Microvision, Inc. Q2 FY2025 Earnings Call

Good afternoon, and welcome to the MicroVision Second Quarter 2025 Financial and Operating Results Conference Call. 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. Good afternoon. I'm here today with our Chief Executive Officer, Sumit Sharma; and our Chief Financial Officer, Anubhav Verma. Following their prepared remarks, our Chief Technology Officer, Glen DeVos, will join us, and 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 status of commercial engagements, business, product and go-to-market strategies, level of customer and partner engagement, cash, liquidity and the impacts of recent financing activities, market landscape and opportunities, program volumes and timing, development projects, performance of our products and solutions, product sales and future demand, projections of future operations and cash flow, availability of funds and conditions for capital raising as well as statements containing words like 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 under the SEC Filings tab. This conference call will be available for audio replay on the Investor Relations section of our website at www.microvision.com. Now I would like to turn the call over to Sumit Sharma, our Chief Executive Officer. Sumit?

Thank you, Drew, and hello, everyone. Welcome to our second quarter 2025 results review. I'll start by updating you on our progress with commercial agreements in the automotive and industrial markets, followed by what we expect from our military engagements and finally, refreshing everyone with our vision and mission. Since our last update, our level of engagement with automotive OEMs has increased with multiple reformulated RFQs. A new architecture, which Glen will introduce at IAA in September in Munich is instrumental to this. It provides OEMs with a wider operational design domain while making solutions cost competitive for larger volume adoption. For the past 5 years, lidar companies have proposed solutions with no mass market adoption by OEMs and limited revenues. The new RFQs target form factors that can be integrated into automotive design with low power and competitive technology cost for economy of scale. Our new MOVIA S and MAVIN offer the widest field of view, delivering what we believe is the most cost competitive performance for dynamic view lidar. Key features include small object detection at range, the widest system field of view, the lowest system power and cost competitiveness with scaled silicon technologies. To succeed in this space, our go-to-market strategy remains steadfast. We are focusing on OEMs with mass market product plans. Even with production targeted for 2028 and beyond, it is crucial for us to win in this segment with a scalable product. Cost competitive and scalable lidar products developed for automotive will also empower us in the industrial and defense segments with higher sensor fusion and perception software sales. We plan to elaborate on this further in September at IAA in Munich. In our industrial vertical, we are in the final stages of several engagements with ongoing evaluations. This segment is also very important to us. The proposed solutions include our lidar hardware integrated with advanced software features like the lidar collision avoidance system, LCAS, directly from the lidar sensor. We have multiple opportunities with these products and with industrial customers. To advance our sales opportunities in the automated guided machines, autonomous mobile robot segment, we also introduced an aftermarket product with our lidar and LCAS software that can be retrofitted into existing forklift fleets. This product makes adoption of our lidar and software far more frictionless for our potential customers. I've been on the road with our sales team for this product and have been pleased by the reception. The mass market product for this segment will be a MOVIA S safety sensor, which we plan to introduce in the coming years. In the industrial space, 2D mechanical lidars that are safety qualified currently hold the highest volume and revenue opportunity. The perception software developed with these sensors is extremely limited. To dominate this segment, we expect to forge future partnerships with AGV/AMR companies looking to evolve past 2D lidar safety sensors to our 3D safety sensor with onboard perception. We are targeting our solid-state MOVIA S lidar for this product line. With resolutions more than 2.5x higher than current products, a smaller form factor and integrated LCAS and safety sensor options, I believe this will be a very successful product line and will allow us to establish reliable annual recurring revenues in this vertical. Our current focus is on finalizing commercial partnerships in this segment. The defense vertical presents a significant opportunity for us to collaborate with existing prime contractors and to serve as a primary technology provider for a comprehensive hardware and sensor fusion product. The defense market demands dual-use technologies and cost-effective systems for land-based, aerial and maritime autonomous platforms. Each of these platforms requires high performance, highly reliable lidar, seamlessly sensor fusion software and a perception software layer that extracts insights from the localization and mapping to enable full autonomy. These systems must be capable of operating in GPS-denied environments without extensive AI training data. This is the forefront of autonomy and our products and technologies can significantly impact this segment. Developing and demonstrating our technology in the military space will further create opportunities in the future for us in automotive and industrial to bring advanced technologies built on top of our lidar for years to come. In the first half of next year, we plan to publicly demonstrate an autonomous swarming drone system. This system will be capable of creating detailed maps of regions and communicating these maps in real time, allowing other autonomous drones to execute a wide range of missions. The core sensor fusion and autonomy software we are developing will facilitate partnerships in aerial, maritime and terrestrial domains. This drone technology demonstrator will be crucial in advancing our collaborations. Our go-to-market strategy for the defense sector will center on developing advanced lidar sensors and sensor fusion technology that delivers the highest level of actionable perception software. We target partnering with established prime defense contractors, and these partnerships may lead to further opportunities for joint ventures that can accelerate our revenue growth. Our company's vision is to accelerate the global adoption of autonomous technologies across all segments. Our mission is to partner and develop the most advanced lidar sensors integrated with edge perception software for the automotive segment, enable the industrial segment with advanced robotic software and our lidars and empower the military segment with autonomous software with multimode sensor integration. I will keep my remarks brief today to allow time for questions from our shareholders, which I would like to prioritize. I'd like to turn the call over to Anubhav now. Anubhav?

Thanks, Sumit. From a financial perspective, the first half of this year, especially the second quarter, witnessed increased trading activity and institutional trading, not just in MicroVision, but across the board in our peers as well. This sustained momentum and elevated interest in lidar and auto-tech names paints an exciting time for us. A lot of blue-chip institutions also seem to be turning their focus back on to auto-tech, especially lidar sector, primarily due to 2 factors: number one, the progress that's being made towards commercialization across automotive and robotics and defense tech; number two, a global portfolio rebalancing that seems to be at play for large financial institutions as a result of which small- to mid-cap companies are expected to continue to benefit from this trend. Expanding on Sumit's comments, we made significant progress with NVIDIA by achieving full integration with their DRIVE AGX platform. This is a big step forward for us to become a fully qualified solution provider, particularly as we engage in several RFQs with automotive OEMs for our integrated long-range and short-range lidar solution. We're looking forward to IAA in Munich next month to demonstrate our new integrated solution for the OEMs. We believe that price will continue to be the single most important factor for OEM decisions to drive higher lidar adoption. The automotive vertical will always be the primary driver for high-volume recurring business that gets us to scale. We're driving momentum in the industrial AGV/AMR market to drive near-term revenue opportunities, leveraging our perception software and MOVIA hardware to solve complex business problems for our customers at attractive price points that lower their system costs and increase their internal productivity and efficiency. We believe that our production commitment with ZF in France drives our ability to meet the anticipated high-volume demand from customers in this space for our MOVIA L product. We believe the ability to mass produce automotive-grade products ensures continuous and uninterrupted supply at a pricing advantage to our customers given our minimal exposure to China-based manufacturing. While the situation continues to be dynamic and evolving regarding global tariffs, we believe MicroVision remains well positioned with our manufacturing partner in France. We continue to press ahead with our pursuit of revenue opportunities in the defense vertical. We recently added Scott Goldstein to our Advisory Board to help find near-term partnerships. Our go-to-market strategy in the sector will be focused on mission-specific projects in 3 key areas: maritime, airborne and terrestrial. In short order, we plan to demonstrate a complete solution with multimodal sensors and our full stack software capable of enabling unmanned drones to complete specific missions. We recently bolstered our sales and business development teams by attracting experienced, talented individuals from some of our key competitors. MicroVision remains well positioned in the marketplace with diversified near-term revenue opportunities in the industrial and defense sectors. The expanded TAMs, streamlined cost structure and recent financings have solidified our position. Now let's review our second quarter financial results. Revenue. For the second quarter, we reported revenues of $0.15 million. This quarter's revenue was driven by our sales in the industrial verticals. Expenses. Our second quarter 2025 R&D and SG&A expenses were $14.1 million, including $1.9 million of noncash charges related to stock-based compensation and $1.5 million noncash charges related to D&A. Backing out these noncash charges, our R&D and SG&A cash expenses were only $11 million in the quarter. On a year-over-year basis, we have reduced our expenses by 44%. We expect the current spending level to be sustained through the rest of the year. We believe our existing workforce and level of expenses allow us to execute on the current business strategy. We believe our current engineering teams can support continued engagement with automotive OEMs and simultaneously scale faster with industrial and defense opportunities in the near term. CapEx was $0.2 million, in line with our expectations. Now let's talk about our balance sheet. We finished this quarter with $91.4 million in cash and cash equivalents. In addition, the company has availability of $76.5 million under our current ATM facility and $30 million of undrawn capital under the convertible note facility. As I mentioned earlier, the lidar sector and broadly the auto sector saw elevated trading volumes in the first half of 2025 due to increased interest from institutions trading in these securities. Given the favorable market volumes, we raised about $35 million net from the ATM during the second quarter and bolstered our balance sheet. While we will continue to be opportunistic in raising capital, we believe that with the recent raises and our current ongoing operating cost structure, we have extended our runway into 2027. The extended runway makes MicroVision an attractive investment opportunity for new large financial institutions. On the convertible note, we have approximately $33 million outstanding that converts at a fixed price of $1.60. With $91.4 million cash at hand, we're now adequately capitalized to make these debt payments starting September 1 in cash with the cash on hand or through stock if the holders choose to exercise their option due to favorable market conditions. The $30 million second tranche remains undrawn and available for future drawdowns. We're pleased to have found a strategic financial partner whose confidence in MicroVision's future has motivated an alignment of economic interest in step with our management team, employees and other shareholders. MicroVision's average trading volumes have significantly increased, which in part is due to the investment commitment of over $90 million from one single investor. As I have noted before, this is the first in company's history, and I am quite pleased with the recent uptick in our trading activity. Our average daily trading volume has more than doubled. Over 5.2 million shares traded on an average on a daily basis during the entire second quarter in 2025. The equivalent number was 2.6 million in the corresponding period in 2024. While a solid foundational retail base is very core to MicroVision, we are pleased to report that the recent $90 million investment commitment has unlocked a sharp increase in trading and inbound interest from several large financial institutions. This has significantly elevated visibility of the company across the broader institutional investor universe. We remain relentlessly focused on our execution and continue to have excellent engagement with industrial customers on their technology road maps. To summarize, we're really excited about positioning MicroVision as one of the frontrunners of the autonomy enablers for the 3 end markets. We continue to drive forward with significantly higher TAMs, including defense and industrial, expansive and broadening solution advancements, a solid balance sheet with superior trading metrics and a well-experienced team to execute the strategy. Operator, I would now like to open the line for questions.

And our first question comes from Jesse Sobelson of D. Boral Capital.

It really sounds like there's a lot of exciting developments, both on the military side here with the autonomous drones you mentioned in these remarks as well as just across the board with some other end markets that we've discussed previously. I wanted to ask just on the industrial pipeline visibility. You mentioned growing momentum in the industrial verticals. Can you expand on specific use cases or customer types showing any traction? And when do you expect this to materially impact revenue?

Yes, we provided an update during the Investor Day and everything we've shared publicly remains relevant. In the industrial sector, we are focusing on AGV/AMRs. In logistics, there are various autonomy requirements, but the greater need is for enhanced safety. Our current MOVIA L product, when integrated with an LCAS system, offers a display similar to a retrofittable solution that can be added to existing installations. This means we don’t have to wait for forklift manufacturers to integrate it into their next-generation products, which typically take longer to develop. We are involved in some RFQs and are optimistic about closing a few successfully. However, I believe the larger opportunity lies within the existing installed base. There are numerous sales organizations specializing in retrofitting that have access to customers with significant installed bases, and they are seeking a plug-in ADAS solution, more akin to a warning system, which can be implemented more swiftly than the pace of forklift manufacturers. This creates a market opportunity with higher average selling prices. Additionally, since we provide a fully integrated product, the time to market is reduced. Beyond this, there are other opportunities where customized software with lidar can be integrated to enhance their LCAS systems or other forms of automation, and our team is actively pursuing those initiatives.

And Jesse, from a timing standpoint, we expect these revenues in the second half of this year and then continue in 2026, as we mentioned before.

That's wonderful to hear. I really appreciate the detail there. I would like to briefly discuss the defense sector before opening the floor to other questions. The autonomous drone solutions you are talking about sound very intriguing. Are there specific programs or agencies you are looking to engage with in this area? Additionally, what is the expected timeline for any prototypes to be announced or for potential pilot projects to begin with these targeted agencies?

We're actively working in this area, and as partnerships develop, we will announce them. We have certain technology blocks already in place, particularly in sensor fusion and perception related to our lidar products. Additionally, we are incorporating other sensors. As Anubhav mentioned, our approach is very mission-specific; we are not creating a general product. Instead of waiting for a partnership announcement to begin development, the interest we've observed allows us to showcase something by the first half of next year with the drone technology, which sets us apart from any other lidar company. This will serve as a public demonstration, and we are funding it based on feedback we've received about which key aspects we should highlight for partners to assess our expertise. Glen, do you have any further insights?

Yes, that's exactly right, Sumit. As you mentioned, we have launched a multi-phase project for airborne drones where we can demonstrate how lidar, vision, and radar work together in various ways. One of these ways is enabling pure autonomous navigation for the drone in environments without RF or GPS signals, which is common in conflict areas. This allows for precise navigation without relying on external communication. We can also create real-time maps and share them with other drones, facilitating swarming and multi-drone operations. We will showcase how our technology enables this. Importantly, we view the drone as a vehicle platform that we control. MicroVision possesses all the necessary technologies to enable this, including sensors, the ability to process and combine different sensing methods, map-making, and perception software to construct the environmental model for the drone. We also have the autonomous stack from the IP we acquired with Ibeo, allowing us to integrate these existing assets into a cohesive package. Therefore, it's critical for us to showcase our capabilities, using this platform to attract the right partners in this space. While our initial focus is on defense, the technology can easily be applied to commercial markets, logistics, and various other sectors.

And our next question comes from Casey Ryan of WestPark Capital.

Talking about end markets and TAM, do we need to break industrial down to be broader than what we've talked about historically, just that distribution and warehousing is one, but are we starting to see a more expansive definition of industrial or sort of nonautomotive? It'd be great to hear about that.

Yes. Can you go on mute so we can answer. Let me just give some context on that. So think about the industrial, I think the way to approach the problem is what are the channels that you have to go in that you have to develop to get your product into the market. Actually, we know how to make product. We know how to solve problems. But I think it's really come from you got this awesome technology that you're sitting with, but how are you going to actually develop a channel to dominate. So if you can take the industrial space, the way to break it down is geofence, mixed-use, ADAS, but also there are certain parts that are kind of automated in the sense that if somebody needs a safety sensor right now, they know exactly who the 3 to 4 suppliers are. They know who's #1 that's got more than 80% market share in there. They go get a quote and they just keep replacing or the new equipment keep adding. So over a long period of time, there is a recurring revenue in that space that is agnostic of the 3 segments that I described. When they develop any kind of AGV/AMRs, they need the safety sensor, they always go to a standard product. So if you think about the channel, that's a creative channel for that market where we are a standardized safety sensor product, then you need a higher workforce, of course, when that moment comes in because the way you would actually go to sales is different than the small thing we have right now that goes after individual high-volume projects, you have to really be a mass market product and deploy across different distribution channels. So the real answer is that how do you segment this market? Well, there's multiple ways. Right now, given how we're targeting, we have to pick the cherry products that have high volume. Recently, we were discussing with somebody in an RFQ and the volume was only 1,500. And they're like, oh, we're only 1,500 units. And I met them. And I said, no, no, that's pretty good for us, right? Because that's how the momentum starts. Of course, we'll build trust from there, and we'll go and take years to build it into their pipeline. So I don't think you have to dissect the segment more, but dominantly, factory automation and warehouse. This is the 2 big places where this sensor and any sensor that we come up with safety sensor is going to be dominant. So I think we can keep it at those segments. It's how we attack those segments and how we go after and developing those channels is probably a better way to discuss because, of course, future expense will be related to that. Right now, what we can do with our current workforce, our sales team is focus on some things. And once we get the real understanding of how those channels are developing, we can invest heavier to go higher. But when we go to the safety sensor, you definitely going to need a bigger sales team to go global across multiple distribution channels.

Mr. Ryan, did you have a follow-up?

Okay. Let's move to the next then.

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

Thank you, Paul. Right. So first question, what is the status of the industrial OEM evaluating our technology? Can you explain what is causing the order delay? What is the status of other industrial companies evaluating our technology?

Yes, I'll take this. I don't think there is any delay in making a decision. I think we have a sensor. We provide software. They have their own software to integrate into their AGV/AMRs. Like some of the ones that we visited are as few as 1,500 units. Some of them are higher than that. I think they're all in different levels of evaluation of how they will integrate into their system. Of course, we sell a solution. But the bigger thing that every partner has to figure out is if they are making a new product, how is that going to plug into their supply chain, has to go to their factory, get installed, the integration part of it. If you have a customer that's potentially looking at to go more aggressively and retrofit it, they have to figure all those things out, like once the product gets installed, how would you upgrade firmware bugs that could be found. So there's lots of steps involved to get that integration part done. So I would just qualify it as more that it is in deep evaluation. I think in all cases, we have not really submitted any big changes. I think we're done. We just support them in the various things that all these customers are finding just to upgrade our offering. But our input at this point is minimal, and we are actively supporting their integration efforts to make sure everything is exactly the way they would want. These customers are different than automotive customers. Automotive customers have multiple years to figure this out. Industrial customers, on the other hand, they take as little as 12 months, as much as 24 months. So typically, they want to make sure whatever they're buying is going to smoothly integrate. So that's where we are in these engagements.

Next question. Recently, most of the other lidar companies have announced sensors for the industrial sectors. How do you plan to compete with them, especially existing players like Ouster and SICK that have a stronger revenue and a customer base?

Glen, do you want to tackle this?

Yes. When we examine the current portfolios in this sector, they predominantly consist of large electromechanical assemblies. There are several key areas where we stand out. Firstly, our technology provides a significant cost advantage because our industrial products are entirely silicon-based, such as our flash lidar systems. This technology enhances the efficiency of sensor assembly and operation, benefiting from production scale. Secondly, our sensors are designed for harsh environments, featuring Gorilla Glass lenses and high-integrity sealing to withstand elements typical in industrial settings. Thirdly, our products are more compact and energy-efficient, which is crucial for battery-operated automated guided vehicles (AGVs) and autonomous mobile robots (AMRs). Moreover, we offer more than just a standard catalog sensor that delivers basic functionality; we provide a complete software package that enriches our sensors with capabilities like perception and driver assistance features, enabling us to customize solutions according to each original equipment manufacturer’s (OEM) specific needs. This tailored approach is significant for our clients, as it allows integration without requiring them to modify their systems. Lastly, as Sumit highlighted, our comprehensive offering includes a bolt-on system, allowing us to enhance existing vehicles or fleets that lack driver assistance or safety features. This enables rapid implementation that increases safety and productivity, fulfilling a strong market demand for such systems that are currently lacking in the industry.

Thank you, Glen. Next question. MicroVision is entering the military tech space. Today, you mentioned drones, aerial and marine applications in the defense tech space. Are we pivoting away from lidar because we have limited success? Or do we have something valuable to offer? And how much dilution should shareholders expect from this?

I'll address the first part of your question, and then Anubhav can help with the dilution aspect. To start, we are enhancing our existing capabilities. As previously mentioned, we do not foresee significant increases in our operating expenses. We are still committed to introducing a sophisticated drone demonstrator in the first half of next year. I encourage all shareholders to view this as maximizing our resources while aligning with market needs. Lidar remains a fundamental sensor, providing us with a competitive edge. For example, while we often think of lidar in relation to autonomous vehicles, it also applies to drones and maritime environments. In the military tech sector, there are substantial investments aimed at automating watercraft, and we need to assess if we can provide something beneficial. Consider a scenario where a team with enough expertise decides to create a new product. They would require GNSS, like GPS, along with IMUs, vehicle automation systems, camera sensors, radar sensors, lidar sensors, microphones, and mapping resources for navigation. These are essential components for any company aiming to deliver an autonomous vessel through a Department of Defense contract. All these inputs converge into a sensor fusion system, which is essentially what we offer. Our lidar speeds up the process of creating a seamless database that allows for rapid identification of critical elements in the environment, including underwater around the vessel. The foundational technologies that support Advanced Driver Assistance Systems and autonomy can also be applied in different sectors. While we have our core components, there are additional elements, like sonar or microphones, that we could integrate. Our goal is to form partnerships that showcase our drone technology, emphasizing that our actual product is a software and hardware solution that streamlines the adoption of autonomy. We provide the infrastructure, allowing others to adopt these systems more efficiently without starting from scratch. In summary, we are broadening our capabilities without increasing operating expenses and will publicly showcase our progress. This isn't a pivot but an expansion of our product offerings in military tech that applies to all three areas. While everyone is familiar with terrestrial advancements, drones present unique opportunities for rapid autonomy. Drones operate in less congested airspace, which allows for quicker demonstrations. The development of real-time mapping is crucial—especially if you're in an unfamiliar location, as needing an up-to-date map is fundamental before any mission. We plan to demonstrate multi-drone collaboration while also extending our applications to maritime settings. Anubhav, would you like to address the dilution query?

Yes, I agree with you, Sumit. In terms of dilution, I want to ensure our shareholders understand our model. We're not aiming to become a complete solution provider like the Auroras or a fully autonomous systems provider. Instead, we are focused on partnering with the right companies for specific missions. The key here is to identify what they are missing, as we have already developed those components individually. Our goal is to collaborate with them to achieve these specific objectives. For example, we don't intend to become a drone company; rather, we want to partner with a drone company to enhance their capabilities for a mission like mapping. This will add a few million dollars in expenses, but we are not shifting our focus to develop a fully autonomous solution from the ground up. That approach, while appealing, requires billions of dollars in capital and extensive patience, as demonstrated by larger companies pursuing this vision. Therefore, I want to clarify that our strategy involves partnering with other firms to create a comprehensive package for specific missions. Now, moving to the next question, what happened to the seven RFQs? The number was removed from the Q2 press release. What's the status of these RFQs?

Yes. Let me start off with that, and maybe, Glen, you can come back and add some more. Think about the RFQs as OEMs reformulating, which is they do quite often every so often where they reformulate what their really needs are. So I think like we've been at MAVIN for a long period of time. And as we've always said, our go-to-market strategy is to really focus on not just making announcements, increasing our OpEx and not revenues coming in, is to go work with target OEMs that actually have a real product plan where we can connect. As you can imagine, as Anubhav said, I've said, Glen has said, for OEMs, automotive OEMs, cost is always going to be #1. They want the highest technology, but cost is equally or even higher in the priority list. So they want to get it at the right level. So for the longest term, I would say, MAVIN, is some of the choices that have always been made of what's required for a long-range lidar, you want a wide field of view, but you also want length, you want low power. It's just over-constrained problem. So yes, if you develop something, you provide it there, the cost is extremely high. The power is extremely high. The form factor is pretty high because the optical choices you have to make. So I would say these new RFQs, I think they're going to keep evolving, but I think they are starting to realize that there are other alternative ways to think about the problem that can be much more cost competitive and meet and exceed the requirements. So perhaps to deliver dynamic with lidar, imposing all those requirements for one sensor and then expecting to be super cheap is a fool's errand, because every OEM and every award that they've done so far, that has never worked out. So I think I'll let Glen talk about it, but I think since he has so much experience from Tier 1s and OEMs, he sort of guided us toward what's the right product. And maybe we can introduce it now, Glen, before we give all the details, like a little teaser, so in IAA, we can give them first of all, perhaps you can join.

Yes. I want to discuss the current status of the OEM quoting process. As we mentioned during Investor Day and previous earnings calls, auto manufacturers are reevaluating their strategies regarding Level 3 technology and the application of lidar in this context. This ongoing process is showing two key developments. First, there is a more thoughtful approach regarding which platforms will actually use Level 3 technology, including how and when they will implement it. Consequently, the quality of the request for quotations (RFQs) has improved, which strengthens our confidence that these may lead to substantial projects and revenue. Lidar technology is not yet as mature or standardized as components like brake controllers or radios, where the purchasing process is predictable and reliable. Lidar and its Level 3 features remain advanced, requiring OEMs to navigate the landscape carefully, but they are making strides. The RFQs we are currently engaged with are of higher quality, boosting our optimism about converting these into genuine programs and revenue, which is encouraging. Sumit highlighted an important point. Historically, achieving widespread adoption of new technology requires lowering costs. There has been much discussion about cost reduction correlating with increased lidar demand, but the reality is that we need to reduce costs to stimulate higher volumes. This principle also held true for vision and radar systems when they were first introduced to the automotive market over two decades ago — it took time for costs to fall. As product costs decrease, volumes increase, supported by more affordable solutions. Our focus, especially intensified since I joined in April, has been to devise an appropriate strategy for automotive lidar that reduces costs without compromising performance. We're approaching this from a broader system architecture perspective, rather than just supplying a single sensor. This entails breaking down the challenges into smaller components, similar to what we accomplished with radar and vision systems, where instead of relying on a single sensor, we developed multiple sensors. We'll share more about this at the upcoming ERR, where we believe our system architecture will offer improved performance, compact design, lower power usage, and ultimately help OEMs provide these features at a reduced total system cost for vehicles. We are genuinely excited about the potential of our technologies in this area, which we plan to unveil at ERR or IAA in early September. We are fundamentally redefining lidar for automotive applications, as previous efforts resulted in insufficient adoption rates. Our goal is to facilitate broader applications, extending down to Level 2 and standard ADAS systems. Now, Sumit, I’ll hand it over to you and Anubhav.

Thanks, Glen. Next question. MicroVision has not won any deals and other companies have since made changes to their products. Are we at risk of having outdated or inferior technology? What are we doing to remain best-in-class?

Let me start by saying that our MOVIA L, along with our software, is a refreshed product offered at a competitive price with integrated software. This is our immediate path to revenue. It's an important question, and the current strategy is functioning effectively. While some other lidar companies may appear to be different, our strategy is clear. As Glen explained, rather than trying to fit all requirements into one single product, it makes more sense to have multiple sensors and a software architecture that considers the entire vehicle, aiming to simplify it and lower overall costs. We are enhancing our product lineup with MOVIA S and MAVIN to provide the right tools for various challenges. This is more of an evolution in our approach compared to competitors who may have halted development and shifted to entirely different products. We remain committed to MEMS-based technology, using 905 lasers and time-of-flight systems, maintaining the same foundational elements. Rather than consolidating everything into a single sensor with a wide field of view, we are breaking it down into various sensors that together can still reduce costs. This will be demonstrated at IAA. Regarding other recent awards, while I congratulate the winners, we opted out to avoid increasing operational expenses with no guaranteed follow-on volume. We are focused on validation and have products ready that should lead to successful deals. Some companies talk about achieving economies of scale by integrating everything onto a single chip, but these statements don't translate to guaranteed revenues from OEMs, particularly since many OEM products are still in the distant future and are primarily generating non-recurring engineering revenues. I appreciate the concern about competition evolving their products, but we are actively evolving by breaking down the challenges we face while keeping costs and integration in mind. Glen, did I miss anything? Would you like to add more?

Yes. I want to emphasize that when people discuss technology, they often focus on the hardware aspect. As Sumit noted, we have a solid road map that we’ve been developing for the three markets we mentioned: industrial, automotive, and defense. Our hardware road map is quite strong, positioning us as leaders in the industry. However, it's crucial to highlight our excellent software road map as well, which incorporates the latest software advancements through machine learning, AI, and GenAI. This applies not only to the functionality of the final product but also to our product development process. Our goal is to achieve optimal performance while reducing the overall system cost. Personally, I keep a close watch on the competitive landscape and how lidar technology is evolving. Overall, I feel confident about the direction and pace at which we are moving, along with the strategy and road map we have in place to support our progress.

Thanks, Glen. Next question. From this earnings call, I gather that MicroVision is transforming from just a lidar company into an autonomous systems company. How does the future look for lidar companies moving up the chain? Let me take that question because I think it’s related to the dilution question earlier. I don't believe this requires significant investments or major changes to the company's cost structure because we are focusing on partnerships. The idea is to utilize the components we already have and fit them into the needs of other providers, presenting a complete solution to end customers. We are not aiming to compete with companies like Aurora that offer comprehensive autonomous systems solutions, which can be costly and time-consuming. Instead, our goal is to empower smaller players to provide autonomy to industrial and defense tech customers. The future for lidar companies moving up the chain involves us integrating multimodal solutions, making lidar one part of the sensor suite alongside our full stack software, which may include radar and cameras. We will deliver this combined solution, requiring integration at the customer's end. This vision does not necessitate a major increase in our current cost structure, though it will involve some investment. We have been clear that this requires some expenditure, particularly for our engineers to customize solutions for various applications. However, it doesn’t imply that our operational expenses will triple or quadruple. We aim to maintain operational expenses at similar levels, with perhaps minor increases. This is the vision we are pursuing and working to implement. Next question. Has MicroVision recently issued more shares? Management has indicated that they do not need to issue shares in the near future. Another related question is about the plan for making payments in September for our debt with High Trail Capital. Do you foresee any immediate need for additional financing or dilution? I want to clarify that I don’t believe any lidar company can claim they won’t issue shares or raise more capital. It’s clear that this is not a realistic statement because all lidar companies are going through a transformation where they must be efficient in their cost structure while pursuing the path that will lead them to become one of the few remaining companies in the industry. This involves advancing to a higher position in the value chain, with software being a crucial part of their offerings. We have sold some shares, as I mentioned during my call, because we have become an appealing investment for several large financial institutions owing to the stability and long-term outlook of the company. Investors want assurance that their investment is secure, knowing that the company has the resources to carry out its business strategy. The effectiveness of the management teams at these companies will be evaluated based on how they raise capital and maneuver through capital markets to implement efficient capital strategies to reach their goals. Our history demonstrates that we have been cautious and strategic in raising capital, and I intend to maintain that approach to ensure MicroVision is well-capitalized at all times to execute its business vision, while also being pragmatic about shareholder dilution. Regarding the plan for making payments in September, we have sufficient cash reserves to make our first payment due on the 1st of September in cash. If the stock price and market conditions allow, and if High Trail decides to accept stock instead, we will need to issue those shares. However, we aim to optimize how we enhance our cash resources on the company's balance sheet to realize our vision. Navigating these markets effectively and choosing the most cost-efficient methods to raise capital is critical until we reach a point where only a few players remain, and revenues have grown to a level where cash flow breaks even.

Next question. What military revenue opportunities are you targeting? How should shareholders think about the revenue from this industry in 2025 and 2026? And what could be the expected impact on the expenses of the company? Sumit, maybe you want to talk about this? Yes. I think as you think about the military revenue opportunities, think about partnerships. Partnerships mean that you have to demonstrate your technology. So there's some sort of co-development. Everybody has their architecture they're dealing with right now. They have fielded products. They have contracts within the military right now with the DoD. And we are targeting specifically people that need an upgrade on their solution. And not just that we sell them a lidar, we try to give them a more holistic product. Certainly, with products that are off-road vehicles that are doing some sort of logistics or all sorts of other things in terrestrial space, that's something that we can demonstrate or find the right partner that is willing to work with us to not just buy the lidar, but also work with us to see what the advantage of our sensor fusion technology is. When it comes to drones and when it comes to maritime products, I think we may have a better opportunity there to showcase our technology and then expand from there. But in all cases, you start with the partnership. And then after you've proven yourself and you can be a trusted partner to them, that is got components that are not susceptible to or they're not sensitive to anything from China, which we are successfully, we could demonstrate that. We have a robust lidar product line. That will enable us to think about other next steps beyond that. I think that's the best way to think about it from a recurring revenue when their products go into market. Glen and Anubhav, if you guys want to add something to this?

This is Glen. I want to build on what you mentioned, Sumit, because you addressed it very well. In the MAV market, particularly for terrestrial applications, there's a demand for more durable systems that are easier to integrate into vehicles. They need to be extremely tough, not just resistant to dust or lightly water-resistant, but capable of withstanding high-pressure washes and all kinds of environmental conditions. Our solutions excel in this area, and it's been exciting to discuss with OEMs how our offerings can enhance their reliability and effectiveness in the field. This presents a great opportunity for us, alongside our initiatives with drones and advancements in enabling autonomy.

Thanks, Glen. I want our shareholders to consider this in two steps. First, let's take a broader look at the defense tech industry. Right now, the defense tech sector is experiencing a pivotal moment reminiscent of the auto-tech boom four years ago. Back then, auto-tech companies thrived due to high demand and their strategic importance to our economy. We're seeing a similar situation in defense tech, particularly in maritime and airborne opportunities where significant investment is flowing. This is crucial because the geopolitical landscape demands a robust economy and military capabilities. While revenue may not be substantial in 2025, the strategic significance of our collaborations will far outweigh the revenue figures. As global tensions evolve, enhancing our defense capabilities becomes essential. We're involved in high-value projects that make us a key player in the ecosystem. Thus, being a crucial part of this ecosystem carries more weight than simply the revenue generated. Investors should understand that we won't be producing millions of units like automotive companies, but instead, we'll focus on delivering comprehensive software solutions for specific missions. OEMs may not be looking for complete software solutions, but we are prepared to provide a full software stack tailored to mission-specific applications. Regarding our company expenses, we don't plan to double or triple our spending. We aim to add some costs to validate the value of our solutions, including our lidar and multimodal systems, as we work with prime contractors delivering mission-specific applications for the military. This encapsulates how I want shareholders to view our top line, strategic importance, and expense profile moving forward. I appreciate everyone for participating in this call, and we look forward to providing our next update soon. We are also excited to share further progress at the IAA in Munich next month. Thank you for joining us for our second quarter call.

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