Good afternoon, and welcome to the MicroVision Fourth Quarter and Full Year 2023 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead.

Thank you, Paul. I'm pleased to be joined today by our CEO, Sumit Sharma; and our CFO, Anubhav Verma. Following their prepared remarks, we will open the call to questions. Please note that some of the information you will hear in today's discussion will include forward-looking statements, including, but not limited to, statements regarding our customer and partner engagement, product development and performance, comparisons to our competitors, market landscape, opportunity and program volume, product sales and future demand, business and strategic opportunities, projections of future operations and financial results, availability of funds, as well as statements containing words like potential, believe, expect, plan, 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 would like to turn the call over to our CEO, Sumit Sharma. Sumit?

Thank you, Drew, and welcome everyone to this review of our fourth quarter 2023 results. I'm certain everyone is anxious to hear about our progress in securing strategic automotive customers. I will start off by updating you on our progress on multiple RFQs. Second, I will cover the state of the competitive landscape and advantages our technology provides. Third, I would like to lay out the opportunity that we see in this space and why all of us are fully committed and what our vision remains for our company. Let's start with an update on RFQs towards design wins. We currently remain engaged in nine RFQs with multiple OEMs located in Europe and North America. The vast majority of these are for passenger car programs with an expected target start of production from 2027, with the largest volume programs starting in 2028. These are the high-volume nomination opportunities. There are multiple small opportunities that are earlier programs. As I've mentioned before, OEMs that have made some early nominations of other solutions are actually looking for new technology partners that would operate as a LiDAR Tier 1 for these higher-volume programs. The total volume of all these programs is in the multiple of millions of units for MAVIN-N, MOVIA-S, and MOVIA-L products. The lion's share of current RFQs are for MAVIN-N product. Later this year, our MAVIN-B sample with all ASICs in place, which we call MAVIN-N, will be ready for OEM integration. The focus is on ADAS level 3 and level 2+, with high-speed highway pilot and urban driving capabilities. With one LiDAR per vehicle mounted on the roofline, the lowest profile, highest resolution, and lowest cost are of key importance. The highest volume opportunity is for MOVIA-S product. MOVIA-S is the next generation of our flash-based sensor and is a derivative of the MOVIA-L architecture, ASICs, and chipset, with a wider field of view and the smallest form factor. With the small form factor, it is capable of being embedded in the car body without any aesthetic break and provide a LiDAR cocoon around the car for the first 50 meters at the lowest cost. Each car could require between three to five MOVIA-S LiDAR sensors depending on the highway pilot or urban driving safety features. The MOVIA-L product line is focused on the industrial space and trucking. MOVIA-L is the legacy product that was part of the Ibeo acquisition, including ASICs and a mature production line that allows potential customers the lowest risk path to getting our mature sensor. All products are targeted to include a perception software running on an ARM core processor within the sensor. This is a big deal for LiDAR products as this will enable us to monetize our perception software to a software license mechanism that will increase the contribution margin. We will talk more about this later in the year. In all RFQs, we continue to meet and exceed all technical requirements. We have a technical team that can deliver mature products. I would say our combined teams in Redmond and Hamburg are the most experienced in delivering LiDAR products and perception software for over a decade. Our team in Hamburg remains the only team that has delivered a LiDAR product with Audi that went into production. Our new partnerships for manufacturing have passed OEM qualifications and quality reviews. We have automation paths that are credible and can be put into place to meet their B-sample needs this year and support price targets. We can demonstrate to potential customers that we can fund our core development and that the customer-funded custom development is within their target ranges. The industry-wide challenge that we continue to work with is proving our capability to operate as a LiDAR Tier 1 with adequate cash runway and investor confidence to execute a supply agreement upon nomination. As you may recall, capital raising was a focus for us last June, and we continue working on this. We are also being conservative about the types of deals we engage in. I don't believe it is in the long-term interest of our shareholders to sign deals that look like we are subsidizing previous poor choices in LiDAR partners that were made in the past by having to take on more risk while being the most mature partner. But for the right volume deal, we plan to take such risks. So to conclude this section, we have made great progress towards securing nominations with our technology maturity and continue to work with each OEM to find a solution to becoming a LiDAR Tier 1 that will be acceptable to them to secure long-term supply agreements. Although others have announced low-volume nominations, we do not believe that any LiDAR company has been able to achieve Tier 1 status and maintain long-term supply agreements following nominations. Second, I would like to take some time and update you on the changing industry landscape we are navigating on our path to securing nominations. I believe this is an important piece of context for shareholders to understand. The seismic change of advanced sensors being added to passenger vehicles is real and continues as evidenced by the high-volume opportunities in these RFQs. It will arrive earlier with passenger vehicles, with internal combustion engines, and eventually EVs. Based on what we have seen, there is nothing slowing down the demand for high-tech, low-cost LiDAR sensors for the future. As I've been saying for several years, active safety systems in passenger vehicles with ADAS level 3 and level 2+ will be the dominant force to drive scale and cost. All OEM and technology companies focused on level 4 are scaling back plans and reevaluating business models. Autonomous trucking remains as one real opportunity for autonomy, but this would be a low-volume business at best, important support, but not the core path to profitability. For us to be successful in the broader LiDAR space, we need to focus on projects that are significantly higher in volume than those offered by L4 opportunities. Therefore, MicroVision remains primarily focused on passenger vehicle opportunities. Another area of change is the Tier 1 landscape. Almost all traditional Tier 1s that were in the LiDAR space are announcing their exit. The oscillating mirror or rotating prism technology is not reliable and scalable, and traditional Tier 1s did not have the backing of investors or talented staff to create the most innovative sensor technology and software. This has created a greenfield for technology companies like us. OEMs are actively engaging with companies like ours to explore partnerships. This is the area of transformation and risk. There's a vacuum left by the exit of traditional Tier 1s that we need to accelerate to establish ourselves as a reliable and trustworthy Tier 1 LiDAR partner. LiDAR companies that got early nominations raised a lot of money on promises and failed to deliver to OEM programs in even low-volume scenarios. They have immature technology and specifications or understanding of how to scale. This has muddied the water a bit for any company involved in the new RFQ, including incumbents, but we have a level playing field moving forward in all RFQs. We continue plowing through this landscape. On this topic, I would like to say both MAVIN and MOVIA products arrived just in time to meet OEM needs. I would say we're in the best shape. Our competition raised billions of dollars in a matter of three years, has blown through most of it, and live to show for technology. We have invested slowly and wisely over the long period of time and have the most mature team and product offerings. The need for perception software will also become a decision driver. In the past, the need to support L4 features drove software development, which is significantly more expensive and not easy to deliver as a qualified product. In the meantime, our team in Hamburg focused on developing critical perception software and taking it through OEM qualification. The software landscape has changed and competitors have invested in development that is not relevant, while MicroVision has an advantage with our sensor-embedded perception software ready with mature KPIs. In conclusion, our positive securing nominations requires us to navigate all these changes and get OEMs comfortable with our capability to deliver on passenger vehicle programs at the LiDAR Tier 1. What's involved in becoming a LiDAR Tier 1? We need to own our own technology with significant IP. We have this fully covered. We need a strong technical and operational team in place to deliver on contracts. We have this in place and can deliver multiple nominations. This has been vetted and qualified by OEMs. We need contract manufacturing partnerships that are automotive qualified by OEM. We have been in this place as well. We need an automation path for our products to deliver the cost targets for high-volume sensor sales. Again, we have this in place. Finally, we need to show demonstrable financial runway to be able to take on large supply agreements at the time of nomination. We need to get that last point in place to become a LiDAR Tier 1 to get multiple OEM nominations for passenger vehicles. Finally, let's take a larger view of the landscape by understanding why we continue to focus on this space and drive hard. I believe to be successful in the LiDAR space for the next 10 years, there are five key things that a company must master. Number one, sensor cost of scale in the low hundreds of dollars. Number 2, smallest sensor size. Number 3, highest resolution with the lowest power. Number 4, sensor-integrated perception software. And number 5, a company operates as a financially stable Tier 1 LiDAR supplier. These are the big things in our space that will not change over the next decade in any RFQ or nomination. Customers are going to want the highest technology LiDAR with a high level of perception software integrated at cost, that in the hundreds of dollars for sensor, and pay additional for perception software license, which translates to high contribution margins. As of today, MicroVision has already solved for the first four items in all three of our products. No LiDAR company can say this with confidence or show evidence of it except MicroVision. Nothing will beat our MAVIN end product in cost, performance, size, and power. Nothing. Nothing beats our MOVIA Edge product in cost, size, performance, and maturity of perception software. In conclusion, there's an ocean of demand for sensors and software out there with multiple reliable OEM partners. We have the technology, lead with our products and the opportunity for a strong gross margin, and I would say, will last for a long time. Investments made to develop products today will run for a long period of time without redesign required, thus having a much lower cost to customer acquisition while having a high lifetime value to the customer. Traditional Tier 1s have stepped out of this space and created an opportunity for us to step in to become a key partner to OEMs directly. Multiple competitor strategies to fake it till you make it are being exposed as we speak. This is truly a greenfield out here for us to dominate, and we intend to do so. I would like to now turn over the call to Anubhav to talk about our financials. Anubhav?

Thank you, Sumit. Now, let me summarize with the current state of affairs in the auto, mobility, and ADAS industry from a financial perspective. Auto OEMs, Tier 1s, and ADAS companies, in particular LiDAR companies, have been under a lot of pressure lately. There are primarily two reasons for that. Number one, the problem of solving for full autonomy L4 and above is significantly more challenging and expensive to execute than all the hype built up over the past several years. Hence, there is a clear reset within the industry as well as investors. Tech companies, OEMs, and capital markets now are gearing to back more investing in more realistic and near-term ADAS L2 plus and L3 solutions. Number two, OEMs are also under significant pressure on their transition from ICE, which is internal combustion engines, to EV products due to the hyper-competitive price wars, which are a direct result of the high interest rate environments and market share expansion battles. Major auto OEMs are carrying historically high levels of inventory. They are therefore becoming ultra-cost conscious as well as aggressive about including new ADAS and safety features enabled by LiDAR in their upcoming models in the next four to five years. The OEMs are striving to command pricing that is attractive to the end customers with advanced ADAS and LiDAR enabled safety features in the upcoming models. Regardless of the delays in easy adoption, having ADAS and safety features is critical for OEMs to expand and even maintain their competitive positions amongst each other. This business problem for OEMs translates into the high demand for LiDAR sensors to enable L2 plus L3 features for ADAS safety at lower prices with more mature technology. All these factors have essentially forced the established Tier 1s out of the LiDAR market as they do not have the risk profile to allocate hundreds of millions of dollars in R&D, which is essentially the CAC, or Customer Acquisition Cost, in developing the technology and responding to these extensive OEM RFQs. This is evidenced by recent public statements by many Tier 1s, including Magna, ZF, Continental, and Bosch, announcing their shift in priorities related to LiDAR. The lack of established Tier 1 presence, in turn, has influenced OEMs as they have to move their internal production timelines to the right, as well, especially after some of the early LiDAR winners failed to deliver on their commitments. The OEMs are being extra cautious, spending more time and efforts on thorough diligence before picking their LiDAR suppliers, or replacing existing ones in case of non-performance. Please keep in mind, the automotive OEM industry is a slow-moving industry that is highly focused on safety and intense qualification processes. So they are now looking for suppliers who have mature technology at the best price, and hence, the lowest risk to execution and strongest balance sheet to become a LiDAR Tier 1 supplier. This has also led to the collapse of a few LiDAR companies and the ongoing consolidation of the industry in the past 18 months. It has now become very apparent that the only way to become a successful LiDAR company is to operate as a Tier 1 in order to capture that huge demand in the later part of this decade and early next. Now, with all these broader trends, how does MicroVision stand to be the company that will remain one of the last few successful LiDAR companies able to capture this huge demand? The fact that we're now actively engaged in nine RFQs, including some of that previously announced by others, we believe MicroVision's product portfolio meets all the following criteria. Number one, the most mature products for both long and short-range LiDAR. No company has both products. Number two, one of the best form factors and sizes. Number three, perception software inside the silicon. And number four, and most important, at the most competitive long-term price. We're now in the process of establishing our credibility as a Tier 1 player in the LiDAR industry. Now, let's address this question in a bit more detail. What does becoming a high-growth Tier 1 mean from a financial and a business model perspective? It really means three things. Number one, the ability to maintain lower customer acquisition costs and generate increasing profits with more hardware volumes. Number two, run a lean business with a strong balance sheet that is scalable. Number three, improve operating leverage through the software revenue stream. Now, let's talk about number one. MicroVision has already spent R&D dollars over the last several years to bring the products to the level of maturity where they stand today. In other words, we do not have to spend hundreds of millions of dollars to develop next generations of products. We have 300 engineers, and we need them to technically respond in detail for all these RFQs. Scaling operations with multiple customer wins will not require us to add proportional headcount to our engineering teams. We see no need to double or triple headcount to support potential revenue growth. The resulting economies of scale would be expected to add significantly more revenue with limited additional R&D expense, thereby translating into faster operating profits. This is what will enable our business model to have lower go-forward customer acquisition costs and rapidly scale operating profits with higher volumes. We, as a management team, have been predicting for a long time now that this moment will come, which will shake up the industry. Now, given financial resources are limited, any LiDAR company that is investing in new products or saying it is investing in newer generations of the same product is again going on a cycle that is unaffordable, as OEMs need solutions that are mature today, not in the future. For number two, financial discipline is key. As we work towards building and establishing MicroVision as a strong Tier 1 partner to OEMs, we believe that we would be one of the last companies standing to capture the LiDAR market. Our financial discipline of having a burn rate between 65 million to 70 million a year is one of our greatest strengths, especially during the times when our competition has finally realized the importance of financial prudence, having raised three quarters of a billion dollars and burning through half of it in just two years. From a business model standpoint, we have always stated that partnering with an established contract manufacturing partner will be the most capital-efficient way to execute. As we navigate the final rounds of these RFQs with OEMs, customary visits and quality audits at production facilities have been important for building customer confidence. We have successfully passed such qualification visits. Now, finally, number three, and the most important one, having a software revenue stream. The key to a valuable LiDAR business is supplying customers hardware with software integrated inside the silicon. To be valued as a high-growth Tier 1 LiDAR solution provider, scale is achieved by securing additional customers or similar products with minimal customization in the software, which allows us to achieve economies of scale for the hardware. As we continue to strengthen our balance sheet, we are establishing a Tier 1 status amongst OEMs. Now let's dive into our numbers. First, let me take some pride in MicroVision's core values of leading by example and predicting industry trends and behaving like a mature public company. I'm pleased to report that we reported revenue in line with our guidance. For the fourth quarter, we reported revenue of $5.1 million. This translates into full-year 2023 revenue of $7.3 million, that came in between our revised guidance range of $6.5 million to $8 million. Revenue in Q4 was primarily attributable to the Microsoft contract signed in 2017. We recognized $4.6 million of revenue from Microsoft representing the remaining contract obligation on our balance sheet. No new cash was realized against this revenue. With this revenue, there is no additional liability that remains under this contract as it expired at the end of December 2023. The remainder of the revenue came from our direct sales channel from the sale of our hardware and software. To remind investors, we revised our guidance from $10 million to $15 million to $6.5 million to $8 million in November of last year as part of the Q3 2023 results. This was a result of some opportunities in the direct sales channel appearing to have moved into 2024. Across the board, we believe automotive OEMs are witnessing historically high levels of inventory coupled with the rising interest rate environments causing OEMs to be a bit more cautious in taking on new projects and moving timelines to the right. This has slowed down the sale of Mosaic as a validation software too. But having said that, we believe there continues to be a strong demand for LiDAR products evidenced by several RFQs in place as described by Sumit earlier. From a gross margin profile, the momentum continued. This profile this quarter resembles that of a typical software business as demonstrated by a 90% adjusted gross margin in Q4 2023 and 80% gross margin on an adjusted basis in FY 2023. We continue to differentiate ourselves significantly from our peers who either have been upside-down negative gross margins or near-zero margins in both industrial and automotive verticals. As we have stated earlier, we expect these high gross margins to normalize as revenue scales up and the mix changes to more strategic sales, including NREs. To support momentum in direct sales last fall in 2023, we also placed an order to build new MOVIA inventory with ZF Autocruise to help satisfy demand from non-automotive customers. We expect this investment in building our inventory to drive revenue growth in the near term and beyond. We're beginning to see medium to long-term partnerships with significant multi-year revenue opportunities even in the industrial sector, especially in forklifts and warehouse automation applications. Again, our business model is to be efficient and not go after 700, 800 customers in the industrial verticals as that is not a sustainable business model. We want direct sales to generate operating profits unlike some of our peers who are focused on revenue with a low growth margin profile. Now, let's talk about expenses. In terms of our expenses, we had approximately $24 million of R&D and SG&A in Q4 2023. Keep in mind, this includes $4.6 million of non-cash stock-based compensation and $1.6 million of non-cash depreciation and amortization. For the fourth quarter, $16.6 million cash was used in operating activities, which is in line with our previously communicated expectations of a cash burn between $65 million to $70 million on an annual basis. To remind our investors, we continue to show financial discipline with our cash burn being within our expectations and on a healthy trajectory. As expected, full-year CapEx was $1.9 million, again, in line with our expectations. Our balance sheet, as of December 31, 2023, we have made most of the payments associated with the Oboe acquisition. A liability of approximately $3 million remains on our balance sheet as the final payment relating to this deal. A final agreement has been reached with the seller, and we expect to pay this amount in the next few months. Our total liquidity was $93 million as of December 31, including $74 million of cash and $19 million availability under the current ATM facility. On the basis of the annualized Q4 2023 cash burn rates of $16 million, we have a financial runway of 1.4 years and are fully funded until Q1 2025. We have one of the cleanest capital structures amongst our peers. MicroVision continues to stand out and beat competitors in terms of maintaining one of the lowest cash burn rates in the industry with a highly talented pool of engineers in both the U.S. and Germany and a strong balance sheet. We continue to have a $35 million ATM facility on file to strategically raise capital as and when needed. To date, we have only raised approximately $16 million under this facility and have $19 million available. The ability to strategically and opportunistically raise money via ATMs positions MicroVision very favorably as compared to our peers, some of which have had to resort to structured finance transactions to raise capital at significant discounts to their stock price. We believe that with our current cash on hand and our ATM facility, we are well situated to deliver to OEMs. Now let's talk outlook for 2024. We're expecting at least between $8 million to $10 million in revenue from the following revenue streams. As of December 31, 2023, we already have a backlog of $3.1 million. This revenue is expected to come from, number one, revenue related to the sales of LiDAR sensors to both automotive OEM and non-automotive customers as the volume ramps up at possibly multiple locations in EU and North America from the customers. Number two, direct sales channels that include the sale of our hardware to non-automotive customers and software that includes forklifts, warehouse automation robots, agricultural and mining equipment companies. Number three, NRE or non-recurring engineering revenue from OEMs related to the customization of our sensors. I would like to provide more details on the guidance towards the middle of the year as we start reflecting the revenue streams from any RFQ wins and multi-year industrial sensor deals. From a cash burn standpoint, we expect the cash burn for 2024 to be similar to 2023, between $65 million to $70 million per year. We believe we have all the necessary engineering resources to deliver on customer projects. As described earlier, with the relationship between revenue and operating expenses that we have modeled out, we expect to see a reduced need for additional capital as the company grows and focuses on achieving economies of scale. To summarize, we're really excited about 2024 and beyond. With our first commercial wins within reach and key focus on nominations, we are strongly marching towards pivoting to the market, our value proposition as a unique, well-positioned, Tier 1 LiDAR company in large and growing automotive and non-automotive markets.

And the first question is coming from Andres Sheppard from Cantor Fitzgerald. Your line is live.

Hey, guys. This is Anand Balaji on for Andres. Thanks for taking our questions and congrats on the quarter. I just wanted to start with something that's on top of mind. And as you spoke at length that you're in the process with OEMs and RFQs, and most recently in December, you put out a PR that you expect nomination in the first quarter of this year. I was wondering if you currently have an estimate of when you think you'll be able to officially announce an OEM partnership, or can you reaffirm that it's going to be coming soon, perhaps in this next month or so, to hit the first quarter?

Yes, we reaffirmed that we expect to announce nominations in the first quarter.

Fantastic. And related to that, I was wondering perhaps what type of OEMs you're looking at for these announcements, perhaps by region or vehicle type, and what you're looking at to contract. And I was wondering also if you could comment on China's most recent legalization of level 3 testing and how that affects the company and its potential prospects.

Sumit, you would like to take that?

Yes, I think let's talk about the last comment first. I think if you think about the legalization in China, ultimately, I would say that I've said this very consistently, if you just look at the team that we talk about in our multiple earnings calls, our focus remains Europe and North America. I personally believe looking at actual things that people are working on, real companies, that's more of a high focus. I think what's happening in China is some new early products will get delivered at very low volume, but there's no real programs that are high volume. And we continue to focus on the high-volume programs because they have the more legitimate path to get a company on good footing. So, I mean, somebody will ask about the DoD, what impact does that have? Somebody will say, what's in China? It's just like that one shadow out there, but yet nothing demonstrable has ever been done by that market early or what happens anywhere else. Anything that goes into cars in China, first of all, we'd have to go through a lot of regulatory hurdles before they're allowed to ship into Europe and North America. Those are the bigger automotive markets. What can ship in the China market, it's going to be pretty chaotic and noisy because there're lots of other Chinese partners as well. And it's unclear what margin somebody could extract out of it being a Western company. There's a handful of small niche projects that are out there, but again, I leave it up to the other LiDAR companies that are now set and talk about that to give more clarity and their analysts to dive into it. As far as the first part of the question, I think Anubhav maybe you can help me out with that one.

Yes, so the focus of the OEMs that we are targeting are based in EU and North America.

Got it. Appreciate that, that's very helpful. And I guess lastly, if we could switch over to the financials, I was wondering if you'd go over the gross margin a little bit and how it works for the quarter as there was a large jump to over 80% when I look at it. And is this due to the cost to get sold for the Microsoft agreement being virtually nonexistent or can you give a little bit more color on this?

Yes, that's right, Anand, because I think we had guided to this last quarter too, that we expect high contribution margins in Q4 because this is essentially the royalty revenue that we get from Microsoft. So obviously it flows through the bottom line. So again, I think this is an important aspect, right? Because I think the focus on gross margins is going to be a key focus because we believe that companies which demonstrate gross margin, better gross margin profiles would be the more valuable companies in the long run because I truly believe that revenue and pursuing growth at all costs, that era is over. And the focus will be for successful companies to continue to protect their gross margins.

Got you. And just as one last quick follow-up to that question, I was wondering what type of gross margin trajectory you're expecting going into 2024?

Yes, that's a great question. So obviously, I don't think it would be 80% gross margins for 2024. We believe as the revenue makes changes to more hardware this year, we expect the gross margin trajectory to be more in the 30% to 40% range going forward for 2024. But like I said, I would like to provide more detailed guidance as part of incorporating these RFQs because that will impact the trajectory of the revenue and the gross margin profiles. So I want to be in a position of a lot more detail in the second half or maybe the middle of the year of 2024.

Got you, that's very helpful. Thanks for taking your questions, I'll pass it on.

Thank you, Anand.

Yes, hey guys, thanks for taking my questions. Your nine RFQs that you noted, I'm assuming some RFIs that you're in progressed into RFQs. And I know you said, you just talked about a potential Q1 announcement, but how many others are kind of in the late, late stages that you think may actually be awarded in 2024?

I think I would say like these are all, all the nine are RFQ, all right? There's an initial RFI that could progress, but it's not, we want to be very clear and crisp about what RFQs are in, where to keep everybody's attention. RFIs may convert or may not convert, but as you can imagine, everything that anybody else is announcing, we're all in the same set of it, but we wanted to keep the focus on the RFQs. Again, like for example, last year, our customers told us when the decision was going to be, it was going to be, and they reaffirmed it before the last earnings call, and these are OEMs, right? So ultimately, they feel comfortable in moving their decision timeline. As far as we're concerned, based on what we have, the best knowledge we have on hand, clearly stated, the decisions for these nine RFQs are expected in 2024, in the early part of 2024, let's say, first half, or somewhere in the middle of the year, probably sooner. I'm just being cagey about it, because ultimately anything we say that we have in writing right now, they could shift, because as Anubhav tried to point out, and I've done as well, they're looking at a much more holistic expense that they have incurred. In the past, they had to take on risks with other partners that they've taken in that haven't delivered anything. Certainly, these RFQs that we're in right now, to be honest with you, were awarded to others, but clearly a year after it, they're opening it right up. Even if I'm giving a product that's lower profile, lower power, the questions are, hey, can you make it bigger so it can fit in this hole? So clearly what others are saying is not getting delivered, and we have to navigate that. We want to make sure that we are in these RFQs, that we support their investigation at deep-level, accent the benefit of our technology, and win that. So a decision will be whatever it will be, but of course, given when they are launching or their startup production is targeted for, we expect that 2024, it can't go any longer than that, right? Because new models would need to be launched as soon as possible. I hope that answers your question.

It does, yes, that makes a ton of sense. And let me ask you this, you now have all the pieces that you need for series production, but any kind of pushback that you're getting from OEMs, and how are you kind of addressing it? Is it mainly just kind of pushback surrounding the balance sheet?

Yes, I would say, in every discussion, it's all about, well, clearly have the technology, clearly have the team, quality system, software that you can execute on it, great. But do you have the balance sheet to take on a supply agreement? Now you can imagine, you take on a big supply agreement, they want to make sure that you can deliver. That you take on other nominations, you're engineering focused, and then you burn through a bunch of cash, where's that other cash going to come from, right? You have to show that there's investor confidence. We've been working on this since last June, and that we are able to raise capital to take on this big contract, right? I mean, some of these contracts that people are announcing, and all LiDAR companies that are dealing with OEMs directly are announcing, you can call it, billions of dollars, then hundreds of millions of dollars, it does not matter. They want to make sure you can deliver, there's going to be constant supply, because these contracts are over years. So every LiDAR company, I tend to be very, very direct and honest with our investors so they can evaluate and make their decision. Everybody's in the same boat. Everybody's getting the same message. In one case, we actually confirmed that this is what you're telling us, but what about, some of the other things that you have done? And the point-blank answer was, they had the same exact thing. How they choose to talk to the market is their prerogative, but clearly that OEMs are requiring this for everybody, because they don't want to take on any more financial risk with companies making promises, not delivering on supply agreements.

Yes, got it, got it. Okay, perfect, thanks guys.

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

Thanks, Paul. All right, so the first question is, does MicroVision still feel it will have multiple OEM design wins in Q1 2024? Can you provide an update and color where this milestone stands? Sumit, do you want to take that?

Yes, I think with as much confidence that you're going to hear in the call, I think we feel like we are in the right place. You have to ride the tide with the OEMs. You cannot advance it. You can't get to conclusions that quickly, but everything is in the commercial space. Everything is really about the runway and really about, can you become a Tier 1? And a small Tier 1, not like the big Tier 1s. If you think about the big Tier 1s. They had multiple lines of business with them over decades that were developed, right? And those Tier 1s are publicly announcing they're letting go like 30,000 here, 80,000 there, 18,000 there in different parts of the world. So Tier 1s are completely retrenching backwards. And what OEMs are looking for is the next wave of technology companies that can actually execute on their own path. And this is not a new model. I think the one name that will always come up about this is this is how they did it about 15 years ago with Mobileye. So whenever a key new technology comes in, they start looking directly to that technology provider to transform themselves into a Tier 1 and collaborate with them over a long period of time. And that's why I mentioned in my prepared remarks about Greenfield that, go as soon as possible, take it, start capturing as much confidence and business as you can. And that's how you take market share early. So yes, still feel we're on the right path, but yes, now you are in the commercial and you are at the discretion of how much confidence you have with these OEMs that your path over multiple years is something they can rely upon with financial discipline.

Thanks, Sumit. The next question is, do you anticipate any NRE revenue before the nomination and what kind of revenue would be fair to expect from NREs and when? Let me take this question. So right now, at this point in time, what we are seeing is sort of two kinds of deals, one is the nomination projects with the supply agreements, as Sumit mentioned, these are spread over multiple years and extending into, in fact, the middle of the decade, middle of the next decade, rather, to 2033. These are some of the nomination projects that are out there that we are part of. The second kind of projects are B-sample only development contracts, where the OEMs are requiring the LiDAR suppliers to put the risk of development because they are either not happy with the current partner or unsure about their timeline, so they want to do a de-risked path. Now, obviously between the two projects, we are choosing to go for the nomination projects only because we're not an engineering services company. We're being strategic to take projects that involve millions of units and volumes because, again, our goal is to get to the profitability that I described earlier, and that's a Tier 1 model. So we're only pursuing opportunities that have a guaranteed nomination because in the end, it's going to be successful companies that will be all about economies of scale. Now development NRE here and there may add short-term revenue, and some of the peers are choosing to take these projects with small volumes, again, to each their own, and we have seen these LiDAR companies suffer negative margins and pressure because of that. We do not want to do that, because I think you mentioned, you heard from us that we want to make sure that gross margin profile remains impressive, because we really want to be a high-growth LiDAR tier, which is valued typically as a hardware-software business, and to do that, it's very important to pursue the right kind of projects, and we do not want to commit the same mistakes some of the others have done. So hopefully that answers the kind of projects that we're going after. All right, so next question is management mentioned continuing to service ICE vehicles. Is this a continuing trend with RFQs and other business opportunities as the EV space has seemed to cool off lately? Shareholders recognize the state of these other industries, raising questions. What are OEMs committed to in this environment, and what are their design cycles going to be now? Can you please provide color on the current OEM thinking and trajectory of ADAS solutions regarding LiDAR? Some in the industry believe LiDAR sensors only apply to L3 and beyond. Are OEMs still considering LiDAR sensors for L2 and L2 plus? Sumit, do you want to take that?

Yes, that's a long question. I think I forgot the first part, because I had planned, but let me just start from the back and work to the front of the question, as I recall it. I think as we talked about the MOVIA S, so it's clear that you're looking at a 15-meter cocoon around the car. So for urban driving and for high-speed highway pilot, it's clear that ADAS level 3 and level 2+. Camera module-based technology does some things, right, but it's not able to do it as economically or as precisely to expand the features where LiDAR would come in, but only a low-cost LiDAR could be competitive. And when I talk about low-cost LiDAR, like a MOVIA S, after economy of scale, it's more expensive than radar, but it's less expensive than what a camera module full-blown systems are costing, right? So it's got the sweet spot, but the overall system cost will be brought down with higher number of functionalities for ADAS safety. So it is clear that OEMs do understand that level 3 and expanding some features that level 2+ does right now would require LiDAR, and that's where potentially the demand is coming from. So as you look at the volume that they're talking about, I would say it's not even scratched the surface. I mean, we're talking about millions of units, right? And some of the people on the call, I'm sure, are investors in micro-reels for a long period of time. I mean, I've only been CEO for a handful of years. So if you start from that point onward, these are volumes that have never been discussed in the history, 30-plus years of this company. So this is the right space. So and then from there, it's significantly more growth because it's not even scratching the entire fleet that gets launched every year. So we have great upside there. So that only happens, the target pricing they're doing is if there's economy of scale available, and they're going to break millions of units. And they recognize that. So they're expanding as we talk. The first part of the question was about, a lot about the OEM timelines. And is this right, Anubhav, did I get that right? I mean, I actually really forgot what the first part of the question was. Could you repeat it? Can you break the question down? Because this is a really long question.

Yes. So I think it was about, I think the first part of the question was between ICE and EV, are you seeing the RFQs more focused towards ICE or EV?

I think they have picked a year that they want to launch these products. Okay. And they've already announced publicly their EVs are towards the back end. So we are in ICE, and all the models that we're talking about, I just see a bunch of ICE projects up front. And part of it is they have to deliver software. With our perception, we can probably accelerate their path. But like any OEM, they pick a model year. They pick, and they get all their suppliers lined up. They start with the sensor choices first off. But they have to get all the supply chains lined up. But I would say dominantly ICE engines are back on the table.

Right. And I think the design cycle, and I think maybe you talked about the design cycles already. Maybe if I can add one more thing, right? Because I think Sumit, you mentioned, yes, the demand there. I think I would like to point out, once you get these millions of sensors out there in the field, I think what automatically pops up is the after-service market as well, right? Because obviously, imagine these sensors out there on the field. And since we have made those sensors, we would be the go-to default to get any repairs, etcetera. So that's also the adjacent market, which again, I keep saying it's a traditional model of hardware and software combined, which just adds to the revenue opportunity here. All right, the next question is, management conveyed that the company is not pursuing AR anymore because it has no control over the end product or the end markets. Here we are, though, trying to get placement in an OEM end product, finding ourselves in a similar situation. How would you characterize it?

I'll take that. I would say that that actually is not the right assessment. In the case of automotive LiDAR, there's multiple global OEMs engaged in it, and they're talking about it, and they're talking about their features. Multiple companies that are saying the same thing because they're dealing with the same OEMs. AR, I think there's one contract that we had, and that did not go to the high volume that we expected. And since then, very few consumer electronic OEMs have actually stepped into it. I think one big one in Cupertino steps into it, but not with AR, with a mixed reality sensor, right? At $3,500 a pop. So I think it's not the right or fair assessment saying that we don't control it. In this case, we control our sensor, but somebody that controls an even more complicated platform, and that's their core business, is engaged, and they're talking publicly about how important this is to them. And they're awarding billion-dollar contracts according to people, as you know. So we're in the right place, I would say, with our technology. MAVIN, with our MEMS-based technology, does something very special, and is in the right place at the right time. The Flash-based LiDAR, I think if you really take the time to read through our prepared comments, we give a lot of context of having a wide portfolio, so we're not like a one-trick pony. In the case of AR, you're a one-trick pony. In this case, you actually have a wide array of products that you can address the market with. And you have high contribution margin with software, which you had no opportunity anywhere else. So I would argue very strongly, and I think, and I really believe that most of the investors would agree with me after reflection, this is the best place to be. This is the best opportunity this company's ever had in its history.

Well, thanks, Sumit. Without going too deep, please elaborate a bit on what type of industry settings our hardware and software offerings are suited for in the near term? Actually, I think, let me take that question because this is about the direct sales opportunity for the non-automotive customers. Look, I think investors need predictable revenue, right? We're beginning to see medium to long-term partnerships with significant multi-year revenue opportunities in the industrial sector. Now, keep in mind, they are not as long as going into the next decade like the OEMs, but these are three to four-year deals that we are beginning to see from some of the forklifts, warehouse automation applications, agricultural applications, etcetera. And I think this gives us the biggest bang for our buck because again, our business model is to be efficient and not go after 700, 800 customers selling three, four, five sensors each to them. In fact, we believe the best way to capitalize on this opportunity is to go after these two, three, four-year, multi-year deals with these industrial automation companies where they can use our MOVIA sensor into their robots and forklifts and the automation applications, etcetera. Again, I keep driving the point of having a gross margin because again, one of the reasons why we have been successful and command such a position in the market is because of being financially prudent and having a strategy to make sure the gross margins are protected, capital raising is done right. All these things truly add to the creation of long-term value for our shareholders, unlike others who chase revenue at low to negative gross margins because that model ain't going to work anymore given where we are in the current economic cycle. All right, next question is, what happens to drive-by-wire and sensor fusion? You didn't mention anything on the call today. What's the plan on that?

I'll take that one. I think, we have a team in Germany that worked on it, and of course our team here also contributed to that a little bit. But, there is no real big plan for sensor fusion. So we've actually taken the sensor fusion part of it and we've wound it down. The people have been allocated to other programs to be able to secure some of these RFQs, but we really don't have a plan with sensor fusion long-term, given the environment that you clearly see that anybody that's been working on L4 is scaling back. So customers were more than a decade out. And to be fair, to really make a dent into it, you have to make a significantly higher investment that we're willing to make on pure R&D, on something that, other people that have a thousand engineers working on it are scaling back. So our main focus remains our perception software. But one benefit I see is a team that knows how sensor fusion would work. They know what a customer's requirement will be. As they continue perfecting the perception software part of it, they kind of know the problems that have to be solved. So I think we're going to have a good team working on and focusing on our perception software. I think the question did not get asked about Mosaic, but let me just say Mosaic as a product stays valid. We're still selling it. We're promoting it to people that are interested, but we're not making any more other investments in it to mature it any further. And again, it's part of financial discipline, because if we're not seeing, we had a year ago when we talked about it, we had very high hopes for all the revenues that we thought that we had pipelines to, and the economy does its own thing, so we can't control that. But we're readjusting the focus of the company based on the situation that we see ahead. And sensor fusion is something that our team did, but as a R&D project, it was never a product that was going to go without any big partnership. And given the fact the market for that has really reduced, I think it's the right move for us.

Thanks, Sumit. What are MicroVision's plans to achieve IATF 16949 certification, similar to one of the competitors who announced the certification? What steps are in place for this certification?

That's a good one. That's a really good question, actually. That's an important question. So we are ISO 9000 now. I think you can go to our website, and it's there. But as we talk about eventually to become a live Tier 1, even though we're working with contract manufacturers, our internal development processes and supply chain controls and everything have to conform to IATF. We intend to do that. But given the timelines that you need this for, it's a qualification that will start over the next several years. We'll get it done in time before any of these contracts. But the first thing is before we make that investment is to make sure you secure a big enough project. And if you think about anybody else out there that got IATF, it would be interesting to know for what volume that they did that. It's millions of dollars you have to spend to get that qualification. But if you had done it early, great, congratulations. But you're shipping as an option to a car, low volume. I think the way we're spending money is, yes, it's going to cost several million to actually get that qualification, but you want to do it for the right time. And as we think about the RFQs, the closure of these RFQs that we're focused on, that would be the right time to initiate it. And actually, OEMs know our plan. We've actually given that to them in writing. And they acknowledge that, yes, if you get it by that timeframe before C-sample, after B-sample, that's adequate and sufficient. And of course, working with consultants outside, you have an estimate of what it's going to cost, what time it's going to take. And given the fact that we have such a mature process that we inherited from Ibeo, the only team that actually qualified an automotive LiDAR, we see our path that that's not something that's going to impede us long-term.

So this is related to the Microsoft agreement. What is the status of the agreement? If renewed, was it on the same terms? Did December 2023 mark the conclusion? And let me take this one. So, yes, the Microsoft contract expired as at the end of December 2023. At this point in time, we have no visibility into any future revenue from Microsoft. Can you provide more detail on cash runway and to what date? And does the company envision it will have to issue shares in 2024? Let me take this one because it's an important one. Liquidity. Look, let's actually detail out the calculation. So our liquidity is $93 million, which I described is made up of $74 million of cash and cash equivalents and about $19 million in ATM availability. And if our cash burn, which I provided to be $65 million to $70 million on an annual basis, it roughly translates into Q1 of 2025 or approximately 1.4 years. While I cannot share out exact plans, what I will say is we have shown a very disciplined history of capital raising, the ability to strategically and opportunistically raise money via ATMs positions us very favorably as compared to our peers. I think you have seen in the past some of the peers had to resort to structured finance, overnight deals at significant discounts, damaging the stock price even until now. We will continue to strategically evaluate all the capital market instruments to preserve and create long-term shareholder value available, including equity and debt to strengthen the balance sheet and again, establish our credibility as a tier-one player. Because I think you have heard us talk about that quite a bit in this call. And I think this is sort of why we believe that we will be one of the winners in this LiDAR industry because of these attributes.

Last question, Sumit, level four highway pilot, are there any updates you can provide about the level four highway pilot trucking OEM previously mentioned on the slide deck?

I think like we said, it's when you think about autonomy, right, I think, because again, we're trying to keep everything consistent of exactly where the market is, give everybody the data that they need to make their decisions. Level four was all everybody talked about. It's still there, but it's much more diffused. I would say there's only a handful of people so focused on it with timelines they have. We're happy to support if we can for the right deal. But again, it's a problem that is a pretty big problem that those guys are working on. And they have to find a viable business model. In the case of trucking, right, there's how do I describe it? I think one of the other companies that is already public describes it as hub-to-hub transit that they're doing. They're starting to explore business models for that. Effectively, they need LiDAR, but their software is the dominant central piece of that product line, but it is enabled by our LiDAR and other long-range LiDAR that reach out to like, half a kilometer or something like that. So trucking is a space that you want to focus on. But again, it's like anything else. I sell a sensor, we do some software, and the rest is really up to them. In the case of a passenger vehicle, it's the same story, but since such high volume is needed that the sensor, the LiDAR sensor actually turns to be a very key supplier partner that they have to work with. In the case of the autonomy, the level-four autonomy in trucking, you're still a key supplier. But their timelines to figure out their business model, right, could determine how much money really comes into the company from the sale of products. So, we support them. They are OEMs. It's a small world. You want to support them as much as possible, but you got to be really mindful about where your resources are. Like as you said, we show financial discipline, meaning that if I have, 350 plus people in the company, we don't want to increase OpEx based on the level four. We certainly want to increase OpEx based on large projects that may be coming with a level three, level two plus. But if you can support them with existing products, we're happy to do so.

Thanks, Sumit. I think we went longer than our scheduled time. But again, I thank everybody for jumping on the call for our annual update. We look forward to speaking with you again for our Q1 call. Thank you so much.

Thank you. Thank you. Bye-bye.

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