Good afternoon, and welcome to the MicroVision Second Quarter 2024 Financial and Operating Results Conference Call. [Operator Instructions] 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 your viewing screen. Analysts who publish research may ask questions on the phone line. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead.

Thank you, Tom. Good afternoon. I’m 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 and timing, 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 intend, 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 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 ir.microvision.com under the SEC Filings tab. This 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 second quarter 2024 results. I would like to start by updating you on our automotive OEM engagements for RFQs and new potential customer development explorations. Second, I will update you on our progress and sales opportunities for industrial segments. And finally, I will update you on the market outlook on what we’re seeing ahead of us. Let’s dive in. The best long-term opportunity for our technology in our company remains with the automotive OEMs, focusing on ADAS level 3 and level 2+ features for passenger vehicles. We remain engaged in seven RFQs with automotive OEM for passenger vehicles. MAVIN and MOVIA S are engaged in all conversations. The pace for reviews and decisions remain with the OEMs. Startup production for these high volume programs are targeted towards the end of this decade, so decisions are pushing out into later this year. We are cautiously optimistic about these targets to decisions, but remain aggressively engaged. A new era of engagement has opened up with multiple OEMs across Europe and U.S. OEMs are engaging with us to investigate the opportunity for a more strategic hardware and software exploration in developing a more customized MAVIN and MOVIA S design for L2 products. We are actively working on this as it represents near-term revenue opportunities as well as delivering a more custom sensor for their B-sample needs for RFQs. We are working on exploring integration of MAVIN behind windshield as well as a new 180 degree field of view MOVIA S sensor that would integrate into a car body with small bumps resembling the current camera module bumps. These are exciting opportunities and I see them as potentially a faster path to RFQ decisions. Some of these engagements are for RFQs that are…

Thanks Sumit. Auto OEMs, Tier 1s and ADAS companies in the U.S. and EU continue to experience the market pressure, driven primarily by stiff competition in terms of both technological innovation as well as cost from Chinese players. Second, not being able to generate return on investments made in the last several years due to weaker than originally anticipated demand for EV and slower adoption of autonomy levels. The OEMs in U.S. and EU continue to be under pressure to produce vehicles with advanced ADAS features powered by multimodal sensors including vision, lidar and radar based systems to improve safety and autonomy in order to compete with their counterparts. But given the cost pressure and macroeconomic climate, OEMs are expecting downstream lidar suppliers to, A, bear the cost in the initial years even when the volumes are low at the start of the production, and secondly have diversified revenue streams from non-automotive to sustain the company during the multiyear ramp up phase for automotive OEMs. This is primarily the reason why lidar companies are under pressure from investors and markets, especially lidar companies that have announced nomination wins or serial production awards from OEMs. The current business challenge for all lidar players is to accept low volume, low revenue projects from auto customers in the near-term and tap into other industries for the revenue needed to sustain these initial years to emerge as one of the few standing lidar companies. We believe that some of our peers have untenable capital structure as well as unsustainable business models coupled with excessive OpEx run rate of over 300 million a year. There’s a huge demand for lidar in the second half of this decade, which is being driven by the global competition and marketplace. However, only a few companies who are fiscally…

Thank you. [Operator Instructions] And our first question is from Andres Sheppard from Cantor Fitzgerald. Andres, your line is live. Please go ahead.

Hey guys, this is Anand on for Andres. Thanks for taking our questions and congrats on the quarter. I was wondering, is there maybe some sort of timeline you might be able to give us on an OEM win? I know this was talked about, and is there something we could think about maybe for the second half of this year, or is there something for next year? I mean, none of us have a good foresight into this, but any color would help?

I think – thank you for the question. And if I was to just go by what the OEM shared with us, it’s a second half decision. But as I said, right. We’re cautiously optimistic because as you know, their launch cycles are in SOP, startup production in 2028, so delays could happen. And so far there’s lots of things changing within the OEM themselves and their strategies, and most of the delays are not related to us. So we’re hopeful and cautious about what they’re saying and that’s what we’re sharing that second half of this year is what they have indicated.

Gotcha. And I guess with respect to the seven RFQs, are there any of them that you wanted to highlight that you’re excited about? Or if there’s something that you could potentially highlight to investors as a catalyst for the company, maybe this year or early next year?

I think the, what I find interesting is all of them, first of all, are for passenger vehicles. If I think about seven of them. Right, are we, would I say that there are two or four of them that we covered? Yes, it’s the ones that have the highest volume and where the integration gives MAVIN, which has got the lowest profile, the biggest advantage. So of course, those we care about. So if you’re going to spend this much and you have to wait four more years for big revenues, they should be big enough. That’s great. Out of the seven, some of them are for models that are smaller. They have to integrate in a headlamp and it’s kind of like a small volume part of it, so they’re all equal. I think we want to win all of them, but there’s certain of them that are high volume that, of course, we put a lot of effort into.

Gotcha. Gotcha. Appreciate the color. And I guess switching gears may be a question for Anubhav a little bit on liquidity. I think you had on your presentation about $60 million in cash and you’ve got the ATM as well. I was wondering how you’re thinking about your cash burn in your runway for the next, for the rest of the year.

Yes. Thanks, Anand. So the way I think the reductions that we did in the second quarter are actually very strategic because they have brought down our OpEx. And as I mentioned right now, our run rate OpEx, including R&D and SG&A, is between $55 million and $60 million. So as it is, we already have a year worth of cash and obviously we have the ATM on top of that to tap into accordingly as the market opportunity presents itself. So we feel pretty comfortable in terms of having the resources to meet our capital needs for the next 12 months to 18 months.

Got you. Sounds good. That’s very helpful. Appreciate the color. Congrats again, on the quarter. That’s it for me. I’m happy to pass it on.

Thanks, Anand.

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

Thanks, Tom. All right, so the first question is, I’m a newish investor and started following the company and lidar space only recently, a few years ago. I’m still confused by what everybody says about the 905 nanometer products versus the 1550 nanometer. Help me understand why you’re going to win and I should stay invested in the stock.

I’ll take that one. Thank you for the question. It’s actually a very, very good question about the right time to talk about it because a lot of things are coming to a head. So just a little bit of context, just you’re newish in this space, or perhaps you’ve done this research, but I’m just going to repeat it for some that may not. So if you think about this whole purpose of 905 nanometer, 1550 nanometer, what benefits in one versus the other? Depending on the audience, they’ll say different things. But here are the facts. The only automotive lidar that a shift in volume was by Valeo SCALA Everybody knows this. SCALA 1 was done by the Ibeo guys here in Hamburg, and SCALA 2 was follow on by them. It’s the only thing that shipped in volume, let’s be clear about that. That’s 905 nanometer fully qualified with a laser that the automotive customers know. They know the cost structure, they know the performance, they know everything about it. What they care about is the steering mechanism, which is where we come with MEMS, where we can do a wide field of view and far in the low resolution, whereas others spin a piece of glass called a prism. Right? 1550 nanometer certainly can do a lot. You can do a continuous wave lidar with that. You can get a velocity, you can do a time of flight lidar with that, like somebody else does. Right. And there are other reasons to do it because they want to have higher sensitivity on the detector, but the overall system is much more expensive. So if you think about, structure that we have, the architecture that we have with our 905 nanometer laser and our MEMS and electronics,…

Thanks, Sumit. Let’s take a second question. So I understand that no deals with OEMs have been announced, unlike some of the competition. I am a believer in the company and management and trust that they walked away from some deals as they were not high volume. I also understand the focus to bring in near term revenue from the industrial markets. What has the management done since April 1, 2024 to increase the adoption of lidar? How can I evaluate the progress that’s being made in this direction?

I’ll take that. That’s a good question, and I’ll answer it in two sections. One is going to be, of course, our industrial space. The other is going to be on the automotive side. So on the industrial space, what we’ve done – we’ve been doing consistently, right, but since you’re saying April 1, we’re focusing on key accounts, meaning that we’ve identified a market segment. We know the top people in there, in that space, I would say that represents 70% of the market share for their product in that space. And we’re engaged with them directly. So we aggressively work with them on key strategic accounts. So instead of thinking about industrial sales and selling like 1Z, 2Z [ph] here and there, like some other of our competitors do, that requires a huge OpEx. We’re focusing our treasure on our engineers and a very small, effective sales team that targets these key customers. And for them, we are customizing our products, so to speak, with the software to demonstrate to them how we can really solve the problem. So we’re not really selling them a lidar. We’re selling them a solution. And software discussions. I can tell you this because I’ve been to all the key customers myself with my team. They are pretty deep into it, right? What really compels them to move forward is the software. Imagine you are in a heavy industry space where you have humans operating machines that can hurt other humans, slow speeds moving around, and volumes in the annual range of something – somewhere between 10,000 to 30,000, if you can imagine, because they would be able to put them into new products going forward, but also retrofit it to other equipment they’ve sold over the years, because some of their…

Thanks, Sumit. Next question is seeing the Hesai news this week has us started to feel worried. Hesai is announcing new design wins with GM, Ford and prominent European automotive brand and announcing that it has secured design wins at 18 OEMs and tier-1 suppliers globally, covering approximately 70 vehicle models as of Q1. The company also holds mass production agreements with six of the top 10 Fortune 500 automakers. We know that Sumit has never said that he is targeting the Chinese market, but it leaves us concerned as to what the future holds for MicroVision if we do not get a similar announcement. Let me take this question and give you a financial perspective of this. I think we have seen Chinese lidar companies clocking almost over $250 million in annual revenue, selling over 220,000 lidars every year. Yet the U.S. markets and the investors do not give them any credit. They are trading just barely over their cash value, which I think is a very important testament and a telling sign that the U.S. markets and investors do not have the confidence or the comfort in their business model. And remember, this is not the first time that this has happened. This is a very important area because governments are getting involved and all the U.S. and EU, OEMs are in the middle of it. As recently as a few days ago, the U.S. Commerce Department came out with an article to propose to bar Chinese software in autonomous vehicles in the U.S. Now that is a very significant shift for everybody who had been using Chinese lidar in the U.S. and EU so far. So data privacy is very clearly a very important concern. And I feel that this is why there’s going to be a barrier between the U.S. and Chinese where obviously we cannot go sell in China and the Chinese lidar players will not be able to be successful in the U.S. markets. Just given the transparency and given where the political climate is. Now, having said all that, I think it is becoming beyond clear doubt that there is a lidar market here in the U.S. and EU and that demand can only be fulfilled by American lidar companies which are headquartered in the U.S. Let me take the next question. I understand that the company is trying to capture market share in the industrial space where ouster is deeply entrenched. How does MicroVision plan to capture market share?

Let me take that. All right. I think if you think about the industrial space, I think you have to cast your vision bigger. There’s a much bigger market than one lidar company whose revenues people follow. And I think I mentioned name today, if you think about – if you really want to understand the market, think about SICK AG, that one company by itself is the majority of the lidar market in the industrial space. They sell a line sensor, right? And effectively, it’s not a 3D sensor. It’s like, effectively 2D sensor. And one version’s got four lines and then maybe an eight line version. Whereas our smallest product that we make right now are MOVIA L. It’s got like 80 lines, and a MAVIN product has got, like 500 lines. So these are vertical lines of scans. So you can imagine the amount of resolution we can get. So in the MOVIA sensor, MOVIA L sensor is ready now. But the real differentiator is, if you think about an integrator, somebody in the industrial space, they get a lidar, but what do they do with it? They have to write a bunch of code for the point cloud to enable them. In the case of SICK, they have these zone detection that they can give them warning, and the vehicle has to take some action. That’s not real perception. That’s just some zones just trickling off, red, yellow, green, light. But what we can do is we can provide them all the software to the level where we can actually instruct these heavy industrial vehicles to stop or to slow down or to. For example, if two of them are going, the one in front is carrying a heavier load and is moving slower, the one…

Thanks, Sumit. Thank you. Sorry, Next question. We do have a question from the dial in line right now from Kevin Garrigan of WestPark Capital. Kevin, your line is live. Please go ahead.

Yes, hi, all. Thanks for letting me ask a couple questions. I hopped on late, so I apologize if you may have answered some of these already. But we’ve started to see robotaxis or L4 vehicles kind of make a comeback over the last few months. I’d say you have Tesla talking about it. You had Uber making their fleet. The seven RFQs that you’re in, are any of those for L4, or are they all kind of geared more towards L2+ and L3?

All the RFQs we’re in are for L3 and L2+.

Okay, perfect. And then, Sumit, you kind of answered this a little bit on as part of the last question, but I know you’re not looking to go into the Chinese market, but just with the recent talks of the U.S. looking to ban Chinese automotive software, have you seen an increase in engagements with Chinese OEMs where they’re looking to just use all non-Chinese suppliers for the European or U.S. markets?

I’m not really sure I can definitively or with authority say that, right. I mean, you hear things, right, but I don’t think it’s probably appropriate for me to just talk about some rumor that I’ve heard from someplace, right. What I can clearly tell you is I’ve been to OEMs, multiple OEMs and they’ve said that these are OEMs in U.S. and Europe. They’ve clearly said that their management decision is that moving forward, they’re not going to entertain any Chinese supply chain, even in your lidar. So they want to know, yes, great that you’re an American-German company, but what key components are where they’re coming from. They want to know your value chain. So it’s to the point where we cannot even use some of the key components that go inside our lidar to come from the Chinese supply chain. So I know that doesn’t answer your question, but I’m telling you the gravity of what is happening right now in this space where EV cars and the fully ADAS and autonomy for the future, these are seeing as key technological areas that European Union and American companies, they want to own, North American OEMs want to own. And China’s got this own firewall that they have created for themselves, right. So that’s probably the better way to answer that question.

Yes. Got it. Got it. Okay. That makes sense. Thank you.

Thanks, Kevin. The next question is, I’ve been a long-term shareholder in the company, and all I’ve heard is from the management that our products are best in class, and yet there have been no deals that have been announced. I’ve also heard the management point out the shortcomings of other lidar players. I don’t want to hear about other players. I want to understand how MicroVision will win. Help me become a believer.

I’ll take that. I think that’s a fair question, to be honest with you. That’s a very fair question. I’m a shareholder in the company also, by the way, right. And not just the shares that Anubhav and Drew, right. Not just the shares of the company that signed me as part of my employment, but I’m a shareholder in the company. So that’s a great question. I clearly am a believer. So let me convince you why you need to be a believer. I think before you can pick upon a winner, like where you want to put your money, think about the space, think about what’s happening. There’s clearly, like, if governments are getting involved, if lidar companies are not the source information, but the OEMs are, that tells you there’s a market that’s developing that’s going to be around for decades because there’s some sort of major transformation, major disruption is happening in transportation, right. So if you think about disruption, the industry is about to get disrupted and it’s been trying to get itself disrupted for five years and it’s going to take another five years, I guess, right. But it’s big enough that there is just a lot of people involved where governments are involved now, right? So that’s, believe it or not, good news that tells you there’s an opportunity here. And the opportunity is that the current players, which is a typical tier-1s, they do not have a leg up on anything. So the true value of their shares is, already to where it is, this new space as it breaks up, where new revenues will come in and there’ll be great opportunity to sell software with higher margin is becoming open. So that’s to keep in mind there’s a market segment opening…

And Sumit, if I can add one more thing, because I think, and while we talk about our peers, I don’t think we’re trying to slam our peers or I think we’re just trying to point out the obvious. Because talking about the peers is an important aspect, because none of the lidar companies have in the U.S. have steady state revenues. And I think it’s very important what Sumit described, to have a business model that is sustainable and a capital structure that is tenable. Right? How can a company burn through $80 million in a quarter with about, a revenue that doesn’t even match up? And again, they talk about the gaps, the gross profits widening next quarter. That tells you that this is a cash guzzling business. And I think that’s why the markets will be penalizing them. And I think the reason why I’m bringing this up is because all it’s saying to us is, the market will decimate companies which are not being thoughtful. And I think the whole idea is if you are being careful, if you are being prudent, you are going to be one of the few guys who would be able to capture this demand, because the demand clearly exists out here. And I think that’s the reason why we’re trying to not slam, but point out the very obvious facts about the business model. And I think it’s not about us tooting our horn, but really pointing out what else exists out there in the market and how a smart investor will look at investing in a lidar company. Let’s take the next question. How many FTEs are on staff and what are they primarily spending their time doing? Specifically, we have program managers, salespeople, operations people, engineers who are…

Okay. Yes. Thank you for the question. I think I expected that this one. So listen, I think we are committed to the company. I think, think about our board. It’s not like we just award ourselves. This is an independent board, independent comp committee. They reviewed it. I mean, I’m encouraged that they believe that we are the right people to actually take the ship all the way through the tough storms and to some safe harbors. And I think we’re very thankful that they acknowledged that it was important to have some retention value in the company. Look, we’re not, having equity in the company. We’re always, all of us giving cash. So I know, like everybody believes us as shareholders always believe that. Well, what? Why? Why, right. But having equity in the company actually motivates people because there’s a reason to build more and that’s what we’re going to continue doing. So but keep in mind that, this is our board and our comp committee evaluating the situation and realizing the team that they want to go forward with because they engage with us day to day. Right. They engage with us every month and every quarter and they know what’s going on within the company, how we’re performing, all the things we’re going through to make sure that we make the right choices at the right time and not miss a single beat. So I think, certainly want to thank them for acknowledging our contribution to the date.

Thanks, Sumit. Do you have any comments about the recent buyout of Cepton by Koito? And do you think more companies will consolidate directly under Tier-1s versus partnering?

I think that was a very unique one. I think that was kind of accounts a long time ago. I think where they’ve ended up, I think we’ll just see in the future where Koito is able to deliver a product and how prominent they are. But I think in my experience, and I think I started off in my prepared remarks, of course, I talked about one Tier-1 that lost nearly a $0.25 billion [ph]. So you can imagine they have no desire to do anything. I know for a fact when we’ve spoken to them, they said there’s no appetite in the company. Any VP brings this up is going to get fired. Okay. So all Tier-1s are going through. Like, if you just read in the U.S .and in Germany what the Tier-1s are doing. Right. Even in Japan, actually, there’s like, they’re shutting down programs, and for the first time in decades, right, they have something like 17,000 people getting laid off in some of these companies that have hundreds of thousand employees. So they’re going through a transformation as well. Their business is going to change as the ICE engine age extends, but still, a portion of it becomes into EV towards the end of the decade. So ICE engineers have been wrong for a long time, but we all know that. But the business model is changing. So is there going to be opportunities for things like that? I mean, who knows, right? Anybody that’s got capital, if they see a big market and they are a believer and the share price is right, why not right? Our job is to execute on everything we say, create value. And if the share price reflects that, and if there’s a premium on that in the market, great. And that’s what most investors believe in, is what the company is doing, what the management is doing, and what evidence they’re showing. But you can imagine if somebody believes that long term, there’s bigger value than what the share price represents. That could happen at any time. Right? So is it Tier-1? Is it somebody else? We’re a public company, right? So as you can imagine, that’s always on the table.

Thanks, Sumit. The next question, to be brutally honest, the takeaways on the last call were that management didn’t understand the business environment, questionably put all eggs in one basket, and now lacks leverage after losing that OEM deal. Ask yourself, how can we square these issues with investors? And our share price has been greatly impacted by these actions.

Yes, I’ll take that one. So I was very intimate in that deal, right? So and I think I always get lots of private notes of encouragement from some of you, but also, that you were not so excited about the tone at the last call and how we talked about it, right? So let’s just talk about it, clarity. If we had enough cash balance, if we had alternative revenues, everything was done. Everything was fine. We were Anubhav and I were involved in this since November. It was all about the financial longevity of the company. This is the truth. Right. So I think it’s a fair question. Right. But I think there’s some context missing, because it was not that we were caught flat footed. It’s not that we were not engaged that the judgment was impaired, because something that starts, that can transform the company, right? Was not just me by myself, with a couple of people involved. The board was involved, everybody was involved. Everybody knew what was going on. But at some point, if somebody keeps moving the goalpost, and the goalpost is, we have very good standing with them. That’s a. I mean, we think highly of them, they think highly of us. I think it’s all good. But it did not make the deal, did not make sense where we would have all the risks. And I, if on their side, there were software delays in development, years could be added to the program. We’ll be sitting there idle with all this investment, making all this money, and no reputation coming in. So I’m not sure who posted this question, but I’m sure some of the investors on the call today remember the April 2017 contract. Imagine that contract. But even with…

Thanks, Sumit. I’ll take one last question. Will MicroVision provide additional videos and press releases, updates outside of quarterly results conference calls? It would be nice if these were provided up to date information and reassured between quarterly calls that we are on the right path in the future. If this was happening. Being kept in the dark doesn’t help one bit. Let me take this question, and I think, again, this is not an attempt to slam others because. But I think context has to be important here. I think we are trying to establish, how do we run a traditional company where the company is communicated on a regular cadence with the markets and informing the markets about wins, contracts and awards that are significant to the company’s future. I think we all agree that we are gone past beyond those days where people are posting selfies, people are posting trivial updates. And I think it’s reflective in the stock prices. People can have giant mega media events and maybe that’s what’s leading up to the $80 million cash fund, which is, again it’s again, going back to the discipline. Right. Because if you don’t use the cash judiciously, clearly that’s not going to help. And clearly that’s what the markets are dictating or telling all the lidar companies that none of these publicity stunts are going to get you anything. So I think that’s why it’s important to understand the context of why we’re being, we are setting the record for how, and I think you probably have heard Sumit and I talk about that we had predicted this long ago that the markets will be L2 and L3 and not full autonomy long ago. Right. And I think we have been really right about forecasting where…

Thank you, everyone.

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