MicroVision - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $0.59M, down 38% YoY, with gross profit turning positive to $0.04M; GAAP net loss was $28.8M ($-0.12 EPS) and adjusted EBITDA improved to a $10.7M loss.
• The quarter missed Wall Street consensus: revenue $0.59M vs $2.25M*, and EPS $-0.12 vs $-0.065*; management attributed slower ramp to customer deployment pacing and broader automotive LiDAR delays, while emphasizing industrial and defense verticals for nearer-term revenue.
• Operating expenses fell 47% YoY to $14.1M; cash used in operations declined to $14.1M; cash and equivalents ended at $69.0M; runway extended into 2026, supported by ATM capacity and remaining convert commitment.
• Management reiterated line-of-sight to $30–$50M revenue over the next 12–18 months, primarily from industrial customers; production commitment with ZF supports high-volume deliveries, with possible capacity expansion if demand approaches the upper bound.

What Went Well and What Went Wrong

• What Went Well

  • Cost discipline: Total operating expenses declined 47% YoY to $14.1M, reflecting 2024 streamlining; adjusted EBITDA loss improved to $10.7M from $18.7M YoY.
  • Balance sheet flexibility: Ended Q1 with $69.0M cash and equivalents, plus ~$143.4M accessible through ATM and convertible facilities; runway extended into 2026.
  • Strategic focus: Management reinforced near-term industrial and defense monetization; quote: “We believe we have line of sight to $30 million to $50 million in revenue over the next 12 to 18 months”.

• What Went Wrong

  • Revenue shortfall vs estimates: $0.59M vs $2.25M*, driven by industrial deployments pacing and continued automotive program delays; management noted slow OEM decision cycles and tariff-driven reformulations.
  • Automotive timing: Seven RFQs remain active, but management does not expect substantial production awards near term; Level 3 programs require pre-development, with model-year 2028 still feasible but dependent on OEM speed.
  • Heavy non-cash charges: Net loss included $16.9M in non-cash items (debt extinguishment, unrealized gains, non-cash interest, stock comp), complicating EPS optics despite operational improvements.

Transcript

Operator (participant)

Good afternoon and welcome to the MicroVision First Quarter 2025 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. At the end of today's presentation, there will be an opportunity to ask questions via a chat line. Investors can submit their questions within the meeting webcast by typing them into the Q&A button on the left side of their viewing screen. Analysts who wish to publish research may ask questions on the phone line. For analysts to ask questions on the phone line, please press star one on your telephone keypad. Please note this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead.

Drew Markham (Head of Investor Relations)

Thank you, Operator. 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 will 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, project developments, performance of our products and solutions, product sales and future demand, projections of future operations, cash flow and financial results, availability of funds and conditions for capital raising, as well as statements containing words like believe, expect, plan, or 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 our 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 microvision.com 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 our Chief Executive Officer, Sumit Sharma. Sumit.

Sumit Sharma (CEO)

Thank you, Drew, and welcome everyone to this review of our first quarter 2025 results. I want to thank everyone for joining today's call. I will provide an update on the progress we have made towards commercial agreements in automotive and industrial markets, as well as expansion towards the military market with our existing products. I will also provide context about our already announced Investor Day event being hosted in Redmond. First, I would like to begin our update in engagements with automotive RFQ opportunities. We remain engaged in seven RFQs for automotive programs and make incremental progress. This has been really slow going because of OEMs' focus shifting to their global plans. Lots of ebbs and flows we continue to deal with.

On one hand, it is clear to us that the current global rebalancing of trade is expected to have a huge refocus on automotive OEMs' resources on their supply chain issues. Advanced ADAS rollout is expected to be delayed, with only very low-volume LiDAR integration so far. On the other hand, we are engaged in new upcoming RFQ and custom development opportunities. We continue to support these potential customers with patience, with the quickest path to on-ramp for any type of project. In previous years, we focused on winning programs targeted for production with several years of customization in play. These deals could be described as the ones our competitors signed. In each agreement, the challenge we faced was not our technology or capability, rather the state of our balance sheet would always cause OEMs to pause. Let me elaborate a bit.

Our competitors who went public as part of a DSPAC collectively raised more than $1 billion. OEMs required a strong balance sheet to feel confident that for the initial start, we had enough runway to fund their development. MicroVision has been running leaner on capital, so it was a huge challenge to get them comfortable with our cash on hand. Our competition has not fared well even after winning early engagements. We strongly believe it is greenfield in this space, with LiDAR absolutely required for advanced ADAS and autonomy. With the strengthening of our balance sheet with the high-tail deal, we are in a stronger position than previously, so we continue to drive and make progress, but I do not expect any substantial projects to be awarded with material production revenues in the near future. We intend to focus on finding custom development opportunities with OEMs.

Make no mistake with the ebbs and flows of the automotive demand. This will remain the largest opportunity that eventually could deliver millions of units shipped and billions of dollars of revenues generated from this segment. With our Movia, MAVIN, and Movia-S LiDAR products, we believe we have the entire suite of sensors to address all OEM inquiries. I remain very excited and optimistic about our industrial segment, though. Our in-production Movia-L sensor integrated with onboard perception software is an advanced solution which is frictionless for our customers to integrate. We have delivered software integrated solutions to multiple potential partners since last year. These evaluations remain in flight. We continue to make progress in this space, and I expect these engagements will lead to commercial wins for us.

With our partnership with ZF, we have no exposure to China tariffs and remain cost competitive with our economy of scales with Movia-L and eventually Movia-S. We remain fully engaged with our potential customers as they evaluate their rollout. Up to this point, none of our potential customers have made us aware of any impact on their timing due to the ongoing global trade rebalancing or tariffs. As I shared in our last earnings call, another segment we started expanding with engagements in 2024 was mobile autonomous robots, military, and commercial vehicles with our LiDAR product. We have brought on a Defense Advisory Board that will help us on opportunities to engage with Department of Defense with our software integrated sensor technology to potentially enable programs with drones and land vehicles, as well as help us explore potential opportunities with larger companies in space for our partnership.

As I also mentioned previously, with our long history with delivering augmented reality for military, we remain focused on opportunities to leverage the large body of work. In this space, we expect to leverage our LiDAR products fused with radar and other third-party technologies into our software. We expect to partner with existing military primes to deliver full sensor intelligence solutions. This segment benefits from all the hardware and software building blocks that already exist within MicroVision. We expect the first system and product prototypes for this segment to be available in six to nine months. Next week, we will host Investor Day in Redmond. We are planning to make this an event in lieu of annual CS attendance.

At this event, investors will get an opportunity to interact with our various technology offerings, as well as demos of how we plan to enable potential customers, including ride-along in our demo vehicle. Investors could have a deeper discussion with management on all the ups and downs of our journey so far, as well as get confidence on the stronger path we expect moving forward. I'm going to keep my prepared remarks brief today as there are questions from several shareholders, and I'd like to address that as the main narrative. I would like to turn over the call to Anubhav. Anubhav.

Anubhav Verma (CFO)

Thanks, Sumit. I'd like to begin by reiterating Sumit's comments. We're absolutely aligned with shareholders to quickly demonstrate step-function progress towards our commercial engagements with industrial customers for near-term high-volume-based revenue. We remain deeply engaged with them for testing and integration of our solutions into their fleet. Next, I'd like to discuss the impact of the recently announced global tariffs. While the situation continues to be dynamic and evolving, we believe MicroVision remains well-positioned as we have our manufacturing partner in France. As announced late last year, we secured a production commitment with ZF in France to be able to meet the anticipated high-volume demand from customers in the industrial space for our Movia-L product. We believe this does offer yet another pricing advantage to some of our customers, given our minimal exposure to China-based manufacturing.

Based on certain triggers, we are planning to bring up another site for Movia-L production later this year to meet the demand. We continue to closely monitor the tariff policy developments and will provide more updates on this later in the year. Now, let me provide the progress in each of the verticals we're focused on. Number one, automotive. We continue to be engaged in the seven RFQs with automotive OEMs. However, the automotive industry is navigating a complex landscape shaped by actual and potential new tariffs. Some OEMs have suspended their annual guidance, while some have quantified the potential impact of tariff-related costs. While LiDAR adoption appears to be a lower priority given the macroeconomic landscape, the direct impact of tariffs has pushed OEMs to focus even more on component costs and the origin of subsystems that go into their vehicles.

OEMs will continue to go through the reformulation of existing and upcoming RFQs, looking for cheaper LiDAR solutions that meet the desired performance criteria. Especially with Glen DeVos joining us from the automotive industry, we're excited to pursue our continued engagement with automotive OEMs. This vertical, albeit slower, will be the primary driver for high-volume recurring business that gets us to scale. Number two, industrial with a focus on AGV AMR in warehouse and factory automation. With various efforts in flight in the industrial space, our team is focused on deep engagement with customers, including on-site, working closely with their teams to support evaluation and integration of our solution into their fleet. We remain confident in the near-term demand from this vertical, especially after securing production capacity to meet this demand.

We're seeing a lot of momentum in the AGV AMR space as these companies continue to embrace autonomy and AI faster than others. With our current Movia technology and secure production capabilities, we're well-positioned to grow in this space. Number three, the defense vertical. In the last few months, we established the Defense Advisory Board to execute our strategy in the defense vertical to map new opportunities for our products globally and pursue monetization of our existing product portfolio through near-term partnerships. Leveraging our existing product portfolio, we're formulating our go-to-market with the support and guidance of our distinguished industry advisors. The current administration has made the advancement of new technologies in defense a central priority, emphasizing rapid innovation through public-private partnerships. We will provide more updates on this at our upcoming Investor Day next week.

We're thrilled to see our engineering team working closely with Glen to align our technology portfolio and strategically advance our product roadmap. With a capital raise in the first quarter and a streamlined cash burn, our cash runway has extended into 2026. 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 Q1 financial performance. For the first quarter, we reported revenues of $0.6 million. This quarter's revenue was primarily driven by our sales in the industrial verticals. Expenses. Our first quarter 2025 R&D and SG&A expenses were $14.1 million, including $1.9 million of non-cash charges related to stock-based compensation expense and $1.4 million in non-cash charges related to depreciation and amortization.

Backing out these non-cash charges, our R&D and SG&A expenses were only $11 million in the quarter. On a year-over-year (YOY) basis, we have reduced our expenses by 45%. We expect the current level to be sustained through the rest of the year. We believe our existing workforce and level of expenses will 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 revenue opportunities in the near term. We believe that the go-forward annual run rate of our cash, R&D, and SG&A expense will be in line with our existing quarter. Q4 CapEx was $0.1 million in line with our expectations. Now, let's talk about our balance sheet. We finished the quarter with $69 million in cash and cash equivalents.

In addition, the company has availability of $113.4 million under the ATM facility and about $30 million of undrawn capital under the convertible note facility. Drawing on these facilities to their fullest extent requires additional authorized capital, as well as certain favorable market conditions. On the convertible note, we have approximately $33 million outstanding that converts at a fixed price of $1.59 or approximately $1.60. The $30 million second tranche remains undrawn and available for future drawdowns, subject to certain limitations. We're pleased to have found a strategic partner whose confidence in MicroVision's future has motivated an alignment of economic interests in step with our management team, employees, and shareholders. Now, let's talk about 2025 targets. We remain relentlessly focused on our execution. We continue to have excellent engagement with industrial customers on their technology roadmaps.

Based on the expected advancement in current customer engagement, along with targeted market opportunities, we believe we have line of sight to $30 million-$50 million in revenue over the next 12-18 months. Our production commitment from our manufacturing partner, ZF, allows us to commit to high-volume deliveries to meet the anticipated demand from current customer projects. While we're not providing fiscal year 2025 guidance, this should help investors understand the size and level of engagements with customers for our Movia-L sensors. As we expand our TAM into defense and other related areas and expand our solutions portfolio and accelerate our go-to-market strategy, we will provide more color on financial and business milestones for 2025 and 2026 and upcoming events.

To summarize, we're really excited about 2025 and beyond as MicroVision drives forward with significantly higher TAMs, including defense and industrial, expansive and broadening solutions advancements, solid balance sheets and superior trading metrics, and a well-experienced team to execute the strategy. Operator, I would now like to open the line for questions.

Operator (participant)

Thank you. At this time, we are conducting a question-and-answer session. Investors can submit their questions within the meeting webcast by typing them into the Q&A button on the left side of their viewing screen. Analysts who publish research may ask questions through the phone line. For analysts to ask questions through the phone line, please press star one on your telephone keypad. One moment, please, while we poll for questions. Your first question for today is from Casey Ryan at Westpark Capital.

Casey Ryan (Director of Research)

Good afternoon, everybody. It's a great update. Thank you for taking my questions. The first question, I think, Anubhav, you mentioned the revenue for Q1 was actually from commercial sales. Is this the first quarter we've had some commercial sales versus, say, NREs or R&D work?

Anubhav Verma (CFO)

No, we have had commercial sales in the fourth quarter as well, Casey. This just continues. This is just a continued effort on that part.

Casey Ryan (Director of Research)

Okay. Let me see something here. Okay. Good. Clearly, you all are calling it out as being focused in the industrial vertical, I think, is what we're or at least what I'm hoping the messaging. What's driving consumption, I guess? Not that you need to know, but you're able to kind of give us this $30 million-$50 million range of potential revenues over the next 12-18 months. I'm just curious what is the thing that's controlling the pace of that, I guess, in terms of how fast those revenues come in? Yeah.

Sumit Sharma (CEO)

Yeah. I'll take that one. Anubhav, maybe you can help a little bit. I think what will drive that is primarily industrial. In the industrial space, there is automation activities, and there's also activities to deploy ADAS with the LiDAR integrated onto everything integrated onto the sensor. That's what's driving it, but it's primarily in the industrial space.

Casey Ryan (Director of Research)

Well, right.

Sumit Sharma (CEO)

Of course, all of us have very high hopes of what we want to achieve, but Q1 kind of throws up for almost everybody, right? There was a lot of indecision, and we have worked through that now. Anubhav, you want to add something?

Anubhav Verma (CFO)

Yeah. I think that's a—I think maybe, Casey, to add on, the trajectory of this $30 million-$50 million revenue is going to be primarily driven by the end customer's deployment and rollout in their internal environments, which is, again, driven by their need to reduce costs and obviously increase productivity, right? Those are some of the primary driving factors behind our customers looking for these solutions to achieve these objectives.

Casey Ryan (Director of Research)

Yeah. Okay. So it feels very closely connected to the end customer versus, say, the hardware manufacturer who's consuming your product isn't necessarily building up some large level of inventory or sort of pre-ordering product yet. It doesn't sound like.

Anubhav Verma (CFO)

No. Yeah. This is deployment across the customer's facilities and different environments that we are dealing with different customers in the AGV AMR space.

Casey Ryan (Director of Research)

Yeah.

Sumit Sharma (CEO)

The customers can be classified as OEMs in this space. We're dealing with directly OEMs, so they don't build inventory. They're going to roll it out.

Casey Ryan (Director of Research)

Consuming in real time.

Sumit Sharma (CEO)

Yeah.

Casey Ryan (Director of Research)

Yeah.

Sumit Sharma (CEO)

That's right.

Casey Ryan (Director of Research)

I see. Okay. That's helpful. Would you be willing to characterize sort of the number of people you're dealing with? Is it sort of more than one and less than 10, or would you care to characterize how many potential unique entities you guys are working with?

Sumit Sharma (CEO)

Yeah. Less than 10. Yeah. Definitely more than one, less than 10.

Casey Ryan (Director of Research)

Okay. Okay. That's helpful. Okay. So a couple of other items very quickly. You mentioned military, and I think you have some partners for military. And you mentioned drones. What's the scope of the military opportunities as you see them? Is it sort of all vehicles across all branches? Is it potentially specific to one branch, or?

Sumit Sharma (CEO)

No. Think about our product base. Our product is basically a sensor and software. We also have things that we've done in the past, which allow us to do sensor fusion with other technologies, but we can provide that. We are not a prime in the military space. We're also not bidding for in the planning group, bid on billion-dollar contracts. We are going to be a technology partner for somebody else that's a prime to deliver something that needs to be solved. This really came back on our horizon last year that there was an opportunity where existing things that we have on the shelf, there may be interest for people to evaluate, and we could get from a standstill to a working demo for them very quickly. We expanded on the existing set of products to engage as many folks as we can.

I think the new part that you would see in the earnings call today talks about drones. I think as we started looking into it, where the Department of Defense is focused on, and of course, with the help of our advisory board that just has come on board. I mean, they're just kind of online, right? We're just starting the engagement, and most of them are not even fully familiar with our product portfolio yet, but they're getting us aligned with what the demand is.

One of the things that we will talk about next week and continue to talk about is things that we were doing in the automotive space with perception and the sensor fusion can also be extended to drones with some other missions that are in mind that our potential customer, which is the Department of Defense and other smaller departments, are evaluating, and they have engagements for that. It was something that was natural to us that we could become part of that. In this environment, where automotive is kind of dormant or nearly dormant but expected to come on in the future, industrial is moving along, but again, it's at a pace that, of course, we'd like to want to go fast, but we have to wait patiently for the engagements to get to the right level.

This was an opportunity that came along, so it was important for us to get into it.

Casey Ryan (Director of Research)

How many primes should we think about you working with? Is there one significant prime, or do you have one now and you guys are open to working with multiple, or are there multiple now that you guys are engaged with?

Sumit Sharma (CEO)

From the amount of work that we've done on this so far, there are multiple primes. We have to think about primes differently. I think in the past, when we talked about primes, we were talking about Lockheed or Northrop Grumman. Those are different programs. Now the primes are a lot of newer technology companies that are names that are new to the military space as a prime, and they have a different DNA. Much faster engagement and getting through, I would say, more in line with tech companies, other tech companies, but they address revenues less than $10 billion, less than $1 billion sometimes, right? And there's multiple of them, actually, not just one.

Casey Ryan (Director of Research)

Okay. All right. That's helpful. And then sort of last thing for me, I think you mentioned that you guys have expanded your capacity again, and I think over the last 12 months, maybe the second time. You've done that. And so I suppose we're looking sort of compared to the revenue, but tell me why you're doing that. It sounds like your customers are asking you to ramp up.

Sumit Sharma (CEO)

No. We haven't expanded the capacity. What I think I'm saying is that we expect to expand capacity later on this year based on agreements that we are able to get done. I think what capacity we have with ZF right now is perfectly adequate and sufficient, but we expect that if some agreements go a certain way, we are going to expand our capacity.

Casey Ryan (Director of Research)

Okay. That's helpful. I suppose one nuance on that is sort of you talked about the 30-50. If you do need to expand capacity, would it be fair to think that somehow we're sort of at 50 or above that sort of part of that opportunity?

Anubhav Verma (CFO)

Yeah. I'll give you an answer to that. Yeah. I do think that, yes, if we end up expanding our capacity, we would hit the upper bound of that range, possibly beyond that.

Casey Ryan (Director of Research)

Okay. Good. Good. That is something to look for then. It has been an exciting update, so thank you for taking all my questions. I appreciate it.

Anubhav Verma (CFO)

Thank you, Casey.

Operator (participant)

Your next question is from Jesse Sobelson with D. Boral Capital.

Jesse Sobelson (VP of Equity Research)

Hey, guys. Thanks for the update here. Thanks for taking my questions. It's good to see some progress on expanding the addressable markets. The first question I had was just on this defense piece of the business. Are you guys looking at strategic alliances that could potentially lead to equity investment, or are you currently solely focused on commercial arrangements?

Sumit Sharma (CEO)

We're primarily focused on commercial agreements right now.

Jesse Sobelson (VP of Equity Research)

Okay. Yeah. Helpful to understand a little bit of detail there. I'm also just kind of curious. We talked $30 million-$50 million in potential next 12-18 months. It's definitely been reiterated here in the Q&A so far, but I am kind of curious. Department of Defense seems to be a little bit more of a focus this quarter than it was in the past when that $30 million-$50 million number was initially presented. Picking it back off of that conversation on capacity, is defense work included in this potential $30 million-$50 million loose figure, or is it something that's incremental to current expectations for the business?

Anubhav Verma (CFO)

Yeah. I think that's a great question, Jesse. No, look, I think the $30 million-$50 million, we believe, is primarily driven from the industrial vertical. For the defense vertical, it's still early days, but I think, as Sumit pointed out, we're working to formulate our strategy and have more clarity in the upcoming events where we could provide and upgrade our revenue targets based on quantifying what kind of projects we're going to take part in through these partnerships like Sumit described. I think one thing I would like to also highlight is, obviously, MicroVision does have an existing intellectual property portfolio related to the ARPs that we have. Obviously, we're at this point looking at all possible options as to how we can partner with other bigger players to accelerate their deployment and go-to-market as well.

That could result in monetization of that through different structures. Like I said, at this point, early days, and we would have more clarity on the revenue targets for this in the upcoming events.

Jesse Sobelson (VP of Equity Research)

Right. So it sounds like you're open to things such as co-development agreements and potential technology licensing in addition to manufacturing products to be used in market equipment. Is that fair to say?

Anubhav Verma (CFO)

Right. I think mostly the way the defense contracts will be expected to work through the partnership structure that I described would be typically in the form of ED&T revenue, which is engineering, design, and testing revenue, which is essentially the work, or if I could draw an analogy for you, that is an NRE equivalent to what we have been talking about in the automotive world, where the government entities, if we are directly engaged with the government or the prime, as Sumit described, they would pay for the project where we are developing this. Keep in mind, we already have the building blocks of the technology, so it is really just putting together the solution like the drone solution that Sumit mentioned, etc.

What it essentially translates into is the ED&T revenue that would start flowing through the system, and that's what I plan to update the numbers with once we have more clarity and more visibility into this sector.

Jesse Sobelson (VP of Equity Research)

Great. I appreciate the call here. It sounds like it's a little bit of a wait-and-see approach for the time being, but excited to see what happens here. Thanks for taking my questions.

Anubhav Verma (CFO)

Thank you, Jesse.

Operator (participant)

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

Anubhav Verma (CFO)

Thank you, Operator. All right. The first question. If we have the best-in-class sensor with the lowest price point, why are we not winning these industrial RFQs?

Sumit Sharma (CEO)

That's a good question. Actually, I think this is a reaction to some of the announcements that are coming from our competitors. I can tell you that we are engaged with multiple customers that are evaluating. One of the challenges that always happens in here is, now that you have software, now that you have hardware, I think our investors, but also a lot of people just think about it as a LiDAR company. When you think about automotive, you just output a LiDAR with a point cloud. In that sense, it's a LiDAR company, and there's a bunch of us competing in that space. In the industrial space, it is LiDAR plus the perception software on board. So there's integration, there's validation. There's, I would say, 90% of all the discussions that we've been part of for the last eight months with a group of customers.

It's all about what the software does and how the software will connect to their software and how the qualification is going to happen. Actually, more than eight months. If you think about the evaluation part of it, it's not the hardware anymore. It is really how the software solves a specific problem for them. I get it. I think investors are frustrated, but I can assure you nobody's more frustrated than I am about this. It takes whatever time it takes, but I don't think it's going to take forever. I think things will converge sometime soon. You have to think about it, right? Yeah. You can have the best price point, but you also have to find an opportunity that you can actually sign a business that's profitable. I'll give you a great example.

Recently, of more than one, less than 10 customers, there was one that we actually lost. It was a small project. It was less than, I would say, 500 sensors is what they wanted. What was the requirement for us to win that was to absorb something like almost $1 million worth of development. Pretty much at that point, yeah, you can say you can get an announcement done, but it is not a sustainable model where you're actually burning through cash to win these things to just get the share price up. Long term, it was not the smartest thing to take care of.

We are getting closer to the point for the right customer, for the right volume, that it is time for us to push our chips in and actually take a risk for the right customer, for the right volume, and we're getting closer to that. Again, you want not just one customer. You want multiple of them. You have to reserve your capital based on who's the one that you want to make a bet behind that's going to be advantageous long term. That could actually turn into a sustainable business because there will be others that will come on faster. That's how we focus ourselves. I get this thing, the best-in-class sensor. What's best-in-class for Movia-L? It's in production. It's very robust, solid state.

Movia S, I think we're going to talk about that in Q3 this year when we're going to announce it publicly, but it's a 180-degree sensor, whereas you have our competition from China and the U.S. talking about they're making a 180-degree sensor, but if you know anything about physics, you'll know that their sensor, there's no way it can achieve 180 degrees because they're just showing some rendering, where we actually have samples that we will show next week, mechanical samples of what we expect out of that. Yeah, having the great sensor is the building block that is important. Now comes the software for industrial that how can we actually enable them with, let's say, some of the ADAS features that were developed by our team in Hamburg a long time ago and deploy that into industrial.

It's going to take some time, but I don't think it's going to take a very long time to get to some conclusion here.

Anubhav Verma (CFO)

Thank you, Sumit. Of the prospective industrial customers that engage with MicroVision, how many are no longer involved? Have you lost some programs in your pipeline? Why? I guess you partly answered that. Maybe let me skip to the next one. How do you plan to compete with the existing players like Ouster and SICK in the industrial vertical?

Sumit Sharma (CEO)

That's a good question. The two ways that we're going to compete is, number one, we're going to sell our sensor with software on board. Since we have spent a lot of capital already developing this and the same software is going to go across to multiple customers as a standard, we're going to offer these features on there. No more customers have to worry about custom NREs for some features because the core development is all actually MicroVision's assets. That's important because what they're getting is not just a sensor that would require a software team from us or from them to integrate, but they get a full-blown solution. We have to start engaging with industrial customers that are kind of focused on that, not just a LiDAR, but they want a solution. The other one is economy of scale.

We have to start hitting price points that are significantly lower than any other competition, and that means we have to aggregate a lot of volume. We have to be competitive there. I think other LiDAR companies are public as well. You know their ASP. The clear indication from everybody is that those ASPs are not sustainable. I think in the safety sensor space, SICK has got a very unique position. They have deployed that for many, many years. Ultimately, when we described our safety sensor last year, eventually, our intention is to go after that market as well. At the moment, we want to just focus on the non-safety industrial market with the software. I'm pretty sure that we can take on Ouster, and I don't think there's any doubt that we have a better product.

I think the spinners, our spinners, they may have some sort of reliability, but ultimately, they're mechanical sensors, right? And SICK is a mechanical sensor. In limited life applications, perhaps they're okay. If you want something robust that has to go for a long period of time, I think the solid-state sensor would be very competitive. Even MAVIN, as we start transitioning it towards while automotive is doing its own thing, finding applications for it in commercial vehicle or military or agriculture mining, I think the robustness of the technology, we just have to make it competitive, sign smart deals. We're not starting off in the hole by financing somebody else's development.

I think long term, we're going to be okay and be very competitive and probably more profitable because our expenses are going to be low and our profit margins per project are going to be much more compelling, in my opinion. Glen, would you like to add some color on this? I think you've been on board and you've had a chance to look at this as well.

Glen DeVos (CTO)

Yeah. Thanks, Sumit. Appreciate the opportunity. I think to build on your comments, one, the sensor being a solid-state sensor, not only does it have greater reliability than other sensing modalities, we got away from electromechanical sensors for just that reason, as well as, as you scale, having a solid-state solution gives you better positioning relative to reducing hardware costs while you scale. Basically, it's a silicon solution, and it really allows you to achieve lower hardware costs than simply scaling up electromechanical solutions. I think that's an important part of it. As you said, it's not just a LiDAR sensor that delivers a point cloud. It has a significant amount of processing capability on board.

Why that's important, it means that we can provide not just the point cloud, but we can provide perception, localization, as well as the LCAS or the driver assistance feature sets, and do that in a way that's essentially a bolt-on solution to the vehicle. Whether it's a forklift or a tugger or some other type of vehicle, you don't have to cut into the vehicle or disturb the vehicle architecture. You can simply bolt this solution on, and that's tremendous. From an ease of implementation standpoint, that's very good. You don't have to add another ECU. From a system cost standpoint, it's very good. Ultimately, from a TAM perspective, it's great because it means it opens up existing vehicles to your solution where you can essentially retrofit, all of which means time to revenue is reduced.

I think the solution that we have with a smart sensor going into industrial will be very competitive and very compelling for the OEMs. Anubhav, I'll turn it back over to you.

Anubhav Verma (CFO)

Thanks, Glen. Let me take the next question. What are the 2025 milestones that shareholders should track in each market, including industrial, defense, and automotive? Design wins, custom development agreements, partnership agreements, ideas?

Sumit Sharma (CEO)

Yeah. I think in the industrial space, I think it's all about taking our sensors that we've talked about and signing commercial deals. Certainly, we make as many sales as possible of the less than 50, let's call them spot sales. I think that's how we refer to them always. Our focus, of course, is defining a group of anchor customers that essentially take up all the capacity that we have deployed already. That's primarily the way you can gauge that industrial market is moving along. You should be able to announce deals, and you'll start seeing backlogs in revenues and normal business on Movia-L. On Movia-S, I think we're going to announce it publicly, and there's, again, engagement with SCHART. Pilot line will be sometime next year and then some sort of ramp, but we expect to start engaging some customers with that technology.

It is not something that is going to have a material impact on the revenues that Anubhav talked about. On the defense side, I think the best way to imagine is, again, we are going to be a subcontractor to a prime. There will be, most likely, as Anubhav has already mentioned, we would engage in some sort of customized development with some partial funding from them while we still maintain all the IP or exploration of our existing portfolio of technologies that we have shipped in the past and some sort of development agreements of what they want to see because anybody that wants to work deeply with a technology that is new to them, they always do a small project together to understand the team, understand the technology, and the viability before they jump to the next one. Defense would be that.

Longer term, I think the opportunity in defense is there are smaller contracts. I'm saying sub-$500 million, maybe sub-$200 million contracts where maybe a pilot program of maybe several hundred units or something has to be built or several hundred units have to be built, and you're part of those contracts where you have to deliver an integrated piece of hardware and software that kind of plugs into some device. That's much more intimate. The best way to engage in defense would be that. In automotive, I think I'm going to have Glen actually comment on this, but in automotive, the best way to think about it is some sort of development agreement or early advanced prototyping for a future program that's coming or an RFQ that, again, will roll on for about a year before they'll award it.

That's about all we can do, but I don't expect meaningful revenues coming from it, but certainly some sort of partnership announcements for much smaller size opportunities.

Glen DeVos (CTO)

Yeah. I can add to that. I can add to that last comment, Sumit. I think the OEMs, and talking to them as recently as last week, the OEMs are going through a bit of a reformulation on level three. The good news is all level three platforms still need LiDAR. There is no change in approach in that regard. Really, the first generation had limited success, very low volumes and take rates. Now there is a bit of a kind of a refocusing on, what is that right solution? I think pre-development contracts are normally how the next step in that environment where they test out and showcase what the solution could look like and validate cost models as well as performance models and really trying to get to a value prop that the end consumer will buy.

What is exciting for us is in those discussions, like I mentioned as recently as last week, we have the portfolio that between long range as well as short range, wide field of view, extended range field of view, we have the portfolio that can really, I think, deliver a solution for them. You probably have seen a pre-development contract prior to any big production contracts, but that is exactly where we are today.

Anubhav Verma (CFO)

Thank you, Glen. All right. Next question. Given that MicroVision is engaged in seven automotive RFQs and the typical timeline suggests OEMs might be making decisions for model year 2028 programs around this time, can you provide any update on the status of these engagements and whether there has been any significant progress or indications of timelines accelerating or solidifying during the first quarter this year?

Sumit Sharma (CEO)

Glen, you want to take that since you have the most contact with the OEMs now?

Glen DeVos (CTO)

Yeah. I think timing-wise, that's certainly the target is to be able to have solutions implemented in the model year or during calendar year 2028. That, generally speaking, is the timing that we've been talking about. What that means is if you think about it, it's already virtually mid-year 2025. That means you have to have solutions that are fairly mature and ready to go. As I mentioned earlier, that's what's exciting about where we are in terms of the portfolio offering that we have, the software maturity that we have, and the different solutions that we can provide. I would say those are active discussions right now. Once the OEMs kind of settle in on the technical solution, then it can move very quickly.

Model year 2028, it's still aggressive, but it's still feasible if the OEMs move quickly over the next, really over the next, I would say, three months or so.

Anubhav Verma (CFO)

Thank you, Glen. All right. Next question is defense-related. Why will MicroVision successfully secure business in the defense industry after years of unsuccess in the automotive and industrial markets?

Glen DeVos (CTO)

Yeah. Maybe I can start.

Sumit Sharma (CEO)

Yeah. Go ahead. Go ahead.

Glen DeVos (CTO)

Go ahead. Yeah. Maybe I'll just start and then turn it back over to you. A couple of things to highlight. These are very different markets. If you think about automotive, there's really one application for LiDAR at this point in time. It's really level three driver assistance and maybe some level two functions, but it's really around ADAS. When you look at the defense industry, there's multiple avenues for the application of the technology. There's drones. There's the unmanned autonomous vehicles. There's also AR headsets. There's terrain mapping. You have multiple areas where the technology is either being applied today in a very limited fashion or the defense industry is looking for solutions in a very aggressive fashion. You have a much greater number of opportunities to apply our portfolio.

What's also really good is it's the same technology that we would be applying, broadly speaking, to automotive or to industrial. It is in a whole different field from a technology standpoint. For MicroVision, it's really applying those assets that we have effectively across those other verticals. Sumit, I'll turn it back to you.

Sumit Sharma (CEO)

Yeah. I think part of the question is why after years of unsuccess in automotive and industrial, I think I get the frustration, but let's always focus on the reality of it. Let me be honest about this. Last year, we were deep into it with DynoRes, most of you know. At that point, we chose to stop at a certain point because going forward, what it meant, more than $20 million of OpEx with them not covering anything when the economy was going in the wrong direction, and it was clear from all the indication that the OEMs by themselves were struggling with the long-term timelines to deliver what they had set. Okay? I would argue that if we had actually done that deal, we're not here right now. We would have been in a much worse position, in my opinion.

The example of that, that example, really, if you look at what happened with Cepton, I'm pretty sure investors want us to sign a deal, but we also have to evaluate because some of those investors want to just trade on that information and move on to the next thing. We really have to support the thesis that the company is going to be around to finish these contracts. That's a very important one. DynoRes, for example, was not the right one for us, right? It was not big enough. I will tell you that the technical review and acceptance happened the year before, in 2023.

I would say Anubhav and I actually were going to these meetings four months into it, four to five months into it, trying to convince them our balance sheet was going to be okay, that the ATM was a medium that was going to allow us to raise, and they wanted more capital because they wanted to make sure that if the ATM was not going to be exercised, that their project would not be in trouble and they would have to come in and fund it. You think about all of this, right? I mean, those kind of projects. You can say, "I was unsuccessful in automotive." I wouldn't say that. It's just you want to get a deal done, but it's worse to get a bad deal done that's going to cause you to fail.

Yeah, I expect you guys to come in next week and have some very, very direct questions. You're going to get direct answers with me, as always, but just think in these terms. At some point, the company has to survive. It's not just about announcing something and trade on it and move on. If you have a customer that's really giving an indication that they're not so certain about their timeline, but they expect you to put all your money in and all your investors to come along with it, you got to really evaluate, right? Automotive has just been tough. Industrial market is just going, I mean, I would say it's going really, really well. I think we started, the acquisition of IBM happened. All the asset transfer took a while. Production started late in 2023.

In 2024, we did some work, which is anytime you go into industrial space, you expect somewhere between 12-24 months for adoption. We got the samples out. This is a very mature product. We started working on software, as I said, for the last nine months or more rather than hardware. It is moving along. I would not say that industrial has not been demonstrated. I know everybody in every earnings call, they want something announced so we can go forward. We have tried to navigate, but now we are to the point where we have a group of target customers, and it is time for us to push our chips in and take a risk with the customers that are high enough volume and they are trustworthy because the things that they are saying, they understand and acknowledge who we are. They see the balance sheet.

They see the strength of it. They see that we can solve their problem right now without any investment from them. I think keep that in context, right? I think what Glen is representing is the future where we're going to take it, things that we cannot imagine as MicroVision by itself where the product is going to go. I'm happy to answer all the questions about the past, about automotive and industrial. Certainly, whatever frustrations investors have, we can cover that. I think the opportunity that we have, if we sort of break it out, the defense is not something we just entered into because it was kind of cool. We were given some indications that it was kind of important for us to be in this space because it's opening up.

We have the opportunity with no extra expenses to go address that of things that we've already created. Certainly, we're expanding rather than just going towards the success. I think in defense, we've done it in the past. We've had success there with multiple projects, multiple announcements. Defense is probably something that we're more confident on. With Glen DeVos's help, of course, we can expand where we can be relevant in defense, specifically in drones and other military vehicles and, of course, AR.

Anubhav Verma (CFO)

Thanks, Sumit. Next question. Would you say we are a LiDAR company or have we fully morphed into an autonomous systems company? If we're now more of a systems company, how has that retooled our approach to securing these new opportunities mentioned, specifically industrial and defense?

Sumit Sharma (CEO)

I think that's a really good question. If you think about the three segments, I'll start on one end, high volume, automotive, they will think of us as a LiDAR company for now that provides a clean point cloud and some software support. But really, they want to be the software company, they go develop. So we're just a LiDAR company there. A lot of our competition is in that space as well. In industrial, we have already graduated to the next level where we are going to be, we are shipping product, and eventually, we expect to ship it in volume with software integrated on it. So the LiDAR is no longer LiDAR. It is an actual LiDAR solution, software that does something specific. Terms that we talk about, like automotive ADAS, think about industrial ADAS. Those kind of features are enabled in this space for our customers.

Therefore, they do not have to have huge investments in software development. They get a solution. They plug it in, and that solves a specific problem for them. When you think about the industrial space, now we are, again, at much lower volume, these margins. Now we are integrating our LiDAR, radar, other things that Glen will, of course, talk about as we move forward, and significant more amount of software, but it is a full-blown solution that you could strap this thing onto a drone or strap this thing onto a military vehicle, and it could do autonomous radars. In my opinion, we have broadened through all three segments. In each segment, we are offering higher and higher value proposition.

We are transitioning towards more of a software solutions company based on our hardware from LiDAR, but also the capability of integrating other hardware from radar and other technologies into a few systems that we can provide to the military and to industry. I think our differentiation is naturally happening because the strength of our team in developing software is going to be highlighted more and more. We're going to talk about partnerships that we are enabling. It's not just because of our LiDAR and competitive price. It's our LiDAR competitive price and the software what enables for folks. Glen, do you want to add something to this?

Glen DeVos (CTO)

I think you really said it well, Sumit. Depending on the end market, we have the right solution for a high-performance LiDAR sensor for the automotive space. On the other extreme, we can provide the complete, not just the LiDAR perception, but multimodal perception, the full localization and environmental mapping, as well as features on top. What's really impressive is that we have those assets across the entire company. We are not having to develop that from ground up. We are really just having to integrate and apply it. I am really excited about what we will be able to do across all of those verticals with the technology that we have.

Anubhav Verma (CFO)

Thanks, Glen. Next question. Why is MicroVision asking for more shares? Why are you asking for more shares when approved shares before with the promise that it was needed to show OEMs we had financial stability, but we never got deals? Why should investors vote to approve another 200 million more shares when no meaningful deal has been announced in the last four years?

Sumit Sharma (CEO)

Yeah. I'll start with that, and then perhaps you can help me on this one. I think there are certain tools that the company needs to be able to work with our partners. As I've said multiple times, and this is not the first earnings call I've shared this, the concern that always keeps coming up is the long-term viability of the company. If you go back to my prepared remarks, right, I try to highlight that in there to give context. Our competition, they raised a significant more capital because they went public with a DSPAC. All along the way, we've been just raising as little as possible as we go forward. I know the investors would love to hear how we're being competitive.

Capital matters because most of the customers, especially in the automotive, they expect you to invest $20 million-$25 million of your money while they have zero risk to get to some level of production and then have all the risk on top of that. If you do not have the cash on hand like some of our competition did, it has always been hard for us to convince them that we have viability, that we have the support, that we have an anchor customer. Since our investor base is so diverse, it is really hard for us to point that, yeah, we have an investor that can actually come in and support us, somebody with a high reputation. I think Anubhav has done a great job to try to get us to that point. We started with UBS. That did not happen.

Deutsche Bank has been helping us a lot. Now, if you think about Hytrail, I think we've done everything humanly possible to give them the confidence that we have anchor investors that can step in at the right moment for any kind of deal because to get the deal done, it's not about technology. I can assure you that. It'd be very hard for me to attract somebody like Glen to the company if it was a big gap in technology or what magical things that can be built on top of what we already have. I think our problem has always been that they have to have a high confidence the company is going to survive for a period of time, execute on these, and be able to expand the revenue base faster than other LiDAR companies. To support that, the company needs certain tools.

I think management is, with very close counsel with our board of directors, we've come up with what we believe is what we need as tools to go forward with.

Anubhav Verma (CFO)

I think.

Sumit Sharma (CEO)

And also.

Anubhav Verma (CFO)

Sumit.

Yeah. I think, Sumit, to add to the point, obviously, 200 million more shares does not mean that we are going to use those shares right away. It is more of an optics as well because when you are competing in defense contracts and big contracts, people would like to see the authorized capital, the number of outstanding shares, and the percentage of your authorized capital to be some significant numbers. I think we believe that 200 million would get us there. I would just like to summarize four things that why now 200 million, right? I would like to point out for the last seven, eight months, look at our consistently heavy trading volume. What that signifies is the visibility of MicroVision on not just retail, but institutional radar screens.

That sort of depicts the momentum that we already have generated, which is the most significant momentum that this company has ever seen in its recent history. Number two, in the last seven months, we had a $90 million investment commitment from one single investor. I think you can count out on fingers how many other companies have been able to do that. Number three, the quality of people who have joined MicroVision's executive team as well as the defense advisory board, that tells you that this is the time when people are looking to go all chips in and believe in the future of the company. That itself is very significant of why the 200 million shares would get us to the stature of competing with the big boys.

I think the last thing is what I would say is this is more of an optics, which is a direct corollary of the first or the first three factors. What I can just say is the investor day event, we had to double our capacity since two years ago. That shows the interest of people interested in MicroVision. That's just retail. We have the second half of the day lined up with quality financial institutions joining us to know more about MicroVision. That highlights the visibility that MicroVision has generated and the momentum that we have seen in the past 12-15 months, which is incredibly positive. Obviously, given the geopolitics that we're seeing usher in across the globe. That's why I feel more confident and why this 200 million share authorization would get us in that lead. We're running out of time.

Maybe one last question. Sumit, what do we expect on the investor day next week?

Sumit Sharma (CEO)

I think it's kind of important that I think CES has not been really that super expensive, and it's not really been easy for us to connect with our investors and analysts. We decided that we're going to actually host it here annually about the same time. It's, again, a great opportunity for us to show all the stuff we spend money, what we have created, and what customers are going to learn to. Without talking directly about any specific customer we've not announced, you can get a really good idea of where our technology is going to be deployed and ask specific questions so you get confidence in the product portfolio. We certainly are also going to talk about our future plans with all our products.

Again, given the context that Anubhav has said that we're not expecting our cash expenses to increase, that we're going to run it tight, it'd be a good opportunity to really understand how we're going to manage that and still create value. Of course, longer term, I think we get a lot of questions from our investors all the time. To be honest, right, even on an earnings call, it's very hard to address them because sometimes they're kind of out of context. They're more conversational. Our intention is to have a session like we did last time where ask us anything, and if we can answer it in a public forum that we've covered in previous earnings calls, we will absolutely do it. We can have a more direct dialogue.

You have a clear understanding of what we're facing and where we're headed with it. I look forward to meeting you all again next week.

Anubhav Verma (CFO)

Thank you, Sumit. With this, I would like to wrap our first quarter earnings call. Thank you again, everybody, for joining us. We look forward to seeing you next week.

Operator (participant)

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