MVIS - NASDAQ

Good afternoon, and welcome to the MicroVision Second 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. 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 product development and performance, comparisons to our competitors, market opportunity, 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, plans, and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call and, except as required by law, we undertake no obligation to update this information. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as for all the financial data presented on this call, please refer to the information included in our press release and in our Form 8-K dated and submitted to the SEC today, both of which can be found on our corporate 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 second quarter 2023 results. We're very pleased with the accomplishments of our team during the second quarter towards and annual and multiyear goals. I'm happy to report that the strategic changes we initiated in Q1, the completion of our acquisition and planned integration, proceed smoothly. With our combined global team and expanded LiDAR and software portfolio, we could address the needs of our OEM customers with a wider range of solutions. I would like to elaborate on this a bit later. We continue developing our revenue streams for strategic and other channels, and I am very happy with the progress we've made so far. The biggest opportunity for the company remains in strategic partnerships with automotive OEMs for our LiDAR products. First, I would like to start by updating you on our progress on RFIs and RFQs. We remain engaged in multiple RFQs with multiple OEMs that are expected to be nominated in 2023. We are the only LiDAR company that offers multiple technology nodes, from highest resolution, smallest form-factor, long-range LiDAR in our MEMS-based MAVIN, as well as a small form-factor short-range sequential flash-based MOVIA LiDAR product lines. Our teams remain engaged with multiple OEMs who are 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. The combined lifetime volume of all the programs up for nomination in 2023 are for millions of units. This, of course, is the most exciting part. We have the right products that are targeted to supply ADAS safety for higher-volume passenger vehicles and commercial trucking. We remain very excited about where we are in the nomination process. In case of a program win, we expect two phases for the engagements. In the first phase, we expect to customize our core technology with the specifics of each OEM's needs under a development agreement. And in the second phase, we expect to supply parts as an ADAS Tier 1 with our contract manufacturing partner under a master supply agreement with each OEM. For the first phase with our core technology remaining the same, we expect modifications will be required for the product mechanicals, thermal, and some custom perception software features, security, and interfaces. All of this would have to go through extensive validation and verification on our side, and more so from our potential partners. We don't expect customization to be a high-risk path for our team. We also expect multiple production lines will be required at our contract manufacturing partner to support customer production sites in North America, Germany, and Asia in this phase. In case of multiple nominations, all OEMs will want to validate that we have dedicated engineering resources for their programs. I am very confident in the size of our global team and our capability to add talent as needed to support multiple program wins. We are heavily engaged in financial due diligence as well. 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 clearly in the first quarter, as you may recall. Again, I believe we are well-positioned for this item, being a publicly traded company on the NASDAQ with no debt, control of our expenses, and a clear understanding of how to grow proportionally to meet the needs of multiple potential customers. Just to summarize my assessment of the engagements. Our technology and products are being well received; our solutions offer the higher technology in the smallest form factor with long-term cost stability based on our custom silicon. I strongly believe we remain on target for our 2023 objectives for strategic sales. Second, I would like to update you on our direct and software sales efforts. These segments will contribute meaningful revenue on our path to mass production for LiDAR products. In order to start our revenue cycle with MOVIA direct sales, we expect to place a large order for MOVIA sensors. With this inventory in place, I see its accelerating paths to revenue. With our team in Germany and our new team in Detroit, we expect great things in the future. As you may recall, Ibeo partnered with

Thanks, Sumit. I'm really pleased with the progress we have made in the first-half of 2023. I'm proud of the company we are building in MicroVision, especially with the integration of our teams in the U.S. and Germany. Our acquisition has positioned MicroVision to become one of the most experienced and technologically-advanced LiDAR hardware and software companies in the market, with over 50 years of combined operating history and 735 patents. Let me talk in detail about our progress on RFQs on the technical front. Well, let me discuss some of the key financial items that the OEMs are looking for in their due diligence on perspective LiDAR suppliers. In particular, it is important for suppliers like MicroVision to show strength in the following two areas: number one, sustainable existing cash burn, allowing a longer financial runway; number two, ability to scale up operations to handle multiple high volume RFQs, both in terms of dedicated engineering resources and production capabilities. On point number one, MicroVision continues to demonstrate one of the lowest cash burns out there. Our publicly-disclosed operating history shows that MicroVision has been consistently disciplined about deploying capital for growth. Point number two, MicroVision has the strategic advantage when it comes to quickly and efficiently scaling up operations, as we consider multiple RFQ wins we have the ability to add dedicated engineering resources at the customer's preferred locations in either North America or Germany. In addition to the maturity of our technology and superior technical specs, the above advantages are also positioning us well with these RFQs. Our customers and potential partners, including contract manufactures appreciate MicroVision's strong and deep IP portfolio, and our industry experience, financial discipline, and technical know-how, all of which are key differentiators for us. We are thankful to our shareholders for supporting us and presenting our best foot forward with the OEMs in the RFQ processes. Now, let's dive into the Q2 2023 financials, for the second quarter we recorded revenues of $329,000. This revenue is both from automotive as well as non-automotive customers. The revenue in this quarter is lower than the first quarter as some of the non-automotive customers pushed out the delivery of units. We expect the momentum in revenue to pick up in the third quarter. At this time, we are maintaining our $10 million to $15 million revenue targets. Over the past several months we have invested in our sales team by bringing in some highly industry-talented veterans, especially in the Detroit area. I expect some opportunities especially in the direct sales business to ramp up in the second-half of this year as our sales team puts their experience and energy to work for the company. To remind investors, our direct sales model includes the sale of MOSAIK to automotive customers and MOVIA to non-automotive customers, and this obviously has a much shorter sales cycle. To that end, we have placed an order to build new MOVIA inventory with [

Thank you. At this time, we are conducting a question-and-and session. [Operator Instructions] Our first question does come from Andres Sheppard with Cantor Fitzgerald.

This is Anand on for Andres. Congrats on the quarter, and thanks for taking our questions. I've got a few here, and I just wanted to start with the recent reported revenue drop to $300 million. I just wanted to check to see how confident you are in reaching the midpoint of guidance, so about $12.5 million, that you just reaffirmed your range of $10 million to $15 million? And how do you guys expect the revenue to be spread out in the back-half of the year, between 3Q and 4Q?

Thanks, Anand. So, yes, I think as I had mentioned in my remarks, we expect that the third quarter, the revenue momentum to pick up. This was primarily because some of our customers pushed out their deliveries, which we're expecting to happen in the third and the fourth quarter this year. And primarily the growth is going to come from the sale of MOVIA. And to that end, we have invested in building up the inventory, as I mentioned in my remarks, that

Got you. Thanks, Anubhav, that's helpful. And I just wanted to switch gears to the gross margin, and wanted to see what the driver was behind the drop in gross margins? And how do you expect margins to progress over the rest of the year?

Yes, so gross margin drop was primarily due to economies of scale, obviously as we sort of put more revenue through the funnel, we expect the gross margins to be again what we had described earlier. And we expect to hit the target of over 30% gross margins in this year because, again, the margins are primarily coming from the sale of software and hardware, from that standpoint. So yes, so we do expect to hit our numbers from a gross margin standpoint.

Got it, sweet. And just to switch gears a little bit, I know you talked about this a little bit with OEMs. I wonder if you could give us an update on discussions you're having with an OEM or when you might be able to expect your first partnership with an OEM or how you would potentially expect NREs to eventually materialize.

I'll take that one. I think as I've clearly stated, right, I think we stay on track for 2023. I think -- not just us, I think it's -- everybody that's in the mix of it will tell you the same exact thing. It's pretty clear that they want the nominations to be done this year because want to get going. They have a very specific timeline for delivery and SOP. So, I stay pretty confident that the nominations would be 2023 as the OEMs have -- and these different OEMs have indicated.

Got you.

And after that, of course, think about, right, we have a core technology done, but every week think about a consumer vehicle versus even a trucking application, you have to customize. And so the core technology is the same, but they need some level of customization on the software side or the hardware side or the thermals. So, there is that whole customization part of it, but it's not a full-blown development, right, the core technology is the same. The reason they're picking somebody who is ahead is when they look at the silicon part of it or they look at the technology development part of it, where is your level of maturity, and they don't want to change that core part, but they want to customize what they need. A lot of it is in software, true. And a lot of it in the NRE is going to come from validation, verification has to be done for their scenarios, right, so we have to give them a validated product. And of course, they can do their own validation with themselves or with a third party. But on top of that is like there's always some customization on the mechanicals, right, so how do you mount it, which side of the connector, what connector do they want, some other customization on the inside, on the thermal side of it because of that, right. But I would not quantify this as something that starts new development. Some of our investors that I've know for a long time, when they think about customization they may think about what we did for Microsoft and what we did for Sony, those were full-blown development programs, right. That's not it. We've already funded the core development to a certain point; the NREs will cover the customization for each individual. And as you can imagine, a production line has to be put into place for whatever they want. And you can't have a single customized line -- a single like that's going to make low-volume high-mix, it's not going to make one part for one, one part for the other because each and every one of these product lines and RFQs we're talking about has pretty high volumes, so you're going to need multiple lines done also in parallel. So, for all that work to happen in the timelines that they have, they clearly understand, they dove deep into it with our team, thousands of hours have already been spent by our team on this, I can assure you that. They have a very good understanding of how that has to be executed and what the timelines are. So, that's why I feel pretty comfortable, and the NREs are going to be some magnitude, but it's clearly not going to cover all our development, because it is our core technology and we intend to not license it away or give the IP away to anybody.

Got you.

Anubhav, I don't know if you have something to add to this?

No, I think you covered it all, Sumit.

Thanks, guys, that's very helpful. I've just got one last strategy question. So, I was wondering if you guys have plans for expansion in the non-automotive market with Ibeo if OEM revenues take longer than expected to materialize. And if that were the case, what segments would you be focusing on and how would you view the trucking market for this purpose, like automated trucking?

I think if you think about the trucking market, let's make a distinction. And I want -- and this is a pretty important one. There are actually two trucking markets. One, of course, is there are trucking OEMs, that they operate -- I mean they have low volume, they don't have millions of units per year or millions or units of outlook, right? Pretty substantial volumes there, right, but they operate just like an OEM. They go through an RFI, RFQ, they have very strict requirements. That's one piece of business, right? That will always -- that's something, of course, people have neglected so far, right, and so that in play always, I'm pretty excited about that actually, more safety coming to 18-wheelers all over the world, that's great. Then I think what you're referring to is there's other trucking applications or companies all over United States, and Europe, and even in Asia that buy sensors, and they're developing their core product, which is a software product, right? So, if you think about it, there is two trucking partnerships there. Certainly there's the direct sales part, that's where our team comes in, we can sell there, we can sell sensors, we can sign deals, you deliver hundreds of thousands of parts to them, there's a schedule to that. Whereas when you go on the other side, now you start looking at like hundreds of thousands of parts because, in any kind of trucking application, you are going to have multiple LiDAR. I think in our deck we talk about -- we show a simulation with real LiDAR data that was collected to show what coverage you can get around, and how many sensors that would take. For a typical trucking application, it could be depending on some configurations, it could be from somewhere as many as five to six different LiDAR. And the one that I think there, in that picture, we demonstrate is our MOVIA product. Now, imagine if you want to do long-range, front and back, there's multiple in there. So, when it comes to the OEM trucking, these are substantial numbers. They're not in the millions, but there are several -- they're pushing in the high hundreds of thousands, right, for the lifetime. And there is multiple trucking partners in the world, there's not 500 of them, but there's some -- a good amount of them, so it could be a really good strong business, but it piggybacks on to how they're rolling out their process, how trucking industry is transforming. I think perhaps the foundation of your question was what we -- U.S. companies, like Aurora and others that are developing really automated trucking, but their core product is software. And certainly I think about that as direct sales, we have our teams that connect with them, we want to be their sensor provider, right? They may make their truck with [Conti] (ph) on whomever they make it with, right, and they own the software, but we want to be specified or spec'd in as a LiDAR provider for that, right, so, certainly going to work on that as well. So, these are both applications. So, how would that accelerate? Certainly that's why we like to call it direct sales, because it's more like kind of a spot sale, you can get more clarity. It is a key part of our strategy, and that's why we're ordering all these MOVIA sensors for inventory because we see a path to that ahead of us. And having inventory, I think, at this point we feel comfortable that the funnel has developed pretty well. Just recall, a year ago, when Ibeo filed for insolvency, it was -- MOVIA did not have -- or the next sensor, they used to call it, right, did not have a lot of [path, it's all for insolvency] (ph), but we resurrected the product. I really believe in it. I think it's a great product. It does solve a lot of problems with short-range LiDAR when you need multiple sensors around it. So, for trucking, that's been missing all along, nobody has offered that. You have cameras, you have radar, but nobody's been able to give a LiDAR that can give you 30, 40, 50 meters 360 around a truck in a very stable form factor. So, I think we're new at that; we're the first one in there. So, yes, absolutely direct sales will be there, and OEM sales will be there. But direct sales is our bridge, from now till start of production, for some of these programs we're talking about.

Got you, thanks, that's very helpful. That's all I've got. Thanks again for taking our questions, and congrats again on the quarter, looking forward to the ramp this year, and I'll pass it on.

Thank you for your time.

Thanks, Anand.

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

Thanks, Mike. So, I think one question that we're getting is, can you talk to us about the product portfolio and how it helps MicroVision as a whole, and the strategic rationale behind the product portfolio, and how does it differentiate us as compared to the peers?

Yes, this a good question. And I think that we talked a little bit about it, in April, but I'm probably going to put fewer accents on it. All right, so everything that we've been talking about at MicroVision, and others talking about is really about the long-range LiDAR. It is a big deal, it is really big. It is going to be a big winner, right? So, yes, that's important. But if you think from an OEM standpoint, they're trying to deliver not just a long-range LiDAR in your car, they're trying to deliver a product, level 3, level 2, level 4, whatever level they want to go to, they want to deliver a product with certain amount of safety. I think the MOVIA product and the MAVIN product, if you think about having two LiDAR products that are not exactly the same technology node, there's two different technology nodes. It's a huge advantage we have that nobody else has. We get into more RFQs and RFIs, in my opinion, because we have multiple technologies, right? In some cases, even if they had made a choice for a long-range LiDAR that may or may not be working out, and we're promoting our LiDAR, just in this year, I've been very excited about what we were able to achieve with our team. That same promotion, we started showing them the MOVIA product, and we started getting traction. So, this is great because they have multiple needs, and there's very few people out there that can actually provide all the LiDARs that they would need at a certain price point, at a certain certainty of technology. So, an important thing if you think about the LiDAR product only, as a standalone, it's -- like we're the one-stop-shop for all the LiDAR needs that they have. And for a young company like us, for the acceleration that we pulled off, I think this is a great thing, and nobody's got that. Everybody is going to keep talking about their long-range LiDAR. They're going to go from one victory or one loss or one victory to one loss, that's going to be -- ebbs and flow of their business will be there; ours is different because we are going to be in more RFQs every year. I'm pretty confident about that just that 2023 is an example for me personally. So, I think -- think about that as a LiDAR product. Now, let's take it one step above that. Perception we talk about; perception is something that every OEM, to a certain level, wants, even if they don't want the name perception, is morphed into different things for different people. At the end of the day it's how that you take the LiDAR data, apply some amazing software to it, and you can extract information and features, on the fly, at frame rate. This is really, really hard. And if you think about, in frame rate, it is actually identifying what's happening, it's extracting that information. And they want that, and that's called like an object-level interface, right? That's also very important to them, is if that's what's coming from a ASIC or SoC inside our product, instead of some AI product that is sitting between the LiDAR and the domain controller, the overall system cost is lower, that has also been developed, and it's been something very mature, and that's part of the Ibeo acquisition. That's one of the teams that I've been very excited about integrating. But all our LiDAR products, in my opinion -- not in my opinion, what the market is going to require, you're going to need perception, and we have that. So again, different people are talking different things, but none of us have to be geniuses, right? If you're an OEM, what do you want? You want the highest possible technology in the smallest form factor, the most -- the lowest power, and a cost they can predict for decades. That's the point that everybody should know that if you are sitting the chair that's the number one thing you look at are these guys going to be able to deliver this product at this price at a long period of time, can I trust them? So, people will try to increase their price point as much as they wanted, ASP as much as they wanted, but all they talk about software and core products and whatever, right? This is like bread and butter stuff, everybody should know that, you are investing in LiDAR company, you know, LiDAR you better have software that enables them do something better, faster, cheaper. So, by adding a perception we strongly believe that the overall system cost can be reduced, and this is just the LiDAR products by the way, this is not about sensor fusion, this is just the LiDAR products. So, if you think about it, these are product lines that complement each other, but the perception does not exist by itself, it exists inside the LiDAR enabling these partnerships. Somebody can just give a LiDAR over the streaming point glass or we can give a LiDAR with all the features that I described, but on top of that, perception with object level interface will have a huge advantage on top of the fact that we have multiple nodes based on what they need we can give them the right technology instead of trying to shove in a product with eight LiDARs or MOVIA when I can just have a MAVIN with dynamic LiDAR do something very special. So, that's how we think about that product line. Now, when it comes to sensor fusion, what's that about? Well, that's as I said, it's a very modest investment, once you have a LiDAR, an amazing LiDAR, and you have this perception level software, the next level above that OEMs struggle with is just a demonstration even of like how sensor fusion can be done, how redundancy in the system can be done better than what their teams are doing, which are integrating cameras and LiDAR and radar altogether, but they have a different architecture. So, it's like really great R&D to start demonstrating that. But it's not R&D for R&D sake, because there is a product there actually. Long-term, we could probably make it shift with our software running on it that sits inside the domain controller next to the video chip or next to the QUALCOMM chip, and it's an accelerator, where radar data can come in, and our LiDAR data can come in, and without object level interface we could actually have higher level software running inside there that seamlessly takes up the load that the chip over there is running out for resources for. So, again, reducing overall system cost. So, this product line eventually is also going to compliment our LiDAR. So, again, it's building layers and layers of stickiness to our products, to our customers, and solving their problems efficiently, without requiring thousands of engineers. So, if you think about it with 350 or less than 400 people we have in the company after the acquisition, and we tons of capital we really build out some great products, and I totally get people frustration like, "Oh, when you're going to announce deals?" I think like we said consistently what the timeline is going to be, and we are performing to that. And then, the last one, MOSAIK software, MOSAIK software is unique; it's sort of like a -- it's something that precipitated from what the perceptions you have done, it's something that's needed for validation anywhere, for validation and verification. And it turns out that software is something that actually our customers, our OEM customers also want for their own validation. So, it's kind of like sign hustle, and it's a pretty nice one. And it's a great team that we have there that's actually supporting them. We intend to just keep engaging with OEMs with that, and the benefit we get out of it is that a very central part of our thesis, for our product thesis is perception is very, very important long-term, okay? Well, if I have the validation software, if I have the reference suite software there, I get to learn about the perception features that every OEM is thinking about years in advance to ever put ink to paper on an RFI that any of my competitors see. So, it's total worth shareholder money to keep investing in it, because it gives an advantage. Once we have multiple agreements done, right, this will be moved, because then we realize we are actually fueling our future development with the small pockets that we have. These are pretty nominal investments right now. So, if you think about every customer with their LiDAR, you know, it's all circular, right, but if it's actually a Venn diagram and map it out what they're saying, you can decide for exactly what me and Anubhav are able to do when we hear somebody else's earnings call, right, aren't pretty straightforward, we have a product portfolio that addresses the needs for the OEMs, and that is going to remain the big price. Strategic sales is very important, absolutely, I totally acknowledge that, but that will never be possible unless you have a high-volume customer that gives you the economy of scale to reduce the price, and really make a dent in that market with margin. Any company that is doing direct sales right now is not that successful, because the economy of scales are out there, the margins are low, massive amount of efforts required to keep running it, it's broken, right? The business we built out actually is going to work. Once we get the strategic deals done, that's very, very important to get these production lines up and running. As we are supporting our OEM supports, one of the off-shooters we can do direct sales, we have software that gives us insight into what is coming around the corner, and of course we have the perception build out to a level that is significantly higher than where anybody else is, and before we start investing significant amount of money and building more, we are just focusing everything on getting these OEM deals done. Anyway, that's a long answer, I mean obviously I feel very passionately about it, but I hope that gives you a pretty good understanding of how all these products are layered in, and story is the same, consistently the same.

Thanks, Sumit. And the second question is also similar on these lines, I think you mentioned talking about the AI chip, so, can you elaborate what's the difference between that and MicroVision strategy? And related question is, have you completed the analog and digital ASICs for MicroVision?

As we said before, the analog -- that's easy one, I will answer that first, the analog and digital ASIC, the analog ASIC has been started, the digital ASICs no plans are started. I think the ASIC, when you say the word complete, I think you may meaning that do we have the production math done, and those chips in, that's not done yet, but that is part of it, like, this is where we are and we have started those chips, and our intention is to finish up the MAVIN. On the MOVIA side, of course they already existed. So, that's not more mature. Then I think the question is about -- let me get that right, what is it, the AI chip, I think I could not understand it actually. Can you repeat your question, please?

In your remarks, you had mentioned the AI chip, the competition it's using versus what the MicroVision's value proposition is?

Yes, I think this goes back down to how we do perception, how we think about perception, system cost is very important to OEMs. They can do prototypes and they can do like demos and they can computers all over the place, but at the end of the day if you are going to put it into millions of cars, all of us know, it's a very, very cost competitive environment with high technology, the cost competitiveness has to be demonstrated. What's fascinating and amazing about our perception is, think about them as like more classical algorithms that have been developed, okay? And they have been validated through certain scenarios. These are more powerful actually. These are equations, think about them as like more algorithms like equations, you know, they're pretty straightforward in that sense, but it takes a lot of elegance to get to a point where you understand the scene and what's happening in it, where you can predict what will happen, and you can do object level interface much easier. AI is like a nice thing. I mean I have Adobe Pro, and I can do genitive AI in our Photoshop, I mean it's all over the place, right? But if you think about OEMs, you can't just put AI in the middle of everything there. It's kind of really well-controlled. I can say with the greatest confidence when we talk about perception it goes a lot further, because they realize how it's been executed. It is not something like really, really, it's a feature that is going to be delivered to a specification, to a system requirement document, it could be traced, it is not -- nobody knows in the Blackbox how it does what it does, they know exactly how it's going to work. And they are going to trust it. So, I'm not a big believer that these AI core boxes that people are delivering, right, things that in video and QUALCOMM already do, that's not the best user shareholder resources to develop, right? We have some things to develop. We have done really well in Hamburg to begin with. Really the main reason why I was very, very interested in Ibeo acquisition, I think that we're in great place, and the evidence of that is, I mean I don't know how else to answer this, the evidence is based on the means that I have been part of, or the things that I have seen so far from OEMs. So, I feel pretty comfortable where we are. I can't really comment on what strategy others are deploying and where they got that information. All I can tell you is everything that I have reviewed and I have talked to everybody within the company, I don't see anything where perception is going to be some AI box. So, that's just our experience. And we are talking to multiple OEMs and multiple RFQs, so --

Thanks so much. Can you give us a little more color on the financial due diligence by the OEMs, and how should investors be thinking about these risks? I think let me take that. So, I think the first thing is I think perhaps OEMs have learned their lessons from the past, and I think that's why they're conducting a lot more extensive due diligence this time on suppliers. And this involve some extensive modeling to fully model how the business and the revenue streams will evolve in the case of multiple links over the next several years. They want to fully understand how will the company be supporting these programs, and that includes modeling headcount projection by geography. And I think if you recall, I had mentioned based on OEM's needs their dedicated resources might be placed in the North America or in Germany. So, modeling that is what we are right now in the face-off. And obviously the cash requirements from a fee sample into production, maintaining their silicon inventory, which remain the key critical point of how will this all happen in the next three years. And obviously I think what Sumit described was the non-automotive revenue and the NRE, which is going to support the cash flows from this. So, this is all what's going into the modeling. And in the back-end, this is how we are moving towards going from lowering the cost of capital from equity, moving all the way to fixed income base capital based on the income streams that will be generated, and the receivable that will be part of the balance sheet, which would ultimately make MicroVision a more traditional company with the lower cost of weighted average cost of capital is what the OEMs are looking for a model of how this will all happen in the case of multiple RFQ wins in the next three years. So, this is what the financial due diligence entails with our customers, as well as our partners, so this is not just OEMs, our partners are also evaluating us as we are modeling this out and helpful them prove out why we are better positioned to evolve from where the company stand today in two, three years from now from a cost of capital standpoint.

The next question is, is MicroVision pursuing consolidation M&A opportunities as some of the weaker LiDAR players filter? Let me take that question as well, Sumit, if you don't mind. Not at this moment, at this moment we are laser-focused on our organic targets of multiple RFQ wins, and building the business around that. But look, if some things come along that are strategic and that accelerate our path to get there, how will consider that, right? But yes, so if I were to answer this question on a short, long answer short, at this point, we are laser-focused on our organic targets for the company.

With this, I think we are bumping up against our time. Thank you again for everybody joining on our second quarter call. We looking forward to speaking with you again, and post you with the company updates on our third quarter call next quarter. Thank you so much.

Thank you everyone.