Vuzix Corporation (VUZI) Q1 2019 Earnings Report, Transcript and Summary

Greetings and welcome to the Vuzix First Quarter 2019 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Now, I would like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin.

Good morning, everyone. Welcome to the Vuzix's First Quarter 2019 Financial Results and Business Update Conference Call. With us today are Vuzix CEO, Paul Travers; and CFO, Grant Russell. Before I turn the call over to Paul, I would like to remind you that on this call management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session. Therefore, the company claims the protection of the safe harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including but not limited to, general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain certain qualified personnel, as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represents management's estimates as of today, May 9, 2019. Vuzix assumes no obligation to update these projections in the future as market conditions change. After the market closed this afternoon, the company issued a press release announcing its financial results and filed its 10-Q with the SEC. So participants on this call, who may not have already done so, may wish to look at those documents as the company will provide a summary of the results discussed on today's call. Today's call may include non-GAAP financial measures. When required, reconciliations to the most directly comparable financial measure, calculated and presented in accordance with GAAP, can be found in the company's Form 10-Q quarterly filings at sec.gov, which is also available at www.vuzix.com. I will now turn the call over to Vuzix's CEO, Paul Travers, who will give an overview of the company's first quarter 2019 financial results and business outlook for 2019. Paul will then turn the call over to Grant Russell, Vuzix's CFO, who'll provide an overview of the company's first quarter operating results. Paul will then return to provide some closing remarks, after which we will open the call for Q&A. Paul?

Thank you, Ed. Hello everyone and welcome to the Vuzix's Q1 conference call. Over the last 3 years, Vuzix has made good progress in growing our business and expanding our foundation, with full year revenue growth almost quadrupling, rising from $2.1 million in 2016 to $8.1 million in 2018, as sales of our enterprise AR Smart Glasses have steadily risen year-over-year. Consistent with the indication we provided on our March conference call, our Q1 results were admittedly soft. And I'm pleased to report that this softness is now behind us, as Q2 revenue bookings through the first week of May are off to a solid start and already exceed the Q1 revenue total. It is taking more time than most expected, but we are witnessing firsthand an accelerating shift in the enterprise smart glasses market in terms of investment and commitment of resources, from chip suppliers like Qualcomm, to supply partners like Verizon and Eaton, to Fortune 500 global leaders across multiple industries that have trialed and are now starting to move to broader deployment of smart glasses. The inflection point for this industry is rapidly approaching. The payback numbers are very compelling. Avoiding just one trip by connecting a remote worker, instead of sending a skilled worker, delivers an immediate ROI, not only from the cost and time associated with travel, but more importantly, the lost production value, which can be hundreds of thousands of dollars. Equipping remote workers with smart glasses and connected devices facilitate the retention and transfer of knowledge, supports faster on-boarding, saves money, improves worker operations and safety and drives efficiency. In the warehouse, picking can be 60% faster and more accurate at the same time. The list goes on and on. It should come as no surprise that recent studies have indicated that 90% of enterprise companies plan on implementing AR Smart Glasses in their operations over the next 3 years. Virtually, every forecaster agrees that the industry usage numbers will get substantially larger over the next few years and that's just on the enterprise side alone. Expectations of millions of units and billions of dollars of sales will be up for grabs for the players with the broadest and most competitive set of solutions. We have worked long and hard to get Vuzix optimally positioned for this approaching tidal wave and we intend to be the lead rider on it. As previously announced, and also discussed on our last call, Vuzix has entered into a 3-year master reseller agreement with Verizon, whereby Verizon, their affiliates and sub-resellers will now resell Vuzix's M300XL Smart Glasses and M-Series related accessories, the Vuzix Blade Smart Glasses and Vuzix Remote Assist, our new remote support video application. Since then, the wheels have been turning. We have spent time at Verizon's headquarters in Basking Ridge, New Jersey, going over the marketing strategy and gaining an understanding of Verizon's extensive sales team structure. We've also completed most of the necessary plumbing needed to hit the ground running with Verizon's enterprise sales team, beginning here in the second quarter. This includes their customer ordering system, Verizon's mobile device management for Vuzix's Smart Glasses and preparation of various sales and marketing materials. Our sales and marketing team has concurrently had deep-dive training sessions with the Verizon enterprise sales teams. They will be selling to their 3,000 largest B2B enterprise customers during the initial phase of this program. I'm pleased to report that we've already had introductory meetings with and seen solid product interest from a number of their largest industrial customers. The second phase of the program will expand to cover all of Verizon's more than 10,000 B2B enterprise customers and include small-and medium-sized businesses. Finally, as new Vuzix products become available in the market, we expect to update our contract with Verizon to accommodate additional products that can be sold by Verizon to their enterprise customers. Verizon will also be working with some of Vuzix's software partners to add to their ecosystem and offer cookie-cutter solutions to their customers. A week ago, we announced a major joint development agreement with Eaton Crouse-Hinds for a new line of ATEX-certified Vuzix Smart Glasses that specifically work in harsh and hazardous environments. These co-branded smart glasses will be sold directly by the Crouse-Hinds sales and marketing team and its resellers, as well as by the Vuzix sales and marketing team. It's important to note that the market opportunity for intrinsically safe smart glasses is quite significant, and today one with price points much higher than conventional smart glasses. Although, we just announced the joint development agreement effort in April, much of the work to bring this product to market has already been completed. We expect volume production to commence in August and to begin selling harsh and hazardous intrinsically safe smart glasses based on our M-Series smart glasses to customers in the September time frame. Earlier this week, Vuzix and Eaton Crouse-Hinds attended the 50th Annual Offshore Technology Conference in Houston, which presented an outstanding opportunity to introduce our co-branded intrinsically safe smart glasses to a universe of players in the oil and gas space. The Eaton booth, which prominently featured our solution, was filled with excitement and customer interest. We are already seeing demand indications of need from some of the largest energy firms in the world. What is great about having a partner like Eaton Crouse-Hinds is that most of the companies that visited the booth at this event were already industrial customers of Eaton. Eaton is a trusted partner for these firms and now their thousands of salespeople have another product to sell that has been specifically designed for Eaton in harsh, hazardous environments. Moreover, our customers and developers that have manufacturing or field service operations with exposure to harsh and hazardous environments is already extensive. These companies are well aware of Vuzix and now our two firms will be jointly delivering a co-branded smart glasses solution to these existing customers. For Eaton, this relationship represents a move into wearables and an opportunity to provide a new cutting-edge solution together with Vuzix for their global customer base. For Vuzix, this relationship represents an opportunity to partner with a Tier 1 leader in the space and deliver a new product across an entirely new segment of the market that was previously unaddressable by us. The importance of our relationships with Verizon and Eaton can't be underestimated. There's going to be a significant increase in the number of sales personnel that will be marketing and selling Vuzix products. This increase comes at 0 additional cost, other than partner margins for Vuzix and substantially adds to the broad ecosystem already in place, consisting of our numerous value-added resellers and VIPs, Dynabook sales team and many other companies with whom we have struck partnerships. Beyond Eaton and Verizon, we are seeing broad enterprise demand for smart glasses continue to build and our VIP partners are continuing to win larger follow-on orders as they remain bullish on the current business they see at hand in 2019 and beyond. We are also making significant progress with some of our largest enterprise customers with expectations for larger scale deployments as we move into the fall. Similarly, with several pharmaceutical companies with whom our sales engineers have remained closely engaged with our internal early development efforts and they are planning for global deployment of our glasses throughout the next 6 to 12 months. These firms operate dozens of facilities around the world and represent unit demands in the thousands. We look forward to providing further updates about them on future calls and frankly, they just represent the tip of the iceberg. At the same time, we continue to forge additional relationships. Over the last 30 days, we've added two additional platform partners that have decided to expand their business focus beyond tablets and computers and into smart glasses. Our new partners VSee Lab and SightCall collectively bring with them more than 1,200 customers across enterprise and telemedicine. VSee Lab is a San Jose-based video telehealth company that provides a HIPAA-compliant video telehealth and telemedicine videoconferencing solution that is used by more than 1,000 telemedicine companies, operating all over the globe. Using the Vuzix M300 and Blade, VSee can deliver telehealth smart glasses applications, ranging from remote training on imaging technology to telesurgery to AR-enhanced video visits. SightCall is a San Francisco-based global leader in remote visual support with operations in the U.S., U.K., France, Germany and Singapore and more than 200 enterprise customers, including many Fortune 500 companies. They will be introducing our M-300XL glasses to their field service customer base. Our product represents a natural fit with their field service solution and by leveraging their proprietary global cloud communication platform, SightCall will bring a robust enterprise-grade see-what-I-see video solution to their customers. The Blade continues to pick up steam. We have been continuing to improve production and yields and by the end of the first quarter, our production rates finally allowed us to catch up with the immediate demand. As we touched upon during the last conference call, we've been focused on removing manufacturing bottlenecks and adding second generation production equipment into the mix, to not only attain the highest quality waveguides, but also increase volumes. Our manufacturing capacity under our current production configuration has now reached the point where not only are the Vuzix Blade orders being shipped same or next day, but we are now able to respond to RFPs and RFQs for larger volume orders. Vuzix Blade software development continues to progress nicely, as new functionality and features are being added to each Blade OS update and consumer-friendly applications, such as Google Assistant, sports, weather, news and Yelp have been added to the Vuzix app store. With these recent consumer-friendly additions, Vuzix has begun focusing on getting further review units to media and social media influencers for review. It's great to see the Blade ecosystem of features and applications continue to broaden. On the wireless carrier front alone, we are actively engaged with multiple telco giants across U.S., Europe and Korea and have shared our 3-year waveguide-based smart glasses product road map with these carriers under NDAs. The coming wave of 5G support is going to change significantly what can be done over a wireless network and the advantages this will give smart glasses and our plans to employ it in our product road map is not lost in these carriers. We're excited about these relationships, as well as the speed at which they are developing. Elsewhere, many of our enterprise customers are asking to see the Blade come with a safety glasses certification, which would expand the demand case for this product everywhere, from factory floors, to usage in the field. We're just completing the testing of this and should have a formal announcement out shortly. Having Z87.1 safety glasses certification for Blade should open up many more industrial application areas for the Blade. In March, Foxconn-owned Dynabook, formally Toshiba Client Solutions, placed a $1 million follow-on order for their Windows-based AR Smart Glasses, built and powered by Vuzix. It's taken some time, but it's great to receive another purchase order from them and we expect this program to continue to expand. Earlier this year, Dynabook upgraded its AR software to include voice commands, enhanced camera capabilities, a video collaboration call log and a customizable splash screen and more recently they announced availability of Ubimax Frontline application suite with their AR Smart Glasses solution. Other OEM opportunities are steadily emerging. After delivering a prototype commercial aviation waveguide-based head-mounted display system to a global Tier1 aerospace firm in Q4, we have received a follow-on order for a modified version of this prototype, based on their feedback. We will book some revenue for this in Q2 and expect to deliver this product in Q3, with the ultimate goal of being a multiyear production program with this company. Elsewhere, we've been asked to bid on five other RFQs for customized waveguide-based programs with companies that serve the defense, commercial aviation and automotive industries. These waveguide-based engineering projects could generate significant engineering fees in the millions for Vuzix over the next 12 to 18 months, with some starting very soon. Should full deployments of products follow, the revenue potential would be very substantial, ultimately dwarfing their engineering revenue potential. Separately, we've been making new inroads into police and first responder markets, some of which we hope to disclose in the upcoming couple of months. This is another market vertical that could bring substantial revenue for Vuzix. I would like to now pass the call over to Grant, so he can walk through our first quarter financial results. Grant?

Thank you, Paul. Before I begin, I would like to encourage interested listeners to review our 10-Q that we filed today with the SEC for a more detailed explanation on some of the quarterly year-over-year variances, as I will be highlighting just a few. For the 3 months ended March 31, 2019, Vuzix reported $1.4 million in total revenues, as compared to $1.5 million for the same period in 2018. Our product sales rose slightly year-over-year, led by a 6% increase in Smart Glass sales, when the discontinued sales of our former iWear Video Headphones were excluded from our 2018 numbers. We did not realize any engineering services revenue in our first quarter of 2019 versus $0.2 million in last year's first quarter, which resulted in the overall year-over-year decline in total revenues. Of note, we're pleased to report that we've already commenced work in Q2 on a new $275,000 engineering project. Our gross profit from sales in the first quarter of 2019 was $40,000 versus a gross profit of $177,000 in the 2018 period. There were several reasons for the decrease. First, on a product cost of sales basis only, our product direct cost was 52% of sales in the [2019] period as compared to 46% in the prior year's period. We earned slightly lower margins on the Blade Smart Glasses, we experienced lower selling prices of the original M300 model after the M-300XL was introduced in late 2018 and we have increased manufacturing overhead costs. Our research and development expense totaled $2.5 million for the 3 months ended March 31, 2019, compared to $2.1 million in the prior year's period. The increase in R&D expense was primarily the result of additional R&D headcount as compared to Q1 2018, increased consulting fees for external software contractors, related to the Vuzix Blade and development work on the M400. Selling and marketing expense was $1.4 million for the 3 months ended March 31, 2019, down slightly versus $1.5 million for the comparable 2018 period, primarily due to decrease in salaries, commissions, benefits and stock compensation expenses. I would like to point out that the first quarter of each year see spikes in our trade show costs and therefore it is not indicative of our quarterly trade show run rate in this area, more on that later. General and administrative expense for the 3 months ended March 31, 2019 was $1.9 million versus $1.7 million in the prior year's period, an increase of approximately $0.2 million. The increase was a result of an IT security assessment consulting and increased legal fees that were partially offset by decrease in salaries, commissions, benefits and stock compensation expenses. The net loss after the provision for accrued preferred dividends was $6.8 million or $0.25 per share in the quarter, as compared to $5.8 million or a loss of $0.22 per share for the first quarter of 2018. Now moving to some balance sheet highlights. Our cash position as of March 31, 2019 was $10.1 million and our net working capital position was $16.1 million. Cash used in operations, including changes in our working capital, totaled $5.9 million for the first quarter 2019 as compared to $6.5 million in the comparable 2018 period. Our net cash operating loss in the quarter after adding back non-cash charges was $5.3 million. In the first quarter of 2019, our inventory level rose by $460,000 over their December 31 levels, when including manufacturing vendor prepayments. This reflects the completion of production commitments for certain smart glass products, as we ready to transition to new models in the second half of 2019. At these finished goods inventory levels, we are now well-positioned to meet visible customer demand with our Smart Glass model. Cash for investing activities in the first quarter was $1.3 million versus $0.4 million in the prior year's period. The quarter's totals include $0.7 million, primarily for the purchase of additional waveguide manufacturing equipment and leasehold improvements related to our planned expansion, which has increased our square footage by approximately 1/3. Also included in the 2019 figure was $0.5 million to reacquire certain rights that were subject to the non-compete agreement amended in October 2018. The final $250,000 installment related to that amendment was made in early April. We remain positive about the increased market availability of our products and services in the defense and first-responder markets. Capital spending for the balance of 2019 is expected to moderate in the second half. Regarding our cost reduction initiatives, mentioned during our last conference call, many of our improvements didn't show obvious improvements in the first quarter results. Without negatively impacting our near-term innovation and growth prospects, we are still on track to meet our goal of a $4 million annual overall reduction in 2019 operating costs as compared to 2018. As previously mentioned, these costs take time to implement and often include wind-down costs. Many of these reductions have been implemented already, despite the modest progress reflected in our first quarter expense numbers. CES in each January and Mobile World Congress in February are seasonal commitments that were made early back in 2018 and they could not be reduced. Together, they represent a cost of approximately $600,000 in Q1 2019, costs that will not be repeated in the following quarters of 2019. Of course, we've already scaled back our trade show budgets for these events for 2020 to better reflect our needs while still maintaining a meaningful presence at these important events. Other areas of cost reduction implemented this March have included reduced spending on external software contractors and website consultants. This work is now at a level that can now be assumed by our internal teams and should represent savings alone of over $200,000 per quarter for the balance of 2019. Further recent changes include the restructuring of parts of our sales team, including the closure of our Barcelona sales office. However, please note, we are maintaining our U.K.-based sales office and fulfillment centers to cover the European markets without interruption. In the R&D area, in Q1, we have continued to invest on our M400 product, as it's now ready for production and commercial delivery this summer. Development cash spending related to the M400 exceeded $600,000 in Q1 and that amount should be reduced in the second quarter and decreased significantly thereafter in the following quarters. Additionally, some longer-term research-related projects have been scaled back and should reduce our annual costs here by over $300,000, as compared to 2018. Further expense adjustments will be made as needed during 2019 in response to our actual revenues, as we continue to right-size the company to properly reflect the timing of various market evolution, both on the enterprise and consumer side. At this point, based on our full year visibility and expectations for revenue growth, as well as the implementation of cost reduction controls and our growing business of paid NREs for our OEM engagements, we expect our March 31, 2019 ending total working capital position of $16.1 million, inclusive of a cash position of $10.1 million should be enough to fund our planned operations through the balance of this year. We will of course remain flexible in evaluating our cash needs as any responsible company and a management team would. In this regard, and is one of several examples, we are now investigating ways to broaden certain strategic partnerships, while simultaneously discussing new ones, where we can have even closer ties and relationships with large entities. Such relationships could include various forms of investments, order prepayments, joint development funding, market access exclusives and related strategic commitments. With that, I would like to turn the call back over to Paul.

The tailwinds in underlying momentum for Vuzix continues to grow and have never been stronger. Our enterprise sales pipeline continues to expand as our engagements with repeat customers broaden. Blade is just starting to emerge as a usable and a volume-available product from both prosumers and enterprise. We continue to see an influx of multiyear OEM waveguide-based projects coming in from numerous market verticals, representing business opportunities for Vuzix that we expect will expand significantly in 2019, and finally should develop into high-margin, high-volume production programs into 2020 and beyond. Overall, 2019 is going to represent another year of robust revenue growth for Vuzix and we're going to do it with a leaner and meaner organization that is focused on servicing our customers, our partners and converting as many opportunities as possible into wins. We've been at this for a while, but I don't think I can stress enough that the opportunity in enterprise for smart glasses is right now, in the future for Vuzix and this industry as a whole is much greater than most can imagine. Finally, in May, Vuzix will be attending the Craig Hallum and Ladenburg Thalmann Investor conferences and Augmented World Expo and Display Week. We look forward to seeing you at these upcoming events. I would like to now turn the call over to the moderator for question and answers.

[Operator Instructions] The first question comes from Christian Schwab with Craig-Hallum.

This is Tyler on for Christian. Thanks for letting us ask a couple of questions. So, with your M400 set to ship in the second half here, I guess, how quickly or what will the mix be between the M300 and M400? Will it be a long tail of M300 continuing over the M400 largely to replace that product? And then on that -- that same line, do you think that it's possible some of your customers may be delaying some of their orders in the first half of the year and waiting for the launch of the M400 coming in second half?

I don't think they're delaying right now, Tyler. In fact, our expectations for revenue in the second quarter are I think in line with previous discussions that we might've had. So I think people are really excited about the M400, without a doubt, but there has been a lot of work put in on the M300 series. And these guys, they are approved devices and they're looking at moving into production with them. So, I think we're in good shape in that regard, and at least at this juncture the M400 has not gotten in the way of the M300 -- the M400 has not gotten in front of the M300XL just yet.

They are at materially different price points. I mean, the M400 is going to retail for [$2,000] and 300XLs at [$1,500] and the 300s at [$1,000]. So we think it will take through to the end of 2019 to probably sell all our M300 models, but -- and thereafter it would all be M400. But for -- so far people are seeing useful deployments with each of the M300 series right now.

Yes, it does the job and we responded to a fair number of tender offers for the M300XL and that's what the documents and all of the efforts have been built around. So we were quite confident the M300XL is in a pretty good position. But again, there is a lot of anticipation around the M400. It's a hell of piece of work, frankly. And for streaming video and a lot of the things that people like to do and including some of this XR-related stuff, this processor is just beautiful.

That's great. And then maybe a larger kind of summary question here. Can you comparably size your different opportunities, I guess, your go-to-market avenues, your traditional VARs and distributors and now this agreement with Verizon and Eaton, and then maybe the OEM and other opportunities, can you size those maybe at a point somewhere in the future where Verizon and Eaton are at a fuller ramp?

I mean, we know what the business looks like that's directly part of Vuzix is value-added reseller and VIP partner channel. We have a feel for what we think Verizon is going to do, based upon our conversations with them and the market that they're going after. The Eaton Crouse-Hinds business, there is a pent-up demand for this ATEX-certified device from Vuzix. We've gotten a lot of inbound requests for it, but I don't believe we have it scaled very much into what they would look like through the year.

Alright, that's perfect color. And then my last one on the OEM, the potential different OEM agreements, it sounds like the focus here is now kind of on this aerospace, defense and then maybe like some automotive display opportunities. Is that kind of the right way to think about the opportunities for that, is there still other end markets that you guys are looking at?

Yes, I would suggest that the consumer marketplace is still there. I would also suggest that the consumer marketplace is trying to figure out where it's going and what's the right next product and there has been some challenging other products in the marketplace that aren't doing so well. And so, nobody wants to have egg on their face in that space. These others space is their enterprise, there's clear value and there's not very many companies that can deliver waveguide solutions in them. And that is just right for the picking for the Vuzix I think. I mean I have to say a lot of this was inbound to Vuzix, requests from these companies saying, we really need to have this, your stuff is great, would you please respond to this RFQ? So, it's I think easier lower hanging fruit, because there's an obvious demand for it. It's really focused, there is dollars in R&D budgets for these efforts. So, yes, I think the more immediate opportunities you're going to see them be in these kind of enterprise-ish oriented kinds of things, because you can flip the switch and go with it today.

And we're also seeing some growing strong interest in the first responder market, particularly with some police forces around the world. And we can't say too much just yet, but we're seeing some good uptake there with some of our products.

Our next question comes from Brian Kinstlinger with Alliance Global Partners.

When you say the book of orders already exceed 1Q, by what magnitude, or can you maybe quantify those orders for the quarter-to-date? And then, you've also said the softness in revenue is behind you. Maybe it'd be helpful if you provide some guidance, so investor expectations can be set appropriately.

So we don't give hard forward guidance. I think we've been there before. I will say, Brian, I think we're going to talk with you later tonight, maybe can fill you in on some of the details around what you're asking. I can tell you that the business here in the second quarter is robust in comparison to what we all predicted what the first quarter would be. There's OEM business, engineering fees in it that weren't in the first quarter. The M300 itself with the programs that are now coming back saying, hey, let's go, let's go, let's go, which we anticipated and then we realized these guys are off a little bit, but they are coming. So, it's just going to be -- it should be a pretty robust second quarter.

Okay. And then you mentioned capacity have now reached demand. So maybe reconcile that with the inventory build and then maybe, can you talk about how much of that inventory is the M300, where discounting might happen and how that might impact the P&L in the next couple of quarters?

Well, on the M300 Series, we already -- in November, we decreased the price of the M300s. So, we've already made that adjustment and we did say that our gross margins came down a little as a result, because it's just a product mix. I mean we're still making the same margins on the M300XL. The M400 is going to be a higher margin product. The Blade will make a little less. We're not currently contemplating a lot of discounting is going to be required to -- for the 300 -- 300XL, We're looking at some bundling opportunities which can add value without affecting margins negatively.

And some of the inventory is solid for the ATEX-certified device. And on the ATEX-certified device, it's a significantly more expensive device for a lot of reasons. But the margins are still -- they're actually quite good on this device.

And to be frank, I mean the supply chains still have a cost to pay [indiscernible] Blade component inventory. I mean, we'd indicated previously, it's taken us time to get the yields and production rates up. And we're now at a position where we can deliver against orders. So, we got to rebalance them more there. But that shouldn't mean any discounting to achieve that.

There is -- nobody is getting discounts on Blades at the moment.

No, I was talking more of discounting on the 300, but that's okay, the older version. In terms of Verizon, my last question is, have they communicated, or have you been able to estimate what the sales cycle is, and when you expect material benefits to your business from this relationship?

We should see sales happening here in the second quarter.

And will they be material by the second half of the year? Or will they be still pretty small early on?

I think the intentions are they are going to go pretty quick. I mean, these are cookie cutters solutions. They have customers that need the stuff that it does today, that runs over their network, because their sales teams are all motivated to be part of this and to make it happen. So, I think we should see some nice contribution from Verizon.

One follow-up from that. In your solid orders you had so far, have you had an order yet from Verizon?

Yes, we have had some orders from Verizon. They are not significant yet, though.

Our next question comes from Jim McIlree with Chardan Capital.

To follow up on Brian's question about the bookings, Paul, when you were talking about orders for Q2, were you talking about the entire product suite, so the Blade, the 300s, the XLs, engineering, you're talking about all orders or we just referring to specific product line?

No, we've kind of just [rolled] the batch in.

Total revenues.

And the phrasing that you've used, I was a little bit confused. Were you saying that it was the orders received or the orders received that would be delivered in Q2?

This is all stuff that would be delivered in Q2.

Okay, great. That's helpful. Also in your commentary, you remarked about the capacity in Blade is now at a place where you can start responding to RFPs. And I'm just wondering if you can just characterize size of those RFPs or the number of RFPs, or maybe end markets, just if you can characterize in any way those RFPs that you are more capable of responding to.

I can a little bit. I mean, Grant had mentioned this -- the police side of the business kind of a thing, and just in some of the very early orders, they're in the -- north of 50 and 150 kinds of numbers. There's other folks that we're talking with that are putting together software and ecosystems to work in Asian kinds of markets that could represent many thousands of pieces. And these guys are -- when you sit down to talk, well, people like, well, how soon can you deliver? What's the delivery rates? How am I going to be able to fit this into the rollouts that we would do in the fall and into next year. And having production, so it's starting to crank up like it is, it's making a lot easier to have those discussions with people.

And then my last one is, can you just update the manufacturing status for the M-Series and what your strategy is, let's say for the next 12 months?

Well, as you know, we work with [Jedo] today and with [Jedo] if you need to make 5,000 a month, you just got to give them enough lead time to get the parts to do it, and they can do it for us. The Blade is done locally here in the States, but for Vuzix to do 2,000 to 4,000 a month out of our current facility to full-up production we could do that. Vuzix could handle that kind of business. The M400 is getting a lot of stuff done in China, but I will say right now for the first round of final assembly, I think we're going do it here in Rochester, New York. In fact, I know we're doing it here in Rochester, New York. With that transition from first units to full-up production is flat with issues and it's difficult to do it remotely. And when we do it here, we can have it all in hand and get it all square around. And then when the volumes pick up, we would of course move it appropriately to an offsite location. Maybe. I would tell you that with automation equipment, you can make a lot of them and we've got some great automation equipment here in Rochester now. We're an ISO certified shop now too, Jim, and there is -- built into ISO are feedback systems in QA improvements, and all of those things and they seem to be working quite well at Vuzix these days.

Ladies and gentlemen, this ends our Q&A session for today. I'll now turn the call back to Paul Travers for closing remarks.

I would like to thank everyone for your interest and participation on today's call and we look forward to speaking with you again in August when we report our second quarter 2019 results. It's an exciting time at Vuzix, looking forward to this fall. Thanks everybody.

This concludes today's conference. All parties may disconnect. Have a great day.