MicroVision, Inc. (MVIS) Q3 2023 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the MicroVision Third Quarter 2023 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. [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, Matthew. I'm 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 customer and partner engagement, product development and performance, comparisons to our competitors, market opportunity and program volume, 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 potential, believe, expect, plan, and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on 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 Web site 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 Web site at www.microvision.com. Now, I would like to turn the call over to our CEO, Sumit Sharma. Sumit?

Thank you, Drew, and welcome everyone to this review of our third quarter 2023 results. I'm excited to be presenting today, and will provide color on progress made on our 2023 objectives of securing multiple nominations for our LiDAR products. I will keep my update concise to allow for more time for questions today. I'm happy to report that we remain on course on our main 2023 objective of securing multiple designs wins with nominations from OEMs. We remain the only LiDAR company that offers multiple technology nodes, with highest resolutions, smallest form factor LiDAR with our MEMS-based long-range MAVIN, as well as small form factor short-range sequential flash-based MOVIA LiDAR product lines. We continue developing our revenue streams from strategic and other channels, and I'm satisfied with the progress so far. The biggest opportunity for the company remains in strategic partnerships with automotive OEMs for our LiDAR products. Establishing a predictable level of direct sales from non-automotive customers is also very important for all LiDAR companies to be successful. I would like to start by updating you on our progress on multiple opportunities for LiDAR nominations, target launch timelines, and the magnitude of deals we're looking at. Our teams remain engaged with multiple OEMs looking to identify their next LiDAR partner for expanded ADAS safety for their passenger vehicles and commercial trucking product lines to be nominated in 2023, and be ready for start of production as early as 2027. The combined lifetime volume of all the programs up for nomination in 2023 are for millions of units with their cumulative revenues of between $1.2 billion and $950 million over the life of production. We believe these first nominations would have a lifetime of up to seven years, with multiple passenger vehicles models added incrementally to their fleet. These are predominantly for vehicles with internal combustion engine powertrains. Based on these engagements, we remain confident in the timeline to sustainable revenues from strategic sales opportunities. In addition to the current nomination cycle that we work diligently to close, we are starting to see additional opportunities for 2024 nominations, with a new potential list of OEMs. These new opportunities would require limited modifications for additional customers that would be covered by NREs in potential future projects. This is an important step since this allows us to establish stable product lines that will address multiple OEMs with shared core developments costs, instead of individual projects for OEMs. We remain very excited about where we are in the nomination process. And I've mentioned before, after a successful OEM design win, we expect two phases for each engagement. In the first phase, we expect to customize our core technology to the specifics for the OEMs needed under the development agreement while maintaining our investments in core engineering. In the second phase, we expect to supply parts as their ADAS tier 1 with our contract manufacturing partner under a master supply agreement with the OEM. As I mentioned before, the continued strength of our balance sheet and capability to fund operations until the start of production is a requirement in all possible nominations. Management has articulated this to our investors and the broader market, as you may recall. I would like to repeat what I mentioned at our last earnings call. I believe we are well-positioned for this item, being a publicly traded company on the NASDAQ exchange, with no debt, control over expenses, and a clear understanding of how to grow proportionally to meet the needs of multiple potential customers. We are also confident in our long-term product outlook that will continue fueling customer engagements. In our product strategy, to focus on LiDAR products, with embedded perception software is the right strategy for the LiDAR product lines. We are seeing this in our current and new engagements. With this strategy, we provide a stable hardware and software product to our potential customers with object-level interface possible at the lowest power and smallest form factor. Our embedded perception software will do the heavy lifting and enable our OEM customer software. This will potentially offer system cost reductions to our customers, and an opportunity to reduce other sensors like radar and camera modules. I also see us making progress in establishing realistic foundations and key target customers for our direct sales. Our objective is to build a sustainable business. Unlike others in the market that are conducting direct sales at low single-digit gross margins, we are focusing on target customers in the industrial space that see value in the LiDAR product. Partnerships with low single-digit gross margins are not the right product strategy since expenses are not even covered. We see an opportunity for our industrial segment to focus on factory and warehouse automation, as well as fuel qualified safety sensors in the future. Our focus is building sustainable and profitable revenues, while controlling our burn rate and finding a path to sustainable business as soon as possible. I want to conclude by thanking our global team for their hard work that has allowed us to be well-positioned for an incredible year ahead. We continue working hard to push across finish lines on our primary objective of securing long-term sustainable revenues. I would like to now turn the call over to Anubhav to talk about our financials. Anubhav?

Thanks, Sumit. Before I dive into the Q3 results, let me first discuss what our first few potential RFQ wins could look like and how they might impact our financial results, especially in 2024 and soon after. We expect any near-term RFQ wins to translate into the following two revenue streams. Number one, NRE or non-recurring engineering revenue from OEM related to the customization of our sensors. This revenue would likely be payable upon us hitting agreed milestones. Number two, revenue related to the sales of LiDAR sensors as the volumes ramp up at possibly multiple locations in EU and Asia from the customers in line with their expected production schedule. Later in 2024, we would work towards potentially securing additional customers for similar products with minimal customization to achieve economies of scale. In this case, the LiDAR sensor, once it achieves maturity and has gone through the PPAP process, we would then be scaling similar products with multiple customers. Now let's talk about modeling the expenses. With design wins, we would expect our revenue mix to include both NRE revenue and serial production revenue from OEMs at a blended gross margin of 30% to 40%. We think all successful LiDAR companies will trend towards this blended rate as OEM volumes ramp and economies of scale begin to be achieved. We believe we are well-positioned to be a successful LiDAR business and on our way to achieve these goals. Upon reaching this point, we would plan to further improve gross margins by offering our perception software to OEM customers along with our hardware. Now let's talk about production. From a business model standpoint, we have always stated that partnering with an established contract manufacturing partner will be most capital efficient and importantly will be required by OEMs. As we navigate the final rounds of RFQs with OEMs, customary visits and quality audits at production facilities have been important for customer confidence. In our experience, OEMs want to see multiple manufacturing locations around the globe, including in the EU, Asia and North America. Of course, key points in our RFQ negotiations center on the allocation of liability and product warranties. In terms of operating expenses, including R&D, MicroVision has a meaningful strategic advantage when it comes to quickly and efficiently scaling up operations. Scaling operations with multiple customer wins will not require us to add proportional headcount to our engineering teams. We do not believe that we will need to add more hardware engineers as we expect to just need more dedicated Project Managers along with quality and operations team to manage multiple relationships as we increase volumes and enjoy the resulting economies of scale. We have the ability to add such resources at OEMs preferred locations in North America and Germany. We see no need to double or triple headcount to support potential revenue growth. That said, in the event of increasing volumes, we would anticipate the need to continue to add software engineers to work alongside our dedicated hardware engineering team to advance our product roadmap. The resulting economies of scale would be expected to add significantly more revenue with limited addition to R&D expense, thereby translating into faster growing operating profits. Our customers and potential partners appreciate MicroVision's strong and deep IP portfolio with the industry experience, financial discipline of managing expenses, and technical knowledge, all of which are key differentiators for us. I think both Sumit and I covered strategic sales in quite a bit of detail. Let me now talk about our focus on direct sales as well, which will be over and above the strategic sales. These direct sales channels include the sale of MOVIA to non-automotive customers and MOSAIK software to automotive customers. While revenue from direct sales is not necessarily recurring, the associated revenue stream tends to have shorter sales cycle as compared to strategic sales that have longer sales cycles. In the near term, we expect the revenue contribution from the direct sales channel to be meaningful and drive high contribution margins, especially in the initial few quarters. In fact, in this third quarter alone, we saw adjusted growth margins of 80%. While we're expecting revenue from direct sales to have consistent growth year-over-year in the near to midterm, potential revenue from strategic sales would be significantly higher than direct sales revenue once OEM serial production volumes have ramped up. Now let's dive into our Q3 results and discuss them in more detail. For the third quarter, we recorded revenue of a million dollars. As we have previously indicated, revenue in 2023 and for a good part of 2024 will primarily come from the sale of software and MOVIA sensors to non-automotive customers. The majority of this third quarter, revenue is related to our MOSAIK software product and is from a leading OEM. We expect continued momentum in revenue in the fourth quarter and expect sequential growth to hit our updated 2023 revenue targets of $6.5 million to $8 million. Now this revenue is slightly below our previously announced range of $10 million to $15 million. The reduction in our revenue expectations is primarily related to direct sales with some revenue opportunities appearing to have moved into 2024. In connection with the integration with Ibeo, we have tightened our forecasting processes with some smaller legacy Ibeo customers to better estimate their sales cycle and predict revenue from the sale of hardware and software. Since these are smaller dollar opportunities, we're beginning to have better visibility into the sales funnel as we integrate the two companies, bringing together our sales force and co-leasing them around common platforms and processes. To further support momentum in direct sales, we also placed an order to build new MOVIA inventory with ZF Autocruise to help satisfy demand from non-automotive customers and drive revenue in 2024 and beyond. We expect this strategic investment in building our inventory to drive revenue growth in near term and beyond. Coming back to this quarter, the split of this quarter's revenue is 80% software and about 20% hardware. The growth margin profile this quarter resembles that of a typical software business, as demonstrated by an 80% growth margin, primarily by MOSAIK. While we expect these high growth margin to continue in the following few quarters, we expect the blended growth margins to normalize as the revenue scales up and mix changes to more strategic sales including NREs. Expenses; in terms of expenses, we had approximately $24 million of R&D and SG&A, which includes $4.7 million of non-cash stock-based compensation and $2.1 million of non-cash depreciation and amortization. For the second quarter, $20.4 million cash was used in operating activities, which included a $3.1 million payment to build up the MOVIA inventory to support the near-term momentum in direct sales. Removing these one-time items, our cash burn for the quarter is around $17 million, which is in line with previously communicated expectations. To remind our investors, we continue to show financial discipline with our cash burn being within our expectations and on a healthy trajectory. As expected, CapEx in the second quarter of 2023 was $0.5 million, in line with our expectations. Now let's talk about our balance sheet. As of September 30, 2023, we have made most of the payments associated with the Ibeo acquisition. A liability of €2.7 million remains on our balance sheet as the final expected payment relating to this acquisition. We expect to pay this amount to the seller later this year once we and Ibeo reconcile and agree to the amounts. Our total liquidity was $78 million as of September 30, including cash and cash equivalents. We have one of the cleanest capital structures amongst our peers. In these times of uncertainty and weaker macroeconomic conditions, MicroVision stood out and beat competitors in terms of maintaining one of the lowest cash burn rates in the industry with a highly talented age pool of engineers in both, the U.S. and Germany, and strong balance sheet. We have a $35 million ATM on file to strategically raise capital as and when needed. To date, we have only raised approximately $4 million under this facility, that leaves about $31 million available on this ATM facility. Both these facts are indicators of financial stability to our potential customers and important attributes in the due diligence reviews conducted by OEMs as part of the RFQ processes. The ability to strategically and opportunistically raise money via ATM positions, MicroVision very favorably as compared to our peers, some of which have had to resort to structured finance transactions to raise capital at significant discounts to their stock price. We believe that with our current cash on hand and our ATM facility we're well-situated to deliver to the OEMs. Based on our current operating plan, we anticipate that we have sufficient cash and liquidity to fund our operations through at least the end of 2024. As described earlier, with the relationship between revenue and operating expenses that we have modeled out, we expect to see reduced need for additional capital as the company grows and focuses on achieving economies of scale. To summarize, we're really excited about 2024, and beyond. With our first commercial wins within reach and key focus on winning nominations, we're strongly marching towards proving to the market our value proposition as a unique well-positioned LiDAR company in large and growing automotive and non-automotive markets. With this, operator, I would now like you to open the line for questions.

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] Your first question is coming from Andres Sheppard. Your line is live.

Let's move to the next question, please.

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

Thank you, Matthew. I guess the first question we're getting is why are you confident that MicroVision will secure an automotive development in Q4, 2023?

Yes, I think that's a good question. I think the process, everybody that would be in, right, by this time has been informed if they're in the last phases of it, because now you're in the middle of the commercial discussion. So, typically the process is you go through the technical engagement early, the alignment happens. It continues, right, but at some point technically you're aligned, you have solutions, they have seen samples, they have seen simulation data, all that work is done. So, technical work, the dominant part is done. You've given them your binding offers, several rounds that have happened. And at this phase, getting to the final phase is when they go line item by line item, understanding the viability to the company, but also really are they getting a fair deal. And the discussions are deep, as you can imagine, for the magnitude of the contracts we should be. And these are binding offers for those per the time. So, it's pretty detailed. And the non-engagement, visiting factories, coming and seeing our quality processes, all these kind of things take a lot of resources for OEMs, so they are very selective of who is in the final round. There is no certification or other things on it, and then there's lots of other terms that people are introducing, right? There's no certification, those things are -- you're already qualified as a supplier, they do quality reviews of you, and you just get down to the money, right? How much is it going to be for NRE, what's custom versus what's core, what they believe is fair, what we believe is there. So, as you get this deep you kind of know when you are in the deal, you're negotiating the final items. So, confidence comes from that, exactly where in the process. Anubhav, do want to add something?

Yes, and if can just add on the financial side, obviously financial due diligence is one of the key criteria that the OEMs are undergoing. And this requires building detailed financial models of how will we support them in cases of multiple RFQ wins. And I think what's required from our side is to lay out a detailed plan of where will the resources be located and how will the production and operations team work in tandem with the engineering team to ensure that the production and the supply chains are secured and intact, because that's something that they cannot absolutely falter on. So, just by the nature of the financial due diligence, I also feel very good about where we stand in the RFQ process with these customers. All right, moving on to the next question, what gives MicroVision confidence that they will secure a design win as it seems like most LiDAR companies have all been saying the same thing about capturing a design win. And if previous LiDAR companies already have wins, are they better positioned to win future contracts?

Yes, I think I'll take this one. And that's a good question. Yes, all the LiDAR companies are looking for viability, somebody is going to win it, and is going to win a lot, right? But let's take a step back, and before you get into this question about where there's some incumbents out there, how do you position yourself. Let me just make it clear, somebody recently asked me the same thing in kind of a more casual environment, and this is the answer that you have to think about. Before there was the iPhone, there was Nokia and Blackberry. Do you even hear about those companies anymore? So, the right product will always win, okay? And you don't have to believe me of what the right product is. If you're a consumer and you have ever bought a car, you know what the right product is. Is it going to be low power, it's going to not increase the cost of the car by thousands of dollars, it's going to give you the safety, the technology blends away and makes the vehicle more secure. What we do know from all these companies saying something, so there is all these OEMs out there looking for a LiDAR solution, that LiDAR is a product that they need, so technology that they need to achieve what the goals they have, and their production starts in 2027; they will take many years to qualify. But the choices that they're making now are going to last for a very long period of time, so they value it very deeply, all right. If the incumbents had such a big advantage, right, it'd be all done. They should just announce it, and let's move on. But that's not the case. And I can clearly tell you, that is not the case, because you have technology solutions that people have out there, and they were early to market. But if you look at that as a product, it's too big, too bulky, too expensive. I mean if people are saying that they're going to drive up the price for customers to $1,000, and that's often go even higher, if you know anything about OEMs, and I know a little bit about it. I can tell you that is absolutely not going to land well, okay? They're all looking for an option where the technology can be delivered at something that's going to go to millions of units, and that's not going to be thousands of dollars in the vehicle, right? That level of value added takes a significant amount of compute power. So, I'm pretty confident in what we're saying. Clearly, it's not just we wake and we are saying, these things are vetted, everybody in the company is involved, the Board is involved, everybody looks at it. So, we're pretty confident in what we're saying. And I think folks that wonder about this, if you take a step back, and it's all playing out as you know. We're not backing away what we're saying. I have not seen anything come across that clearly says that decisions are getting delayed. For us, it is still on track. We have to deliver samples. If any kind of nomination happens, some of the samples have to get delivered in first-half of next year or early first-half. They have to make a decision as fast as possible because their launch timelines are not changing. And so we have a very detailed understanding of what are the steps involved to get them and get our technology qualified. And the engagement is pretty deep. So, I feel pretty comfortable that better technology is always going win, better products are always going to win. And it has to be small-size, low-power, cost-competitive, all of these things, and a secure company that they can trust is going to be around for the seven years of the contract to deliver on what they're about to sign. And if you think about the magnitude of the volume and the ASP, like the dollar value that I describe in today's call, these are big numbers. These are big numbers that take some serious consideration and discussion.

Thanks, Sumit. Let's move to the next question. It doesn't seem like the industrial market overall has been doing well for companies in general. I would love to get management outlook and how they view the industrial market over the next few quarters.

I think, I'll start with this and Anubhav, perhaps you can add a little bit more to this. The industrial market, as we looked at it, we have our guidance. The more we look at the market, I think there's something there. So, I still believe that direct sales is a tier of revenue that is very important for a LiDAR company. You need to work on this. You'll have to solve it. Any LiDAR company that does not have this is, not going to be able to stand on some legs in the future. OEM wins are there. Yes, you'll get NREs, but it does not cover your core engineering. Plus on top of that, you have significant long contracts that, once they materialize, there's going to be a ramp up period, okay? Direct sales are important because if you have actually developed something that goes into the OEM market like our MOVIA sensor, which is ready and you can start addressing sales there, you want to ramp it up and you want to actually make a dent into that market that's been stagnant. There's hundreds of millions of dollars' worth of revenue to be made there, right? But you also cannot have a product that you give away for free at single digit gross margins. So, as we look at it, right, I remain very confident about this thing. I think this is important. This has to be a substantial layer of revenue, year-by-year they can count on that you're saying, you're getting an install base outside automotive, right? So you have a multi-market strategy, but you can't be -- people should not be promising hundreds of millions dollars with the revenue because the growth in those market is slow but it's stable and predictable and you learn a lot more about your product and features if you're going to be a dominant player in this space, right? So I still believe that this is important thing and I think, yes, I think the numbers right now -- everybody's going to get on their earnings call and talk about the economic headwinds and all your things right and I know like investors kind of sometimes roll their eyes and they don't understand this right because they just want results. I just want results, all of us just want results but the reality is that industrial markets take a little bit longer. We have a great team. I trust the team, they have a plan, it's just a slow-moving behemoth, but there are ways to make significant revenues in that market and I'm excited about it. Anubhav?

Right. And I think one thing that I would like to specifically add to while pursuing revenue is obviously in the industrial markets is a strategy but I want to make sure our focus on gross margins is extremely important right, because I think we're out of the growth at all costs era where money was free and everybody was growing by just adding cost to the system and I think industrial markets is just exactly that pitfall and we have to very carefully trade it, what I mean by that is, I think what you saw in the Q3 margins as well. We want to pursue opportunity, which translates into a positive growth margin story because I don't think there is any value of transferring wealth from our investor to these direct sales customers where we have seen companies which did that and are doing that actually, who are focused on industrial market. Yes, they have very good revenues numbers, but again their margins are really either even in the negative [indiscernible] with them. So, I don't think that's something a business model that the markets and the investors will reward in the long run and I think this is pretty evident from just some of our peers who are focused on this market and their valuations because investors want companies to focus on growth that translate into growth margins and ultimately lead to a path to break even and I think as so much you mentioned it's really hard to achieve economies of scale because all these direct sales revenue are non-recurring in nature and you have to spend a lot to get the same quantum of revenue. So, meanwhile having that said, it is extremely important aspect because this is also something that the OEMs are looking at us because what it does is the focus on this revenue at good margins essentially alleviates the need for or reduces the need for additional capital to grow the business and I think that's sort of why what I mentioned the financial discipline is a very important attribute in some of these financial due diligence because like I mentioned as we are modeling out the next 5 to 7 years with these OEMs. This is also part of the revenue stream, which they understand is dropping to the bottom line as well.

Moving to the next question regarding LiDAR, what will OEMs deliver to excite people to buy a new car, is it safety to prevent collisions with cars and bicycles around the vehicle, save life injuries and prevent costs?

Yes, that's a very good question. I think, you have to think about, as you get a new vehicle in the future, whatever the powertrain is, I think most likely it's going to start with the internal combustion engine, because those are still dominant for a while. Passive safety and active safety is a very big part of it. So, certainly so many meters 15, 20 meters around the car having a safety cocoon, so you want to see 360 that can have, like, the MOVIA sensor, that goes around it. And, of course, also active safety and driving highway speed conditions. So, it's all about safety. The first entry to this market is going to be, I think, like, there's lots of articles recently that were published about that the first commercial applications are in trucking. Yes, they're going to make a lot of investments. They're going to go forward. But as you can imagine, penetrating the trucking market, with high volumes, right, is again, it's going to take a long period of time. It's a very, very conservative market. But, yes, it's sustainable revenues, sustainable volumes there. But passenger vehicles are significantly more, a number of them are launched every year. These OEMs are in a very competitive market with each other. Regardless of where the interest rates are, you have to be selling vehicles, right? And for them, they have to sell more value. You can't just buy another vehicle with seven more airbags and feel safe. There is a definite push to having more ADAS features that kind of blend away, that create this active and passive safety cocoon around the vehicle. So, yes, I do believe that safety is going to be a key differentiator for not just premium OEMs, all OEMs, as they look towards what are they offering their customers and how soon can they bring this technology from their premium segment to some of the other higher volume segments within their fleet.

Thanks, Sumit. And I think, I guess, a related question. What do you see on the regulatory side that maybe gives you more or less long-term optimism about LiDAR being just there as a safety piece of content required maybe one day for many, if not all cars? This is actually a good question. So, as you can see, OEMs are qualifying the new technology they ship, they take the liability, and they are able to, through the NCAP process, deliver right now. The regulatory part you're talking about is, if ever, there's a body of data that shows that cars that ship with these features were significantly more safe compared to everything else. At that time, regulation will move in and mandate, like they did back in the 90s, that every car has to have an airbag. Well, someday in the future, I expect that these ADAS features are going to be the dominant safety features. They will definitely deliver a huge amount of factors of safety to vehicles. And what everybody expects is that you're going to get a regulatory move towards sometime in the future, is that going to be in the next couple of years. Probably not. It could be the body of data. So, no, none of the LiDAR companies that have announced anything, right, have shipped anything in volume. They're just kind of cranking it up slowly, right? And they don't talk about any of their volumes yet. What we're doing is we're telling you that OEMs must have enough data to now start putting forward these next set of RFQs for 2023 that have these kind of volumes, but that is still only scratching the surface. I mean, 100 million vehicles, if you take away China, there's still a significant amount of vehicles that are shipping. To get penetrated into their fleet, that changeover is coming over pretty soon to start delivering that. And soon after that is of course, regulation will step in if you can see a significant advantage to safety. Thanks, Sumit. The next question is, what's the sequence with the automotive companies for an RFI? Is it RFI the first phase or RFQ the second? And what is sort of the -- if you could just walk us through the process of design winds?

Sure, sure. RFI is a phase where they solicit, they have a need, and they solicit a wide, CASA-wide net. They reach out to all the LiDAR companies that are known entities, and they give their requirements, some loose requirements, and they try to get where is your state-of-the-art technology right now? Where are you, right? What's your production capabilities? What's the maturity level? What's your liability? They want to know what product would you be proposing to that? Then typically from that, it would be a down select, but it would still be a handful of companies that get into the RFQ, the first-run RFQ. And then there is a deeper dive into the various concepts of your technology. They want to know how your technology works. They want to get in the middle of it. They want to see data. They want to understand all the different things. But they also want to disclose to you about what they want to do with it, what their unique needs are. We're not selling screws and glue, even not commodity products. How your customer is going to use your technology is slightly different every time. And we, of course, work with them to accommodate them. But that's where a huge amount of technical alignment starts happening. In parallel, of course, we start making some non-binding and binding, depending on the OEM, commercial proposals of really where we are going to be. From that phase of the RFQ, you go to another phase where they even down select even further. They do a even deeper dive. And then, of course, they get, you can go on forever, but essentially it starts converging down to like one or two companies, which is the last one. And you start, you have like binding offers and detailed understanding of what the thing is going to cost. And they want to know breakdowns and understand like, what the future would be if they were to pick you. So, and then after that is, they nominate somebody. And the good point that I see so far is that right now, for the volumes that we're talking about, they're looking for a sole supplier. So, they really want to understand the quality and manufacturing capabilities and partnerships, your supply chain, and understanding that how are you going to be able to, like if they pick a sole partner, how are you going to be able to supply the volume in all the regions that they may want to expand to in the future. So this entire thing has to be put together. It's not, you can imagine that the technical part is very detailed, but I would say the commercial package and the financial diligence is probably significantly more involved than even the technical. We are very fortunate, we have great engineers and they can walk people through, they can get the excitement, they have mastered what they've created. So, we can get the confidence in the technical side. But the commercial side, they need to believe that the company has a plan to be sustainable for a long period of time. We can get to start a production and beyond that. And what our strategy would remain to make sure that the prices we're giving you right now are affordable for them, but also it's sustainable for us. So, I think that that's kind of a general process, how you get to a nomination or a design plan.

Thanks, Sumit. I think the next question is probably on [indiscernible]. It's about what are OEM's most important requirements, including financial due diligence for these nominations? So, I think I touched based on this, but let me elaborate that. So, I think what OEMs are looking to do is extensively model how the business and the revenue streams will evolve in case of multiple wins over the next several years. And this also includes the direct sales channel that we talked about earlier. They want us to project the headcount by geography and the predictability into how the cost will fluctuate in terms of the volume ranges that they have given us. This also involves who will maintain the inventory and where will the locations be and how even the shipping will happen to the different production plants across the globe. Because as I discussed in my prepared remarks, we are required to have manufacturing capabilities or production facilities in Asia as well as to supply to the Asian business of these OEMs. And I think most importantly, modeling, how will the company be capitalizing and most importantly, lowering the cost of capital, right, because as you can imagine, as the company starts to generate traction, we will be reducing our cost of capital and moving on from equity to debt financing. And as the company generates cash flow, a lot of other options open. So, I think what the OEMs are looking for is a clear path as to how the company becomes a more traditional company as the entire LiDAR business and LiDAR industry becomes more mature and the companies move towards a traditional company with lower costs of capital than just equity. The next question is, are there any automotive requirements that only MicroVision can provide and none of the other competitors?

I think the way to think about it is that OEMs put together what they need. For example, this question actually comes up often, right, about the dynamic view LiDAR or let me just describe. For example, they'll give you a field of view and they'll give you regions of interest of what resolutions they want at what ranges. All right. So, if you think about it, what they're actually describing there's a dynamic view LiDAR, right. That's exactly how technology works. That to maintain these high resolutions and these narrow fields of view in flight, we accumulate all the data and we pump it out. So, from my vantage point, I'm going to look at a teardown of anybody, any of our competitors technology. I'm sure they've done ours as well. When I look what's inside, they're just running a static view. I mean, there are four channels or some number of channels that are pointing in different directions. Okay, statically taking in whatever noise that they have and the field of view is fixed. So, therefore the resolution, the far range is much harder for them to achieve. They have apertures. They have MEMS that are in the smaller aperture size, so they're not even able to reach those kind of ranges. So, everybody technically says the same thing, but if I look at it, from my vantage point, a lot of these things have been written with dynamic view LiDAR in mind. If you think about MOVIA, it's a 2D sensor, it's got -- it's a big cell and a spot array, known technology, but customized by our team in Hamburg to actually create something very unique about it, right, which gives a cost advantage long-term. So, it's what they want, but if I have to say it's one requirement, what is one requirement that they want somebody to provide? It's actually cost. It's something that is small and low power. You've got to meet it, right? So you can see the size of our product, we're talking about the SRL, we're talking about MOVIA, these are small, they'd be low power, with their ASICs in there, right? It's actually the cost. It's to say, are you scalable? Can you put a production line in that's not going to cost us $40 million, $50 million and you're trying to amortize that, right? It's a reasonable production line. They can go at high volumes at a very high quality and deliver that because no OEMs wants a product that is going to be $800 or $1,000 per unit and somebody trying to drive their price up, not getting to economy of scale. We are pricing it aggressively and the reason is because we can achieve economy of scales a lot easier because the products are truly running on a semiconductor active aligned, automated line. These kind of automations exist. So, that's like a core benefit we have. So, I would say if there is like a real advantage our technology has, all the specs, I can talk about it all day. I love it. But it's a real commercial proposal we're making. We can start hitting price targets that they have dreamt about and nobody has achieved them yet and we're going to do that at profitable gains for the company after so much R&D invested to get to this point. So, that's what I'm more excited about that. That is an automotive requirement, but it is really a commercial agreement that they feel like is sustainable.

Thanks, Sumit. I think this next one probably I should address is like, on the revenue guidance for Q4 2023, which markets and products will contribute the most and how much will be software versus hardware?

So, Q4 2023, we do expect a significant step up in revenue from Q3 levels to hit our range of $6.5 million to $8 million for the full-year 2023. And as I mentioned earlier, we expect this revenue to come from direct sales and this is the high contribution revenue primarily from software. So, we are expecting similar levels of gross profits as well, next quarter on these revenue as well. And I think maybe this is the right time to also talk about what 2024 could potentially look like. Obviously, we will be providing detailed guidance and details at our annual Q4 call next year. But 2024, as I had mentioned earlier, would be a combination of NRE from OEMs and also direct sales of MOSAIK and MOVIA to some of the non-automotive customers. And direct sales are shorter sales cycle revenue. And I think like I mentioned, we want to make sure the focus to increase the direct sales revenue channel is only done at high gross margins to help drive cash flow and reduce needs for additional capital as the company grows and focuses on achieving economies of scale on the strategic sales aspect of it. So, I almost think of this as a dance in tandem between direct and strategic sales, where direct sales are uplifting the strategic sales revenue channel for the company.

The next question is, do the current RFQs cover OEM's complete automobile offerings or are they limited to specific models? And along the same lines, are the OEM RFQs projected to cover multiple year models and do the RFQs tie the OEM to the selected LiDAR company for multiple years?

I think I'll answer the last one first. Any contract you sign, I think you come through an agreement, they're going to invest a lot of engineering on their time to get the product they need, get it qualified, will invest a lot of time. So, I think the way you think about, are they committed to us, are they committed to the contract? As long as you perform for the contract, you deliver that, you're going to be a great partner. And I believe where others may have failed in the past of delivering on time, that's not an issue with us because we have a high level of maturity. Certainly, that's a really big advantage that we have. As long as, is it going to go across, I think the question is, let me rephrase that, I think what I understand is, like, is it going to go across the entire fleet, right? I think the way to think about it is that you have multiple model years that they pick, they will have something that will introduce you, they have a marketing strategy that goes with it, but the volumes that you're talking about, right, that would be across multiple model lines, right? When you start getting to millions of units, it's going to be across multiple model lines. So, yes, I can say with absolute confidence that this will be across multiple model lines and depends on how they deliver the product, how they market it, what the uptake would be, because you're going to create this whole environment for them to be able to get access to that technology at a certain price point, they would have qualified it, it's like a qualified part, and it has to go into production for them. And you got to deliver on time, if they have a production timeline for 2027 they want you to be ready on a significant amount of time. You can't be the one that ever causes a delay. And if anybody did, that would be pretty bad. That would delay any kind of launches for an OEM, and that's very, very bad. But for us, I feel like that we're probably well positioned with our Tier 1 strategy, and of course the supply agreements we tend to sign with a contract manufacturer, that the OEMs have already looked at and qualified and feel very comfortable with. So, I feel confident that, once we are tied together, contract is still, it's a pretty significant commitment that we would make on their behalf, and of course they would have to make by picking us as a technology partner.

And we do have a question from Andres Sheppard. Andres Sheppard, your line is live. Mr. Andres Sheppard from Cantor Fitzgerald, your line is live.

I think Andres is having some trouble. Let's continue and let's see if he can get through somehow.

Right, I think the next question is from the outside, MicroVision's hiring and it can look promising and indicate a company ramping up, but without execution went in the third quarter, will this look fiscally irresponsible? Actually, let me take that question. Look, I think we think of this company, not just a quarter-to-quarter, but a long-term business, right? And to build a business, you need to have the right building blocks. And for that, not just engineering, we need to build our operations and our supply chain, which is absolutely very critical to these OEMs, as I mentioned, as part of their due diligence too. So, recently we brought on senior executives for building our operations and supply chain and product engineering capabilities as well, because these are very critical in any of these discussions with OEMs, because they help us lay out a complete roadmap from where we are today, and how do we scale the product in terms of the units, which are millions of units, as from the described. And to achieve that kind of pricing, which is sustainable, we need to have a very solid plan in place to be able to deliver those prices that we are offering to our potential customers, which will essentially help us get a competitive edge over the competition. So, yes, so I think that's sort of why the hiring, the recent hiring initiative that MicroVision have been focused on for the company. And like I mentioned, for scaling, it is going to be all about scaling similar products. So, that's when you achieve the economies of scale. So, at that point, we would not need to add more hardware engineers, but that would more be project managers, which will be dedicated resources, managing the particular OEM relationship that will be tasked with delivering that production schedule to make sure any recalls or any associated production nuance that the customer and we have to deal with are taken care of. So, that would be the growth in the headcount related to that. And then on top of that, obviously, the software engineering team as we integrate more software into our products down the road. All right. So, the next question is, at the Investor Day, you stated that all the in-flight RFQs required MicroVision's dynamic view LiDAR and capability, and no other vendor has that capability. If there's still an accurate statement, you said no one can catch us, and that will have multiple deals this year and refer to the potential take of 80% to 90% of the market share and wish the shorts good luck. Is there still an accurate statement?

Yes, it's sort of the accurate statement. Everybody's using some sort of spinning prism or a static, electrostatic mirror that you cannot change the field of view of the MEMS mirror dynamically or like galval. So, ultimately firing off multiple pulses with a slow moving mirror, you can only collect. So, if you think about this dynamic view at the resolution, the way to do it is the dynamic view LiDAR. So, that statement is still valid from everything I've seen so far.

All right, we still have yet to hear any LiDAR supply agreement from OEM. Our timeline still as management had imagined and some investors have lost faith in the LiDAR market has been quiet. And if no decisions are made before the end of 2023, that won't help the cause. Although obviously we know that there's not much LiDAR suppliers can do as it is up to the OEMs. So, any specific demand environment or delays that we're seeing?

Yes, I think like if you look at the margin or the contract, anybody would be entertaining at this point. These are big numbers. That would take some time. But they have to nominate somebody so we can start going by assigning resources because there are timelines. I mean, one of the things is, in the early part of the RFQ is they vet out, are you able to deliver to the timeline they need? And if not, it doesn't matter if you have the best technology, you're out. Okay. So, that's important to them. Now again, different people have different reactions to the 2027. But that's realistic. That's where OEMs are right now. Their software will take a while to develop, even though you're ready with your hardware. So, but again, those are not like significant like into the next decade or anything, right? They're all within contained within a typical OEM engagement for these kind of technologies to be incorporated into their vehicle, right. So, as you can imagine, that timelines, they have specific dates. They have to build their fleet. They have to collect data. We have to deliver reliability. They want to see a control build. They want reliability data. They want to see the fully automated line. This whole development is a multi-year development. And you want to not do it with thousands of engineers. You have to do it with concerted effort. So, I get it. I'm a shareholder. I mean, I bought shares in the company on my own as well. It can't go fast enough for all of us. And I get that. And I live it every day. And even if, like, nobody's applying pressure on me or anybody in the company can assure you I apply pressure on myself, and everybody in the company feels that anxiety, I get it. And I promise you, we get it. But OEMs are OEMs. I feel confident because the way things are moving, this is how people that are about to make big decisions talk. Nobody's going to get rushed, especially somebody is going to sign up for something big, my provision in our history has done some big contracts, right? But nothing is big. Never, ever anything is big as ever crossed us, right? And grab multiple of them simultaneously. This is a big moment for us. I want to make sure that we sign agreements that are sustainable, that they appreciate what we bring, and what risk they want us to take. And I think a term I like that Anubhav used, we don't want to transfer our wealth from our investors to our customers to win a project. And you can't just throw in your towels and just go home because they're asking for something tough. I just feel like very confident. We can talk to them. We can describe them in situations. We can show them the details. And they're getting a pretty good deal. Somebody that is actually going to give them a commercial proposal that says, you know what, I can give you in the hundreds of dollars. Here you go. But here's the economy of scale, I need from you. And if you don't achieve the economy of scale, here's what the price is going to be. And somebody could, and OEM could say, yes, I want a flat price from day one. Well, from day one, if the first year volume is low and I'm running negative gross margin, my investors are not going to be happy then, right? So we have to find a balanced approach. And what I can clearly say is they listen, they talk, they're engaged. They understand. They all understand because if the tables were turned, they acknowledge, right? Yes, I understand what you're putting together, right? And so it's like any deal. When you have big numbers involved, you got to go through it. I wish I could give you a lot more flair about it. And maybe that's going to get people understanding the process. But this is just a lot of money. And you got to have a cool head and just get through the process. You can't have any hyperbole to investors, to the market, to your employees, or to the customers.

We do have a question from Andres Sheppard from Cantor Fitzgerald. Andres, your line is live.

Hey, this is [Nathan] (ph) on for Andres. Can you hear me?

Yes, we can hear you.

Sweet, cool. Congrats on the quarter. And thanks for taking our question. So, I was just wondering if you could quickly walk us through what led to the revenue guidance revision and potentially related to that how long it would take for you to materialize a potential OEM contract? And with that what type of margins would you expect once that begins? Thank you.

Right. So, let me take that question. So, on and just to clarify the reduction in the revenue guidance from 10 to 15 to 6.5 to 8 was related to direct sales so if you'd recall we had talked about that this year it's going to be -- the revenue is going to be from MOSAIK and the sale of MOVIA and the reduction is primarily attributable to some of the customers where we saw the opportunities moving into 2024 and this is primarily related to just tightening our forecasting processes with some of these smaller legacy Ibeo customers to better estimate the sales cycle and predict revenue. Since these are smaller opportunities, we're now beginning to have better visibility into the sales funnel as we create the companies together. Now in terms of margin obviously, Q3 we delivered 80% adjusted growth profit margins, which is again in line with the software or high contribution margin that we had talked about, and we expect that to continue in the fourth quarter as well and obviously, in 2024 when we provide more detailed guidance, it will -- the adjusted gross profit margins would come down to become more normalized as we tend to get more NRE revenue from OEMs as well. So, hopefully, that answers your question about the guidance and how to model it going forward.

I appreciate it and I guess the second part of the question is how long would you say it would potentially take to materialize an OEM contract? And how would you characterize your progress on that front? Thank you.

Sumit, do you want to take that?

Yes, I think as I mentioned earlier in the call. I think, we stay on track towards our 2023 goals. So, at this point I think it's going to be in the transcript, right, pretty much we're in the deep phase of negotiation and of course the timelines for the different these projects have already been established and it's down to just the commercial agreement.

Got you. I appreciate it.

It's just as we mentioned in the past.

Cool. And I guess the very last question just switching gears a little bit to the non-automotive sector what type of demand would you be saying you're seeing in the MOVIA sensor for verticals such as agriculture robotics and these have a shorter sales cycle and we've asked this a few times and we were wondering how you're progressing with potentially securing partnerships with maybe trucking companies or related verticals?

I think I'm going to take this one. So, if you think about strategic sales, I think trucking let's put it over there in that strategic side, but if you think about just spot sales. If you have a segment or a market that does not see value in technology and they're thinking that about you're going to finance them with single-digit gross margins right. That's fine. Others, our competitors can't take over that business and drive themselves out of business, we're going to focus on the market within that segment is a segment that really appreciate the technology what it could do for them, right? And they understand that with high reliability, right? It's got the automotive great product that's already qualified. It could be a sales safety product, right, which has got a $100 million with the market with some people out in the world. These are real markets, right, where it's not a flash in the pan. We're choosing to focus on that because you can actually build a sustainable business a successful sustainable business leveraging what's already been created on the MOVIA platform. So, yes, I think as we look at our guidance of course it's always if you're downgrading anything right you never want to disappoint people but at some point you take a look at it and saying is it a sustainable path that if we enter a market some robotics somebody talks about a -- can we put it on some robotics that's running around a little, a humanoid robots are running around that's not a sustainable market and it's the only way they can make their market is by having us not make any profit on their behalf and transferring wealth from our investors to them. Yes, I think it's better off that we don't do it, especially in the current environment, economic environment the interest rates that high, it does not make the most sense for our investors. So, yes, we're focused on it but we're really looking at it turning every rock and understanding how is the business sustainable if you engage with them and we do want to grow right growth is important, you got to have growth to profitability, you can't have growth with negative growth smart you and somehow magically turn the corner on the economy of scale issue.

Got it. I appreciate the insight. Thanks again for taking our questions and congrats again on the quarter. We'll pass it on.

Thank you for joining today.

There are no further questions in the queue.

All right. So, I think before we move on to the next question, I just wanted to wrap up my comment on the demand environment. So, I think the way I think about this is LiDAR isn't a product or is a technology that is going to be needed and at the end of the day it's all about which company will be successful in building a business around a technology that is going to be ubiquitous and it's going to be around for a very long time just like the airbags work, so I think it's just about investors really trying to identify because I think look at the end of the day there won't be 15 LiDAR companies standing in this industry because obviously that's not -- that's not how any industry goes, so there will be consolidation but I think it's very important for any successful LiDAR companies to make sure they're building a business, which is sustainable with a cost structure that is scalable with a foundation that is easy to grow and not having to do the other way, which I think we have seen recently growth grew at all cost but we are way beyond past that era and it's time that all companies realize that the path to good growth margins and a path to breakeven for a new technology like this is extremely critical for any successful LiDAR company.

All right. So, next question, I think, we described in -- MicroVision as operating primarily at Tier 1, why is that? Is that something you intend to do across all customers and products and is it to have something to do with manufacturing at et cetera, is that accurate? And we want to make sure we understand the business model and why MicroVision has chosen that route. And will MicroVision provide the recipe and utilize existing manufacturing processes by other companies to build products?

Yes. We've raised quite a lot of money, including Ibeo, but MicroVision as well, to develop a great technology to get to this point. And that was done on the backs of our investors. Okay? The only way we can monetize that and amortize all that R&D, and of course show incredible input to the market that we create something really valuable is to sell something. You can't do that without a license. So, you would have no choice as to enter this space and become a Tier 1. And that's what's required. Okay? Because the company long-term, even if you had millions of units a year of volume and it was a licensing model, everybody in this market will expect you to make a handful of dollars. You cannot even sustain the company that you need to do that. On top of that, you would not be able to amortize all your investors have put in. They put in this for a high-growth company. Therefore, you have to sell something. And we're going to sell LiDAR. And we're going to make money on that one, right? And certainly show a business. And if you think about all the LiDARs that are going to go inside, our objective remains the same. Do I wake up every morning to just have single-digit growth? No, of course not. You want to be a dominant player in this market with a profitable business and get to like the 80%, 90% market share someday in the future. And you can only do that if you become a Tier 1 and you actually are willing to work with the partners, create supply chain, create the engineering discipline required, and you can deliver them the finished LiDAR. It's your core technology. You've hired the people. You've spent money. It's time to give some returns. And that cannot be done by licensing. So, yes, we intend to stay as the ADAS Tier 1 partner to OEMs because we continue to invest in developing technology and doing R&D for what they need in our core technology area. And so therefore, we have to build a sustainable, business model that allows us to be around for a long period of time to enable them. And of course, this is the highest-end features that are going to new cars in the future, in the near future, right? And you have the core technology that's required, and you're the only one that's scalable, and you're talking about price points, ASPs, that are significantly better and charming to OEMs than any of your competition. You're at the right place at the right time, and you own your entire IP, and you have an extremely motivated and talented workforce. I'm pretty sure that many, many people on this call that would love to change places with me and to be managing that company because that makes your life a lot easier. So, yes, but it's hard. You have to make sure some tough times to get to that point where you can take a breather, and they may not come for years, but you have to get through this, but you are going to have to make your own LiDAR. You can't just think like, well, I'm just going to give it to somebody else. Even when you buy an iPhone, I mean, just look at the public phones for somebody like Apple. They have a significant team that actually does that, and they sell their phone. That's their most dominant product. It's not the app store only. So, we are going to make our LiDAR, and that's where you want to be because you're going to have to invest in R&D to make the current LiDAR there, to deliver that, but they want to see a roadmap because that's simple company. How are you going to give me more features at a lower cost or more software in the future because, of course, software is a big part of it? We are going to establish our LiDAR business. And then, of course, the key area of software is how you really start monetizing this company because you'll have an install base and you can sell them software that runs on their product as we sell additional LiDAR in the future.

If I can just add to that, I think the capital markets are already -- they have sort of given their verdict on LiDAR companies that took the licensing route, and their valuations are significantly lower today because I think you can give away the farm here because I think it's very important to have a contract manufacturing model because this is how we maintain control of technology. And obviously this is how we share overheads. And part of it also has to do with we are going to provide the liability and the warranties associated with any product like a tier 1 as well. So, I think all these aspects are very important to even build a business because, like I said, at the end of the day, a successful LiDAR company will have the entire capability from soup to nuts in terms of having the design house as well as the production, and the supply chain infrastructure in place to be that successful [technical difficulty] --

It's hard to secure, but if you can imagine, we've engaged with lots of OEMs. Some of them did not choose us early part of the year. And part of it, to be honest with you, it's not technology. They all acknowledge the technology is there, it's just their timeline, that they need the launch timeline. And they value it early on if you are going to be there at the end of it. Some of them acknowledge there's another model year coming after that that you would be better suited for because that lines up with your timeline. But this whole manufacturing part, security, quality, confidence in supply, those are pretty important deals for them. And some of them just had -- like two years ago, we were deeply engaged with them it would have been better, right? But I think -- but it hasn't shut the door because we're still engaged with those OEMs, but they recognize that -- but your onboarding time is going to be at this point, so the technology is there, they're aware of us, we could get onboarded for them, but it's really about, I would say, and this is not true just of us, this is every company, every company that are announcing a deal, that one of the first thing they're looking at is how close are you to getting things going. And not just your word, they want to take a look at it, they want to see, do they believe that you have the supply chain for it, you have the partnerships for it, do you know what the automation would be, like is it not invention or is this execution. In the case of MOVIA, of course, certainly there's a production line that's there. MOVIA SRL is a derivative of that. So, of course, there's great confidence that, "Okay, you know how to do this one, so you can start to do another product line for that." MAVIN, on the other hand, we have 200 millimeter wafers, we have single-cavity tools, we have automation equipment that we risk-purchased early on in anticipation for these things. So, we've done all the things that are there, and the rest is ASIC timelines, all these things. But I would not say it is our technology. When it comes to technology, it's clearly that we can to any place and they'll say, "Wow, this is great. I'm so glad you're there." But it's launch-readiness is, I would say -- I'm thumping the table when I'm saying this, it's launch-readiness. And we have to be flawless in being able to ready to launch the product.

Right, thanks, Sumit. I think we'll maybe take one last question, we're coming up on time. What strategy does MicroVision intend to employ for the rapid scaling of mass production for MAVIN and MOVIA? What will be the expected pace of mass manufacturing expansion?

I think it's a good question. I think this is actually a really good question. If you think about it, the real benefit we have is we don't have to invent a huge amount of automation to make our products. We use semiconductor processes and wire bonder, die bonders, and other automated equipment that are available that we modify for our needs. So, our -- to get a production line up and running towards a very specific tact time that a customer would want is much more predictable. But getting a single line qualified or single set of supply base qualified for the OEM takes a long time. So, I don't at this moment expect that we're going to have three different factories in three different continents all simultaneously. We are willing to do that if a customer is willing to pay for it. We're going to have a mother factory, we're going to start, establish our line, our process, have partnerships there, and we could supply globally there, taxes and VAT and everything is taken care of, logistics timeline, all the price is all baked in. Then if there's a very specific need that an OEM has where they want us to say, "Well, I want you to put a production line to support my North American operations. And I want to decouple it from Asia." Absolutely happy to do it, as long as there's security of understanding what the volumes would be, what investments would be, what part of tooling they can cover, because clearly you have a factory up and running. And we're also willing to do it in Europe if there's something specific that they want us to do to secure independence from any specific region that they may have in mind, we're happy to do that. But we're certainly going to start with the number one thing, as I said to you today, they expect a very competitive price. That competitive price comes from key partners that are in Asia, because a lot of the semiconductor equipment companies in Asia and has been deployed in Asia, and the best process engineers are in the U.S., but also in Asia, and very, very good process engineers are there. So, we need to trust our partnerships -- our contract manufacturing partnerships for that. So, we're going to start with that. And we're going to look at expansion as and when the volumes are real. End of Q&A:

Right, thanks, Sumit. I think that's all the questions. With this I would really like to thank all our shareholders for joining us on this third quarter call. We look forward to sharing more updates with you in the near-future. Thank you again.

Thank you. Bye-bye.

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