Good day. And welcome to the MicroVision Fourth Quarter and Full Year 2022 Financial Operating Results and Conference Call. [Operator Instructions]. At the end of today's presentation, there will be an opportunity to ask questions via a chat 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, MJ. I am pleased to be joined today by 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 will hear in today's discussion will include forward-looking statements, including, but not limited to, statements regarding our acquisition synergies, product development and performance, comparisons to our competitors, market opportunity, product sales and future demand, business and strategic opportunities, customer and partner engagement, projections of future operations and financial results, availability of funds, as well as statements containing words like potential, believe, expect, plans, 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 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 conference call will be available for audio replay on the Investor Relations section of our website at www.microvision.com. Now, I’d like to turn the call over to our CEO, Sumit Sharma. Sumit?

Thank you, Drew. Welcome everyone to this review of our 2022 fourth quarter and full year results. 2022 was an exciting and eventful year for MicroVision, and I expect 2023 to be an even more pivotal year in our journey. I would like to update you on three areas. First, our product portfolio. Second, our momentum for partnerships and revenue. And third, our competitive outlook. First, let's dive into our product portfolio for 2023. 2022 was the most important year in MicroVision's history. With relentless execution, our team matured our MAVIN product to align to automotive OEM expectations for high volume RFQs happening in 2023. We also executed on our strategy to become a full spectrum ADAS solutions company by joining forces with Ibeo automotive and acquiring assets. The combination of MAVIN and our balance sheet puts the combined company in the best position to help realize the true potential of the Ibeo team. Let me start with MAVIN update. For long range LiDAR, MAVIN meet and exceed OEM expectations for seamless roofline integration for high-speed highway pilot. Nobody is offering a mature product with the size, performance or cost. We challenge MAVIN best-in-class status period. Let's just put any speculation to rest. Roofline integration is the dominant requirement across RFQ for long range LiDAR for 2023. While our competition is starting these design cycles to deliver on size, cost and performance, we are ready with the product now that goes to production over the next several years. Programs announced by competitors years ago are still not shipping either from their own factories or their tier one partners in any meaningful volumes. As I look at the RFQ in-flight across Europe, North America and Asia, we are engaged in multiple RFI, RFQ opportunities, with outlook for more than 20 million…

Thanks, Sumit. 2022 has indeed been a transformational year for us. Not only did we take a giant leap forward with the launch of MAVIN for our customers last year, but we also announced the combination with Ibeo. This deal further positions as well to become one of the most experienced LiDAR hardware and software companies in the market. I'm pleased to report that we achieved all the milestones we had laid out in 2022. Also, we continue to show tremendous financial discipline as a mature public company in Q4 2022 net cash used in operating activities of only 8.4 million. This equates to an annualized net cash used in operating activities of under 34 million on a run rate basis, which is slightly better than our guidance of 40 million. As a mature public company, we will continue to differentiate ourselves from our competitors through financial discipline, transparency, and guiding to metrics that we believe are realistic and achievable. Before we talk about full year '22 financial results in a bit more detail. I would like to discuss how the Ibeo acquisition significantly accelerates our trajectory and transforms our roadmap into the future with new products and access to new customers. Based on our current suite of products and visibility, we will be providing our financial outlook for one year out that is 2023. Additionally, I will be providing several details and inputs to help investors quantify the impact of the Ibeo acquisition and model the business through the end of this decade. The Ibeo acquisition is indeed an inflection point for MicroVision. Our teams worked around the clock to close the acquisition much sooner than our expectations. We are very pleased and excited about the 250 employees in Hamburg and Detroit, who became a part of our 100-plus…

Thank you, Anubhav. At this time, we are conducting a question-and-answer session. [Operator Instructions]. Our first question today comes from Andres Sheppard of Cantor Fitzgerald.

Hi, good afternoon, guys. Congrats on the quarter. And thanks for taking our question. Anubhav maybe you can just remind us again on your capital needs for the future, with the 83 million in liquidity currently, when do you anticipate needing additional capital? Thank you.

Thanks, Andres. So based on our current operating forecasts, we think that we are well-funded through the middle of next year. Obviously, as you can imagine, the cash burn expected this year, there's 52 million, 55 million in 2023. And we are expecting incoming revenue of 10 million to 15 million. So that puts us in a very good position. And one thing, I would like to say is obviously our cash burn, employee metric, continues to remain one of the best in the industry. So we feel our financial discipline is positions as well from a balance sheet strength standpoint.

Got it. Thanks, Anubhav. That's very helpful. And maybe just walk us through your plans to ramp up in 2024. Is that still the case? And do you see kind of those revenues gradually improving over time? Or just maybe any visibility, there will be helpful? Thank you.

Yes. So 2024 is, we're actually very excited about it. Because we expect the growth from the auto-annotation software, which as I talked about, is going to be a high margin or high contribution margin revenue stream that we expect to increase or improve in 2024. Primarily, because as OEMs need, or try out more sensors, they need the software to validate the ground truth data against those sensors. So we expect 2024 to be even higher growth in terms of the revenue mix coming from this auto annotation software. Now the second stream is which I talked about was the sale of the sensors to the non-automotive markets, which we seem to be picking up steam from as well in 2023, and 2024, as the market expands, because that just gives us another revenue stream in 2024. Obviously, this stream is not going to be the recurring revenue, because this is in the spot sales or direct sales, which is similar to some of the non-automotive LiDAR business models that I think we all are familiar with. But this will certainly add more momentum and add more cash flow to the company between this year and next year as we ramp up that production. Now, the other thing to note there is, we already have a production line. So that obviously helps us to ramp faster as the demand for some of these products grow in this year and next from that standpoint. The last stream of revenue, which I think, Sumit also describe for this year, and next year is going to be from the MAVIN sample sales and the one-box solution, which we expect to happen in 2023 and 2024, coupled with some NRE revenue from the OEMs as well. So these are the three streams to think about between 2023 and 2024, which we expect to be even stronger year than 2023 based on where things stand today.

Got it. Thanks, Anubhav. And maybe just one last question maybe for Sumit. Can you give us an update on potential partnerships with OEMs? Any updates there and when do you expect you might have a partnership materialized? Thank you.

I think as I iterated through the entire call, right, 2023 is a year of convergence. I think they're all settled in, most of them have settled in and all the products that are going to need, the RFQ cycles are ongoing. Where do we end up converge, I think it'd be pretty hard to say like, we're going to sign by this date that would be impossible like that, I'll give an example. There was something specific like nothing big right with an OEM for the auto-annotation software, they were expected to close for this call. And for reasons because of some of the bureaucracy within the company, that delayed, that's something that I feel confident sharing that it's going to happen, but you can't nail down the time. They control the momentum, let's be honest. But I feel very, very confident that for them to get, if you look at the schedules, the multiple schedules I've looked at, they have a launch schedule, and you work backwards from them. The launch schedules are set all the way out, they need industrialization by this day, so on and so forth. Those decisions have to get made in 2023. And these are big decisions with big volume. So, the look is extensive, but I feel very, very confident that 2023 is going to be a conversion path. And the fortunate thing is, we have a LiDAR that's ready. We showed it at IAA in Munich, two years ago, the product has -- the housings have changed, but pretty much have stayed consistent with the hardware ready for a while, evaluations have happened, the theme, the software running, they've seen, things pretty much everything has gone to the technology checklist. And now comes the commercialization part of it. So, I feel pretty, pretty confident where our competitors are just starting off doing design and showing CAD images. We have products that they've had, that they've reviewed multiple times. And so, I feel pretty confident in 2023, Andres.

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

Thanks, MJ. So as we look to the questions, so I think the first question is Sumit, can you please provide a succinct definition of drive by wire, why is a drive by wire demo important to prospective OEMs and is the drive by wire demo relevant to the 2023 RFQ process.

The drive by wire demo, let's just talk about the terminology, okay? So if you want to think about you need a special license, you can't do these demos on an open road. That's number one. So if you do them in a closed track, because you're demonstrating something, and all the safety requirements have to be taken care of within a closed track. But there's some specific scenarios that are very heavily action prone for humans, like a unprotected left turn or small object detection, like a biker has fallen on the road at nighttime. These kind of scenarios are pretty well known. And they're very, very difficult to test in autonomous ADAS level three kind of phase. So forget about ADAS like autonomous driving, think more about it as in, can the car actually detect that obstacle, know what it is and avoid it. We use terms like driver not drivable, but it has to make a decision what to do. All right. Now try to do that at 130 kilometers per hour, but 80 miles -- over 80 miles an hour. So drive by wire, what you do is, you still have a driver in the seat, but the control of the vehicle is given to the computer and the scenario is put in front of it. And different variations of scenario will have to be done. And then you have to avoid it, you can't just like drive through 15 times and 14 times you hit it and one time you don't make it, show the world that video, if you're really going to do it, it's got to work. And that's really what it is right? The word drive by wire really implies that you're sitting there, the driver is -- there's a train driver…

Thank you, Sumit. The next question is, what are the steps forward with Ibeo specific customers and their conducts?

Okay, I guess I'll take that. I think with -- when the insolvency was announced last year, of course, as you can imagine, has a very dramatic effect on the entire group of people that were engaged. I think it was a surprise to employees. But I'm actually certainly it was also a surprise to the market, because the partners that were there. So once we have announced, of course, we've got to do everything to stabilize the core team, try to give assurances to everybody, right. But our intention, of course, is to try to pick up as much of that as possible. I think if you're alluding towards, some of the contracts they have signed in the past, of course, we are in the process, already engaged with talking to those folks to try to resurrect it as a new company. And that's why I think, Anubhav speaks with confidence about our growth path from the revenue we're talking about this year. As part of the asset sale, after purchase, of course, all those things are now part of like what we have acquired. So I think they had great connection with OEMs. I think we had started off with our connection with OEMs in 2019. And I think combining the two things together, and of course, putting an experienced team together and expanding it further. I think we're going to have great connections with global OEMs.

I know and yes, that's right, Sumit. And obviously, what I would like to add to that is, obviously with Ibeo's operations in the Detroit area also gives us more strength and momentum in both OEMs across both sides of the Atlantic. So we're very excited about the future. The next question is, so you have just added more engineers? And is this going to have an impact on the cash burn? I'll take that question. So yes, so this will be adding cash burn to our run rate of standalone MicroVision, which I just described was 8.4 million per quarter on a run rate basis. Now, if you carefully observe the 2023 estimate, what it tells you is the net cash burn is expected to be 50 million to 55 million, which is the net cash out the door, which includes the cash that's going to be coming in from the revenue stream. So if you truly observe, the total cash burn has not gone up as significantly as some of our other peers, which are again, burning $200 million a year, as an example. Our cash burn per employees still remains one of the best in the industry. And obviously, that's why we feel very comfortable that we're well funded into the middle of next year. And any OEM programs or the customization that Sumit described, obviously, we would be looking for the OEMs from the revenue streams, et cetera, to fund those development programs. Hence, that's why I feel very comfortable with our balance sheet position. And the new cost structure of the company, which in my mind is very scalable, because obviously to have a 350-engineer team, or 350 employees across U.S. and Germany gives us a very good chance to even scale up in the event of RFQ wins and design wins. And which obviously, we can always build from on top of here. And unlike our peers, which -- where the cash burn is significantly at a much higher level where it stands today. The next question is actually regarding Luminar's recent announcements. Do you have any views around the new product launch from Luminar today and what does a 300-meter ranging facility best in the planet even mean?

Look, to be honest, right, I have not looked at it in depth. I just had a little bit before this call. Here's my impression. First of all, like the 300-meter I think, our teams working together, demonstrated that 300 meters was -- our LiDAR without any changes, but that addition to the software the improvements, was able to do. An indoor facility, I think that's just money. When you drive it out in the real life, there's lots of things, lots of corner cases that happen. So, it could allude to anything, I think this is a question better for them. Like, why this such a big thing that has to be -- file a K for this, but not for anything else. And that's kind of interesting to me personally. But it's just a test facility, right? I mean, we can create one of those, but there's no need for that. Because when you get to those kind of distances, you want to be driving, you want to be moving around, you want to see the noise, you want to see how many multiple times you have to drive on the same scene. And they need validation software, right? We sell validation software. We drive around and we create validation data, and we really understand what's happening in every scene and what could be improved. So I'm not really sure I take that, that there's any huge benefit one company has over the other. That's for them to explain. The brief thing that I saw about them, I think, great, the announcement they made, and [indiscernible], look forward to some real filing with the SEC, so everybody can know what it is. The product, I think a lot of people have asked me a question already like about the product that they have announced today. And, again, brief review that I did of it. And all I saw was CAD, we've been showing products with the cover off for a while, and supply chain reviews. And we've launched wafers, and we're much further along. So I'm not really sure that -- more data is needed. And I think it's for them to describe to the market and to their investors and analysts. And I think it'd be inappropriate for me to comment beyond just as an engineer saying, cool. That's really cool CAD.

Thank you, Sumit. The next question is also related to that. How does Luminar AI engine compared to MicroVision? And what's the competition there?

I've gotten this question before, several times. I don't know what that product is. I don't know any details about it. But I can describe to you what our strategy is, what makes sense and what I believe is ultimately going to win. If you could actually put these perception algorithms, and these are classical algorithm, not AI-based algorithms, into the ASIC running on DSP, running without no huge amounts of GPU power, the chip would be cheaper, and it would actually have all the KPIs that the owners are looking for. One of the main reasons why I was so charmed by when I met the Ibeo team, is because they had done the same exact work, the same premise and they have arrived at the same point. They're demonstrating KPIs to the OEM levels, that the OEMs are also -- there's pretty much to the limit what the OEMs want. So effectively, their software for the ideal sensor has already optimized to level that was pretty phenomenal. You add MAVIN to it, it of course, now goes to much longer range, it is going to have the KPIs. So as it sits, all those features that you talked about for perception, they have the highest KPIs with a combination to company. But the real magic happens when you can put that perception feature into the ASIC, if the cheapest version of is going to be there. If customer A, if one OEM says, what, I just want the LiDAR and my team wants to produce -- we want to own the perception software, no problem, Chip A, one version of chip A they can get and they can go on their way, that's perfectly fine. But there's definitely OEMs that always want their perception development teams perhaps are not that further along, then, of course, you can offer them software and the LiDAR from a different variant on the same chip. Okay? That's actually really powerful. Because from the LiDAR, now you're getting object level. I mean, you're getting perception, this is really, really incredibly important. And the only way you do that is because they've already found the classical algorithms that can go inside the chip. This is really, really powerful. This is -- once this adoption happens, imagine for 15 years, you're making the same exact product, because nobody's going to ever switch because once that's qualified, it's going to, just keep turning the crank. So this is incredibly powerful. You will not require a significant amount of software every year for every model year for qualification. So the long-term trajectory of expenses for OEMs would go down. And this is something that they had developed. And this was one of the primary reasons that I felt that the team in Hamburg is somebody that we have to join forces with.

Thank you, Sumit. We're now out of time. We really appreciate your participation in our fourth quarter earnings calls and your continued support of MicroVision. Thank you.

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