Good afternoon, and welcome to the MicroVision First Quarter 2024 Financial and Operation Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Drew Markham. Please go ahead.

Thank you. I'm pleased to be here today with our CEO, Sumit Sharma, and our CFO, Anubhav Verma. Following their prepared remarks, we will open the call to questions. Please note that some of the information you'll hear today will include forward-looking statements, including, but not limited to, statements regarding our customer and partner engagement, market landscape, opportunity and program volume, product development and performance comparisons to our competitors' product sales and future demand, business and strategic opportunities, projections of future operations and financial results, availability of funds, as well as statements containing words like intends, believes, expects, plan, and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update this information. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as for all the financial data presented on this call, please refer to the information included in our press release and in our Form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC Filings tab. The conference call will be available for audio replay on the Investor Relations section of our website. Now, I'd like to turn the call over to our CEO, Sumit Sharma. Sumit?

Thank you, Drew, and welcome everyone to this review of our first quarter 2024 results. Let me start off by updating you on our progress on multiple RFQs in flight, which remain our primary focus to get automotive partnerships in place, while adjusting to the OEM realities. Finally, I will provide an update on the broader view we are working on for partnerships and licensing. We believe that the best long-term opportunity for our technology in our company lies with automotive OEMs focusing on ADAS features in passenger vehicles. This segment will have the highest demand in millions of units and is spread across several OEMs in North America and Germany. As I shared last time, to win and dominate in this space, a company needs: first, LiDAR cost of scale in the low hundreds of dollars; second, smallest sensor size; third, highest resolution and range with lowest power; fourth, sensor integrated perception software; and finally, a company operates as a financially stable Tier-1 LiDAR supplier. I believe with conviction that our technology offering with MAVIN, MOVIA and perception software are aligned with OEM needs for existing RFQs and newly expected RFQs in 2024 that we are starting early engagement on. I understand the frustration and anxiety of our shareholders on the speed with which we can provide OEM validation of our technology. Context is important. There is a big demand opportunity in this segment, but a wide range of challenges to meet OEM commercial requirements for successful passenger vehicle nomination. All OEMs evaluate our technology and how it fits into their individual specifications. In all cases, we meet and exceed their technical requirements. Our team's experience and effectiveness is also a strength that OEM often complement us on. They find our cost structures compelling, given that we talk about…

Thanks, Sumit. The challenges for the auto, mobility and ADAS industries continue to persist amidst the current market conditions. Auto OEMs, Tier-1s, and ADAS companies, and in particular, LiDAR companies, continue to experience market pressure. Particularly the auto OEMs in the U.S. and Germany that remain our primary customer demographic are experiencing stronger pressure mainly due to two factors. Number one is stiff competition from the Chinese OEMs in terms of both prices and features of SDVs, or software-defined vehicles. These software-defined vehicles are being run on centralized computers with domain controller with 10 to 12 cameras, one to five LiDARs, and several radars, while the U.S. and German OEMs are still showcasing vehicles with ADAS features enabled only by cameras and radars. The pressure to produce vehicles with advanced ADAS features continues to increase for U.S. and the German OEMs to stay competitive. The second is the cost focus. OEMs here are also under pressure to realize returns on huge investments made for their transition from ICE, or internal combustion engines, to EV products as EV adoption is lagging in the North American markets. Couple with this, the recent UAW actions in North America are further driving OEMs to be laser-focused on cost to roll out the new models. Recently, one of the major OEMs pushed out their decision on LiDAR beyond 2024 as they internally aligned their Asia strategy. This RFQ was for high volume passenger cars that we were competing for. We believe that this could be in response to the growing competition from the Chinese OEMs to realign their global strategy and expand the LiDAR RFQ scope in order to compete on a global basis to offer these advanced ADAS features. In addition to this, the high interest rate environment further directly impacts the cost of…

Thank you. [Operator Instructions] Our first question is coming from Andres Sheppard with Cantor Fitzgerald.

Okay, wonderful. Sumit, I want to maybe start with OEMs. Last quarter, you had mentioned I think you expected to announce an OEM contract win by March 31. So I guess, can you help us understand what happened with this particular contract? Was the contract award lost to a competitor, or was the timeline kind of delayed further? Just I guess trying to understand what might have happened there.

Yeah, I think, there's [ further ] announcements in public from somebody else, so I'll let people sort of ferret that out. To be honest with you, we're on the call. We're talking about timelines to RFQ completion and nomination, talking about MOUs, talking about all the things that go doing the contract right the day after the earnings call. I mean, our confidence was that high, we were that engaged in it. But ultimately, you cannot reach an agreement when, as I mentioned in my prepared remarks, there's a huge asymmetry, and of course, we have this previous experience that if you have a contract that's so asymmetric, all our people will be dedicated to it even -- we have great relationship with them. They acknowledge that the volume is not big enough. They're concerned about that. And we're concerned also that if the nomination like that happens, do we have the talent to actually go after something bigger that would actually ride the ship for us. So, like anything else, right, we're discussing, we're confident, we have to -- earnings call happen when it happen, right? You have to give the most realistic view to our investors and to the market of where we were. And then, our expectations were clearly stated and we just could not reach a mutual agreement.

I see. Okay. I appreciate. That's helpful context. I guess to follow-up on that, by now, I think some of your competitors have won some OEM contracts out there. You have I think Innoviz with BMW, Luminar with Polestar, I think Aeva with Daimler. And some of these are producing material revenues for the year. Ouster is on pace for $116 million in revenue this year with 30% gross margin. Innoviz on pace for I think about $40 million in revenue for the year. So, I guess, what is the -- can you give us maybe a firm timeline as to when you might expect an announcement or win from an OEM? Is this something now we can target for Q3, for Q4, or is this maybe a 2025 story? Thank you.

Well, I think you've mashed a few things there. So, the OEM wins are the first. Ouster does not have any automotive OEM wins. So, let's just separate that. Let's be clear. Okay? Anything they've announced for BMW, right, I will let them defend it. What was the first and the last order they'd receive. I think you probably know more than that because you're an analyst there. And on top of that, other companies you mentioned, their burn rate versus revenue -- I mean, we would want to be in that position, yeah, which was a big enough. But it's clear the ones that anybody signed is between 30,000 to 50,000 and they had this thing called the order book that actually complicates our conversation with the OEM of what they -- we would expect for an announcement. So, I think like it's great to say numbers out there, but it would be wonderful to see what revenues actually come from BMW, right? And we look forward to hearing from that in the coming months. But when you think about these RFQs that we're talking about right now, they're in it. I'm pretty sure they're in it, and these are substantial volumes that were not offered before. So, whatever communication were done in the past is not accurate, but I think the market has to figure that out through those companies. It's not our place to clear that up. But as far as I'm concerned, if I lose something, I think our investors know me for a while, I'll be the first one out there. Okay? But you can't sign agreements that's going to just handicap the company. It's clear from those guys, you need hundreds and more people to have one OEM and then there is no guarantee…

Yeah, but I guess -- that's helpful. The last part of the question is, is there may be some sort of timeline that you might be able to give us as you might expect a contract win? Is that something in the second half of this year? Is that something next year? Obviously, none of us have a crystal ball, but just -- yeah, go ahead.

Well, I'm cautious about this, Andres, because if I just go by what I'm being told, OEMs are saying that we expect to make a decision in Q2 and Q3, but I did not say that in my prepared remarks, because again, we're discounting the fact that we've been told those things before and they keep moving it out, because they don't move to the timelines that we have to report to the market. That's an anomaly for us. To them, they deal with Tier-1s that never have to do this, right? The traditional Tier-1s have huge business. This is just part of like ongoing business. So, I'm being cautious here is like when we know something for certain, we're going to go out there. But yeah, of course, the expectations still are that sometime in 2024, some key decisions will be made. But personally, when I look at it, the expectation is when an OEM says, yeah, I'm going to make a decision, yet they have multiple configurations they're looking at in multiple models for multiple brands within their group, and it's clear that they are not all in agreement within the OEM, right? We just have to kind of be cautious that what they're telling us within even their company, their people tell us that they're not so certain how they're going to come to those decision points fast enough, right? So, I can't give anything, but, yeah, the most current one that we have is that sometime in 2024, they expect to start making these decisions for these big large volumes. So, they'll have four years to start a production, and we're going to focus on what information that we're given.

Got it. No, I appreciate that. That's helpful. Maybe one last one for Anubhav. So, assuming an OEM contract win is announced maybe in this year at some point, can you just maybe remind us how do you foresee the revenue recognition from that contract like taking place? Like I guess, how would that contract ramp up in terms of revenues and kind of what would be the timeframe for that? Thank you.

Right. The way I think about this is, I think, the passenger because -- I think, Andres, maybe let me sort of go back to your prior question as well, because clearly I think the markets are discounting whatever the other competition is saying, which partly comes from I think what Sumit described as the complications within the OEM ecosystem, right, because there's a lot that needs to be done from industrialization of the product and then ramping of the volume. So obviously, any logical OEM contract will have NRE revenues first and then gradually going into the ramp up of the volumes as the cars come out with the sensors across multiple locations. So, the cadence of the revenue would be, again, NRE in the beginning, then coming out with the volumes -- the revenue volumes that are expected to hit the markets. And what the RFQs that we have been part of it -- again, like I said, the OEMs have been burned in the past. So, they are making sure that this time that the volume -- there's enough time between now and the volume ramp up. So, most of the programs that we're talking about are 2028, 2029 when the major volume really kicks in. And I think that's a very important point to highlight, because you may have trickled revenue here and there, but the cash burn is just not enough to cover that revenue, right? And I think that's the business problem that I stated in my remarks as well that all of us, not just MicroVision, but all LiDAR companies have to navigate this period when the revenues would be disproportionate to the cash burn. And I think we all have to navigate these years successfully, because a bunch of LiDAR companies will fall off the map for signing up for the wrong deals, as Sumit mentioned. So, long answer, but I'm hoping that puts context of why this is not a very simple answer and maybe that's why you're also seeing this across LiDAR companies that most of the LiDAR companies are also stopping short of giving guidance beyond 2025, 2026 onwards, so which again is a direct result of the business problem that both OEMs as well as us are facing.

Got it. That's super detailed and helpful. I appreciate that. Okay, that's it for me. Thank you so much. Congrats on the quarter. I'll pass it on.

Our next question is coming from Kevin Garrigan with WestPark Capital.

Yeah. Just to start out, in the seven RFQs that you mentioned, are there other automotive trucking customers in there, or are all seven RFQs now just passenger vehicle OEMs?

All seven are passenger vehicle.

Okay. Perfect. And then, this is kind of a two-part question, but I think you noted in addition to industrial sensor sales, MOSAIK is going to be pretty important going forward. And then last quarter, you had called out sales kind of were slowing there. So, are you expecting kind of any revenues here from MOSAIK with sensor supply agreements kind of being pushed out? And the second part, it seems like others in the automotive industry are either kind of creating partnerships or developing their own validation software. So, can you kind of give us your thoughts on why you believe the MOSAIK software would have a competitive advantage against other solutions?

The thing about MOSAIK software is if you think about all sensors, when they're going to go into a vehicle, they require validation. In one of the RFQs that we're working on, just to give you an example, this OEM team had some very specific requirements and very specific KPIs. And I mean these were like really, really high level. I mean just a contract like that would be more than $100 million. We just told them that we can validate what you're saying, it's going to cost $100 million. Just to give you an example, right? And then of course, they scaled it back like, "Okay, I think we asked for too much." And this is part of what happened with the RFQ. But it's just an example that the costs associated with validating a solution, not just the sensor, a solution are that high for an OEM. So, there's -- and a lot of it is driving, collecting data, people, lots of things that go into it. What MOSAIK does is, of course, automates a big portion of that that could be savings. So, your first question was, do we expect any revenues from MOSAIK through the year? Yes, the answers to that is, yes. But it all depends upon who is in what cycle of validation and any software that we would give them, software tools we'd give them, they'd have to commit to for several years. But, of course, we do smaller deals now where we give them access for certain portion of their validation, rather than the whole suite. So, again, our team keeps working with the customers, what their needs are. Some of them -- recently, about a month ago, I was in a meeting, and we talked about it and they said, "Yeah, this is great. This is -- I wish I had known about this. But right now, I have a process where we send it over to Southeast Asia, and it's manually done. Nobody likes it, but it's cheap, and it's kind of there. But we want to keep an eye on this thing." But again, those are slow developing relationships that -- at an OEM, by the way, that does not [ does ] the validation all by themselves, that they would make the choice and they would get the partners that are supporting their validation to accept this, right? So, I think that's how we have to think about how MOSAIK will be. But validation is required for a system level. It is not just a LiDAR thing. It is done for radar. It's done for camera module. It's done across the board, the sensor suite that goes into for ADAS.

Yeah. Got it. Okay. I appreciate that color. And then just last question, we've heard from a few other LiDAR companies kind of speaking about the recent NHTSA ruling for automatic emergency braking systems. I'd love to hear your guys' thoughts on it and what it kind of mean -- what you guys think it means for LiDAR?

Yeah. My personal view is, automatic emergency braking has been in Europe quite a lot. Now it's starting to become regulation across the board. More and more cars will have it. Some limited level of features have been shown with camera modules and radar. And of course, as think about mass adoption, you want a feature that is across the board, safe, reliable, long term. LiDAR can play a part in it. There are Tier-1s and one OEM that will say, "Hey, we don't need LiDAR for that. We're going to do it with other technology." But all the other OEMs are clearly saying that's part of what they want to get done, right, that that has to be part of it. Most of LiDAR that you talk about -- I mean, that's the key of the LiDAR, right, that if you had a LiDAR sensor within your car 360 and a long-range LiDAR, all these features are kind of just part of it. You don't have to have another subsystem that provides that level of safety. While you're doing active maneuvering active safety, these features would be also part of the suite that the OEMs would just develop on this sensor's stack. So, as more adoption happens, right, there's more opportunity, because now the product does more than just highway -- high speed highway piloting. It has got actual safety features required by regulation that will be part of it. So, it makes it more of an intimate product that's needed to meet the long-term requirements for the product capability for NCAP. So, it's good news for LiDAR, because it's something that it's natural to it. It's going to be very, very good at it. And as economy of scale start coming in more and more, as you can imagine, like the big volumes you talk about now are in the millions of units and surprisingly it's the same 2028-2029 timeline, right about the time. So, yeah, more OEMs are getting active of what are all the features that LiDAR can actually incorporate in there. And to be clear, we make the LiDAR, we do perception software in there that aids it. They develop the automatic emergency braking and those kind of safety features plus high-speed highway driving features, right? So, we support them, but LiDAR naturally can support them much easier than other technologies. But other technologies have been around. If they operate at lower speeds and OEMs want higher speed, they're going to evaluate those other technologies as well in LiDAR. But I very strongly believe that if you've ever really worked with the LiDAR data stream, if you've been around engineers that work with LiDAR, it is so much easier to do it with the LiDAR data stream.

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

So, the first question is, why has there been a lack of any communication from the company since February 29? And are there expectations of further delays in the RFQ decision making timeline? And how is MicroVision adapting to these changes? Do you expect to add to the RFQ pipeline?

Well, I'll answer the last one first. Yes, we do expect to add to the RFQ pipeline. We already have a couple of line of sights to RFQs for both MOVIA and MAVIN that we're starting to engage. Our team is going to be flying globally to go support the OEM in the early stages as they start developing their plans. As far as like what's the delay since February 29, we had our earnings call. And as I mentioned early on, when Andres asked the question, we were engaged, very actively working with them. You really have to stay silent till you know what's going on. And it was just -- you can imagine, like -- if you go back and read the transcript, where they are the things that they're offering, it is -- it was very, very confusing times. You really wanted to make sure that you got to a point where you can get some sort of agreement or really understand what is on the table, and then communicate. And as we got closer to the earnings call, here we are to announce -- to let you know exactly what that one RFQ is. The other one is actually was for the MOVIA S. I think that was -- to be honest with you, it was -- OEM was pretty clear about it, that it's their product strategy for different regions. And that one really perhaps was -- it could come up live, it could change, because their own strategy is changing within, right? It's not clear. They just wanted to give us like, "Hey, don't call me every week and ask me what this is going to be, but just give us some time to go figure that out, right?" So, I think it made the most sense to get on the earnings call and talk about it with the color because you can't really do this much of color in a short press release or a small comment.

The next question is, last year at the Retail Investor Day, MicroVision reiterated that the company is very far ahead of the competition and it would take years for them to catch up. Does this statement still hold true? And if it does, the OEMs are still keeping their bar standard high, or are they lowering it to accommodate more choice in suppliers?

Yeah. It is 100% true, and I'll give you an example. These seven RFQs we're talking about that MAVIN is part of, we have to dumb down MAVIN to be in the middle of it. I mean, it's -- there's things that we have to do, but we can certainly do it, right? I mean, there's nothing new development. It's just new calibration, new firmware, new development for us as part of our ASIC, so it's not that big of a deal. But as you can imagine, right, as I always said, right, it is best-in-class, so far ahead. When you get into these RFQs, nothing has been thrown at us that requires us to meet it. If anything else, we've been brought towards the mean. We're not at one end of the bell curve anymore, right? We're kind of brought towards the median, towards everybody else, saying, how would you do this? What's your cost structure? What's your size? What's your performance? Right? So, yeah, you have to compete in that range, because they want to make sure that the advantageous solutions are, of course, size and power, things like that. But the base specifications of range and resolution, they want to make sure that you meet and exceed it. Whereas, all the requirements that we have, we don't really look for exceptions. Whereas I believe -- what I believe is, like, others have to have some exceptions into some of the things that they're asking for, in case that there was an actual incumbent, with that specs that we have to meet. So, it's clear to us like the gap that our competition has sometimes because the spec that we see that was created for the incumbent, right, it clears that we can do that, and this was…

So, over a year later since the Investor Day, how does MicroVision feel about its market position given both Innoviz and Luminar have publicized new slimmer units to fit behind the windshield? So, let me get the market perspective and maybe you can handle technical perspective. I think what the markets -- the way markets are reacting to these announcements are I think it's evident in the stock price, right? And I think this was also in response to my -- to -- response to the question Cantor raised before that I don't think the markets is giving any credit to anything that's being said for publicity, because at the end of the day the numbers are speaking for themselves, right? As I described the market cap of these LiDAR companies which have announced $1 billion awards, they are trading lower than the market value of before the awards, right? What that means is the market is discounting these awards and is predicting that this is destruction in value since the time they signed up for the awards. And if I can simply -- that's a lot of complicated financial jargon, but if I can simply break it down how the game is going to be played is, is about how do you navigate these years when your revenue and your costs are mismatched. So at this point, I don't think any LiDAR company can afford to spend on new developments because they have to perfect what they've got. Recently, we saw in the Q1 announcement that companies are spending more on the industrialization by depending on third parties rather than doing it in-house. So, in my mind this model becomes unsustainable and that's sort of why it's reflective in the valuation of these companies. However, I think the question -- I keep going back to the point that, yes, even while that's happening with the other players, what we have got to do is make sure sign up for good deals and making sure our survivability or we make sure our runway, our cost structure is palatable which can support the scaling of the business because when these millions of volumes of units arrive, you want to be there to catch them all when some -- because you have seen a few LiDAR companies fall off the map and this will continue to happen. You just got to be there when this happens, because, as Sumit described, our product, in my mind, still beat and meets the expectations of all the RFQs that we are in.

Yeah. And I think us compared to the other size and stuff, I think everybody wants me to comment on that. Like first of all, I would like to say, this is our earnings call for MicroVision, right? I would rather talk about us. I would love to come out here and talk about a partnership that has formed and what that all means, right? I think I would welcome that day. The problem we have right now is not technology, it's a business problem we're working on. As far as -- so like, let me separate it, then I'll get back to the business problem in a second. If you look at our technology, hands down, where it's going to win, is when I walk into a room like that, I talk about a wafer, that our MEMS comes from a wafer, and we have lasers coming from this and these are all semiconductor technologies for MOVIA and MAVIN. Those guys are still coming in with a box, which has got a glass prism rotating and a little galvo moving. What is the steering technology? So, everybody talks about it, right? But can everybody talk what's under the hood? Some of them are still doing CAD and Photoshop, and they're talking about samples. Others have actually started with the MEMS, and it was too hard, so they went away and now they're in the galvo space in their next generation. So, what you don't know is who's going to win long term. So, yeah, people have made announcements, they have market support, they have analyst support, like whatever they have. At the end of the day, you have to have the product to win and the product -- the simplest product should win in the market. But the hard…

Can you provide more detail on cash runway? And does the company envision it will have to issue share in 2024? Let me take that question. So, let's talk some numbers here. Our cash balance at the end of March 31st is $73 million. We have $128 million available under the ATM. While I cannot share out exact plans, but I think, our history indicates that we would only opportunistically raise capital when needed, because I think it's very evident that to navigate this you have to be very financially -- you have to be prudent financially. And bring in cash, as Sumit described, we would be accelerating our industrial revenue stream from our MOVIA product because that's something which is short term, which brings in cash, faster than the automotive revenue. And also some of the licensing and partnership opportunities in the sub verticals within the industrial market. So, some of these opportunities is what we are going to help to resort to monetize this asset and bring in non-dilutive cash to further support the cash burn and the sustainability of the company. And I think it is the most critical ingredient at this point, how do you survive the couple of years to emerge as one of the few last-standing businesses in the LiDAR industry? Because as I mentioned earlier, the demand is huge, which is waiting at the end of this decade and we just want to make sure that we are one of the few handful of players that will make it to the finish line. I think with that we're coming up to our time here. I, again, thank all our investors for your support. And I think we -- that's -- your support is truly reflective in how the market perceives our strategy and our execution and we continue to work towards the objective that Sumit outlined, and we look forward to hearing towards our Q2 call in August for the next quarter.

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time, and have a wonderful day. We thank you for your participation.