Microvision Inc 0 Earnings Call

Welcome back, everyone. Next, we have MicroVision, Inc. It trades on the NASDAQ under the symbol MVIS. It's defining the next generation of lidar-based perception solutions for automotive, industrial, and security and defense markets by delivering integrated hardware and software solutions designed for real-world performance, automotive-grade reliability, and economic scalability. Happy to welcome CEO Glen DeVos and Interim CFO Steve Herendich. Nice to see you gentlemen on the conference. We're happy to hear your story.

Very good. Well, first of all, great to be here and appreciate the time. Why don't we get right into the material?

Perfect. I'll skip over the safe harbor statements, I assume everybody will read those, and really get right into the discussion around Lidar 2.0 and what we mean by that.

Lidar has been around since the early '60s. It's been used in a number of applications for many years now, but really starting in about that 2012, 2013 timeframe, as automated driving came up, we saw a very strong growth and interest in lidar. During this period, really what we call Lidar 1.0 was all about hardware. It was the best performance possible. It was very expensive. The basic thinking was the technology would unlock so many amazing use cases, mainly around automated driving, that it would just be adopted and that volume would then drive the cost of the lidar down.

The result was very fragile revenue for those early contracts, heavy burn rates for the companies, and quite honestly, not as sustainable or really a good outcome for the market over the last roughly 10 years. As we think about Lidar 2.0, this is where we're moving from that providing and proving technology to proving value. What I mean by that is really focusing in on lidar bringing the right performance for those specific use cases, a very strong focus on designing for cost, using software differently and basically as a differentiator, and then the whole philosophy here for MicroVision is that cost drives adoption. That is the key link between mass adoption and the technology is cost.

Supporting that discipline execution, diversification of revenue streams for lidar providers being tied to one market or one industry only simply doesn't provide that diversified or resilient revenue stream. As I think about the actions that we've taken, it's really looking at our business through a couple different lenses. The first is, as I mentioned earlier, is making sure that we deliver the right performance at the right price. Being able to bring to our end markets solutions that are performance and cost optimized. It means having the right portfolio so that you can bring the right technologies into those. MicroVision, we've been building out that portfolio to be able to offer everything from short range to ultra-long range, solid state to scanning, 940 nanometer to 1,550.

It allows us to make sure that our solutions are tailored to the end customer application. Open software as a lever. What I mean by that is historically, sensors or these components that go into complex software architectures are typically black boxes. We want to open that up so that the system developers have access to the software in the sensor, access to the processing, which is essentially compute on the edge. Basically through our acquisitions, accelerating revenue across those 3 end markets. That's been our focus. How is that materialized? Well, when we talk about the right portfolio, we now have, with the completion of the acquisitions of Scantinel Photonics, Ibeo 3 years ago, Scantinel here at the end of the year, Luminar here at the beginning of the year.

We have the complete portfolio across all short range, long range, as well as ultra-long range. In addition to the 905 and 940 nanometer to 1,550, Time-of-Flight to frequency-modulated continuous-wave. What does this give us? It gives us the ability to bring the right technology to the end market and to the end customer application. Supporting that is a full stack software solution from the point cloud to perception. Everything from simply providing a point cloud to being able to build functions, what we call lidar collision avoidance systems on top of that. The tool chain for our end customers to be able to integrate it seamlessly into their environments and into their architectures.

Ultimately the open software framework, which enables them not just to understand how our software is working and integrated to their software stacks, but to actually put software into our products and to be able to really optimize their system architectures. Why is that so important for us? This portfolio then unlocks those new end markets and the revenue streams from them. When we think about where lidar can be applied, industrial security and defense, and automotive, these are the markets that we're targeting. Industrial being off-road and material handling, as well as industrial automation. Now a very high growth market, in particular with Physical AI architectures, is robotics, both humanoid as well as robotics operating in close proximity to humans, where very good three-dimensional mapping is required.

Security and Defense, where you're looking at intelligent transportation systems or security and monitoring of installations as well as defense, is another very high growth area, especially as you see the move within defense towards drones and surface-based autonomy, both for terrestrial or ground-based vehicles as well as naval. These are applications that need 3D mapping, need advanced perception, and detection. Finally, automotive, which is really the market that accelerated the expansion of LiDAR and the interest in LiDAR, but is the slowest developing. When we think about automotive for us, that's pass cars, that's also robotaxis as well as trucking and commercial vehicles on highway. Those are markets that ultimately we believe are the largest TAM, but also have the longest lead time to cash, quite frankly.

While we play in automotive and we stay connected, we know that industrial Security and Defense give us near-term opportunities for revenue while automotive develops. We look at those, this is why that end market revenue diversity is so important. We picked three end markets that we believe have very good growth, each independently with counter-cyclicality. What I mean by that is as you think about Security and Defense, it moves at a different pace than, say, auto does, or a different cycle than auto does. As auto slows down, which is what we're seeing right now, Security and Defense is picking up. As industrial goes through its phases or its cycles, you see a different cycle occurring in those other markets. You're not riding up and down on one end market cycle. You have that end market diversity.

As we build customers across all three end markets, it's critical that that gives us revenue resiliency, and basically a top line that we can continue to grow as each individual market would cycle. Where does that leave MicroVision? Where we are today is we've guided to $10 million-$15 million revenue for 2026, and I'll talk a little bit more about that revenue composition shortly. We're doing that with a very efficient burn rate. If you think about our cash consumption, we're sitting at about $60 million for the year, and we're going to manage that burn rate as we continue to grow revenue so that we accelerate our time to positive cash, and we control our structural costs very carefully as that revenue grows. Let me talk just a little bit about revenue.

As we think about 2026 revenue, MicroVision has a history over its 30 years of having what I would call fairly lumpy revenue. Peaks and valleys and, in general, really not sustainable revenue that grows year over year. Where are we as we look at 2027? As I mentioned, our guidance today is $10-$15 for 2026. IRIS revenue, which is IRIS is the product that we acquired through the Luminar acquisition, is about 70% of that with 12 customers. When we acquired Luminar, they had about 30 different customer engagements. We're now converting those customers over to long-term revenue streams. That process, which began back in February, has continued, and one by one, we're converting those customers over. MOVIA L and S, these are the products that MicroVision has developed pre-Luminar acquisition and pre-Scantinel acquisition.

That'll be about 20%, the big thing here is the MOVIA S launch, which occurs in October of this year. That driving about 10% of that revenue, and more importantly, over 25 customer engagements with that product in pre-production evaluation and proof of concept. Very excited about that product and what it will bring for us in the fourth quarter of 2026, really growing in 2027. Ongoing engineering service revenue. We just announced here yesterday the MicroVision Semiconductor Inc. That's what's driving the bulk of that, is about 13%. A consistent year-over-year generator. What's critical with that revenue mix is this is all revenue that grows. It's not a one-and-done customer or a spot buy. These are contracts that continue into 2027, 2028 with growth in the outer years.

As we go into the second half, we can build out that backlog and talk more about what 2027, 2028 revenue looks like. What's very exciting is the pipeline. When I joined MicroVision about a little over a year ago, I think we had about, I would say, a handful of meaningful customer engagements. As we look at it today, and we just announced this morning our new Chief Commercial Officer, James Byam, we have over 100 meaningful customer opportunities where we're either in proof of concepts, in RFQ stage, or evaluations with that customer, and it's across all three of our end markets. As I mentioned, industrial is moving the fastest. The broadest number of customers there, security and defense coming right behind it. Automotive, we're staying very much engaged with that. MOVIA is a brilliant product for robo taxis and those types of applications.

Ultimately, it's security and defense and industrial that have the near-term opportunities, and it represents, across these three, about a half a billion dollar in booking opportunities for us. All of which as well, will drive top line growth, delivering 35%-40% gross margin. As we think about our business and we think about, well, where are we in 2026, it really is a transformative year for us. We've significantly updated the portfolio. That portfolio is now delivering and developing commercial traction. Revenue growth now occurring in 2026, leading into 2027. Managing our cash very carefully as we build working capital and CapEx for that unit production growth, always maintaining that gross margin. With that, I'll wrap up and turn it over to Q&A.

Actually, Glen, let me just add one comment to that.

Sure. As you saw our metrics that we have, what we did in May of this year in our Q1 earnings call, we updated two of our three metrics.

We kept our revenue consistent with $10 million-$15 million. Our cash use in operations plus CapEx, our previous guidance was $65 million-$70 million, and we updated that to approximately $60 million, primarily due to our integration as well as our synergy cost reduction actions that we've taken. Our gross margin, we were previously at a positive. We are now updated to 35%-40%. Again, we've been aggressively negotiating our supply agreements, we're optimizing all of our sensor sales mix to ensure we're getting a higher mix of our higher priced customers.

Perfect. Thank you for that, both gentlemen. Let's jump in with some questions. We have a question from Todd Roth. In the Lidar 2.0 strategy, how does your product portfolio set you up to win in the automotive, industrial, and security and defense sectors you are targeting?

In a couple key ways. The first is the breadth of the portfolio. We're not a single technology that we're trying to sell across or a one size fits all solution. We have a very broad technology, really one of the broadest in the industry, that allows us to tailor those solutions. For example, in industrial, where you really need more near field, sub 30 meter, wide field of view, and you really want solid state, low power solutions, MOVIA S is a great fit for that. It's 180 by 135 solid state solution that essentially comes in at a fraction of the cost of today's electromechanical spinning lidar. Again, a tailored solution for that market that really meets the customer needs at the right price point.

As opposed to that, if you think about unmanned ground vehicles for defense, they really want 1550 nanometer lidar, longer scanning, longer range. That's where IRIS and HALO come in. They meet those requirements just perfectly. In each case, we can bring the right solution to that market. That broader portfolio, that ability to tailor the solution, combined with our focus on bringing costs down, is I think a really critical differentiator for us.

Perfect. A question from our viewer, Mark O'Brien. Over the next 12 to 18 months, talk about what specific milestones investors should be watching out for, and what that would signal transition from development stage engagements to recurring revenue.

Yeah, it's really going to be around two things, developments, if you will. You're starting to see that now with the Luminar, the previously Luminar contracts. We kind of went from POs in Q2 to now supply agreements or master development agreements that are, you know the mining equipment provider that launches end of next year. It's those types of announcements that we'll continue to make throughout the balance of the year that talk about that conversion from kind of initial engagement to evaluation, to POs or master development agreements to production. In addition to that, you'll see reseller agreements where we'll start pushing out through the reseller channels. Finally, more on just making progress with the product. We have progress made, introduction of new products, and associated revenues.

Perfect. Glen as well, sorry for interrupt.

Just to add, we have our product that we bought from Scantinel, which is the FMCW technology. We're looking to get our A sample out sometime around mid-next year, which we will have the opportunity to introduce to our customers.

Thank you for that. David Huhn wants you to address, based on the three sectors you're focused on, where do you anticipate the strongest commercial traction coming from now and into the future?

Yeah. The three sectors. Industrial is I would say the fastest moving right now. That's mainly driven by Industrial's been using lidar for a long time, and warehouse automation continues to grow. Industrial ADAS, a new growth area within that segment. What's really becoming interesting is the push in Physical AI-based robotics. That we're seeing just a massive push and a really strong growth opportunity there. Coming in kind of right behind that is security and defense. This is more driven by the expansion in defense. We're shipping today to UGV providers for Europe, so in the Ukraine. Just the whole robotization and the move towards autonomy within defense, both for drones and terrestrial and surface vehicles, is just accelerating.

lidar is a very important sensor as part of that, both from a drone and a mapping standpoint, but also from a surface vehicle standpoint or a naval vessel standpoint, being able to map the area around it for collision avoidance, obstacle detection, and navigation. Automotive is kind of coming up behind all of that. Automotive is just going to take time, whether it's robotaxis, which it's great to see the progress on those pilots, but they still are relatively low volume. Pascar, outside of China, is going to be a slow growth area. Commercial vehicle automation will take time and will be a slow ramp. That's kind of the third, but the biggest market.

Xander Sosa says, "With your strategic direction, how are you different? Better poised for greater success now versus your competitors?

Yeah. It gets back to the comments I made earlier, which is, one, the portfolio. Being able to really tailor the right solution to the end application and being able to deliver that quickly to our customers. The second is our use in software. What I mean by that is if you think about lidar, and you look at how lidar has been talked about within our industry, it's very hardware-centric. It's all about, hey, more beams, more scanning, I can do more and more in the hardware. The reality is, if you really want to drive costs down, you need to shift to a software-centric design approach. This is what we did with radar. It's what has been done with cameras, where you are using software to gain performance with lower-cost hardware. Radar today for automotive is a great example of that.

Our whole approach to our sensors is very software-centric, both in terms of the software and the sensor model. The basic, how you develop the point cloud, how you develop the perception stack, but also in terms of the open software framework for the integration of our product into the systems themselves, which is very different than what you're seeing for the rest of the market. I can tell you, the feedback on that from our customers is absolutely fantastic because it gives them, as the systems integrator, the ability to really optimize their system and use the processing either in our sensors or just fully integrate the software across their whole stack. It's a completely different way of thinking about a sensor or a component as part of a system architecture. That software centricity, I think, is really critical.

The third is, as a U.S. and a German company, that puts us in a very good position to support U.S., in particular European, defense and security applications where they really want local, and they want U.S. and European suppliers for that. It is another advantage that we have in supporting those markets.

Excuse me, Colin asks, "With the recent announcements of engagements with J.A. Green and IDI Laser, how does this fit in with your forward-going strategy?

Yeah. Great question. A little bit different. Those are two very different companies in terms of the markets they serve. IDI Laser really going more into the industrial space, the reality is the industrial market is highly fragmented market, massive market. Many customers out there. We're not trying to stand up a complete sales operation to deal or to try to address those customers. We want to work through capable and qualified resellers that give us access to that customer base, but without us having to build up a whole sales operation to do that. IDI Laser is a great example of a company that can do that for us, a great partner, and you'll be seeing more of that.

That accelerates our access to those markets for components like MOVIA S, where our customers can adopt it, they can integrate it and use it. J.A. Green, on the other hand, kind of similar in the sense that it's a move for us to attack that market, but that's U.S. defense, where there's many participants, but it's a very different procurement and a very different sales environment, if you will, than the industrial space. J.A. Green has that knowledge of that market, understands those procurement cycles and how it works, and can help guide us and ensure that we're pursuing the opportunities that both make sense for us as well as we know we can transact. Both are good examples of where MicroVision is leveraging existing capability in our targeted end markets to accelerate our business.

Albert says you've described software as a key enabler in your strategy. How does software drive your vision to commercial success?

That's really an important question because when you think about a sensor, in particular lidar, to drive cost of that sensor down, again, cost driving mass adoption, there's very clear steps that you go. The typical starting point is an electromechanical assembly that has a lot of hardware content, and you're solving the perception problem in hardware. You move through these steps, solid state, you move from electromechanical to solid state. We're seeing that with the short-range sensors. You move to a more software-defined sensor and ultimately, getting on wafer scale processes and software enablement. For us, software is a key to simplify the hardware design. It just basically, you solve every problem you can in software versus hardware. That's just a design approach that's very different. Historically, you see the industry focused on hardware.

The problem is, when you solve something in hardware, you pay for it every single time you produce a unit. When you solve it in software, you pay for it once. Our approach is very software sensor at the sensor model and at the perception stack level. That allows us to lower the cost of the hardware and simplify the hardware. The other piece of it, as we mentioned, is the open software framework, which is a very different way for our customers to be able to engage with our product and integrate it into their architectures. It enables our customers to basically optimize system performance at the system level, but also lower their total system cost. Additional benefit of using MicroVision.

That's why we see software as such a critical element to the product, but also to our relationships with the customer.

Last question, I believe due to time, from Chris, how do you see the TAMs of the three sectors you're focusing on, and what does that mean for your future revenue projections?

Yeah, the TAMs on each one, if you think about the slide that we were showing, these are very high growth, high CAGR TAMs, and that's why we picked these three end markets, industrial and auto and security and defense. Each can support a very robust revenue stream for the business. Ultimately, we want the growth that we're seeing in these TAMs. We're seeing it grow from just under $10 billion in 2028 over to over $40 billion by 2035. Very robust CAGRs for each of them independently. I think security and defense, quite frankly, will actually surprise us with the huge push into drones and autonomous vehicles. Each of these then can support the business and our growth plans.

That was really the key factor, is we wanted diversity of revenue, but we wanted TAMs that actually had very good growth, and then as we grow with the TAM, as well as take market share, that gives us the revenue stream that we're looking for.

Well, thank you, Steve. Thank you, Glen. We appreciate your time and presentation with us, we would love to have you back on the conference again real soon.

All right. Thank you. Thank you, Anna. Very nice to be with you today. Bye-bye. All right, everyone. Thank you.