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Microvision (NASDAQ:MVIS)
Q1 2021 Earnings Call
Apr 29, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Welcome to the Microvision first-quarter 2021 financial and operating results conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lindsey Stibbard. Please go ahead.

Lindsey Stibbard -- Paralegal

Thank you. Good afternoon and welcome, everyone to Microvision's first-quarter 2021 financial and operating results conference call. Joining me on today's call are Sumit Sharma, chief executive officer; and Steve Holt, chief financial officer. The information in today's conference call includes forward-looking statements, including statements regarding exploration of strategic alternatives, sale of our product verticals or technology, sale or merger of the company, or completing any such strategic transaction; maximizing shareholder value; managing costs; potential customer orders; future royalties; progress under and benefits of existing contracts and license agreements and the negotiation of future agreements; customer product launches; advantages of our technology; litigation; business execution; projections of future operations and financial results; availability of funds; product development applications and benefits; availability and supply of products and key components; commercialization of our technology; future product roadmaps, potential product sales, potential impact of products in the market, ongoing development of technology, scalability of technology and designs, expected performance of products, comparisons with competing products or technology, market opportunities and future demand, as well as, statements containing words like opportunity, potential, possibly, intend, believe, goals, paths, expects, plans, will, could, would, likely, 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 various SEC filings, including our annual report on Form 10-K filed on March 15th, 2021, as well as, various other SEC filings made from time to time in which we discuss risk factors associated with investing in Microvision. These risk factors could cause 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. The financial numbers presented on the call today are included in our press release and in the 8-K filed today. Both are available from the investor relations section of our website. This conference call will also be available for audio replay in the investor relations section of Microvision's website at www.microvision.com.

And now I'd like to turn the call over to Sumit Sharma. Sumit?

Sumit Sharma -- Chief Executive Officer

Thank you, Lindsey. Good afternoon, everyone. The last 14 months have been incredibly busy and productive at Microvision. Today, I will cover some of the important achievements from our automotive lidar product development and their potential impacts, our target areas of execution going forward that we believe will increase shareholder value and provide a business update.

First, I want to thank our employees for their continued dedication and execution. Multiple times in our company's history, our team has performed exceptionally, and delivered products based on our technology that we believe were far ahead of global competitors. Our employees are incredibly smart and talented, and I am continuously humbled by their dedication to make Microvision a success. Let me start us today by updating you on our first-generation long-range lidar A-Sample and the potential impact it could have.

I believe this sensor could offer a much higher level of performance, compared to any lidar currently available or announced in the market. Our team successfully completed our A-Sample hardware and development platform on schedule. Our A-Sample hardware, as seen in the pictures shared in the press release earlier this week, is targeted for potential customers, partners, and parties interested in a strategic transaction and can bemounted on top or behind the windshield inside a test vehicle. We designed this hardware to support automotive level moving platform testing from the ground up.

Our robust design also allows us to target this hardware for initial sales in the second half of 2021 following completion of internal and external testing. I will elaborate on this a bit later on this call. We expect our sensor to meet or exceed current target OEM specifications. Microvision's lidar sensor is expected to perform to 250 meters of range.

It is also expected to have an output resolution of 10.8 million points per second from a single return at 30 hertz. lidar companies communicate product resolution in different ways as you may know. I think looking at points per second is the most relevant metric to compare resolution performance of competing lidar sensors. We believe our sensor will have the highest point cloud density for a single-channel sensor on the market.

Our sensor has also been designed for immunity to interference from sunlight and other lidar sensors using our proprietary scan locking intellectual property. Our sensor will also output axial, lateral, and vertical components of velocity of moving objects in the field of view at 30 hertz. I believe this is a groundbreaking feature that no other lidar technology on the market, ranging from time-of-flight or Frequency-Modulated-Continuous-Wave sensors, are currently expected to meet. Let me elaborate a bit more about the potential importance of this feature.

The capability of future active safety and autonomous driving solutions to predict the path of all moving objects relative to the ego vehicle at 30 hertz is one of the most important lidar features. This is significant since these active safety systems are tasked with determining and planning for the optimum path for safety. Providing a low latency, high-resolution point-cloud at range is an important first step. However, having a detailed understanding of the velocity of moving objects in real-time enables fast and accurate path planning and maneuvering of the vehicle.

Sensors from our competitors using, either mechanical or MEMS-based beam steering Time-of-Flight technology currently do not provide resolution or velocity approaching the level of our first-generation sensor. Additionally, flash-based Time-of-Flight technology has not demonstratedimmunity to interference from other lidar which is big issue. This potentially limits the effectiveness of these sensors to be considered as candidates for the optimal lidar sensor or as the primary sensor to be considered for active safety and autonomous driving solutions required for 2024-25 OEM targets. lidar sensors based on Frequency-Modulated-Continuous-Wave technology only provide the axial component of velocity by using doppler effect and have lower resolution due to the length of the period the laser must remain active while scanning.

With the lateral and vertical components of velocity missing, lower accuracy of the velocity data would make predicting the future position of moving objects difficult and create a high level of uncertainty. The core function of active safety hardware and software is to accurately predict what will happen and adjust in advance of a dangerous event. These missing velocity components could potentially mean a larger error in the estimated velocity compared to the actual velocity of objects and predict incorrect positioning. Let me share an example.

An ego vehicle moving at 60 miles per hour and a target vehicle moving at 25 miles per hour relative to the ego vehicle, covers approximately 11 meters in a single second. Our sensor updates position and velocity 30 times per second, which would enable better predictions at a higher statistical confidence, compared toother sensor technologies. If the target vehicle suddenly starts changing its position relative to the ego vehicle, an active safety system would do a much better job if it had more precise position and velocity data of the target vehicle. This could mean the difference between active emergency braking stopping short of an accident versus a potential collision.

A sensor that can provide an accurate and detailed picture of position, resolution, and velocity ofall objects relative to the ego vehicle at a faster frame rate would enable better active safety systems. Delivering safe mobility at the speed of life requires a sensor that is fast in data output, has high resolution so it can classify objects, has appropriate cost for large volume scaling, and provides precise velocity and range of objects to predict what will happen in driving conditionsall of us experience day to day. When evaluating lidar specifications from various sources, it is important to consider the context of actual risks in the driving experience all of us have. I would also like to provide a fuller picture on what our product roadmap could look like and why this is important for our value.

We expect Microvision's long-range lidar sensor will have two versions in the future. Our first-generation sensor is the first product in this roadmap. A future generation sensor would be a more advanced version and could have the same hardware layout as our first-generation sensor. A future sensor could also include our proprietary software that would provide features needed for a stand-alone sensor used for active safety applications.

I want to expand a bit on the importance of this future product and the value this could represent to our shareholders. Having what I believe to be the best-in-class first generation sensor gives us a huge step up against competition. It also provides our very capable team with a hardware platform to further increase value for potential partners and our shareholders. In the short-term, I expect our team to continue focusing on internal and external validation of our first-generation lidar sensor and any potential confidential evaluation from customers or partners.

In the long-term, I believe a future sensor could provide features like Active Emergency Braking, Active Emergency Steering, Pedestrian Active Emergency Braking, and Active Lane Keep, among a longer list of higher level ADAS features with Microvision software running on our edge computing. I believe a lidar sensor with embedded software that does not require massive amount of external computing will ultimately reduce cost of systems for OEMs, thus potentially accelerating adoption of vehicles with autonomous driving and active safety systems. I expect that key features in our firstgeneration sensor like highest resolution, full velocity components, immunity to sunlight and other lidar could allow an incredible opportunity for us to add significant value with our software for a greater sustainable strategic advantage. I believe future products built with our software, sensor performance, edge computing, and scalability, would be valuable to OEMs, Tier 1 automotive suppliers, companies that are focused on mobility as a service, and therefore, of value to our shareholders.

As we remain focused on exploring all potential opportunities to increase value of our company,a portion of our team will continue building toward this roadmap. I look forward to reporting on our progress. Another major advantage of our technology is its capability to demonstrate scalability. To demonstrate this, we successfully developed and installed our long-range lidar sensor pilot line in Redmond.

This pilot line is sophisticated. It includes six custom active alignment stations that our team developed working with our automation partners to enable scalability and performance. Our team has launched multiple pilot lines in the past for ourdisplay, augmented reality, and interactive display products. I am very proud of our team's ability to apply their expertise and complete this pilot line on time given the challenges with a pandemic.

This pilot line will allow us to validate designs and manufacturing processes in house in faster cycles. We expect limited quantities produced from this line will support exploring potential partnerships. This pilot line will also enable us to take our designs, process maps and control plans, and launch a new highly automated production line to support expected initial sales inventory in the second half of 2021 through a contract manufacturer. This future production line in Asia will eventually have the capacity to produce between 12,000 to 15,000 sensors per year starting sometime in 2022.

The purpose of this second line is to show the next level of scaling. The ultimate capacity of this production line can be adjusted to meet volumes as required prior to mass production in the 2024 to 2025 timeframe. We continue to work to mitigate risks to our plan due to COVID and other supply limitations. A key element to show scalability of our technology comes from being able to scale our highly reliable and cost-effective solid-state beam steering system for automotive use.

This month, we launched our fifth-generation MEMS to a 200-millimeter wafer size with our MEMS fab partner. This is of course not a new effort for us. We have launched our MEMS to scale in the past with our third-generation that were used in a Sony product and our fourth-generation MEMS that was part of our April 2017 contract and are currently in production. Advancing our fifth-generation MEMS to the fab is a big step for this program that will allow us to demonstrate to potential partners our capability to meet future price targets.

I am extremely proud of our team to have achieved this key objective with all the challenges faced through 2020. I would be remiss if I did not mention that our long-range lidar sensor is and developed internally from our proprietary MEMS based laser beam scanning technology. This intellectual property has been developed and proven in various programs for more than two decades. Our differentiated sensor is built on a large body of intellectual property, including more than 400 patents. I believe this provides us with a competitive moat in hardware and software for years to come and a very important sustainable strategic advantage.

I would now like to briefly update you on our exploration of strategic alternatives. I believe, our technology and products are at inflection point in multiple verticals. I want to emphasize that the Company remains committed to exploring all strategic alternatives to maximize shareholder value. In October 2020, we set the objective to complete our lidar product and said having hardware that can be productized would be an important step for evaluation by potential interested parties.

We completed that objective in April as planned and are prepared to support any potential evaluation of our technology and capability to scale. As I shared earlier today, I believe our sensor technology is differentiated by features that will potentially be recognized as disruptive in the market. I have shared with you that I believe consolidation in this space will continue and signs of this are starting to become public. I believe Microvision needs to continuously build value with our products, roadmaps, and partnerships, while also exploring strategic alternatives.

Given the continued consolidation in the market, I believe this is a pragmatic approach as we seek to maximize shareholder value. I want to emphasize our primary focus will remain continued validation of our first generation lidar sensor and support any customized evaluation data from potential partners. Finally, we ended the first quarter with $75.3 million of cash and cash equivalents. As Steve will share, our cash requirement and plan for growth are under control providing a sustainable runway.

This allows us to explore all our options from a much stronger position to maximize shareholder value. I sincerely believe our company now is in one of the strongest positions in our history to be successful. We are in a solid financial position and potentially have a disruptive new product in a market segment expected to have global impacts. The work required on the road ahead is hard.

I am truly energized everyday as I think about our future and remain profoundly optimistic in our path. Now let me turn the call over to Steve to discuss the first-quarter's results. Steve?

Steve Holt -- Chief Financial Officer

Thank you, Sumit. Good afternoon, everyone. For the first quarter, revenue was $479,000, a 21% increase over last quarter's revenue of $395,000. All of the first quarter's revenue was royalty revenue and attributable to our April 2017 customer.

We're pleased to see an increase in royalties over the fourth quarter and look forward to our customer's continued success with sales of their product. As I have pointed out before, royalties related to our April 2017 customer will be credited against the non-refundable prepayment the customer made in 2017. Once the prepayment is exhausted, the customer will begin making cash payments for royalties due. At the end of Q1, the balance of the prepayment stood at $7.3 million dollars.

The $7.3 million is on the balance sheet as a contract liability. Our first-quarter cost of revenue included a $5,000 credit related to the reversal of a warranty accrual. The result is a first-quarter gross profit of $484,000. In comparison, gross profit was $395,000 in the prior quarter. Operating expenses were $6.7 million in the first quarter, up from $4 million in the prior quarter.

In the first quarter, we put in place an employee incentive plan to retain and motivate our team. The expense recognition for this incentive plan increased our operating expenses by approximately $1.2 million in the first quarter. Total non-cash compensation for the quarter was $1.6 million. This expense was a non-cash item.

Other causes for the increase were the company's portion of payroll taxes on employee stock option exercises and vesting RSU awards. There was also increased spending on labor and benefits due to an increase in headcount, and an increase in materials and subcontractors for the development of our first-generation lidar sensor. Our headcount at the end of March was 57, up from 47 at the end of December. For the first quarter, our net loss was $6.2 million or $0.04 cents per share. This compares to a loss of $3.6 million or $0.02 cents per share in the prior quarter.

For the first quarter, cash used in operations was $4.5 million, which compares to cash used in the prior quarter of $4.2 million. Again, the non-cash compensation I referenced a minute ago was the primary factor causing the cash usage to be so much lower than operating expenses. Cash and cash equivalents at the end of the first quarter was $75.3 million, up from $16.9 million at the end of the prior quarter. The increase was the result the proceeds we raised from two ATMs which we discussed on our last earnings call and that were completed in the first quarter.

I'd like to now turn to the second quarter and give some thoughts on our spending and cash usage as we move forward through this year. I expect an increase in operating expenses in the second quarter. As I mentioned earlier, we initiated an incentive program that uses equity to retain and motivate team members. Those programs will continue through this year, and the expense recognized in Q2 will be similar to the $1.2 million recognized in Q1.

I then expect the expense related to that program to decrease to about $1 million in Q3 and $800,000 in Q4. Additionally, in April the company signed a three-year employment contract with Sumit as CEO. The agreement eliminates any cash bonuses and instead primarily uses equity for CEO compensation.The agreement was designed to align CEO compensation with long-term shareholder interests. The agreement grants Sumit 1.2 million shares over three years and will likely generate non-cash compensation expense of approximately $7.5 million this year.

About $5.3 million will be recognized in Q2, and then about $1.1 million in Q3 and $1.1 million in Q4. Again, this expense is a non-cash item. As for cash expenses, we expect we will continue to add headcount at the pace of around 10 to 12 people per quarter for the remainder of the year, primarily in our engineering organization as we further advance our first-generation long-range lidar sensor and prepare to start production. Additionally, we expect to backfill some of the support positions that were eliminated in our February 2020 headcount reduction. Taking those items in to consideration, along with other spending, we see Q2 Operating Expense in the $13 million to $14 million range.

Given that much of the increase is in non-cash compensation, we expect cash used in operations to be in the $5 million to $5.5 million range, up $500,000 to $1 million from the $4.5million used in Q1. Additionally, you may have heard about tightness in the supply of silicon chips. To mitigate risk of supply shortages, we have ordered inventory for some long lead-time components that are expected to arrive in Q3, but if they should arrive before the end of Q2, we could see another $1 to $2 million of cash used in operations in Q2. As Sumit said earlier, development is progressing well and to ensure the supply of components needed to meet our plans, we concluded it was prudent to place orders for those long-lead time components.

Before we open the call up to questions, let me add my appreciation for our engineering and G&A Teams. The engineering team, just days ago, completed the A-Sample hardware and development platform on schedule. This feat was something that some said they couldn't do, much less do on schedule. They were supported by a top-notch team in our G&A areas that were able to support the engineering effort and also maintain the public company compliance and controls that are so necessary to our success.

We are very fortunate to have some many outstanding people working at Microvision. With that, we will now open the call for the questions.

Questions & Answers:


Operator

[Operator instructions] Our first question today will come from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Glenn Mattson -- Ladenburg Thalmann -- Analyst

Hi, thanks for taking the questions. Congratulations on getting the A-Sample out for the lidar product. So you know, you set a milestone and you hit it and that was a terrific work. I guess then people start thinking about what the next milestone is and you've kind of hinted multiple times that there'll be product available for shipment in 3Q or 4Q.

So you know, I guess, is your expectation that you would have multiple shipments by then? If so, when would the timing be? Like, would you be able to announce them? Maybe not announce to the customers, but that you know, similar to the April 17th contract that you got a customer or two or three and OEM that's sampling the equipment. Any thoughts on the kind of roadmap for the news flow over the rest of the year on that -- on that front?

Sumit Sharma -- Chief Executive Officer

That's a good question, Glenn. So I think the way I think about it is, I think Steve and I have both mentioned that these are initial quantities. So we're looking at a couple of hundred and think about them in terms of more like direct sales, if somebody wants to buy and do moving platform testing and they need sensors for their fleet or whatever, a range of options that come through us, right, and there's lots of companies out there. I'm not only available publicly because at that point, it's been validated by us and external parties, and it would be something we would offer to buy.

But I think sending out its initial quantity part is an important point to remember.

Steve Holt -- Chief Financial Officer

I think what we said was we're working to get the production line up in Q3, Q4 timeframe. We'll be doing our internal and external verification reliability testing, compliance testing, and be -- and then plan to sell those initial quantities in the later part of the year. So that's that's sort of what our thinking is for this year in terms of getting the product out there and for sale.

Glenn Mattson -- Ladenburg Thalmann -- Analyst

OK.

Sumit Sharma -- Chief Executive Officer

If you think about our April 2017 customer, right? We -- that contract's going into production. Therefore, we always have the very proof concept that we are in that space and we are driving past the automotive parts. In the automotive lidar, creating reputation for a long time is important. So therefore, this line objective shows scalability is very important actually.

And I think I mentioned this last call as well that it's equally as important technology and we are actually in very good position for that.

Glenn Mattson -- Ladenburg Thalmann -- Analyst

Right. In the past, you've said that getting the product completed would kind of derisk the story potentially for potential acquirers and you kind of talked about that a little bit in your prepared remarks. But I wonder was there kind of a lull in negotiations while people waited for you to finish this and we expect now that it would pick back up? Or just any color or their clarity on that would be great.

Sumit Sharma -- Chief Executive Officer

Yeah. I think we are clear that having the ability to prove what we were trying to -- what we were saying we could do was critical in progressing things along. And so you know, I totally can't comment on the process further than that.

Glenn Mattson -- Ladenburg Thalmann -- Analyst

OK. Thanks. And the April 17th customer, there was a large technology company that won and is a very large DoD contract in the last six weeks or so. You know, I guess can you, whether or not you can comment on anything about that, or how it would affect you if it's related? I imagine you can't comment, but I thought I'd ask.

Sumit Sharma -- Chief Executive Officer

Yeah, yeah, we can't -- we can't comment on that Glenn, sorry.

Glenn Mattson -- Ladenburg Thalmann -- Analyst

OK. Sure. And so -- and just, Steve, on that expenses for the components that note because that's the only kind of cash the major part -- most of this is non-cash related to the stock comp stuff, but the $1 million to $2 million you said it could come in Q2. But if it comes in a little early, thte $1 million to $2 million and otherwise, I guess, that would come in Q3 until make --

Steve Holt -- Chief Financial Officer

Yeah. The target -- I guess, I'm trying to say, we're thinking the Q2 cash used in operations would be in that $5 million, $5.5 million range. But I want to say there could be $1 million to $2 million of inventory, should it arrive early that would be a good thing I guess. But you know, inventory purchases go to cash used in operations and so I just want to put that out there as a caution that if it arrives on the certain quarter, one day versus the next, it could be $1 million to $2 million, depending on how many units arrive.

Glenn Mattson -- Ladenburg Thalmann -- Analyst

Sure. OK. Great. That's it for me.

Thanks and congrats again.

Sumit Sharma -- Chief Executive Officer

Thanks, Mike.

Steve Holt -- Chief Financial Officer

Thank you.

Operator

Our next question will come from Kevin Dede with H.C. Wainwright. Please go ahead.

Kevin Dede -- H.C. Wainwright -- Analyst

Good afternoon, gentlemen. Thanks so much for taking my questions. Steve, you mentioned headcount going from 47 to 57 the end of the quarter and Summit you mentioned, I guess, development -- software development for generation, the second generation. I'm kind of wondering how you're teeing up headcount to address the challenges you might find in that -- with that initiative.

Sumit Sharma -- Chief Executive Officer

I think that's in the numbers that Steve gave last time how you'd end up the year. I think, we work very closely that's accounted for. So there's no changes in what -- I gave a little more detail today of what's value, right, how you think about step by step. But I think, we've -- everything we've said is, it's already accounted for in there.

Steve Holt -- Chief Financial Officer

Yeah. I said today, Kevin, we're looking at 10 to 12 people a core. This is probably the pace we would see this year.

Kevin Dede -- H.C. Wainwright -- Analyst

OK. Yeah. You spoke -- though you addressed support staff and I guess, I was just wondering what you were going to have to do on the software development side.

Sumit Sharma -- Chief Executive Officer

Yeah. We'll be having people in the engineering team, in production areas, and support staff, and that's all of those areas in that 10 to 12 people per core.

Kevin Dede -- H.C. Wainwright -- Analyst

Yeah. Got it. Got it. Thanks.

OK. Thanks. Can you help me sort of put valuation in perspective, gentlemen? At what -- almost $2.9 billion market cap and maybe a 20% premium. I'm wondering how you think that might size up against alternatives.

I know you spoke to some -- that you spoke to frequency modulation and I'm just wondering how you guys look at that.

Sumit Sharma -- Chief Executive Officer

Yeah. I'm not going to comment on valuation obviously, but I mean, just think about it. I think that we said -- we talked about a lot of detail in the call today specifically. You have a disruptive product that's able to do something that the final application needs and there is a spectrum of technology and companies out there.

Their solution is to [Inaudible] regardless of what the comparative valuation is, I'll let the market decide that. Our job is only control. We take our technology and make sure people understand the value of it, as deep as they want to go, as broad as they want to go and impact it's going to have. Numbers like you're saying, right, I think it's all relative.

And then of course, I'm very optimistic about the company. I think there is room to grow, I always do. But you know, it's something that it's important for everybody to get to see, why it took so much time to talk about the innovation, why it's so valuable. You haven't just offered product in a hot market, excuse me, that's hard to pin down, right?

Kevin Dede -- H.C. Wainwright -- Analyst

Yeah. Absolutely, that's why I asked for your view. Thank you for taking that --

Sumit Sharma -- Chief Executive Officer

No, no, you know I mean --

Kevin Dede -- H.C. Wainwright -- Analyst

Sumit --

Sumit Sharma -- Chief Executive Officer

It'll go up and down and our moods are based on what happens. It's really knowing like what we have is disruptive and that's the point we have to make. That's it.

Kevin Dede -- H.C. Wainwright -- Analyst

OK. Fair enough. Thank you. Could you help me understand the OEM, the auto OEM's qualification cycle and maybe the time involved? Just so I might be able to compare that against your, I guess, time to development.

Your -- because you suggested, I guess, full manufacturing in the '24 or '25 timeframe at volume.

Sumit Sharma -- Chief Executive Officer

What I said was our production --

Kevin Dede -- H.C. Wainwright -- Analyst

I understand how long it takes them to yeah --

Sumit Sharma -- Chief Executive Officer

So our production lines that can make A-Sample which is a first step, except this A-Sample design will go through reliability and other things and it could be available for direct sales or anybody obviously. Beyond that, the real answer to your question is, that if let's say an OEM was interested in something, you have stages, A-Sample, B-Sample and so on, which is their development cycle. So whenever I make sourcing decision I take that step by step. There are always in the market standard features that everybody is aware of and it's standards qualification of what [Inaudible] wants and what [Inaudible] those are standards.

But then, OEMs, each OEMs because they're competing in the same market each other, they have their own confidential things behind that. So you just -- it's a hard question to answer, but the point is, those phases is what they take out. They look at the maturity the technology, they look at the maturity of the company, they look at the maturity of the supply chain. It's a safety-critical device that's going to have a 15-year tail.

They want to make sure they can support it for that long, so those are all the things that goes into it. So as far as the qualification, once they have a target in '24 or '25 model years, let's backtrack and it's pretty well known what the decision will be and how you would go and how they're being valued. So the production line, the way to think about it is, it's a demonstration obviously. There's nobody in the world that can actually demonstrate that level of scalability.

You know the whole concept of, excuse me, the perfect lidar, I'm using bunny ears on the phone here. The perfect lidar is not just about the features. It's also about scalability, long-term cost, reliability, proving all of those things and this production line will just let us allow it to show off what we've done all the time. You know, I wanted to emphasize over 20 years.

It's not the first time we've done this, we've done this multiple times successfully. So I think we're in a good position to demonstrate that, but really, that schedule is controlled by the individual OEMs. There's no general steps, except what's generally known that there's after a BCM so on sample to mass production or certain production.

Kevin Dede -- H.C. Wainwright -- Analyst

OK. Well, I speak for myself and I'm sure Glenn follows into this as well. You know, we've been around through a bunch of those cycles, Sumit. So we understand it.

I guess, it was just on the production side, right? It's just kind of hard to fit where you are and how that folds into what actually goes into a finished, complete vehicle. Because I mean, as I understand it, there's a -- there's certainly the OEM qualification and there's the intermediary and I was just trying to make sure that I had a rough idea of how to think about it.

Sumit Sharma -- Chief Executive Officer

All right. So the thing is, to think about A-Sample product, obviously, it's not an FPGA, right. To make an [Inaudible] that the timelines are known, so those are all compounded in. And obviously, for us from a timeline standpoint, those milestones are probably more important because that's the biggest cost reduction right there, is a [Inaudible].

So some of the features that may be in a application processor like Velocity for our first-generation product and are putting in our associate reducing cost, we have a lot more flexibility for that. So as far as you're thinking about, like you know, timelines for that, the first thing is, the Tier 1, as any company, I'm not going to use Microvision as an example, any company and that's really going to be providing. Are they going to be a Tier 2 supplier or licensing to somebody else? Those are things that have to be figured out with the OEM. So the question is hard to answer because of that, but scaling of our technology, the timeline, and whoever does it have to do it or somebody else has to do it.

Those are the ones that have to be checked out first and then a decision on how to commercially do it, right. So there are two separate things, but the milestones are kind of set. Any design that would have an FPGA needs analog and there's SOC in our case. What level of application software is in there.

We do something very unique or we are endeavoring to put it all in SOC and not have to require a huge amount of computing. That's actually very important and we have a line of sight to that. So just demonstrating that as the steps ahead or even if it will be required for something like that.

Kevin Dede -- H.C. Wainwright -- Analyst

Thank you so much for the -- OK. Yeah. Well, thanks. Thank you very much for the color.

In the -- in an ultimate on the road test platform, how many sensors the Microvision type would you suspect any one vehicle would need?

Sumit Sharma -- Chief Executive Officer

So let's talk about it in general. So you see a lot of numbers in TAM, the softwares, there are a lot of things mixed in, but if any of us are going to have these cars, it has to be affordable. You can't have them [Inaudible] in the sensors, but you definitely want to have more than one, right. Because it's up to five sensors, one can imagine, but there are a combination of heavy pilot versus traffic jam pilot versus parking, depending on the feature.

Recently, I read that GM said that it had 30 models targeted for ED and four or five year timeframe for example. How many of them are going to have these features? Those are things are going to become clear as any company moves to this, but there's just a handful of sensors required to get to those higher level of sensors. Now if a car needs forward collision warning and active lane keep for example, our lidar sensor, obviously, has higher level required, but have the added benefit off to other fields of view. So it gets resolution at range, it's very unique in that sense.

But if a rear warning is required and there will be another one, so it really depends upon the kind of features that they're offering in those vehicles, on those targeted vehicles. So a general answer is, a long-range lidar which is the fourth one, which is going to be the real active safety that's required and then there's other potentially flash bays or some other kind of lighter or sensors required for lower-speed maneuvering that work in concert or that work individually. But certainly, can be more than one, let's be honest because getting as much awareness as possible of your surroundings in these vehicles, would be very important for the first-generation product. So it's unclear at this point that all of us have the same marking data that's available and that's wide ranges of numbers in there and they all account for different numbers of sensors required.

Yeah, but in general, right, definitely more than one.

Kevin Dede -- H.C. Wainwright -- Analyst

OK. Thank you, Sumit. Thank you very much. Thanks for taking my questions.

Sumit Sharma -- Chief Executive Officer

Thanks, Kevin.

Operator

Our next question will come from Tay Bordner, who is a private investor. Please go head.

Unknown speaker -- Private Investor

Yeah. Hi, can you guys hear me?

Sumit Sharma -- Chief Executive Officer

Yeah.

Unknown speaker -- Private Investor

OK. Hey, congratulations on -- to you and the whole team on all the progress made over the last 14 months. I got a quick question for Steve and then I've got another question. Steve, last year you guys had to declare publicly in one of your SEC documents, an estimate for the 2017 royalty customer.

Do you have to do that again this year?

Steve Holt -- Chief Financial Officer

Yeah. Yeah. You're talking about under AFC66, the revenue guidance.

Unknown speaker -- Private Investor

Yeah.

Steve Holt -- Chief Financial Officer

You project out what your deferred revenue and contract liability recognition is going to be for the current year and that's in our 10-K that we filed back in March, $3.2 million and it'll be in the Q when we file that.

Unknown speaker -- Private Investor

OK. Great. I must have missed that. Sorry aout that.

OK, thanks. Right. Right, kind of reading the footnotes. I got a question on the software.

Actually, I've maybe two questions on the software. I mean, Sumit, you've spoke about the development platform which I assume is a software platform. Is that -- is that a platform that is going to -- is used to collect, analyze, slice and dice the data that's received from hardware? Or is it a software platform that actually allows the hardware to be configured based on maybe different types of FOV or resolution type stuff like that or is it both?

Sumit Sharma -- Chief Executive Officer

Both, it's a developer platform because the sample, anything you want to put on there, you want to have someplace that you can test it out, put it on. And of course, our A-Sample that's on path, potentially if anybody wants to do something unique that they know -- they want to test for themselves. We would not upset our path of our A-Sample because there's a group of people that potentially might be wanting to look at that. So our hardware platform that I'm talking about, software hardware platform is -- we would do that.

So it could be -- it depends, you know, I mean it's flexibility. That gives us the flexibility of what is the right place to provide what's needed, right. If anybody ask any potential person interested in options and unique, that flexibility would be there.

Unknown speaker -- Private Investor

OK.

Sumit Sharma -- Chief Executive Officer

We certainly don't want to take like somebody who's obsessed with the entire thing. You know there was more than one people, right, so it gives our team more flexibility.

Unknown speaker -- Private Investor

Right, it makes total sense. Makes total sense, right. Lets you be a little bit nimble. And then regarding the software comments you made today for the potential next generation, future generation.

I mean I guess, I heard that the -- I view that more as embedded software. That's sort of just completely integrated with the hardware and the software to do a bunch of work that would have to be done outside, meaning higher latency probably and maybe not as efficient. Is that what you're referring to there when you talk about that kind of software and the potential future version?

Sumit Sharma -- Chief Executive Officer

That is correct. So we've always focused ourselves on -- first of all, we don't do anything [Inaudible] products. So I think most of the investors when they listen to other competing companies, everybody talks about quote unquote software. So we're very specific and consistent in what we've always said.

We make a hardware, our hardware and anything would be at the edge computing level alone. So there's companies out there, that of course, there are mobility companies out there that have significant software suites. They're doing another level of automation, much higher, level five, high level, level four, let's say. That's a different market.

The big market and tam is a level three, that's where most of the cars are going to be. Having something that a better software that works easy, without requiring massive computing like five or eight-kilowatt waterproof computer, that's not reasonable. Those are OK for development cars, moving platform for development cars, but computers are like very expensive. You cannot imagine a real car ever having them.

So if a lidar sensor have high enough resolution, fast enough frame rate, and can process lots of data which our sensor can, our sensor has somewhere between 1.5 to 2 gigabits per second, it's a massive pipeline of data. It processes that at edge that allows you to somehow show the feature validation independently, then you can actually be considered potentially for a primary sensor. Right now, nobody can save any sense of refinery or not. So that software that I described today, it is actually a big important part of the story.

Now, we have our first generation, I want to be clear, we call it the first generation that it is a product, a piece of hardware and I call it a future generation without getting a number because it's on the roadmap. It's showing what the value is and every one of these things don't have to be turned over. If you want to really know what the value of it is, what they impact is, what disruption you've actually caused, you have to turn over and you have to show people what's possible with technology and leverage and what it does. Now, if somebody had a path of that future costs of that full sensor, suite, or that system could be reduced, I mean, one could project that potentially adoption to these because you have more affordable solutions.

Unkonwn speaker -- Private Investor

So, ultimately --

Sumit Sharma -- Chief Executive Officer

Actually be part of that conversation and let them know what we have actually can do.

Unknown speaker -- Private Investor

Sure. So ultimately, that -- you know, your painting a picture and telling a story about how Microvision could provide that software. And ultimately, that is just really to reduce the cost of the overall system solution, it sounds like to me, and more efficient as well.

Sumit Sharma -- Chief Executive Officer

Well, again, let me just go a little bit higher for us, right. There's lots of lidar companies out there, and I think on the last call I talked about consolidation is common sense and you're not going to have massive -- two hands of lidar companies, automotive, they will condense down and everybody wants to know who's going to be at the final table. Is is going to be specs, is it going to be scalability, right. You can imagine that all the valuations saying, whoever is going to win is going to win big.

These revenues are multiple years out, why do valuations valid? Because people are making the bet, maybe they're making the bet potentially, who's going to be at the final table, who's going to win, right? So you want a sell component of why you have something that projected out that far has a very serious chance of being a contender. And so David and Steve today and we're just going back and talk about airbags. I think when airbags came out in the early days, same exact thing. But when they became regulation, there's only a handful of companies that were there in the world that were supplying all the airbags.

So, yes, you want to show that it is much more high tech compared to airbags as far as what this will be required to do. So it's in our best interest to make sure that people understand, not just the high resolution and you know those specs, it's beyond that because that data stream, but what do you do with it? You put in the software and you work something that you can actually do something actionable. And you know, there's lots of little testing and of videos on YouTube I'll let you guys find that out. Just go take a look at it right and they show you actual accident situations, how fast they happen.

Just imagine a computer has to do it faster than the human that was driving that. Interesting videos and I love watching it because it kind of blows your mind. It kind of puts in perspective for me. Why it's important, why like all the things that our team is driving for, I mean some of the best people light our work, in Microvision now.

There's been some real good work. So that's the -- that's the top down answer I can give you is, it's really about the consolidation, how we converge and you can think about our software is a meaningful part because ultimately, that overall system have these.

Unknown speaker -- Private Investor

OK. Great. Thanks. Final question, can you tell us how many entities have requested the A-Samples? Is that a fair question?

Sumit Sharma -- Chief Executive Officer

We're not going to comment on that.

Unknown speaker -- Private Investor

All right. Thank you very much.

Sumit Sharma -- Chief Executive Officer

Thanks.

Operator

Our next question will come from Jim Cronica, who is a private investor. Please go ahead.

Unknown speaker -- Private Investor

Thank you for taking the question. My question is, how if the -- a buyer or a partner has an automotive company, as one of its members of its group, and you want to work with them and then the second group comes in -- I'm thinking of like Microsoft have decided they want to go in the lidar business and they're going to work with GM. The second group could be Google and interest from Ford because they had somebody on the board that used to work there. Is your lidar going to be constricted because of that slightly premium relationship with the one partner.

Is it going to be a slick restricted to a single automotive manufacturer? Or will you still be able to do business with many more auto manufacturers?

Sumit Sharma -- Chief Executive Officer

Let's let's take that question generic, right. Because I think it's a very speculative and lot of things you're asking about. Let's make it generic and I'd like to borrow your name.

Unknown speaker -- Private Investor

Fine.

Sumit Sharma -- Chief Executive Officer

I think, let's say there is, OEM 1, OEM 2, right, I think as I say general some pockets of people that may be interested or they want to evaluate it. The benefit we have is, everything we have is homegrown, proprietary to us. We've grown this all from ourselves. We own it all.

So it it gets acquired, the company will own it. And then it's of course, you need to [Inaudible] that person, right, and our job is you've got to imagine what it is right now. But in the case that if somebody or multiple people want a partner, there's no restriction. It's all on -- it's what value will be.

There's no restriction to one person, either because when Takata sell the airbag or maybe it's not a good example because the Takata is no longer around, but even a company sells an airbag to OEM A and then, not to put it aside to OEM B, it's not commercialization they want to scale globally. So I think that's -- that's specific case, think about it and we never talk about OEMs general specifications of any of the product vertical, nobody talks about that. In automotive, some generic ones they made public. So, yeah, we can comment on that, but they keep some secret, right.

So this is a unique industry. So I think, think about it. You are a company, you have to roll it out, and it depends on what the commercial options available there, But there's no restriction to us. We own everything.

Unknown speaker -- Private Investor

But you could be making a restriction in who you ultimately decide to partner with if they -- if they are the best buyer.

Sumit Sharma -- Chief Executive Officer

It's really hard to speculate on because I mean to comment on because it would be speculative as what anything would be, who knows. But I mean, the fact is, it's all ours and you have to give them a compelling reason why this is going to be a paradigm shift for them. That's about all we can probably say. So I think, like, you know, you're trying to draw conclusions.

I'm just saying, it's impossible to even get to that point because there's various scenarios. Clearly, everybody wants the best economy of scale obviously, right. And ultimately, what combination that may be or may not be, it's impossible to comment on. I think I'm going to give a very honest answer actually.

It's because I don't know. I don't have a crystal ball to say what people think. But if there is like, there's two companies, if it's our product, we can trade with anybody, of course. If we don't like it then -- we own it all, right.

We choose who we work with, right. We will sell to any OEM that or any consumer or any pocket of customers that feels confident that this is what they want. Absolutely.

Unknown speaker -- Private Investor

OK. Great. Terrific job by the way for all -- for all of you. I appreciate it.

Sumit Sharma -- Chief Executive Officer

Thank you.

Operator

Our next question will come from Adam Jones who is a private investor. Please go ahead.

Unknown speaker -- Private Investor

Hey, Sumit, it looks like you're moving from successful development to marketing now, sales and marketing. And a lot of that was laid out in a recent job post for a brand marketing manager. I'm wondering about a couple of points in that. Maybe you can illuminate one of those points was about bringing the brand and product story to life for customers, investors, employees.

I'm wondering how you see that story, how you see it unfolding, and what kind of ROI you expect it to generate.

Sumit Sharma -- Chief Executive Officer

I think I'm going to step back and put it into perspective. We've received a fair amount of questions about this. If you think about it, we have -- we have lots communication to be done with a new product, new market. It would behoove us to know that the value to the shareholders, obviously, because you want to make sure that everybody has a fair understanding of the impact that we have created here.

So I think like one provision there. I don't think it's that big of a deal because it helps us make sure that people know the right story. You know, it's not kind of organically grow into it. So it's kind important that that's done.

You know, communicating with investors and investors have something, right. I mean, you know, we have a small team here. We can't ever -- we can't have, I think, sort of you said like maybe you want more and understand more about the technology side of things, right. And it's not marketing in general, if you think about it, I think one thing you said that's what I am saying we're here to.

We're not getting into marketing, it's just part of a normal company building value. If you got something valuable, if you don't get the message out, how do you know that you have enough value on the table and I don't know any other way, right. People need to understand what this is and I can describe you my enthusiasm, right. But it takes more than that to tell the real stories, step by step to understand how to solve it.

So I can talk about the concepts and what the business impact is, but it takes a lot more than that. And I think to be fair, we've gotten many questions from our retail investor base, wide range of them, and said yeah, that would be nice to to do it, except we can't have that with the resources we had so far. So I think that's a -- I think that's just part of the value that you have to create when you have something valuable. And you know, I think a role of that person to help you tell the story, I think it's beneficial for the company, right.

Unknown speaker -- Private Investor

That's really my only question.

Sumit Sharma -- Chief Executive Officer

Go ahead, Steve, sorry.

Steve Holt -- Chief Financial Officer

Yeah. That role do corporate communications, company presentations, website or things like that. So those are all that role is going to do.

Sumit Sharma -- Chief Executive Officer

And as a [Inaudible] of this company, where your website's updating takes too long, right? So, we're a tech company, right, and we have to act like a tech company. So we're just aligning to what is expected.

Unknown speaker -- Private Investor

So -- but in terms of marketing or working with potential customers that I believe it was in the 10-K you mentioned that that's the executive management team. Is that still the case? Are you guys making those inroads directly?

Sumit Sharma -- Chief Executive Officer

Yes. Well, this is where, if there is Expos what we go through. There's a bunch of what we've done to have a floor show. Steve and I can't do that.

I mean, I just mean --

Unknown speaker -- Private Investor

Yeah. I know that.

Sumit Sharma -- Chief Executive Officer

But you have to get there. You have to have get your sensor out there. If you end going to see us. You know, any Expos that you go to, just imagine.

There's a bunch of work to be done and presented to the market. So we always are excited to come visit us and we always welcome you so long as yoiu have a good experience because this is something new.

Unknown speaker -- Private Investor

I guess so, maybe I was just getting hung up a little bit on the semantics with them. That you have it, where it talks about customers or senior stakeholders, and maybe some other differentiations you make in terms of who does what within the realm of the business.

Sumit Sharma -- Chief Executive Officer

Yeah, maybe so, maybe so.

Unknown speaker -- Private Investor

OK. Congrats on reaching a successful milestone this April.

Sumit Sharma -- Chief Executive Officer

Thank you.

Steve Holt -- Chief Financial Officer

Thank you.

Unknown speaker -- Private Investor

You're welcome.

Operator

Our next question will come from Gio [Inaudible] who is a private investor. Please go ahead. Gio, your line maybe muted.

Unknown speaker -- Private Investor

Sorry about that. Yeah, I was muted there. Good afternoon, gentlemen. Sumit, I was looking at the pictures that the the lidar unit yesterday and the one with the cover of -- there was a lot of talk sort of among various shareholders that that's a very ASIC and we're wondering if, is that something that was a proprietary design of Microvision? Or did you go to someone else and use their part or partner with someone else in designing that? Could you give us a little bit of color about the internals of that thing?

Sumit Sharma -- Chief Executive Officer

Yeah. So it's got the analog and analog side, obviously, that drive all the analog side of it. The MEMS and the ASIC and then there is our FPGA-based, you know, where our magic sauce is. Of course, all our own family jewels in the digital which we're trying to do ASIC in the future, but it is an FPGA level.

And there is a -- there's a third board on top which houses a processor or an external processor for the platform, right. You want to have everything there if you are required to create something you're not scrambling so it's part of it. Is it getting use or not use, that's you know -- we're not going to comment on that because it's unclear what long-term. As I said, our first-generation product, our intention would be to not have that significant cost or have any kind of application processor with GPU and big CPU on there.

Our bread and butter is you know, we are very good at actually putting into our SLC that goes up to the DSP level, right. And that's -- that's why products that we make are great features and yet they have no competitive price points that we can do. So think about that A-Sample, it's serving a purpose it's supposed to be, which is a development platform. So we have multiple, just preparing for anything may or may not come.

You have everything there, so you can respond quickly, and you don't have to keep developing new hardware. That's the best that I think about that.

Unknown speaker -- Private Investor

OK. That makes sense to me. Thank you.

Sumit Sharma -- Chief Executive Officer

I just want to add a little note, right. I mean, probably one of the reasons why I wanted to put that picture out there and I think I kind of got a little annoyed. I'm not -- I shouldn't get annoyed so easily that people are saying that Microvision they don't know what they're doing in hardware. They've never done hardware.

What business they have and that kind of just rub me the wrong way and I'm pretty sure of a lot of people that work here is rub the wrong way. So it's kind of important to show you guys. Obvioiusly, you don't want to talk about what's inside, I mean lot of things were left covered, but to show like you know there's real hardware just like the housing top and bottom that -- anybody can do that. There's actual stuff in there, right.

So I hope you know, I mean this is a brief look into it, right. But I think it's quite a lot in there.

Unknown speaker -- Private Investor

You know me, I'm always up for talking about the tech.

Sumit Sharma -- Chief Executive Officer

Sure.

Unknown speaker -- Private Investor

Thanks.

Sumit Sharma -- Chief Executive Officer

Thank you.

Operator

Our next question will come from Jeff Porter who is a private investor. Please go ahead.

Unknown speaker -- Private Investor

Gentlemen, good afternoon. Congratulations.

Sumit Sharma -- Chief Executive Officer

Thanks, Jeff. Thank you.

Unknown speaker -- Private Investor

Following up on Gio's question, there appears to be an -- I don't know if you can comment on it or not, but there appears to be a NVIDIA Jetson Xavier NX component. Can you comment on, whether that is -- that's what it enables?

Sumit Sharma -- Chief Executive Officer

I can't comment on what it enables. I think you can see logos and stuff like that. Just think about that incidental choice. We could have another song there if we want to, right.

We've just picked one that makes sense. What we're doing, but it's -- there's nothing more to really comment on that. So I think the point about the first generation, I really want to take that -- Jeff, the take away is, it's our intention. Think about it, there's let's say there were two products, one is going to be your first generation which is going to have a very specific price target.

The other one's got software, probably got more to it, more innovation, there was going to have a different price points. So these things are like future things. What our current hardware has to start thinking through, what the different options would be for that and to demonstrate that, when we talk about scalability, absolutely, when you do things at the factory, but also designs are scalable. That when somebody looks at it, it's not another 10-year invention.

All the key ingredients of what's -- all are very good actually, just trust me on that. They think through multiple steps ahead of how they would want to scale. That's what's impressive about them. So think about that as an incidental choice right now, we can show what do we want.

But if our business benefit is to put it our [Inaudible] of course we're going to do that. We could provide a feature at the lowest cost. So I want to be clear. It's incidental.

That's how you think about it because it has to go to an advantage. If everybody's got the same chip you know, of course, that's going to limit some things, but there's some features that people want put in that are not required, right, and this is public data. So if somebody could do active for example, that's a pretty big important feature. It takes priority over anything else for multiples.

It's public accounts that people made. So again, think about that chip as a, as an incidental choice that we made and we would somebody else's ship, if they liked. It's agnostic to it is what I want to say.

Unknown speaker -- Private Investor

OK. OK. One additional question and this relates more to display. Can you talk about the current state of direct green laser diodes as opposed to, say 10, 20 years ago when a company was founded.

Sumit Sharma -- Chief Executive Officer

I think green lasers you know are fortunately, there's more than one partner in the world that has been lasers now. So I think they're not supply limited. You know there's no -- they all have their own IP. They're mature processes.

I think it's more demand limited. So I think as the market starts opening up, laser is not going to stop and you got to roll out of any kind of factor display or any product that we have or that display only AR. I think the green laser diodes are much more common now. Not common, there's only a handful going OEM, but they're not art anymore.

Unknown speaker -- Private Investor

So they're more prevalent now than they were 10, 20 years ago.

Sumit Sharma -- Chief Executive Officer

Oh, yeah, absolutely. Yeah. I mean if you think about our attractive display, I think we -- we've worked on that for a long time. Obviously, that's part of the supply chain.

Things that we had to open up and we had to work on that and we're pretty confident that that would not have had any impact.

Unknown speaker -- Private Investor

OK. All right. That's all I have gentlemen. Congratulations again.

Sumit Sharma -- Chief Executive Officer

Thanks so much.

Steve Holt -- Chief Financial Officer

Thank you. In addition to some of the questions today, we also received quite a few questions were submitted. We've run over on time. I've just gone through the list of them and I think we hit most of this stuff that was covered in the questions that were asked today.

So I think in the interest of time and not being redundant, the questions we've already answered and we just go to your closing comment.

Sumit Sharma -- Chief Executive Officer

So, thank, everybody for joining. I think it is a good time. I think we really have to think about built -- continue to build value while I'm exploring, if you can do those two things simultaneously. And I definitely want to emphasize that, as you go through alternatives, this is something we focus on very seriously.

But we also look at every opportunity to increase shareholder value and we will continue to be prudent as we see and describe how we move forward and focus on the areas that make us the value the most. So thanks for joining and we really appreciate all the effort, all the energy and emotion everybody was putting in. Thank you for that.

Operator

[Operator signoff]

Duration: 71 minutes

Call participants:

Lindsey Stibbard -- Paralegal

Sumit Sharma -- Chief Executive Officer

Steve Holt -- Chief Financial Officer

Glenn Mattson -- Ladenburg Thalmann -- Analyst

Kevin Dede -- H.C. Wainwright -- Analyst

Unknown speaker -- Private Investor

Unkonwn speaker -- Private Investor

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