MicroVision - Earnings Call - Q4 2024

Executive Summary

• Q4 revenue was $1.65M, below S&P Global consensus of $3.25M as an expected customer order slipped into 2025; Primary EPS (S&P) of -$0.095 beat consensus of -$0.125, while GAAP diluted EPS was -$0.14. Management cited industrial customer momentum but a decision delay as the reason for the top-line shortfall (S&P estimates marked with asterisks and defined below).
• Non-GAAP adjusted EBITDA loss was $13.2M (vs. $13.6M loss YoY), and cash used in operations improved vs. prior year to $15.0M (vs. $16.6M), with year-end cash and investments of $74.7M.
• Outlook: management reiterated near-term focus on industrial verticals and disclosed secured production capacity via ZF to fulfill anticipated demand of $30–$50M over the next 12–18 months (not formal revenue guidance). 2025 OpEx run-rate guided to $48–$50M.
• Liquidity: post-Q4, access to capital of $161M (ATM, remaining convertible facility, and new equity), with $12.25M of the note converted (27%); CFO also framed total available capital as $235M including subsequent equity in February 2025.

What Went Well and What Went Wrong

• What Went Well

  • EPS (Primary, S&P) beat: Primary EPS of -$0.095* vs. -$0.125* consensus, aided by lower non-cash D&A and stock comp vs 4Q23 and overall cost discipline (S&P estimates marked with asterisks; see Estimates Context).
  • Industrial traction and capacity readiness: secured ZF production commitment to meet anticipated industrial demand of $30–$50M over 12–18 months; Q4 revenue largely sensor sales to multiple customers (under 10), not NRE. “This gave us the confidence to enter into an agreement with our partner, ZF, to increase our production capacity.”.
  • Liquidity extended: ended Q4 with $74.7M cash and investments; subsequent equity and note conversions improved flexibility. Management cited access to $161M (8-K) and separately $235M (CFO) subject to conditions and subsequent actions.

• What Went Wrong

  • Revenue miss and timing: $1.65M vs. $3.25M* consensus, with management citing a customer decision delay into 2025; underscores volatility at low scale and dependency on deal timing (S&P estimates).
  • Wider GAAP net loss due to financing-related items: Q4 net loss $31.2M (vs. $19.7M YoY) included ~$13.2M of new convertible note-related expense; adjusted EBITDA loss was roughly flat YoY.
  • Gross margin pressure: Q4 gross loss of $2.47M (gross margin ~-149%) on low revenue; margins remained negative in Q3 as well, highlighting operating leverage sensitivity at current scale.

Transcript

Operator (participant)

Good afternoon and welcome to the MicroVision Fourth Quarter and Full Year 2024 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 QA button on the left side of their viewing screen. Analysts who publish research may ask questions on the phone line. For analysts to ask a question on the phone line, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please note this event is being recorded. I will now turn the conference over to Drew Markham. Please go ahead.

Drew Markham (General Counsel)

Thank you, John. Good afternoon. I am here today with our Chief Executive Officer, Sumit Sharma, and our Chief Financial Officer, Anubhav Verma, and also I'm very happy to welcome to the call our Incoming Chief Technology Officer, Glen DeVos. Following their prepared remarks, we will open the call to questions. Please note that some of the information you'll hear in today's discussion will include forward-looking statements, including, but not limited to, statements regarding our business, product, and go-to-market strategies, customer and partner engagement, cash liquidity, and the impacts of our recent financing activities, market landscape, opportunities, and program volumes and timing, development and performance of our products and solutions, product sales and future demand, projections of future operations, cash flow, and financial results, availability of funds, 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 Forms 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 10-K, sorry, Form 8-K, dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC filings tab. This conference call will also be available for audio replay on the investor relations section of our website. Now, I'd like to turn the call over to our CEO, Sumit Sharma. Sumit.

Sumit Sharma (CEO)

Thank you, Drew, and welcome everyone to this review of our Fourth Quarter 2024 results. I would like to start by providing an update on our customer engagements for automotive and industrial opportunities we have been working on through 2024. Additionally, I will give an outlook on new engagements in 2025 for potential automotive, industrial, and military opportunities. Still a very exciting time for our technology. First, I would like to begin with our engagements with automotive RFQs and industrial opportunities. There are four areas that our technology engagement has focused on through 2024. We focus on automotive OEM programs with seven RFQs and a few custom development proposals. In the industrial space, we focused on three areas: automated guided vehicles, AGVs, and autonomous mobile robots, AMRs. These platforms typically operate in a geofence environment, require low-power perception software, integrated solutions, embedded localization, among other features. Number two, collaborative robots.

These robots share the environment with humans and operate in a semi-structured environment with humans in charge and, again, require integrated perception software on the sensor. Number three, mobile autonomous vehicles. These include commercial vehicles for industrial and military applications with multimodal sensor suites. We remain engaged in seven RFQs for automotive programs and make incremental progress. Automotive OEMs are still adjusting to their new timelines for product launch. It is abundantly evident that LiDAR is an integral part of the sensor suite required to deliver a reliable ADAS experience. What all of us are adjusting to is their updated timelines to launch decisions for their platforms. We continue to explore opportunities for customized development with our OEM engagements. With ripples in expected future trade conditions for OEMs and their product timelines, we have remained actively close to them in their process.

Their plans for future models of EV and ADAS are taking a parallel priority to their near-term goals of fielding models with traditional powertrains that launch faster and in affordable price points. In the AGV and AMR space, we made progress on multiple engagements through 2024 with our Movia L with integrated perception and application software. This gave us the confidence to enter into an agreement with our partner, ZF, to increase our production capacity. Basically, we are offering a sub-8-watt sensor, which has our perception and application software onboard the sensor and talks directly to the customer's controllers. This is an advanced solution, which is frictionless to our customers to integrate. We continue to make great progress in this space, and I expect these engagements will lead to commercial wins for us.

There are more than 20 well-established companies for this segment that already have their products implemented and are actively looking to upgrade their platforms with LiDAR implemented in industrial ADAS software. The TAM for this segment is lower than automotive, but we have a much faster line of sight to significant revenues for multi-year programs from hardware and software solutions. I'm very excited about our multiple engagements in this segment. In 2024, we deliver software-integrated solutions to multiple potential collaborative robot partners as well. These evaluations are in flight. This is a slower-moving segment for evaluation and large commercial agreements. With the current potential ripples in international trade, we expect large-scale decisions to be more fluid in 2025. We continue supporting and developing strong partnerships. In this segment, we again expect to have lower TAMs, but higher margins.

This is a segment we watch through 2025 to add layers of recurring revenues. Another segment we started engagement in 2024 was mobile autonomous robots in military and commercial vehicles with our LiDAR products. The larger opportunities in this segment are for long-term partnerships where we could enable our potential customers with our mature perception software and advance their multimodal platform development. This is an important area for partnerships we expect to develop. This allows us to showcase the breadth of our technology in enabling autonomous driving and ADAS outside the traditional automotive OEMs. These partnerships will certainly come with revenue, and the broader play is to show that we are already a company with parts that are more valuable than what I see reflected in our market capitalization. This year, we have already started working on expanding our partnership opportunities. The world is changing.

A new era of opportunity for our advanced technology in military applications has appeared. With expansions expected in defense spending under the current administration and lots of realignment happening with this sector, our mature technologies in augmented reality display systems, as well as perception LiDAR solutions, will be promoted for defense programs. I would say that it is early times, and we are actively working on pursuing all opportunities. As investors will recall, for over 30 years, MicroVision has delivered technology for various military programs. The company was founded for this segment. We have participated in programs for U.S. Army Virtual Co-Pilot Program for high-resolution, full-color helmet-mounted display. Two, U.S. Military General Dynamics Mounted Warrior Program with helmet-mounted display for armored vehicle use. Number three, U.S. Army Aviation and Missile Command Program for Boeing for binocular helmet-mounted display for Comanche Helicopter.

Four, U.S. Air Force full-color head-mounted display for Air Force eyewear. Five, U.S. Military Battle Command Battle Lab for head-mounted display. And most recently, we were part of the HoloLens product developed for the military. We are very strong in this area and expect to bring a military advisor that will help us partner with larger companies in space for a partnership. I expect to talk about this more as these opportunities continue to develop. I'm going to keep my prepared remarks brief today as we received a large list of questions from our shareholders, and I would like to address that as the main narrative. I would like to now turn the call to Glen DeVos, our new CTO. I'm excited that Glen has joined MicroVision to advance our product solutions and help us grow to provide more advanced software and hardware-integrated solutions for automotive and industrial market segments.

Glen and I have had a chance to get to know each other over the past six months, and it has been great to mutually share the excitement for MicroVision. Glen.

Glen DeVos (CTO)

Thank you, Sumit. I appreciate the introduction. I'd like to start by saying how excited I am to be with you today and to be joining the MicroVision leadership team as their CTO. Over the course of my career at GE, Delphi, and then Aptiv, I've had the opportunity to both lead significant global technology development as well as to manage high-growth automotive business units. As Aptiv's CTO, I led the development of smart vehicle architecture and our advanced autonomous mobility technology, which incorporated radar, vision, and LiDAR as part of our advanced perception system, which powered the 2015 launch of the Las Vegas Robotaxi fleet during CES that year, as well as our cross-country autonomous drive that occurred in April of 2015.

As President of the Advanced Safety and User Experience Business Unit, I managed the introduction of global large-scale ADAS programs for our leading OEM customers, resulting in the accelerated growth of that business unit into a multi-billion-dollar business with annual bookings in excess of $5 billion. I understand what it takes to identify, industrialize, and then successfully commercialize these disruptive technologies. This is exactly why I'm joining the MicroVision team. Building on MicroVision's proven technology portfolio, I believe that we are perfectly positioned to not only successfully commercialize our current LiDAR products within the automotive market, but also able to extend and deliver the complete perception system as well as a rich set of features suitable for the industrial, defense, and commercial vehicle markets.

Now, to successfully capitalize on these opportunities, we have an important year ahead where we will be showcasing the complete MicroVision industrial autonomous and advanced driver safety platform, which will utilize multimodal perception with a scalable software-defined set of advanced features. Now, while these adjacent markets represent important near-term opportunities, we remain committed to the autonomous ADAS and the autonomous applications within the automotive space. MicroVision's technology will be a key enabler to unlocking additional L2 plus and L3 features for our OEM customers. Maven, Movia S, and Mosaic are the right products at the right time for the automotive market. As I mentioned earlier, I couldn't be more excited about joining the MicroVision team and being part of this journey. Thank you, and I'll now turn it over to Anubhav to talk about our financials. Anubhav.

Anubhav Verma (CFO)

Thanks, Glen. We took many transformational steps in 2024 to adapt to the dynamic nature of the industry, including the macroeconomic conditions and geopolitical factors. The three notable achievements of the company are: number one, expanded near-term revenue opportunities in the industrial and defense sectors as timelines continue to evolve in the automotive industry. Fierce automotive OEM competition from China, both in terms of price and features, continues to drive U.S. and European automotive OEMs to quickly find a way to progress their ADAS and EV initiatives. While this means revenues at scale from this industry are delayed, the certainty of LiDAR adoption, especially given its success in China, has never been higher.

To adapt to the changing landscape, we successfully positioned the company to focus on near-term revenue from industrial verticals with a focus on AMR, AGV in the warehouse and factory automation space, and also cobots or collaborative robots. The revenue potential is immediate and significant given the need to reduce the cost in this industry. In addition, we're now actively pursuing opportunities in the defense vertical, especially given the focus of the Trump administration to prioritize defense spending on cutting-edge technologies by leveraging our existing technologies and products in the AR and the VR space. Number two, disciplined cost management and added world-class leadership team. We adjusted the workforce last year to focus on resources on near-term revenue opportunities. While the entire market executed several rounds of restructuring to conserve cash, our cash burn continues to be one of the lowest in the marketplace.

Also, in line with our focus on operational excellence, we are thrilled that Glen has joined us. His experience, energy, and perspective will help usher in transformational advancements in our solutions and go-to-market as we prioritize the expansion of our end markets, including industrial and defense. Number three, strengthened our balance sheet with two rounds of investments from a strategic financial partner. With the raised capital and a further streamlined cash burn, we extended our cash runway into 2026. With near-term revenue opportunities and our expansion in the industrial and defense sectors, we believe we have improved our timelines to achieve cash flow breakeven. This is the first time in the history of the company that one single investor has committed to invest an aggregate of over $90 million of capital.

This $90 million includes a $75 million convertible facility entered into in October 2024, and then a subsequent $17 million common equity transaction executed in February 2025. We believe these back-to-back financing transactions signal a strong vote of confidence. This has also been reflected in the MicroVision trading volumes that are significantly higher, three, four times of the historical levels, driven by both institutional and retail. If I can summarize this, securing an institutional financial partner to make an over $90 million commitment signals a strong vote of confidence in MicroVision's future. Last fall, we ran a competitive process to select institutions for a capital raise and received term sheets from multiple quality institutional investors that reinforced the market perception of MicroVision's technology. As a result of this, we have achieved a strong market cap, bypassing several of our peers.

We remain one of the highest-valued U.S.-based LiDAR companies with high average daily trading volume, with elevated levels of institutional trading. These are all reflective of MicroVision's market position and strong staying power with low cash burn and high revenue potential from automotive, industrial, and defense sectors. Now, let's review our Q4 financial performance. For the fourth quarter revenue, we reported $1.7 million. After backing out the one-time Microsoft revenue in Q4 last year, the revenue grew from $500,000-$1.7 million year-over-year, primarily driven by customers in the industrial vertical. While we did see momentum in industrial verticals, the Q4 revenue came short of our expectations as one customer delayed its decision to 2025, though we remained significantly engaged. On the expenses side, our fourth quarter 2024 expenses were in line with our expectations.

For Q4, we had $14.7 million of R&D and SG&A expenses. These include $2 million of non-cash charges related to stock-based compensation expense and $1.7 million in non-cash charges related to D&A. Backing out these non-cash charges, our R&D and SG&A expenses were only $11 million in the quarter. In line with our expectations, our expenses have trended down sequentially since the first quarter of 2024, primarily due to the reductions in force we implemented to focus the company on Maven and Movia products and away from Mosaic and Sensor Fusion in response to the automotive projects being pushed to the right. We believe our workforce and expenses are well-positioned to execute on the current business strategy. The current engineering talent pool is sufficient to remain engaged with the automotive OEMs and simultaneously scale faster with industrial and defense revenue opportunities in near term.

We believe that the go-forward annual run rate of our R&D and SG&A expenses will be $48 million-$50 million for 2025. Q4 CapEx was $0.1 million in line with our expectations. Now, let's talk about our balance sheet. We finished the year with $75 million in cash and cash equivalents. We're pleased with how our relationship with High Trail has developed over the last six months. In February this year, we raised another round of equity investment from them. Subsequent to these financings, the company now has access to a total of $235 million as of December 31, 2024, with the following four components: number one, the cash and cash equivalents of $75 million; number two, $114 million availability under our current ATM facility; number three, $30 million of undrawn capital under the convertible note facility; and lastly, the $17 million of new equity capital from High Trail.

In addition to the equity capital raised in February, High Trail also converted over 20% of their note into common stock. In addition, the June-August redemption payments on those notes were deferred. 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 other shareholders. This makes the overall cost of capital for the convertible quite attractive. We believe that the benefits to the company spurred by the investment significantly outweigh the cost. We sold about $9 million worth of common stock under the current ATM in the fourth quarter. We have $114 million available. On the convertible note, we have approximately $33 million outstanding that could convert at a fixed price of $1.59. The $30 million second tranche remains undrawn and available for future drawdowns subject to certain limitations.

Now, let's talk about 2025 targets. We have already secured production commitments from our manufacturing partner at ZF to fulfill the anticipated demand from the customer projects we remain deeply engaged in. We expect this demand to be in the $30 million-$50 million range just from this vertical only over the next 12 months-18 months. As we expand our TAM into defense and other related areas and work together with Glen to expand our solutions and accelerate our go-to-market strategy, we will provide more color on financial and business milestones for 2025 and 2026 in the upcoming events. To summarize, we're really excited about 2025 and beyond as MicroVision drives forward with: A, significantly higher TAMs, including defense and industrial; B, expansive and broadening solution advancements; C, a solid balance sheet with superior trading metrics; and lastly, a well-experienced team to execute the strategy.

With this, John, I would now like to open the line for questions.

Operator (participant)

Thank you. At this time, we will be conducting a question and answer session. Investors can submit their questions within the meeting webcast by typing them into the QA button on the left side of their viewing screen. Analysts who 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. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Casey Ryan of WestPark Capital.

Casey Ryan (Director of Research)

Good afternoon, everybody. Thank you for the exciting update. I was curious if we could start with the discussion of the $1.7 million in revenue in the quarter. How much of that would we characterize as sort of commercial shipments versus, say, NREs or some sort of R&D work done in conjunction with partners?

Anubhav Verma (CFO)

Hi, Casey. Thank you for your question. This is Anubhav here. The $1.7 million in the fourth quarter was primarily the revenue derived from the sale of sensors to our customers. There is very minimal NRE in this. The NRE that we were expecting to get in Q4, we expect that to be pushed out in 2025 because of the customer decision.

Casey Ryan (Director of Research)

Okay. Terrific. Would you describe the $1.7 million, whatever portion was sort of commercial, was that sort of to a single customer or maybe potentially to multiple customers? Because that would be exciting if it were.

Anubhav Verma (CFO)

Correct. It was to multiple customers, not just one, because I think here I would like to differentiate, however, the number of customers that comprise this $1.7 million is less than 10 because our strategy has always been to pursue high-volume industrial customers because that significantly drives a higher ROI because we can get those revenues without inflating our SG&A expenses. That has been the motto of the company to go after industrial customers with significantly higher volume estimates to either retrofit their existing robots or for new robots that are going to be deployed in the future.

Casey Ryan (Director of Research)

Okay. Terrific. That's helpful color, I think. It feels new, the mention of defense opportunities for the company, which I agree is exciting. I have two questions around that, I guess. Is it fair for us to think that those opportunities are related to, say, ground-based or movable objects, or are they also aerial objects? I guess I'm trying to understand maybe how big the opportunity is if it's sort of multi-theater, essentially.

Sumit Sharma (CEO)

Let me take that one. I think the focus is, if you think about our core products, the core product we've been working on five years since I've been CEO is the LiDAR product with the perception and expanding that into platforms in automotive. Certainly, with the team here in Hamburg combined, we have something we can offer to people developing vehicles that are non-automotive. It happens to be that in the military space, there are multiple programs on this. We engaged on that last year. Primarily, that's the product we're working on. Of course, the pedigree of the company, 25 years plus before that, is, of course, display systems. Given the current environment, as opportunities arise, we want to make sure that all the assets of the companies are made available for potential revenue.

Casey Ryan (Director of Research)

Okay. Terrific.

Sumit Sharma (CEO)

Nothing missile-related, right? It's just ground-based and, of course, directly related to our soldiers.

Casey Ryan (Director of Research)

Okay. Not to harp too much on it, but it is exciting. Are you sort of aligned with a sort of partner as you sort of work to sort of penetrate the defense space, or are you able to go directly because of your past history and past relationships?

Sumit Sharma (CEO)

We've actually never gone direct. I think if you think about the size of the company we are, we build one part of the subsystem of something larger. We tend to work with partners that can be part of the bigger program. As I mentioned earlier, right, we intend to bring on some military advisors to help us through the process.

Casey Ryan (Director of Research)

Okay. All right. Terrific. Circling back, last question, sort of less than 10 but more than one sort of commercial customers in for Q is pretty exciting. For all those opportunities, are you finding that you're competing against a lot of the names that we would think about, or are you finding that it's really maybe MicroVision is being sought out for its unique capabilities, or what's the competitive nature of these sort of wins, essentially, in terms of building relationships with these customers?

Sumit Sharma (CEO)

The customers are all the customers know who the parties are. I'm not going to comment who's in the mix. That's not appropriate for us. That's their confidential information. One thing that's just my general view of talking to other people, with the potential of some trade barriers that may come up in the future, working with Chinese-based LiDAR companies, it has ups and downs to navigate. Most recently, somebody said that, yeah, having a company that is here at home definitely gives us a warm and a fuzzy, right? That limits, not restricts, but that narrows down the number of companies you compete against. To them, you make a LiDAR, somebody else makes a different LiDAR, you have software, somebody has software, how well can you integrate, how well does your application, how well does the application software solve our problems?

Real-time, low power, they want choices, right? They do not want to lock themselves in because some of the decisions that people make are seven years program lifetimes. They may be smaller volume compared to automotive, but they are pretty big decisions. Typically, there is more than one company involved, and they try to, just like every situation we walk into in the automotive, they try to understand the uniqueness, but also what is really something they can count on your technology. In our case, offering 25,000 hours' worth of life, low power, software integrated on board, not requiring ECUs, those are the kind of value proposition and unique selling points that we promote so we remain competitive. Others will have a different unique point, but there are LiDAR companies with software, but a narrower subset of companies competing.

Casey Ryan (Director of Research)

Terrific. Thank you for all that color, and I think you're painting a very positive outlook for 2025. Thank you. I'll drop off the line now.

Operator (participant)

Our next question is from Jesse Sobelson of D. Boral Capital. Please proceed.

Jesse Sobelson (VP of Equity Research)

Hi everyone. Thanks for the update here, and thanks for taking our questions. The first I was just wondering on is this ZF contract, you mentioned $30 million-$50 million over 12 months-18 months. Could you provide a little bit more clarity on exactly what the deal is, potentially what kind of product you expect to deliver, and if this is an ongoing and consistent delivery contract or some type of lump sum agreement? Please?

Anubhav Verma (CFO)

Yes. Go ahead, Sumit.

Sumit Sharma (CEO)

No, no, go ahead.

Anubhav Verma (CFO)

Okay. Jesse, so I just wanted to clarify a few things. This $30 million-$50 million is what we expect as the demand from our customers in the next 12 months-18 months. To fulfill that demand, we have already secured production commitments from ZF, who is our manufacturing partner, to ensure that we have an uninterrupted supply to our customers. I think, as Sumit described, one of the important reasons for some of these commercial discussions with industrial customers that we're engaged in, it's a priority for them to make sure a company like ours can deliver solutions at scale and predictable volume and predictable schedules. Hence, for the certainty of fulfilling that demand, we ensured that we have a locked-in production commitment from ZF so that when the demand comes and arrives, we're able to fulfill that sufficiently well.

Jesse Sobelson (VP of Equity Research)

Great. Thanks for the explanation there. I'm sorry for the mistake, but I appreciate the clarification. It's good to hear that you've been able to secure this type of production capacity for potential demand. Looking to one piece of the puzzle here that's been consistent with the business is the automotive RFQs. You mentioned some continued engagement with several OEMs, and there have been delays. It is just across the board, but could you just give us an idea on maybe some potential update on realistic timelines for these RFQs converting into revenue-generating contracts could potentially be?

Anubhav Verma (CFO)

Sumit, do you want to talk about that?

Sumit Sharma (CEO)

Yeah. You broke up there for a second. Could you just repeat that for a second, please?

You broke up for me.

Jesse Sobelson (VP of Equity Research)

RFQs, I'm just curious for in the automotive segment of the business, the industry's experienced delays, but was just curious for some potential update on when we could expect that business to be generated.

Sumit Sharma (CEO)

Yeah. I think in general, the RFQs, the timeline for their startup production is moving out. The technical evaluation goes on. To be honest, right, even on the OEM side, there is a churn. As you can, we all read the news. They have churned. Their tier ones have churned. The programs by themselves, right, are seeing some elongation in their timelines. As RFQs go in, technically, lots is known. New items come out always like, "How about this? How about that?" The decision is not clear when it is going to get made, right? They are not driving towards a decision as fast as they were in previous years. That is at least our experience, right? I know we feel there are a lot of questions from our investors, "You are best in class.

How is it that you're not winning? Part of it is there's a process that you're part of, and you have to go through it to get to the commercial side of it, right? Technical reviews go in. You want to get to the green part, technically green, but then you have the commercial side of it. It would be very hard for me or anybody else to predict when those timelines are and if those programs are actually going to go to fruition. One could get an award, but that does not mean it goes to SOP. Lots of variables, right? I guess everybody wants to win, do the press release, stock goes up, and it's great.

Nobody can actually talk about, "Is that actually going to go into production or not, and where that program is?" I would argue that a lot of our competition has announced wins, but it's really hard for them to say where they will be long-term, that those programs are going to actually be maintained. We are in a different stage. We made a bigger bet, which is to reduce everything in size and go for passenger vehicles early on. We started incorporating the perception software by bringing on the team here in Hamburg. The bigger contracts will take longer, in my opinion.

Jesse Sobelson (VP of Equity Research)

Sure. Understood. It's a developing process with these guys, and I think it's just across the industry. I guess lastly, I'm just kind of curious. There's been some discussion here.

Sumit Sharma (CEO)

Actually, if I.

Jesse Sobelson (VP of Equity Research)

Oh, sure. Go on.

Sumit Sharma (CEO)

If I can interrupt, right? We have a new CTO who comes from this space. He's probably got far more experience than I do. So perhaps, Glen, you can give a little color of what your we talk about this a lot, so I think we should be candid about what we think, right?

Glen DeVos (CTO)

Yeah. Yeah. I mean, it's a good question. I think what you're seeing now is a period where there's a lot of reformulation within the OEM community about exactly what their higher content, ADAS, and level two plus and level three systems are going to be. I think we've seen a couple of consistencies in that. That LiDAR is clearly a part of that. As you talk about level two plus plus or level three, LiDAR is part of the perception system, which is great for us. It's very clear after that kind of first generation of level three systems came out and really underperformed in the market, many were just simply not adopted to the extent that the OEMs wanted. There's been somewhat of a, like I said, a reformulation of what are those strategies. That's the process they're going through now.

There is some exploratory work that they are doing as well as trying to figure out what is the right formula, what is the right value prop for their customers. It is clearly coming. I do not think there is any debate about that. Where those systems have seen success with some of the OEMs, it has been good. I think you are going to see that developing. That is certainly going to happen. LiDAR will be a part of that solution. We are supporting them and staying very engaged with that process and hopefully able to accelerate their adoption.

Jesse Sobelson (VP of Equity Research)

Great. Thanks for the detail there. One last one for me, and I can jump back in the queue. It sounds as if MicroVision does have something of a focus on potentially expanding its perception solutions. Would you say are there any strategic opportunities to accelerate growth through acquisition, potentially in complementary technologies, either with sensor fusions or some type of software? Just to follow up, are you actively evaluating potential M&A opportunities, and how would you go about doing so?

Sumit Sharma (CEO)

I think let me start with that just to establish what we've done already. With our acquisition of the Ibeo team several years ago, I believe, and I think it's part of the reason why Glen has actually taken a big look at it and he wanted to join, the perception core is probably pretty mature. It is actually very, very mature. It was developed for Audi years ago in very close collaboration with them. At a very high level of maturity. On top of that, we very quickly were able to build out different application software to support different customers. It was for LiDAR specific. I think what Glen mentioned just now, and I think I don't want the subtlety to be lost, there's a whole space of multimodal. Those are just words, but it's like radar, camera, LiDAR.

There's a group of sensors in combination and software that will get to the high level. I think your question about M&A, I'm just giving you context that we have quite a lot of things built out. The best thing would be for cheap and efficiently if we can build more out internally. Like any company in this space, right? Yeah, if there's an opportunity. I mean, our focus right now is to get revenue, to get partnerships, to get to a path where everybody feels that it's somewhat sustainable. Growth comes different ways. Certainly, we want to home grow everything. It'll be cheaper and it'll be faster. If the right opportunity comes along, I think everybody would want to become a stronger company, especially if that allows you to get customer support.

If you can actually get a program done faster, of course you would work on that, right? I think everything is up on the table always, but generally, we have something very valuable built out already.

Anubhav Verma (CFO)

I think, Jesse, if I could just add, recapping what Sumit was describing, the strategy of the company is to truly become the ADAS solution provider for the industrial commercial vehicle space as well. I think the idea is to build a full solution to be offered to these customers. That is what we're looking to get to either organically or inorganically.

Jesse Sobelson (VP of Equity Research)

Great. I appreciate the details there. Thanks for taking the questions, and thanks for the time.

Anubhav Verma (CFO)

Thank you.

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)

Thanks, John. Right. The first question we have is, Sumit, what are the factors that delayed the signing of this industrial deal?

Sumit Sharma (CEO)

If you think about industrial customers, they really do not get much attention and much love from a lot of the bigger companies. You can go to another LiDAR company, buy what is off the shelf, try to integrate it. You work through all that to a certain level, which means you would have to have a software team. It gets to a certain level of adoption, yes, you could do that. What we did was we had a very unique thing. Our team has the perception, not running on a big NVIDIA platform. We actually have this high-level perception running inside our sensor on our SOC. This is actually a very, very big advantage because for that small power, it is not just the LiDAR. It is the LiDAR with the perception running. When you have that much software you are providing, all the interfaces are provided.

You have to collaborate with the customer. It's their application. Can they sell more product? Can their platforms go faster, much more adoption with their customers with this new technology? There is a period of time they want to qualify. They want to make sure that we're bringing hardware, which, to be frank with you, some of them don't even understand how do we do this? How does the sensor model work? Where does the noise go? Why does the point cloud look so clean? They understand how to test LiDAR, but they don't understand how it really works. On top of that, the software is doing things that everybody acknowledges that, "Oh, that looks great. I mean, you got everything on board here. You can do ground plane. You can do this. You can do this.

All the things are ready to go now. The application layer, just their own qualification part of it takes longer. I think that is the bigger one, that the qualification timeline that we were tracking to, that they were tracking to, saying, "Hey, this is how long it's going to take us," they have far exceeded that, right? You just get deeper and deeper into it because the decisions are bigger. These are not small projects for hundreds of units. Whenever you do thousands of units, right? I mean, think about automotive is like hundreds of thousands of units. You go through a huge amount of qualification step. Orders of magnitude less, but again, they're getting features that were available in the automotive space, in the industrial space. They're finally seeing some love from different companies.

We're bringing mature technology that runs for 25,000 hours' worth of life. Imagine in industrial space, you're making something that was redesigned robustly and software that can essentially they would never have to develop any software, so they have to rely upon us. That's what takes the most time is the full-blown qualification part of it.

Anubhav Verma (CFO)

Thanks, Sumit. The next question is, can you comment on the recent deal announcements by several other lidar companies with global OEMs? If MicroVision had the best sensor with the lowest price point, why did the company not win these RFQs? Is it too late for MicroVision? How does MicroVision plan to differentiate itself from competing effectively against these competitors, including the Chinese lidar players?

Sumit Sharma (CEO)

I'm going to answer one part of it, which is to give context, and then I'm to actually have Glen add more to it. He's going to give a broader perspective. I think the question always comes up, "You have this best in class." People have asked me, I think it was at the investor event a couple of years ago, "What's best in class?" I think it's still not clear to everybody what's really awesome about our technology. People ask the question about FMCW versus time of flight. At a base level, it's going to be in a car. It has to be low power. It has to be small. It has to have lots and lots of features. They need to see small object detection at 150 m or higher or all the different attributes they need to see, and you have to go create data.

This is things that I've already shared in the past. On top of that, they want to make sure that the industrialization is to a level where it's fully automated, you can deliver it, and the features are kind of set. On top of that is financial health of the company, how many years of runway. I think from a technical standpoint, we get to the green very quickly. When it comes to the health of the company and the strength, why does Anubhav work so hard to find great investors that shows them that, "Yeah, we can actually support ourselves, and that is a lower risk." You have to try to get through that. Best in class in technology, as an engineer, of course, you want to be excited about that your company has the best technology.

A decision is beyond just technical part of it. It is a lot of the commercial industrialization part of it over a long period of time. Others are announcing it. I think I'm going to turn it over to Glen because we recently had a very interesting conversation about some announcements. We're not going to talk about anybody specific. That's their confidential data. We're just going to talk about, in general, how we don't get nervous why this is still early times for this technology. Glen?

Glen DeVos (CTO)

Yeah. Thanks, Sumit. I think to build on Sumit's comments, I mean, as I said earlier, you are seeing this continued commitment to using LiDAR for these advanced systems, so level two plus plus, level three systems, which is great. I think you're seeing some announcements as people kind of solidify maybe part of what they're trying to do across their portfolio. Not uncommon, but you're really not seeing yet concrete plans or broad adoption. Over the last, probably 10 years, we've seen this occur on a regular basis. For us, it's a matter of making sure that we're focused on the right customers, the right opportunities within those customers that really will bring volume and not just chasing engagement or announcements. As Sumit said, at this point, not really concerned with what's been announced so far. Again, a lot yet to play out there.

I think when we look at what we have with MAVIN, what we look at what we have with NVIDIA and MOVIA S coming, these are going to be the right products that, as the OEMs really solidify their broader plans, I think we're coming in at just the right time, not too early, and really when they're ready to start moving on larger programs. I think you'll see more of this, announcements in the coming months, I'm sure. It's really not going to take us off our focus. At this point, not really overly concerned with it.

Anubhav Verma (CFO)

Thanks, Glen. Next question. Do you think the NHTSA requirement for the U.S. automatic emergency braking rule due by 2028 is unrealistic? When is the latest date an OEM would need to sign a series production deal to ensure their cars were meeting this requirement for 2028? Can MicroVision LiDAR sensors enable OEMs to meet this?

Glen DeVos (CTO)

Yeah. Maybe I'll start, and Sumit, you can certainly add color to it. The 2028, 2029 requirement by NHTSA, it is achievable, but it's going to, for each OEM, if you think about an OEM, they'll have a portfolio and a number of vehicle platforms that have different levels of capability. Really, one of the key focuses on the NHTSA ruling was vulnerable road users, pedestrians. You're able to detect pedestrians up to certain speeds and make sure that AEB is functioning and avoid the accident. If you're an OEM, you're going to look at your fleet of vehicles and your platforms. For some of those, it'll be relatively simple to implement these changes. It may just be software. Those will tend to be the higher-end systems that have more sensors, more capability to them.

For their lower-end or value segment vehicles, maybe vision-only based AEB, it may not have that ability to discriminate pedestrians required by NHTSA. For those platforms, it's going to take longer. In some cases, they may struggle, even though there was four years from the ruling, it was about a year ago that the ruling was made, they may struggle to get those platforms updated. You're going to see I would expect to see some negotiating between NHTSA and the OEMs to try to stage that so they're not disrupting their vehicle platform plans. Fundamentally, the technology is there. NHTSA will continue to evolve in terms of their requirements and become more stringent. They can look at, in particular, NCAP, Euro NCAP, U.S. NCAP.

LiDAR can be a tremendous advantage to doing that because of its ability to discriminate, detect free space, and really determine where that object or that pedestrian is. For each OEM, it's going to be a bit of a different type of challenge. Generally speaking, it's doable for most of the platforms. For some, they'll struggle. I would expect them to try to negotiate with NHTSA to give them either more time on those platforms or as they try to figure out what to do to comply.

Anubhav Verma (CFO)

Thanks, Glen. Next question. How does MicroVision plan to compete with FMCW LiDAR technology given its increasing adoption by OEMs like Aeva's recent win with the top 10 passenger OEM? Are there plans to transition or integrate FMCW technology into MicroVision's product portfolio to align with the trends?

Glen DeVos (CTO)

Like I said, if you want to start, I can certainly add my perspective to it as well.

Sumit Sharma (CEO)

Yeah. I think I'll start. I think I've talked about this in the past a little bit. The OEMs will always make the right choice, which is the lowest cost, the highest fidelity system. At the end of the day, at time of flight versus FMCW, one of the big differentiators is you get velocity, right? They already have, as Glen mentioned early on, five radars on the car. They have velocity. They are integrating into features that are pretty mature, and they're shipping right now. At the end of the day, the technology that drives the lasers in a time of flight, 905 nanometer versus the FMCW, is significantly different. There's cost barriers. In one case, tens of billions of dollars would have to be invested to make FMCW more affordable in very, very high volume.

There is no other technology out there or any demand out there that requires them to make that investment. There is no hard disk drive industry that needs these kinds of lasers or anything else, right? I think it's great, right? I think if there's more sensors in the market, people are fielding it, that's great. In general, I think you have to look at it like, is it going to be cost competitive? If you're going to put a device in the cabin behind a windshield or something like that, and it consumes tens of watts, significantly higher than a time of flight, imagine if you have 20 W-25 W, 15 W-25 W in there, you're going to need cooling, and it's not going to be fans. There's lots of variables that go into it.

I think this keeps the nervousness that our investors may feel, given the fact that we have not had a commercial success with an OEM, I appreciate that. I respect that. I think it's totally warranted. At the moment, I don't think the physics does not dictate that anything has changed specifically, that all of a sudden there's a paradigm shift. Mounting it on top of a truck with ample airflow, yeah, that anybody could see. Miniaturizing that for that situation, yep, anybody could see. Starting to put it into a passenger vehicle, right? I mean, they're fielding it. Our competitors, they're showing us CES and other shows. I think that's totally fair. Let's see how far the adoption goes, right? We're going to focus on ours because we know our core technology works.

In the middle of a race, you don't switch shoes and say, "I'm going to run a different race." Before we entered this, we had actually thought through time of flight versus FMCW. We made a conscious decision to do a time of flight. Because if you recall, MicroVision's core technology was not LiDAR. Only in 2011, we started with this. So the team at MicroVision at that point really thought about it as what made the most sense from an energy standpoint. Glen?

Glen DeVos (CTO)

Yeah. If you think about LiDAR as a sensing modality, it's not going to operate alone. It's going to be combined with radar and vision. You have camera systems as well. Radar, which is a big part of my background, you get relative velocity very accurately. I don't need LiDAR as part of a perception system to also be calculating that. Really, you're looking to operate each of these systems into their sweet spots. LiDAR with time of flight, very proven, very robust technology. As Sumit said, lower power and power consumption is hugely important from a packaging standpoint and from a where do you place this in the vehicle standpoint. It means you can actually make it smaller. When I think about a multimodal perception system, time of flight with LiDAR gives me exactly what I need from the LiDAR modality.

Radar gives me relative velocity, gives me object detection in all weather conditions. Camera gives object classification information, those types of things. Each modality operating in its sweet spot, when you think about it, that's why time of flight, it works really well in that combined environment. For us, I think TOF is still by far and away the preferred approach.

Anubhav Verma (CFO)

Thank you, Glen. How does the recent announcement of cooperation between Volkswagen, Valeo, and Mobileye impact MicroVision as the three parties look to cooperate to enhance driver assistance by integrating hardware and software sourcing together? What does that mean?

Glen DeVos (CTO)

Yeah. I can speak to this. Very familiar with all the parties involved. The announcement of it was, I think, described as or branded as Surround ADAS. This is where you use a combination of six cameras, two 8-megapixel cameras forward and back, and then four 3-megapixel cameras for the kind of the parking, the bird's-eye view function, combined with five radar, four corner radar, which tend to be more short-range, and one forward-looking radar, which is longer range. All packaged together, and it's public. It's running on the EyeQ6 High that Mobileye provides. What I would tell you is a couple of things. What's interesting about the announcement? One is it kind of ends the debate relative to base-level ADAS systems. If you think about the platforms that that system will go on, the MQB platform, it's kind of a value-segment vehicle. It's the Golf.

It's the smaller vehicles. And so highly cost-sensitive market. It'll have limited, it's kind of level two functionality, not unlike what's provided today by a lot of the systems that have been launching. Basically, it combines radar and camera. It kind of eliminates the debate now that, "Hey, can you do everything with a camera? Can you do a?" No. You need radar and camera to have a truly robust ADAS system. That sets the floor. If you think about it, as I mentioned, that's a level you would call that a level two system. It has lane assist. It has some other things that goes with it. That now sets the floor. What that means for the broader ADAS market is that the value-segment vehicles now have level two systems. You've moved up from level one.

Content per vehicle continues to grow as it relates to the ADAS market, broadly speaking. For the OEMs, what that means is to differentiate. Now, you need to be providing level two plus plus or level three systems that are different and differentiated versus what I would refer to as kind of the commoditized ADAS. That is essentially the commodity level. Why that is exciting for MicroVision is that means you are now looking at having to pull in LiDAR and more advanced systems as part of those level three offerings, not just at the very premium levels, but really at the more mainstream level of vehicles above value segment. That is where volume is. That is where you are going to get differentiation for the OEM. That is where LiDAR will really enable the OEMs to deliver those systems.

When I step back and look at those announcements, for me, it's exciting because it raises content per vehicle. It raises the floor for ADAS systems within the automotive space. It really pushes the OEMs to start incorporating more advanced features to be able to differentiate their higher content vehicles.

Anubhav Verma (CFO)

Thanks, Glen. Next question. If MicroVision were to see an increase in demand for AR products, when would the company communicate that to the market? Let me take that question. Obviously, since this is a new sector that we're looking to pursue opportunities in, any material purchase orders that come in or any significant transaction if there is an offer made to purchase our IP and other assets related to the existing technology to our AR and VR products. That's what we're most excited about. Next question. It is publicly known that Microsoft previously had a contract with MicroVision for HoloLens 2 and that the IVAS headset is based on HoloLens 2 technology. As your intellectual property was used in HoloLens 2, would other parties be interested in starting a collaboration again?

Sumit Sharma (CEO)

Yeah. I think in this call, I think some investors have known this for a while. This question has come up over the last five years. We had not focused spending our raised capital on anything but LiDAR. It is in our blood. Believe it or not, I've done AR longer than I've done LiDAR in my own personal career. I know a lot about the space. I think as far as partnerships are concerned, we stand ready. Whatever problems may exist on an existing system, I think we have the talented people within the company that we can solve them very quickly. Developing potentially new technologies for anything next generation, certainly we can do that. Of course, we have reference ideas for what we would do. On top of that, of course, what we've matured into is we're more of a systems company.

Beyond just the display technology, there's other things in the headset that we can innovate on, that we can add to. If you think about some of the biggest problems that come in this space, it is really motion sickness, right? As you think about motion sickness, it's a hard problem to solve. If you have the right eye tracking, and of course, you want the entire system to be low power, you get instead of talking about LiDAR and sensor models, you start talking about eyeboxes and color uniformity. At the end of the day, there's a bunch of software that we believe that we have still beyond just the display that we had done in the past. We have more to offer now. There's some of the perception technology that we talk about in the space of automotive.

are things that we do in there that if you were to add a very miniaturized LiDAR on top of the helmet and be mapping near the field, you could do a much better job overlaying the information from an AR to XR side, integrating that with some really, really fast and slick, low-cost head tracking gear that goes on an existing helmet. We can offer more than what's there just in the display technology. Therefore, I think we will collaborate and we can fix existing products. Of course, we can go on and actually add more value by making something next generation that was not visualized in the past.

Anubhav Verma (CFO)

Thanks, Sumit. I think we have gone over the hour. We again thank you to all our investors for joining us on our Q4 Earnings Call. We look forward to speaking with you again very soon. Thank you so much.

Operator (participant)

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