of expectations. We recorded $782,000 in revenue, which represents impressive growth from Q4 and 123% growth year-over-year as compared to the first quarter of 2022. As a mature public company, we will continue to differentiate ourselves from our competitors through financial discipline, transparency, and guiding to metrics that we believe are realistic and achievable. Now before we talk about Q1 2023 financial results in a bit more detail, I would like to discuss and remind investors how the Ibeo acquisition significantly accelerates our trajectory and transforms our roadmap with new products and access to new customers. Following our completion of the Ibeo acquisition, MicroVision is indeed at an inflection point. Our teams have been working hard to execute the integration process ahead of our expectations. The integration between our sales and business development teams is also picking up momentum. And we recently added a very seasoned executive based in Detroit, Michigan to lead our U.S. sales and business development efforts, especially in the automotive sector. MicroVision's first quarter performance continues to demonstrate our financial rigor and discipline, along with strategic capital deployment. The investment in Ibeo brought us an experienced and highly talented team of engineers, targeted customer relationships, and a broad product portfolio. We're now benefiting from past R&D investments made by Ibeo of over EUR 200 million deployed over several years. This considerably reduces our go-to-market timeline and allows us to leverage these products to generate high-margin revenue for the go-forward company. Let me recap some of the highlights of our investment presentation for some of the new investors addressing the size of the markets we compete in and how they have significantly increased due to this transformational deal. We think of the lidar industry divided into three sub-verticals. First, the ADAS market. Modeling the requirements of L2+ and L3 vehicles produced every year, we expect L2+ cars to require one long-range lidar and two short-range lidars per vehicle while L3 cars will require two long-range lidars and four short-range lidars per vehicle. While we continue to hear ASPs from our peers at around $1,000, our design and ASIC enable us to price our long-range lidar at $500 depending on volume greater than $10 million for MAVIN. Using this ASP estimates applied to the projected number of vehicles expected to come out of production, we estimate that the total lidar market for the automotive and the ADAS sector will generate at least $82 billion of cumulative potential revenue for the entire industry through 2030. The second sub-vertical is the nonautomotive market. While we have seen a variety of estimates from peers and reputable business consulting firms, we have estimated on a similar basis, the cumulative revenue potential through 2030 to size the nonautomotive market, which further consists of three sub-verticals, the industrial. We expect this market to be at $2.5 billion in 2025 and grow at an estimated 20% CAGR. If we sum up the total by every year through 2030, we estimate that the total sales in the industrial market will be cumulative $32 billion by 2030. Extending the same model to nonautomotive smart infrastructure, we expect this market to be at $2.8 billion in 2025 and grow at a 30% CAGR. If we sum up similarly the total by every year, we estimate the total sales in this vertical to be a cumulative $46 billion by 2030. For robotics, we expect this market to be at $1.8 billion in 2025 and grow at a 50% CAGR, and summing all these things up, it adds up to $37 billion. Now if we add these three sub-verticals, we get to $115 billion market potential for all the lidar players. The third and perhaps one of the most important pieces in the lidar industry is the validation and the auto annotation software, which we call MOSAIK. This is a specialized market with not a lot of players competing. As a reminder, this software provides ground truth data generation to reference against the sensors OEMs are trying to validate. The key advantage of our validation software platform is, it enables validation of a sensor suite that includes MicroVision lidar and third-party lidar to process and detect surrounding 360 degrees. A modular approach to enable different sensor setups allows for any use case setup. While it is hard to estimate the TAM for this industry, we estimate that we may be able to generate $200 million to $300 million in revenue through 2030 through the sales of this software. We believe the demand for this software will increase as the OEMs strive to validate more and more sensors. Now let's dive into our Q1 2023 financials. For the first quarter, we recorded revenue of $782,000 that came in ahead of expectations. This revenue is both from automotive and nonautomotive customers. The split of this quarter's revenue is approximately 60% lidar hardware and about 40% related to the software. The customers in the hardware revenue stream include a major automotive OEM along with other customers in the industrial and agricultural sectors. The customers in the software revenue stream include two major automotive OEMs. Before we move on to expenses, a quick recap on Microsoft. We received communication from Microsoft that no units were delivered in this quarter, as a result of which we still have an unapplied $4.6 million balance left on this contract liability. Our agreement with Microsoft continues to be in effect with an expiration date of December 2023 with automatic renewal clauses. Now let's move on to expenses, the cost of goods sold. Our gross profit margin on a GAAP basis was 30%. Please note that going forward, because of the acquisition of intangible assets from the Ibeo acquisition, we will now have a noncash amortization of intangible charges hitting the cost of goods sold every quarter. For this reason, we now believe it is more meaningful to provide non-GAAP adjusted gross profit and margins, which excludes these noncash charges for the intangible amortization. We believe that these adjusted gross profit margin metrics will be a better indicator of our cash gross margins. Based on our adjusted gross profit, margins were 63%. In terms of expenses, we had $21.5 million OpEx, including R&D and SG&A. This includes approximately $5 million of noncash stock-based compensation and depreciation and amortization. The higher expenses were driven by Ibeo as we added additional employees and facilities as a result of this acquisition as well. In this quarter, we also have a bargain purchase price resulting from the Ibeo acquisition. For the first quarter, $14 million cash was used in operating activities, which was well in line with our full-year guidance for 2023. To remind our investors, we continue to show financial discipline with our cash burn being on the expected trajectory. In these times of uncertainty and weaker macroeconomic conditions, MicroVision stood out and beat competitors in terms of maintaining one of the lowest burn rates in the industry with a highly talented pool of engineers in both the U.S. and Germany and a strong balance sheet. As expected in the first quarter of 2023, CapEx was $0.6 million, in line with our expectations. We received the incentive payment in the second quarter of 2023, which helps us recover the build-out and the tenant improvements associated with the move into the new facility earlier this year. We will be reporting more details on the incentive payment next quarter. As of March 31, 2023, we have made the majority of the payments associated with the Ibeo acquisition. We plan to make the remaining payment on the acquisition of EUR 5 million less certain deductions in purchase price in the second quarter of 2023. Our total liquidity was $67 million as of March 31, including investment securities. There has been no update since the last earnings call in February on our ATM program. As we had previously stated, we still have approximately $44 million currently available under this program. Based on our current operating plan for 2023 and beyond, we anticipate that we have sufficient cash and cash equivalents to fund our operations through the middle of 2024. Now looking ahead, we're excited about 2023 as we march forward on our path to $10 million to $15 million in revenue this year from the revenue streams Sumit and I described above, especially with a strong Q1 performance. We believe our three product lines, MAVIN with perception software, lidar sales to nonrecurring engineering revenues from OEMs, MOVIA, sales of flash-based lidar, and MOSAIK sale of auto annotation software for automotive OEM validation, should be able to drive momentum in the remainder of the year. To summarize, we're really excited about 2023 and beyond. With our milestones and key focus on winning RFQs, we will be proving to the market our value proposition as a unique and strong lidar company. With this, I would now like to open the line for questions.

Our first question will come from Andres Sheppard with Cantor Fitzgerald.

This is Anand for Andres here. I just wanted to touch on your liquidity status that you just mentioned. I know you mentioned that you have $67 million in liquidity, down from $82 million last year and you're funded through the middle of 2024. How are you thinking about the burn and what's going into this calculation? Just wanted to get more color there.

Yes. Thanks, Anand. So this year, as we had guided, we are on track to $50 million to $55 million cash burn, as we have previously stated. Obviously, we expect as we gather more momentum in the rest of the year for sales to pick up, which we expect to continue in 2024, we expect there would be more inflows in the second half and early next year. So that's why we feel very comfortable with our current liquidity position and as well as what's coming down the pipe in terms of our wins, projects and some of the revenue opportunities that we're chasing. Please keep in mind, a bulk of this revenue, as we had described earlier, would be driven by MOSAIK and MOVIA, which obviously are high contribution margin revenue streams for the combined company.

Got you. And a follow-up to that. I wanted to see how you're thinking about capital raise opportunities potentially. Are you looking at equity or debt? Or how do you consider that in the future?

Yes, that's a great question. We have consistently shown a strong approach to accessing the capital markets when necessary. We believe that any capital raising should always align with strategic objectives. For instance, when we completed the Ibeo acquisition, we looked to the market for funding because we saw it as a sound investment in the company’s future. We will continue to apply the same level of discipline. One of the factors that sets us apart from our lidar competitors is our status as a traditional public company, backed by over 20 years of public company experience. This gives me confidence in the options available to us compared to many of our peers, as we are uniquely positioned in the industry without any significant history of financial setbacks. This is why we are optimistic about the company’s capital raising options moving forward.

Got you. I was wondering how long it might take for an OEM contract to materialize or for you to announce it. Do you have any insights regarding your relationships with your OEMs for the MAVIN lidar?

I'll take that on the top. I think we've talked about that quite a lot. That's our corporate milestones for this year, and we continue to make progress on it. I think the key there, of course, to think about is other people have announced it. They've taken the mirrors. There's no products out there. But the current tranche of projects that are in the RFQ, these are the high-volume ones that are for consumer vehicles. I mean these are not for trucking. These are for vehicles, and they are not as options. So the volume is a lot higher. So therefore the rigor required is significantly more. But based on our engagement with the engineering teams and of course, also with their purchasing team, I feel pretty confident that we remain on track.

I will now turn this call back over to Anubhav Verma to read questions submitted through the webcast.

Thank you. Let me take some of the questions that we're getting from our investors. The first question is management has mentioned automotive RFQs want dynamic-view lidar and only MAVIN offers this feature. Why do you think that you won't win all the deals this year? And are there any RFQs out there that MicroVision is not a part of?

I guess I'll take that. I'll answer the last one first. I'm not really sure. There's no public listing of all the different RFQs that are out there that you can bid on. We engage with all the OEMs. We look for projects, we look for alignment. In some cases, they're fielding the most advanced sensor they need because of the highest volume. It has to be integrated within the body of the car, that these requirements. So certainly, right, the dynamic-view lidar is the perfect one for that because it kind of meets all the requirements. I think recently, you've seen that in the last, I would say, three months. Our competitors are doing Photoshop and some other CAD images and all sorts of prototype level stuff to demonstrate that they are headed in that direction. But of course, we have that. So in those specific ones, we feel pretty confident. But there are still other RFQs that were, let's call it legacy, that it was not that important to have a roofline integration. Maybe it's for some sort of small, small truck 4x4 or something that kind of project. So it's not in load with the ground and they were just leveraging what somebody else has already done. So there's nothing innovative there. So those kinds of RFQs certainly, we can be competitive there, but that's not the big volume stuff. So we focus on everything. We focus on many RFI, RFQ that comes along. The team gets dedicated to that. In fact, every week is very eventful at the moment. And we're very fortunate that we have such a large team between Redmond and Hamburg, that is in Nuremberg, of course, that allows us to address these. So as far as the dynamic-view lidar is concerned, it's looking for projects that require long range, high resolution closer range. Yes, we're pretty well positioned for that. As far as ones that are not looking for that and they're just looking for a feature and there may be some sort of a trucking application or something like that, they can probably take a lower specified product as well as a starting point. But all the high-volume stuff is, as I mentioned, the dynamic-view lidar.

Thanks, Sumit. The next question is, over the last few days, there was a significant shakeup at CARIAD. How do you think this impacts the lidar players, including MicroVision?

I think it would be inappropriate to speculate. If I had any facts to share, I would do so. However, this is all new information and its rollout is still uncertain. There's a lot of conjecture regarding what it means for the individual brands at VW, CARIAD, and so on. But nothing has been officially announced yet. Many people anticipated this change since the CEO transition. I have consistently maintained for about a year that some of the early agreements signed are now being defended, despite the fact that they never encompassed the entire fleet. Each brand has different needs. For instance, a high-end vehicle that requires roofline integration would not have a significant bump at the top of the roof. I have been clear about this. As for the recent shakeup at CARIAD, its implications are still unclear. I've heard a lot of speculation in the last two days. Some of it is factual, but mostly it’s speculation. We will have to wait until we get clarity on how the brands will implement lidar, either individually or collaboratively.

Thank you, Amit. You now have a single lidar solution with various sensor software, making MicroVision a comprehensive provider for OEMs. Can you share some insights on the cost advantages this offers OEMs compared to assembling solutions from different partners? How has the one box, one shop model been received by the OEMs?

The one box solution includes the perception system inside, which will require two ASICs. One ASIC can be point-cloud only for customers who want to use their own software, and we will certainly offer that as a product. Integrating this perception into real products will enable more efficient development at OEMs, which is our unique value proposition. I’m excited that we recently engaged with a major OEM that is looking for a one box solution. It’s worth noting that evaluating lidar takes time, and combining lidar with software will take even longer. This aligns with the typical selling cycle in the automotive industry, but it's encouraging that the underlying concept is gaining traction. To lower costs through economies of scale, our goal is to provide customers with the best price possible. Most hardware within the lidar will use similar components, such as optics, sensors, lasers, and some shared electronics, though some electronics will differ based on the integrated perception. Around 75% of the design can be standardized, allowing us to leverage common parts across different model years, even if those models ship a few hundred thousand to half a million units annually. The only difference would be that one model has full perception while another does not, allowing us to offer significant price advantages. Even though we are developing a more advanced sensor software, we can still achieve economies of scale by aggregating production. Our team is currently focused on finalizing the B-sample design, as we’ve received valuable feedback regarding necessary integrations and customizations. We aim to converge on a production-ready design once the ASICs are available. Regarding pricing, I am confident in our architecting approach, which allows for enough customization without forcing one specific solution on customers. Our integrated thermal solution addresses power usage and heat generation effectively; for instance, the high resolution requires substantial power, similar to a few watts from a light bulb in a car. Our team has worked hard to develop an efficient cooling solution that fits well behind the windshield or roofline. As all parts are shared across our variants, we feel we are in a strong position, with the team successfully designing the product with these considerations from the outset.

Thanks, Sumit. I think we're now out of time. We appreciate your participation in our results call and your continued support for MicroVision.

This concludes today's conference call. All parties may disconnect and have a wonderful day.