Ibeo Automotive Systems GmbH (MVIS) Earnings Call Transcript & Summary

Good day, and welcome to the MicroVision Shareholder Update Conference Call. [Operator Instructions] In addition, 4 retail shareholders have been requested to ask their questions today on the live phone line. Participating analysts and the 4 retail shareholders will each ask 3 questions. [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 Anubhav's prepared remarks, we will open the call for Q&A. Please note that some of the information you'll hear in today's discussion will include forward-looking statements, including, but not limited to, statements regarding anticipated benefits of the company's asset acquisition announced last week, such as accelerated strategy, forecasted revenue, expanded customer base, larger product offering and access to increased manufacturing capacity and availability of funds as well as statements containing words like potential, believes, expects, plans and 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. This conference call will be available for replay on the Investor Relations section of our website at www.microvision.com. Now I would like to turn the call over to our CFO, Anubhav Verma. Anubhav?

Thank you, Drew, and good afternoon, everyone. Thank you for joining us again. Last week, we announced an agreement to acquire assets of Ibeo Automotive systems, a very important software and hardware company based in Hamburg, Germany in the LiDAR space. On the conference call last week, we presented to the market the strong industrial logic of the coming together of MicroVision and Ibeo to create a formidable LiDAR company. Today's fire chat is intended to further address the strategic merits of the deal and provide more color on the go-forward strategy for the combined business to a much broader audience, including our expanded shareholder base. The team at Ibeo has built incredible products over their history, ranging from the highest volume LiDAR product, shift to date in the automotive industry with their SCALA sensor to innovative software products in perception, auto annotation, validation and autonomous driving demo platforms. Ibeo is a highly regarded company by global OEM and have been focused on solving key problems in the LiDar and ADAS space. MicroVision's strategic goal has always been to create exceptional lidar hardware and embedded software products that will solve mobility problems ranging from high-speed highway pilot for automotive OEMs. In addition to that, we want to further diversify into nonautomotive customers through multi-market strategy, including customers for industrial, robotics, commercial vehicles and smart infrastructure. This gets the combined company an accelerated revenue trajectory and expands to TAM, which I will discuss in a bit more detail. The combination helps us achieve this goal and create a formidable group of engineers in LiDar and software space. With more than 700 patents awarded globally and additional intellectual property, meaningful revenue synergies are expected for the 2 companies. Now let's turn to Slide #3. The 2 biggest advantages of this acquisition are discussed here. Let me talk about the first one. The combination accelerates the development of a high-speed highway pilot capable solution desired by automotive OEMs. With the combination of MicroVision's best-in-class MAVIN lidar and Ibeo's perception software ported into the MicroVision digital ASIC under development, the combined company would be able to deliver the lowest cost, smallest profile, highest embedded perception capable sensor. Sophisticated hardware development with custom ASICs and MEMS, our core expertise in our Redmond team. They will collaborate closely with the new Hamburg team in developing a product ready for OEM qualifications. We expect to demonstrate the combined capabilities of the MicroVision hardware and Ibeo's perception software by early second quarter 2023. With automotive OEM target feature landscape changing to requiring low-profile sensors that would be integrated into roofline products. The combined expertise of the 2 companies would be ready just in time for RFQs targeted for 2023 and beyond. We would be the only company positioned with the product that meets all aesthetic and performance OEM requirements. Number two, this acquisition further expands the breadth of offerings for MicroVision that now includes software that has already passed qualification through OEMs and is generating revenue. This adds a very important dimension that would generate revenues faster. But this combination adds Ibeo's legacy sensors and flash-based sensors that are currently sold to nonautomotive customers as well. This enables acceleration of revenue through our multi-market strategy as this provides diversification into growth areas in industrial smart infrastructure, robotics and commercial vehicle segments. For the combined company, we are forecasting a revenue range of $8 million to $15 million for 2023. The range is dependent on timing and completion of the transaction. What's important to recognize is that Ibeo has a mature perception, auto annotation and validation software solution available today. Ibeo software has successfully passed through qualification process and is used today by numerous customers. Now let's turn to Slide #4. Ibeo's current product portfolio includes legacy sensors and next-generation flash-based hardware for addressing market segments in industrial, robotics, smart infrastructure and commercial vehicle at a competitive price. The software suite of products include perception software, which is a mature source code for 360 degrees all around the vehicle that enables point cloud preprocessing, algorithm for clustering and segmentation, lane and road boundary tracking, 3D dynamic object tracking, et cetera. Another important opportunity for innovation and revenue generation is in Ibeo's stand-alone software business in auto annotation. This is an important product line that we expect to invest in. The software takes driving validation data that is collected by OEM, Tier 1 and other lidar companies and auto annotate it for machine learning algorithm development. This is an accurate and cost-effective way to perform this task in comparison to manually annotating the commonly used techniques. We're excited about this product line and expect to grow it. This product line will generate revenue in 2023 with expected growth for years to come. It is currently utilized by teams at top-tier OEMs in Germany and U.S. Ibeo has had key relationships with top-tier German and U.S. carmakers in the sector with some key logos shown in the slide. To execute on the product lines, we expect to leverage the existing manufacturing partnership between Ibeo and ZF. Ibeo has an existing partnership with ZF as an established Tier 1 partner to OEMs that is manufacturing Ibeo's current lidar sensor. ZF has been producing lidar systems on behalf of Ibeo since 2020, providing deliveries to Great Wall Motors, China's largest SUV and pickup manufacturer. This highly automated production line pass the capability to supply sensors to automotive OEMs and nonautomotive customers. As a result of this acquisition, MicroVision expects to expand the existing manufacturing partnership to include the manufacturing of MicroVision's MAVIN product at the ZF's facility. Now let's turn to Slide #5. This is an attractive deal for MicroVision from both value and structure. This transaction is structured as an asset purchase only where MicroVision acquired Ibeo's key assets, key customer contracts and partnerships, key patents and intellectual property related to the hardware and software with limited liabilities as part of the deal. The purchase price for these assets is up to EUR 15 million. In other words, MicroVision gets the full economic benefit of the go-forward revenue with limited liabilities. The transaction is being financed exclusively with cash on hand and no stocks being issued to the sellers to retain the upside for MicroVision shareholders. If you recall, we had shared that the company would strategically utilize the ATM program to create shareholder value. In November, we raised some capital as part of the existing ATM program. Although the cash purchase price is not payable until the closing of the asset acquisition, tapping into the ATM has allowed us to raise sufficient gas to cover the purchase price when do. This ensures that the combined company has financial runway potentially through 2024. MicroVision's financial discipline and market leadership position enabled us to act as an industry consolidator. This transaction demonstrates our financial discipline that differentiates us from our peers in being very strategic with our investment philosophy in line with that of our traditional public company. The closing of the acquisition is expected to occur in the first half of 2023 subject to the regulatory clearance from the German Ministry of Economics and climate protection. Now let's turn to Slide #6. Let's discuss the combined company business model and financial performance. For the combined company, we are forecasting a revenue rage of $8 million to $15 million for 2023. This range is dependent on timing and completion of the transaction. This revenue is projected from an expanded and synergized product portfolio, this portfolio now will include Ibeo's perception software, standalone auto-annotation software, Ibeo's legacy sensors and next-generation flash-based hardware, along with our existing MAVIN product line and MicroVision's AR-related products and technology. The combined customer base includes key automotive OEMs in Germany and the U.S. as well as direct sales to nonautomotive customers. In previous calls, we had outlined a projection of $2 billion to $4 billion in cumulative revenue through 2030, which was primarily based on our estimates only for serial production win with the automotive customers. Now with this acquisition, we have expanded the focus to cover multi-market segments that represent approximately $10 billion of incremental TAM. This acquisition not only adds further upside to these projections, but also helps derisk our business model through the ability to expand the partnership with ZF. We now believe that there will be significant upside to the $2 billion to $4 billion revenue estimate through 2030. We hope to provide additional color and updated financial projections based on the revised business model once the transaction is closed. MicroVision has always taken pride in having one of the strongest balance sheets in the lidar company -- lidar industry, coupled with a disciplined and prudent approach to make investments. Based on our balance sheet, plus the capital we raised recently, we expect the combined company to have financial run rate potentially through 2024. To summarize, we're very excited about this transformational acquisition for MicroVision as we have been able to leverage our strong balance sheet and discipline to accelerate our go-to-market strategy and create our revenue-generating software and hardware business. I believe the combined company will support tremendous potential to help drive long-term growth within expensive product lines that are in sync with the customer landscape both in automotive industry and multi-market industries. We look forward to your questions during this conference call. We expect to close on the acquisition in the first half of 2023. We'll provide more information about the combined company after closing on the acquisition. Operator, let's open the line for questions.

[Operator Instructions] Our first question is from Andres Sheppard of Cantor Fitzgerald.

Congrats on the acquisition, and -- maybe to start off, Anubhav, I was wondering if you could maybe give us a little more detail, that $8 million to $15 million in revenue that you are now targeting for 2023. Is that coming from the sample sales that have begun this quarter? Or is that also a combination of now the combined business I just want to get a sense of that variance in that revenue.

Yes. Thank you, Andres. That's a great question. So this $8 million to $15 million is a pro forma combined company revenue which is a combination of revenue streams from MicroVision's product portfolio as well as Ibeo's product portfolio. And I think I talked about quite a significant portion of this revenue is coming from the already software revenue-generating products, which will flow through at higher margins expected in 2023 and 2024. So we are excited about this revenue streams, that will accelerate our trajectory in the coming years.

Wonderful. That's very helpful. And maybe as a follow-up. You've mentioned that with this acquisition, you now expect to increase the TAM by north of $10 billion. And so I'm wondering, is that addition in the TAM? Is that a result of MicroVision now perhaps more aggressively pursuing these nonautomotive verticals for the lidar. I think we touched on smart industrials, robotics, smart infrastructure. Is that where that additional TAM is expected to come from?

Yes. Thanks, Andres. Yes. So obviously, what Ibeo brings to the table is a very strategic product the sensors that are essentially going to be used for the nonautomotive customers because, obviously, as you're aware, our MAVIN product is a high-speed highway pilot, and especially with the competitive price point of Ibeo sensor, we expect to be very competitive in the nonautomotive markets such as smart infrastructure robotics, industrial applications where these sensors would be sold to as direct sales to nonautomotive customers to further provide the revenue streams in addition to the high-speed highway pilot from expected from MAVIN. And the strategic reason for that is, I think we have discussed it, what this gives the company is an opportunity to expand the growth profile by including the industry or the multi-market TAM, which obviously, I think there are several reports in the industry would suggest that the growth profile in that industry might be even stronger than the automotive growth. So that's why we are very excited because this combination gets us best of both towards industrial as well as the automotive -- the multi-market as well as the automotive lidar verticals.

Got it. Understood. And maybe my last question, it's a bit of a 2-part question. With these new verticals, can we assume that the sales cycle for them is shorter than they would be for automotive. So therefore, is there an opportunity to perhaps begin ramping up revenues sooner than initially expected? And maybe secondly, if I could, the long-term guidance remains unchanged at this time, even though the TAM -- despite the TAM increase. So what was the thought process there?

Sure. So let me take that question, and maybe I'll address the second question -- the second part of the question first. So we kept the revenue guidance in obviously because of the transaction is still not closed. I expect to update the guidance once the transaction is closed from that standpoint. So we would have more information once we announce the closing of the transaction in the first half of next year. Now coming to the first part of the question. Yes, the sales cycle in the multi-market strategy are shorter than in the automotive space. So we expect that these direct sales would be obviously not as big as the serial production wins, which we expect to win in the automotive vertical, but they would be sooner or faster, which should accelerate the revenue trajectory. And hence, that's why we have the range of $8 million to $15 million, which essentially is sort of our expectation of what 2023 could look like for the combined company?

The next question comes from shareholder, Mike Volcan with Volcan Investments.

First, I just wanted to mention that Sumit, Anubhav and Drew and the entire MVIS team. I want to let you know on behalf of all investors that we appreciate the work and dedication and the execution of our go-to-market strategy. This has been well done. My first question -- with the company's focus being on completing the automotive RFQ cycle, what are the meaningful milestones during that process, including MAVIN that investors should be focused on as you work towards completion.

I'll take that one. I think a lot of it is in the prepared remarks, but let me just pull out the key threads and I'll highlight it for you. As you think about it, the overall product we're targeting, we believe that it's a real niche is somewhere in the roof line, which is exactly where every OEM is focused on for high-speed highway pilot. Where the product is right now, you can see from the hardware design that we've demonstrated, some of them would open cover tops and everything. It's at a very high level of maturity. But the next big step that has to really -- that's a game changer and it will be the only lidar company that we will graduate from a lidar company to more of an ADAS company is incorporating perception inside our ASIC. And this is may sound like just a bunch of words, but this is actually very, very important folks. If you think about it, most people that make lidars, they output a point cloud. And that point cloud gets filtered and gets handled and all that stuff happens. And then it goes to some place else, like perhaps like a domain controller, where other algorithms are applied to extract some actionable items from it. And the list of features that earlier in the call that Anubhav mentioned, pretty much that's the family of features that are getting done down there. People call it classification, they call it different things. But a different variant of that is getting done down on domain controller. Since it's getting done on the domain controller, there's expensive computing, the entire system cost is higher. And so therefore, to justify that, people do things called classification, free, mailbox so on and so forth, right? But this comes at a heavy, heavy price. But I think I've always talked about the word drivable, not drivable, right? It's a simplified way to think about perception of you perceive your environment, and it does not matter if it the mailbox or [indiscernible], just don't hit it. If you think about what we're calling about perception right now, right, it sort of incorporates all the features that Anubhav mentioned, and it enables drivable, not drivable as an actionable item. But that would be coming from our ASIC. So -- if a customer wants the point cloud and wants to implement that on their domain controller because there's some algorithms, they can still buy a high-resolution lidar -- high resolution relating into lidar. But if a customer wants a really cheap solution where the perception -- object level perception comes out of the product, that's what we will provide. So this is the very next step. So what I expect, as I mentioned, is to showcase that our best-in-class hardware and their best-in-class perception software, combined together how they would enable this product. And -- that's actually going to be a big step that I expect, as I mentioned, right, early Q2. It should be something that we would be sharing with the market, just normal videos and other ways to sort of prepare and share that. So that's like a very, very big step. Beyond that, as I mentioned, for us is the ASIC cycle starts. And it starts with the analog ASIC cycle and eventually the digital cycle and now that we're going to put perception in we're going to shift the digital ASIC cycle slightly, but still stay in line with the nomination that potentially any kind of nomination from an RFQ that would be there. So kind of just align everything together. But then after that is our analog ASIC getting done, our hardware is getting qualified, just more and more data that we'll be generating for anybody that would be looking at it. But of course, our focus remains on getting a nomination for the combined hardware and software. So I think as you look at the rest of the year, there's -- again, like all this like every year we've had so far, there's going to be some discrete milestones, first of which is going to be in early Q2. And there'll be additional ones that we will talk about and we talk to you at the Q4 earnings call next year.

Thank you. Let me skip a couple of questions because Anubhav answered those very well. How is our MAVIN production relationship with ZF impact our go-to-market strategy of letting the OEM choose their own Tier 1? Many prominent OEMs have an existing relationship with ZF. How does MicroVision market MAVIN to other OEMs that have existing long-term relationships with Tier 1 other than ZF?

Yes. So this is -- I think it's -- we've always said we're going to market our product revenue to OEM. It's important for them to decide what technology they want and how they want to utilize in their systems. The Tier 1 relationship you're talking about, those are Tier 1 integration relationship. They wouldn't create a sensor into behind the windshield or the roof panel sort of like a complete product they would deliver, but they are integrators. By the way, there's no relationship with ZF, as we said, potentially as part of this deal, we're going to work with them. That's our expectation. ZF would be like a manufacturing partner or another Tier 1, like those Tier 1 companies, you also have manufacturing facilities, so you'd work with them in a supply chain capacity, right? So our interaction with them would be there because we're still marking directly to OEMs. What we're not doing is we're not licensing our technology and having those Tier 1 market to the OEMs. That's not what we're doing. So our go-to-market strategy is still intact. We market to the OEMs. They can pick any integration partner, but the manufacturing of the device that has to happen still has to happen at a factory that they trust and have been qualified and the typical ones, the big ones that have scale are, of course, the Tier 1 manufacturing facility. But we work with them in the capacity of a manufacturing partnership but not as a marketing or a license partner because we are not licensing our technology.

I understand. One last question. With our MAVIN sensor available by RFQ in 2023, can you give us a more specific time line by stages to RFQ?

There's no -- there's none that you can -- there's different rounds of information that people ask for. There's an RFQ document is generated, then you have to submit can be something as much as 10,000 pages worth of information because they really want to know is something that they can trust, the company that can trust, partnerships they can trust, the technology they can trust, IP that they can trust. So even though you have a pedigree with other deals you have done in your past that led to like tens of billions of dollars worth of business in the past, you still have to go through a pretty exhaustive betting process. And especially when you're talking about a system that's going to have perception inside. But that's the price of entry. You just have to have the first of year end and patients to get through it, and we do. So I think there's no other milestones to discuss. I think if we're at some point, a nomination, which is like a designed win, when that happens, it is appropriate, we will definitely, of course, announce it, right? Any kind of design win, it's an event. And of course, we look forward to updating it if that potentially happens in the future.

The next question comes from [indiscernible] Jacob with Peak Financial Group.

Thanks for taking the time and allowing us to ask a few questions. My first one would just be what does MicroVision see winning an OEM partnership look like? Does that stem from a single design win and manifest itself from there?

Yes. I think what an OEM design win looks like, I mean, RFQ is effectively our base sensor, which is the bistatic, right, a version of that with perhaps different mounting conditions, different firmware, something customized for them. It's not specifically connectors. I mean, everybody would have their own connector. And for that variant, you would develop a customized version for them that there will be potentially some NRE or who knows what kind of deal we strike at that point. And then you would go through that development and qualification cycle. So the development is to a high level of maturity, as I've said, but the qualification for something like this that is safety-critical, takes a long time, right? And the benefit we have is, of course, we do everything in ASIC and it's not software. So qualification paths are relatively easier to visualize. But step by step after design win, of course, is they give you a model year. They tell you the volume. They give you the qualification steps that they would like to follow. And that's part of like the RFQ process. that you have to give them confidence you understand and you can meet and exceed their expectations. So those steps will be there all the way to what's called start up production or still production start.

Perfect. Next question is, I know it's only been a short amount of time since you guys announced the potential acquisition, but have you had any responses or OEM engagement just about the acquisition?

Well, I think we've just made the announcement last week, and we haven't closed yet. You have to close first, then you can talk about it. But of course, we will -- I mean, this is the week after the announcement. And yes, we intend to put together things and update all relevant OEMs about what our intentions are. And yes -- and then once the time is appropriate, of course, we will make the announcement if closing happens. And from there, it becomes more of a straightforward marketing because at this point, we haven't closed yet. We just announced the deal so far.

Got you. Well, that makes sense. And last question for me is MicroVision has been primarily focused on the European market up until this point with the potential acquisition. Can you give us an update on your strategies for the U.S. and Asian markets?

I think for us, we can do an RFQ in any part of the world. We're prepared with data. We're prepared with samples. We're prepared with a lot of things. It all comes down to OEMs and when they're going to have a model year or a specific platform that they decide that they want to incorporate such features on. So it really comes to the OEM time line, right? In the case of lidar, these are long programs, they have to be supported. So we're at their mercy. But there's a schedule that's created that we have a visibility of all the different RFQs that are in flight. And by the way, somebody was interested, there's public data on that one, right, I can't point you towards it, but if you look hard enough, you'll find it, once those announcements are made, then everybody sort of prepares and once you cover that RFQ. But for us, we're agnostic. Of course, I would say that the German OEMs are probably the most active with most programs. Anything outside China, right? Because China is kind of a different way to think about it. But as opportunities come along in North America and in Korea or in Japan, certainly, we stand ready to support them.

The next question is from [indiscernible] Consulting.

Yes. Sumit, Anubhav and Drew, and congrats on the pending acquisition. It seems very synergistic to me. And thanks for letting us ask these questions. I appreciate that as well. Maybe you can just take us through the story here a little bit and give us some insight into the acquisition process. I mean when did you first start talking to Ibeo? And how long is the due diligence process? And was it a highly competitive process?

I think what I would like to -- I mean, I can't really comment on a lot of the things, right, but let me just give you some color on it. I think it was clear to us that we have a very special sensor, and we are on our path. And as we look at what are the opportunities, how do you derisk the path? You look at every opportunity that brought to you. It's a great team. Everybody should have visibility of them. This is -- they're very impressive. They have a great pedigree. So the process -- the insolvency process with them is incidental. There's no tarnish on there, the engineering team that you will ever meet there because just like the MicroVision team in the U.S., they're all awesome. So I think like as the opportunity came along and we were made aware of the compressed time line, we acted appropriately. But I think just like anything else, I think Anubhav have mentioned this multiple times, every management team in this industry that is still finding its footing has to stand ready for these kind of opportunities and make sure that they are running their companies with enough discipline, so they have capital available. And also, you have to sort of attract them because if they have lots of choices, there's something has to be charming that when they see MicroVision that, that team said, "Hey, we want to join you. You can join anybody, but we want to join you guys", right? So it's not just as simple as like, just you walk up and you make a bid. But I would like to say that as they looked at MicroVision, they realize that they're a very special company here also, not just the hardware, but just our culture and our people, and that it would be a very, very good joining of forces. So I think that's the best color I can give you for the process. Certainly, this is -- I'm in Hamburg right now. This is my fifth trip here, so a very impressive group of people. really enjoy talking to them every day. And of course, our team also is very excited about it. So I think we're certainly very, very excited about this thing. And it came together very quickly, but not as quickly as you think.

Well, sorry, I would just like to add [indiscernible] to your -- just to add some more color. So obviously, we ran our due diligence process, and Deloitte was the financial adviser and Rural Partners was also our adviser all throughout this competitive process with Ibeo.

Okay. Good. I'm sure you're limited to some degree. And maybe serendipity is still alive and well. So congrats on being prepared for it. It appears from the public statements you've made that there are some -- you're already working together -- it seems. Are there any limitations on what you can do prior to the deal closing? I mean, whether it be legal, compliance, anything at all that prevents you from working together?

I think we've just made an offer that's been accepted. I think they'll be closing. I think that's all we can comment on, right? But I think we're -- I mean, as I mentioned, Hamburg, just to welcome and have a town hall, let the people know who their management is going to be, what our culture is, what our style is. It's an event. It's a big event. And everybody wants change, but nobody likes change, as we all know. But it's a good group of people, and it's very important for them to understand we really value them. And the go-forward company, the joining of forces is going to be a much, much better ride than it has been so far for anybody as a single company. So we just want to communicate that. And beyond that, I think we really don't have any comments.

Okay. Yes, sure. Sure, that makes sense. I mean, I guess moving on to my second question. It really goes back to some of the discussion we've had here already a little bit, but maybe a little bit deeper. I mean -- as you mentioned, Sumit, direction has been, as you've stated, drivable, nondrivable the Tag point cloud. People can use the [indiscernible] cloud, they can use some of that information to a level -- at the next level up the stack. Obviously, with Ibeo, you get it seems much more deeper, I guess, tried and true perception, object-level capabilities. I mean can you talk about what this means? I mean it does seem to me to be a bit of a change in the sense that now that you have this greater capability, more complex software, it does more things that you can provide to the OEMs maybe -- and you said it a couple of times over the last month or so, a true one box solution. So can you just add a little bit more color to that? What does this all mean in that sense? And are the OEMs asking for more -- maybe they're pulling back on their own perception capabilities and looking for vendors to provide more capability.

Yes. Yes. I think the perception side, the ASIC is the path to the drivable, nondrivable. It's always in our plan. So I think that it trades true to like what has been said for a couple of years, right? Nothing has changed from our strategy effectively. But as far as like if I had to describe how OEMs perceive and what they want, they want like a one box solution that plug in. They have a data sheet that tells you all the hooks that tells you that the lidar provider is just getting you everything from super nuts. So effectively, they want to implement safety but they have a custom lidar, they don't want to learn a flash lidar versus scanning lidar of A, scanning lidar of B. Some other lidar from 1550, like they're all different technology nodes. They don't care about that. What they care about is the point cloud, the quality of it and the perception that you can do with it coming out of one box -- low cost and integrate it into the roof line and something that can have 15 years of product life, things like MEMS life for 40,000 hours for us, continuous operations way beyond what they would ever need, right? So the point is that there's a high level of maturity in a product like I always talk about. But that's what the one box solution is. So nothing about our product road map has changed by this. All it does is bring security. As far as the word acceleration, well, you're still on the time line for the OEMs, where you stand out as you stand ready, more ready than you would have been if you were developing it, that they would have to patiently wait for a couple of years like some of the other partners have announced some deals. But you know what, it's kind of like moving along like molasses for them, right, because there's a huge amount of qualification. But this we stand ready faster because of that, right? So that's the way to think about most of the product line, how they're going to get drivable, nondrivable and execute it. Okay. Does that answer the question?

Yes. Yes. Very well. very well. Along the same lines, and the same sort of follow-up here, you stated a little while ago that you wanted -- you're going to do a drive by wire demo. And I think you've not given a specific date, but said 2023. Does that -- does this acquisition -- I mean, I imagine it does, but does it speed up the process of getting to that drive by wire demo?

Yes. So think about the drive by wire demo. So most recently, there was a company that was in Level 4. They announced the bankruptcy that shook everybody in the industry. What does that mean for companies that are trying to do full autonomous driving. So that's going to work itself out. But we still keep saying that the path to any Level 4 feature is through Level 3. You really have to do sensor fusion extremely well, extremely efficiently, and there's some innovation there. So the one box lidar solution is the very first big step to enable that. But then you need to have like what I think Anubhav used word, 360 awareness, right? And that's created with sensor fusion. And you have to have another chip that would accelerate that and that all the signals from those sensors going into, let's say, a domain controller necessarily does not produce any kind of results. And that could be demonstrated by other people that have been trying it so far. It's the right set of sensors used the right way, would enable the right software to truly enable high-speed highway pilot at full Level 3. And once you can do that, it's a jumping off into Level 4 because you would have a sensor stack that is doing something and it's affordable. So you effectively use the economy of scale that would come with Level 3 and Level 2 systems, apply them to your sensor suite and now you would have a jumping off point that would have a cost-effective solution starting and then you would be Level 4 stack above that, okay? So Level 3 is still the path. And what is Level 3. I think the high-speed highway pilot is effectively Level 3, but it could have different features from different OEMs underneath it. So nothing has changed for us. Now of course, the Ibeo team has an experienced team in here that has been doing some sensor fusion autonomous driving software, but as a small prototype team. I think you've seen the pictures in our deck. There's some vehicles they have here in Hamburg and that they have demonstration platforms. Of course, I think there's also one in the U.S. So they've done some work on that one. But of course, we tend to expand on that work by focusing more on the [ L3 ] solution that we were envisioning and that we believe that our lidar would enable in combination of perhaps their lidar, radar, camera module, those things combined, a demonstrator has to be prepared, right? That would show full-blown Level 3 working in a drive-by-wire mode, meaning that you'd be on a track, you would specifically put a challenge in front of the vehicle and you would have the operator or the driver do something goofy. And then you want the system to correct it what the right solution for that should be, right? I think you've seen some early videos of that, that we try to describe the test scenarios that we have there earlier this year. So that's what they bring and, of course, having a team that's already worked on some of these problems, right, sort of alleviates our path instead of hiring a team in the U.S., joining forces makes sense. Because what we bring to the table is, of course, there's awesome lidar product that is going to enable all those features.

Okay. Yes. No, good. I know you've said publicly that the fusion of the lidar, of course, your own lidar data and radar data was something you were planning to do. Does Ibeo do camera-based sensor fusion today? Are they processing?

No. I think like you have your lidar, then you pick somebody's a radar, that's got a dev kit. You can take somebody camera module that's got a dev kit, ultrasonic, that's got a dev kit. And you design a hardware system because ultimately, what you're selling is how you would do sensor fusion, the technique with your lidar and the perception in the stack in the middle of it. And some core software that does "the autonomous driving", the drive-by-wire part of it, right? So that's just a demonstrator. And then effectively, if you did make something very compelling, where all these sensors are within the body of the car. You don't have any kind of bump-up anywhere now. Nothing just looks like a car, and you are able to create 360-degree awareness, you would create that demo. And then you would go to the OEMs because why would you want to invest significantly more capital to go all the way to a product, and that's the perfect junction point to go find partnerships. And that will take some time. But ultimately, we want to own the sensor fusion chip. Of course, our lidar that we've already developed and the technique. And they can pick a net camera module they want. They can pick any radar they want. And then we would work with them to go develop that. But of course, the L3 driving software, they would want to own, which is called planning and maneuvering. But we would show them how we -- some sort of generic way to do planning and maneuvering in a test environment. But the broader version of that, of course, they will go to develop with whomever they want to develop. So we would still carve out a big piece of silicon for ourselves, of course, the custom lidar and software, right, which is what we've always said that we want to own.

So just to be -- just to make clear, the planning and maneuvering would be owned by someone else, right, not MicroVision?

Yes. Because every vehicle provider, they want to control the customer experience, acceleration, deceleration, the pressure you feel when you turn the steering wheel, that's their drive experience that they sell. You buy a Porsche, you buy a Toyota, you buy a Honda, you buy a GM, right? There's a drive experience you get with the vehicle. That's their signature. They will own that. They will always own that. They don't want anybody messing with it. But we show a demonstration of how that could be done for the safety situations. But that piece of software, yes, I think so far, I can say consistently, they said they want to own that. That's their experience. That's their experience they give to their customer, and that's very sacred to them.

Okay. Okay. No, that's helpful. And the last question I have is, it seems to me that -- and you've mentioned it, I think the OEMs evolve, right? They change as they -- they change there thinking a little bit as they move along. And it seems to me that over the last few months, the term roofline has been said -- and it seems like maybe the OEMs are sort of -- I don't want to put them all in the same group, but perhaps sort of gravitating towards that roofline. And my question around roofline is does that means solely outside of the cabin? Or does that also include potential placement of lidar inside the cabin?

Yes. Let me have clarity on that. So I think there's some videos, some OEMs have actually put out there or something that have incorporated in a product they're going to launch, right? But what I found interesting about the video was all the camera angles were from down below or a different angle. So you all see the size of the bump out. Because clearly, you want to sell a car, you know that it looks like a taxi, it can be hard to sell. So just look at the video angles as a consumer, not even as a CEO of a lidar ADAS company, right? Just as a consumer, I'm like, hey, that's what they're trying to hide. That draws my attention to it, right? Because I like those details. Think about what roofline is. Think about where your windshield ends, above that is the sheet metal that makes the roof, right? So your roofline is where the sheet metal ends. So what anybody would want is the best vantage point for this high resolution, low latency sensor you're going to put in, expensive sensor, is the higher it is, the better angle it has to see small objects on the road that you would have to avoid that using your eyesight, you're able to avoid, but you need lidar that can do more precise maneuvering, okay? So the roofline is that where the sheet metal meets the windshield. There's also opportunities that people may want to explore to put it behind the windshield. So if you think about the roofline area, it's right at the edge where the windshield meets the sheet metal. And of course, the ultimate product would be, think about the curvature of a car that you may be driving, you like the styling of it. If somebody could put a sensor in that little edge of a sheet metal and it does not break the lines of the product, that would be pretty cool, right?

The next question is from MicroVision shareholder, Adam Jones.

Anubhav, Drew and Sumit. Congrats on a great year. I just preface by saying I feel like I know more about the company than I ever have. I think the communication has been stellar this year. I got a quick question that you may not be able to answer about the Ibeo acquisition. When you look at Page 4, there's a pretty put-in list of key partners and customers. When the acquisition is complete, I don't know if you can give us some color on how some of their existing relationships or current legacy contracts or licensing agreements might evolve as there's a transition in an acquisition. Is that something you can comment on?

I think I'll give some color on that. And I think I would like Anubhav to comment on that as well, okay? So I think we'll give the answer in 2 parts, if that's okay. And by the way, Anubhav has no idea what I'm about to say and I've no idea what he's going to say, so we're going to do the slide.

One last -- Okay. Go ahead.

No, go ahead. Please go ahead.

I just -- the other thing that would be helpful is if there's any overlap in the OEM relationships that we've been building for several years that you're able to convey, that would also be helpful.

Yes, that second part, we can comment on. So we'll start with that. All right. Let's go back to your original question. That's a good question, actually. So as you can imagine, one of the assets is the business development team, they're very experienced business development team. We've been in the process of growing our team here in Germany, also in the U.S., putting them together. Naturally, all those relationships have had over the years. This is an experienced team, they're combined with our experienced team, and that's one of the biggest synergies. It should be just on BD sales team focused on the OEMs and focus on the direct sales market or the multi-market strategy that we have. So combine that together. That's important, right? That's a synergetic thing. So as far as relationships, they come over because those people come over, right? So I think like that makes things more secure. You don't double up on anything. Anubhav, do you want to talk about the other -- the list of contracts and stuff perhaps?

Yes. So I think I'd just like to add a few things here, right? So I think we talked about the list of customers. And additionally, as we work towards closing the transaction and consolidating Ibeo as part of a NASDAQ-listed company with a strong balance sheet, you can imagine that we will be generating a lot more traction with existing and new customers of Ibeo, who were otherwise on ice due to the current situation. So obviously, what we expect is once the transaction is closed, some of those discussions would now be accelerated and obviously, now the combined company is stronger together and obviously able to offer a lot more features because obviously, if you think about it, this is a marriage of -- from an automotive standpoint, a hardware and the software, which ultimately gives us the edge to these OEMs and carmakers, right? So that's what we are expecting and some of these discussions and traction even in the -- as the news becomes more widespread, we expect to get more traction in the coming days as part of our CES, investor events and as obviously, when the transaction closes, that's when we can truly provide more color as to what some of these customers -- who some of these customers and who some of these relationships are once the transaction is closed. So we expect to provide more detail once the transaction is closed next year.

Super. Just along that line since you're talking now, the nonrecurring engineering revenue that you mentioned, can you give us a little color on that when that might come into play, how that might accelerate cash flow in 2023 and what we can expect there?

Yes, I'll take that one, Anubhav. Let me just take that one -- let me add something and then you can add something to that. So I think like as I described earlier in the call, if you can imagine, we have a core product, but there's always customization as in like this is how it has to amount. This is the [indiscernible] version that we want, here's a tweak to the feature, all those accustomed to that one design win. So as design wins happen, then depending on the complexity of what anybody wants to get done, then you actually incorporate that into a -- that's how you think about the nonrecurring engineering, right? Those are the customization for each that you would do, and that's triggered after design wins. And if they take a standard product that's already done, even then, there's some level of implementation integration needed to -- for their platform, testing customer to the things that we have to do. Everybody has a requirement for qualification that are custom. And as is evident from some of our other competitors, you can see that anything they announced, there's some associated nonrecurring engineering goes with it. So -- Anubhav, do you have?

I don't know if you can answer this. But on the nonautomotive side, after the acquisition is complete, would there be any nonrecurring engineering revenue within that? Or is that not something you can comment on until the deal is done?

I think the general answer is there may or may not be an area for that, right? It's clearly like not something that could be predicted. It depends. It depends what the market is.

And I would just like to add the revenue range to $8 million to $15 million is obviously the direct sales, some of it is direct sales to nonautomotive customers, which could be in the form of sensors that are sold to these customers or software. So it's going to be a combination of these revenue streams along with the non -- the NRE revenues that Sumit described.

I just have one more question. It's pretty hard to ignore that there's been about 40 million shares of MicroVision still short this year. But at the same time, you've navigated a challenging year really well. You get all your milestones, institutional investing went from like 10% to 30%. So there's obviously a lot of trust in the company that's been solidified. What would you say to anyone betting against you at this point because the prospects look really good, especially with the acquisition?

I would say good luck to them. I think we live in a free market society. I mean, as to just remind everybody this, right? The company's job is to execute and to share that equally with all investors and somebody could wake up and decide to be along and somebody could wake and get short. That's part of our economy. But as far as the destiny we control, is to make all the right moves, be careful about money and be very strategic about it. But execution is how we take care of that. So I honestly -- I can honestly say there's nobody in the company wakes up about that. I know like as investors all they always worry about why aren't we defending? We can't. All we can do is execute and provide information to the market and people can make their bet. But of course, on an optimist as far as MicroVision is concerned, I poured a lot myself, and I can tell you a lot of employees at MicroVision had poured even more than me. And a lot of people at Ibeo have more poured their lives. So there's a group of very hungry and very competent people ready to win. So anybody wants to make whatever bet, I wish them good luck.

Yes. No. And it's been -- at least for most investors and most everyone I talked to, it's been a relatively impressive year. You hit every milestone. I mean the company is in really a wonderful place. So we wish you the best as well.

Thank you.

I will now turn this call back over to Anubhav Verma to read questions submitted to the question button on the webcast.

All right. I guess I think the question that I'm hearing is the recent Apple announcement for the fully autonomous driving, does it have being delayed, does it have an impact on the broader lidar industry? Sumit, would you like to take that question?

Yes. No, it does not because think about lidar is a sensor and to be able to complete any kind of autonomous or LP feature, you need sensor suite. And as I mentioned earlier on, there's a huge amount of software stack that they want to own and they then want to right to create the experience. If you think about Apple, as you mentioned, by the way, I haven't read that article, so I apologize, right? But I can imagine. They want to control the experience for the user in their vehicle, just like my iPhone and just like my AirPods. So you can imagine a company like that, they're going to get the experience right. But the sensor part of it, all the different sensor companies, all our competitors, ourselves, everybody, right? We provide sensors. And then, of course, we work with everybody to help them create the experience that they want. This is no different than our contract in Microsoft. They want to experience we give the technology. So this is how we trade with the big OEMs. So I -- to me, like when I heard there's a question there that Anubhav just read, to me, that's more like, yes, they would have to decide the experience and what's the right time to go to market.

And I think I would just like to add because I think we have been constantly saying that the companies have to deliver an L3 solution first because that's what's going to be the most 5immediate revenue monetizable opportunity, rather than jumping into the fully autonomous L5. And I think we have seen a similar example of our goal happening a few months ago as well. So this just validates the strategy that we had laid out that L3 has to be brought to the market first because that's what the OEMs are looking for to offer to their customers and which would be a big revenue opportunity in the lidar space. The next question is what about the revenue -- geographic distribution of revenue. I think -- let me take that question. So I think I touched base upon this in my -- in the last call as well. The revenue diversification, especially in the next year, would be weighted towards the European customers because, obviously, as both MicroVision's focus, as we have talked about, has been on the German carmakers, which are typically pioneers in adopting new technology. And especially with the specs that they have laid out and what MAVIN provides for us, they have been very interested. So we expect the customers to be heavily weighted towards the European side of the Atlantic. But obviously, given Ibeo's relationship with the American carmakers and especially as we develop and generate more traction because obviously, as part of this acquisition, we also get offices in Detroit and our presence in the U.S. market, we expect a gradual ramp-up of revenue on this side of the Atlantic as well. It looks like we have run out of time. So I would like to thank everybody again for jumping on the call with us and giving us a chance to discuss the merits of this acquisition. We are very excited about this acquisition, and we hope to provide additional color and more updates once the transaction closes next year. Thank you so much.

Thank you. Bye-bye.

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