MicroVision, Inc. (MVIS) Earnings Call Transcript & Summary

Good morning, and thank you for joining today's webinar featuring Hans Werner-Kaas and Glen DeVos. We're especially honored to have Hans Werner-Kaas serve as our fireside host today. Hans Werner is a McKinsey & Company senior partner, Emeritus, where he was the Co-Founder of the Automotive and Assembly practice for the Americas. Today, Hans Werner is joined by Glen DeVos, CEO of MicroVision. Glen is leading MicroVision's evolution from advanced R&D to scaled commercialization in lidar, autonomy and intelligent mobility. With his wealth of experience and global leadership roles in automotive technology, perception systems and advanced electronics, Glen brings a rare combination of technical depth, operational rigor and strategic vision as the industry moves into lidar 2.0 and MicroVision's next phase of growth. Following their remarks, we will be opening the call to some questions. But before we get started, I want to make a couple of quick housekeeping remarks. Please note that some of the information you'll hear in today's discussion will include forward-looking statements, including, but not limited to, expectations regarding business, product and go-to-market strategies, products and solutions and market needs and timing. Status of commercial engagement and future demand, level of customer and partner engagement, market landscape and opportunities, acquisition benefits and risks, projections of future operations and cash flow, cash, liquidity and the impacts of recent financing activities, availability of funds and conditions for raising capital as well as statements containing words like believes, expects, plans and other similar expressions. These statements are not guarantees of future performance. Actual results could differ materially from the future results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update this information. With that out of the way, now I'd like to hand it over to our host, Hans Werner-Kaas.

Thank you, Jeff, for the introductory comments, very important. And first of all, a very warm welcome to the entire audience. I know we will have a great mix of attendees, automotive enthusiasts, nonautomotive enthusiasts, technologists, et cetera, business partners, investors. So thank you for joining us today. And we are very excited for a great discussion on the evolution of the lidar industry. The path, if I may frame it that way, from innovation to scalable deployment and frankly, also to successful [ commercialization ] and what it really takes to execute in [Technical Difficulty].

I'm a little behind. I just have this up right now so you can get [Technical Difficulty] another town hall that I wasn't supposed to this morning.

Excuse me, whoever might be talking technicalities in the background. If you could please silence your voice or mute yourself. Thank you. So just a warm welcome in case some of you may have missed it. Warm welcome. I know we have a great mix of attendees today, automotive enthusiasts, technology enthusiasts, et cetera, investors, business partners. You're all very much welcome. And if I may, Glen, also welcome to have you here with us today representing not only MicroVision, but sharing key insights in the evolution of the lidar industry. And if it's okay with you, Glen, I think let's jump right into it.

Yes. Thanks, Hans, and great to be with you today. Let's get started.

Super. Glen, you have been with MicroVision now for nearly a year. But obviously, you're a well-known entity in the automotive industry and the technology industry. You have been many years with Aptiv and before that, obviously, with Delphi. How would you describe the current state of the lidar industry?

Yes. Yes, I was thinking about that. It will be a year in April, and a lot has changed and it continues to change. And if you think about the lidar industry kind of broadly, it's really entering a new era. The first chapter of the lidar industry was kind of built on Silicon Valley disruption, hardware first, best-in-class, expensive, kind of financed on the assumption that automotive revenues would be coming sooner than later. And then that volume with automotive would drive costs down. And the result of that was a lot of kind of flashy wins. There was a lot of excitement about lidar and automotive. But the revenue is very fragile. There's revenue in automotive is always uncertain. There was very heavy burn rates for the supply base. And as a result, a number of kind of washouts as that reality set in, long time to revenue, slow growth market. And while automotive remains a really important market for us, that reality colliding with that kind of start-up behavior was pretty tough on this industry. And so when I look at it now, we're really transitioning to the next chapter, one that we call lidar 2.0. And the important characteristic of that is it's all about providing value. It isn't about providing the most impressive sensor. It's about getting lidar deployed at scale across real-world applications and platforms. And it takes a different mindset and a different set of capabilities. And what we're doing in MicroVision, and that's what we're talking about today is really building MicroVision to lead that new chapter to lead lidar 2.0. And really, that involves combining what we would say, 4 critical capabilities. The first is the right portfolio and the right performance. And that means you have to have a portfolio that's able to span across multiple applications, short range, long range and able to serve multiple markets. It can't be just a single threaded portfolio that serves one market. You have to be able to serve automotive, industrial, security and defense markets and really with products and solutions that are developed for deployment, not just simply demos, built in the U.S. and built in Europe, MicroVision has a really strong position to do just that. So the right portfolio with the right performance. The second is, and I've talked about this since joining MicroVision, it's the right price. It's about cost and price enables volume, not the other way around. We've embraced at MicroVision that design-to-cost philosophy really driven by solid-state solutions and really with the knowledge that economics are a primary concern, not a secondary concern. The technology is important, but economics are just as important. The solution has to be economically viable. And then the third key element is using software as leverage. And really, MicroVision is investing in what drives scale adoption, and we're shifting our center of gravity away from really hardware bragging rights to software that lowers cost, increases flexibility and really strengthens the system capability, which is so critical for our customers. And that's what's really critical about using software as a leverage to help drive cost down. It's what we did with camera-based systems. It's what we did with radar systems. It's what we're doing now with lidar. And then the fourth, when we talk about product and technology, I can talk about that all day long. One of the things that you don't always talk about is capital discipline and execution. And it's being very disciplined about how we deploy our capital, how we engage with customers, how we pick which customers to really engage with and where we basically place our investments. Delivering on time, on to budget with those automotive grade solutions, but being very disciplined about our capital management and our financial management. And so as you think about that kind of shift to lidar 2.0, those are really the 4 pillars that MicroVision is building.

Yes. And thank you for framing it that clearly. And indeed, it's not only about the right product line, the right performance of different product offerings. I'm very glad to hear. It is about product cost, that means enabling the right price because both MicroVision as the provider needs to make, call it, a sustainable margin and sustainable cash flows to sustain the business. And obviously, the price needs to be also attractive, be it for the OEM and ultimately for the end consumer, depending on the positioning or packaging, be it as an option or as an offering. Very glad to hear that. Now let us dive in a little bit more in the changing customer expectation. If you look on the one hand, lidar 1.0. Now lidar 2.0, what do customers really want other than obviously an affordable price, no question about it. What you're seeing in the use cases like we have seen in the early 2000s. Remember, adaptive cruise control was enabled by Radar and suddenly, every end consumer said, that's really value added for me. I probably should order it if it's not part of the initial base offering.

Yes. I think for each market, it's a little different. I'll kind of focus in on automotive for right now, though. There was a lot of excitement about the technology and the potential that the technology could bring in terms of useful features to the end consumer. That's what drove a lot of the real excitement. It was partially driven by Level 4 automated driving, but then also, hey, Level 3 hands-off driving. And there was a lot of excitement about, well, what is that -- what can that bring to the end consumer and what kind of value can that unlock? And as you think about customers now in lidar 2.0, it's not just about the tech. It is about what value they're bringing to their end consumers, which means what value can they create. And so as you think about that and we kind of look at the different markets for automotive, it really includes how can lidar enable Level 3 features but make them affordable for the OEM and ultimately, the end consumer. So it's a compelling value prop for the end consumer. There's features there, like you mentioned, adaptive cruise control, blind spot detection or other features like we see on ADAS platforms. Once you have them, you will never buy a car that doesn't have them. You won't take that step back. They're incredibly sticky and customers will expect that in their next vehicle [indiscernible] customer pull. But it has to be affordable. And that's really where the auto industry has struggled. I mean even this week, we're seeing more OEMs kind of pulling back on their Level 3 offerings. And the issue is the end customer is not seeing the benefit for the on cost of the vehicle. When they go buy a vehicle and the on cost is $6,000, $9,000, that's a lot. And there's got to be a lot of value there, and they're not seeing -- just not seeing the value and the benefit whereas ADAS systems are less than 2,000 or 3,000 maybe tremendous value. And so customers, as we think about lidar 2.0, we have to enable compelling features that are affordable to the end market where consumers pull them through and the OEM can create value from that. In industrial applications, it's a little bit different. lidar has been there for a long time. And now what we're doing is we're expanding the product offerings. There's automation, so enabling autonomy for forklifts and all sorts of industrial automation and robotics within the factories and within the distribution centers. But there's also really expanding the safety systems that are on human operating vehicles like forklifts like tuggers, like other equipment that's still manually operated in the plants and in the distribution centers where we can provide very cost-effective and very, very effective safety systems for those. And then in security and defense, this is really -- this area is moving very quickly. And especially in the area of unmanned ground vehicles, so UGVs, which need to have very capable perception systems onboard the vehicle, but also in terms of drones and what we're seeing with drones and the drone's ability to extend that vehicle's perception system, so lighter on the drone doing mapping and communicating with the ground vehicles, but also just terrestrial mapping, ISR missions, these types of things. And so you really -- when you think about that question, what is the customer expecting, it's value, and it's really unlocking new features and compelling use cases that for their applications or for their customers, they see a very strong pull. And what's exciting for us is our technology portfolio, the same core technologies support all 3 end markets. So that is incredibly important because I can basically repackage but reuse the same technology, the same software across all of those end markets. And that gives a tremendous benefit for us.

Yes. One follow-up question, as you talked about different end markets, automotive, industrial, but also obviously, aerospace, defense, security and using the same core technology is it even mutually beneficial for a player like MicroVision? And I know there are obviously others as well to actually play both in auto, non-auto, knowing that the automotive adoption path needs still a little bit of time.

Yes. Yes, that -- it's important for a couple of reasons. One, and to have multiple end markets where you can basically commercialize your technology. The first is that they tend to have different sales cycles, different times and paths to revenue. And so what we're seeing is while auto develops, we still believe that's the biggest TAM, that's the biggest market. While that develops, we're able to capitalize and monetize basically in near-term markets like industrial, like security and defense. So that brings revenue streams in now while auto develops and which is great for the business. The other thing it does is longer term, as auto is there, as industrial is there as security and defense is there, you get more -- you get really revenue resilience, revenue diversity. So when an auto cycle occurs, auto is a very cyclical business. When that occurs, well, industrial is on a different cycle. It's on a different time horizon. Security and defense is on a different cycle. So you don't get -- you don't have that effect of, oh, my entire market, my entire revenue stream is now going through a down cycle. You have revenue diversity, which gives you a lot more resilience. We talked about revenue fragility earlier on. I mentioned that. That's exactly -- this gives you the opposite of that. It gives you a robust revenue stream that's less sensitive to down cycles. And that's incredibly important for companies like ours.

Yes. No, thank you for highlighting, frankly, multiple dimensions and nuances of the economic benefits of developing and deploying the technology, both in automotive and nonautomotive. Let us shift gears slightly to the lidar industry itself. There has been over the last, frankly, few years and not only recently, quite a bit going on in terms of consolidation of the industry and in the lidar space, as we know. And obviously, when you look at other, call it, automotive supply or nonautomotive supply segments, the structure of an industry segment and how players behave plays a very important role. Where do you see MicroVision's role in this changing and new landscape, evolving landscape, probably the best way to say it. And what steps are you actively taking?

Yes. Well, near term, we've been actively acquiring. So we've been a force of consolidation. As you're indicating, lidar was a new market, an uncertain market, but a new market, a lot of technology entrants coming into it. Revenue is playing out slower than what was anticipated. And so that gave us the opportunity to identify and then be able to capitalize on consolidation or acquisition of companies where we felt their assets really were beneficial for us. And Ibeo approximately 3 years ago, Scantinel earlier this year and now most recently, Luminar. And in every case, when we looked at it, we said, hey, it's a technology that is interesting for us in terms of our portfolio. It's talent that we think is really important for a technology and an engineered product. And then in the case of Luminar, it's also -- it's both of those things plus commercial. so existing commercial relationships. So it really brought all 3 elements forward. And so we see our role not simply as an aggregator, but being able to essentially help the industry consolidate, bring together the right pieces and parts so that we can have that as part of a really a coherent portfolio and then put ourselves in the best position to -- on the path to commercialization across all 3 end markets. And so I think it's -- I think we'll still see more of this occurring in our space. But for MicroVision, we're focused on how do we build a company that as we think about lidar 2.0, we're positioned to lead in that chapter and not simply chase it, but lead it.

Yes. No. Well said, Glen, you just mentioned Luminar and obviously, it's on everybody's mind given the most recent acquisition by MicroVision. Can you dive a little bit deeper into the role that Luminar plays for, I call it now the combined entity, the combined offering of MicroVision and Luminar. And how does Luminar align with your lidar 2.0 vision and pathway as you just talked about?

Yes. Great question because obviously, that was a major development for us here just recently. And I would say there's 2 things that -- as I mentioned, there's 2 really critical things that Luminar brought. And the one was from a portfolio standpoint. And their long-range lidar, which is available already now [indiscernible] In production, Halo in development, but essentially [ BSage ] that accelerates our portfolio, our ability to offer a 1550 solution now. What's also important is that's the product. Behind that product, there are a tremendous amount of technology assets. So there's technology building blocks. There's technology, both in hardware and software that we can apply more broadly as well. So we had an immediate benefit of a long-range scanning solution today. It has a broader benefit of their technology applies across a lot more areas of the portfolio than just that. So it was a great technology portfolio fit. The other thing we talk about is their customer relationships and the contracts that they have. And that accelerates our path to revenue, just to be very -- put it very simply. So those engagements, which -- and to the credit to the Luminar team in terms of developing that, booking those business, getting those engagements started, those engagements are incredibly valuable. And we understand them. We understand the applications. We understand those customers. Many of these are customers I've dealt with for many, many years. And so that's the other piece that it brings. Underpinning all of that is talent. The third thing is really talent. And so for us, the way I look at it is that when you think about the Luminar acquisition, it wasn't about, hey, MicroVision is acquiring Luminar to grow bigger, to be a bigger lidar company to basically increase our size, it was acquired for us to move faster and move faster both on the technology development front, but also moving faster on the path to commercialization and revenue. And so that was a unique opportunity for us. Team worked really, really well to be able to make that happen. And now we're focused on bringing it all together and execution.

Yes. No, thank you, Glen. And let us quickly stay with one theme you've mentioned as the 2, 3 key strategic rationales why you acquired Luminar, talked about the technology assets, the portfolio, the talent, but also commercial relationships and customer access. Let's stay with that for a moment. Can you talk a bit more about revenue and commercialization? Because I know we have a very well-informed audience here. Some of them would like to see automotive customers on a faster and more scalable pathway to adoption, but that has different reasons. Obviously, we have camera radar-based solutions in the ADAS stack, but also there's the cost and price argument. How does that pathway look like? I know you need to look at both auto, non-auto as you just outlined.

Yes. Yes, that's a really important question [indiscernible]. Let me start by saying there's a customer set that Luminar that they were engaged with. And I can tell you, when you're working with a supplier, -- and you've invested, in some cases, years of efforts and development work with that supplier. And then that supplier has financial difficulties or goes into a bankruptcy. That's incredibly concerning as a customer to that supplier, you have a big investment there. And now you have to look at, hey, do I throw away everything I've invested in that? Do I have to find a different partner to work with? Do I have to basically start over and lose all that time? And it's incredibly disruptive for those customers. And that -- I understand that situation very, very well. So one of our first priorities was reaching out to our customers, engaging with them and basically repairing those relationships, restarting those relationships. And what's been great is we're able to -- one, we're a team that has a tremendous amount of automotive experience, industrial experience. So we understand what they're doing and what their needs are. And then for us to come in and say, look, we'll support you on Iris, we'll support you on Halo, we'll support your near-term supply needs as well as your developmental needs has been really well received. We have a company that's -- they have a company that's acquired Luminar that can be a good partner. Now that's where we now have to prove that from kind of normalizing the relationship to demonstrating we're the right long-term partner. But I believe we have -- we're in a very good position to do that. We have the right portfolio. We have the right, I think, design-to- cost mindset and ability to execute. So I think we have a great story and a value prop for those customers -- and what I can tell you today is that's been a very positive process. And to be honest, that's one of the best parts of my job is to be able to talk to customers and understand how I can solve their pain points. And so that's repairing the existing commercial relationships that Luminar had, and it's going very well. The other aspect of this, there's 2 other things that are happening as well. The one is I can now bring in MicroVision's portfolio to those Luminar customers. So I can show that here's what we're doing with short-range sensing -- here's what we're doing in these other technologies. And so it's a more comprehensive road map. It's not just about what am I doing with Halo, for example, It's, hey, I have MOVIA L, I have [ software ]. I have all these different capabilities that I can now bring to bear. The other thing is I can now bring in Luminar's technology into my MicroVision. And so where I was really focused in the near term on short range, I now have the ability to bring a long-range 15, 15 time-of-flight sensor. It's really synergistic in terms of how, one, we rebuild the existing customer relationships, but then we augment them and expand them with additional portfolio offerings. And it's been, to date, great progress. We have to execute. We have to demonstrate, we have to prove, and I know we can do that. But I'm really happy with the progress that we've made so far.

Yes. Thank you, Glen. And thank you for being so transparent also what it takes to call it, improve, reignite. You used the word repair customer relationships. I think folks in the audience here really, really appreciate that. So thank you. Let us because you already touched on it, talk a bit more about execution. You mentioned it already. At the end of the day, you can make a lot of statements. You can show great, call it, pilots or prototypes in certain settings. But ultimately, it has to go in higher volume scalable deployment, we call it a bit earlier. And lidar 1.0 transition to lidar 2.0, as you framed it, is indeed very critical. The first stage was much more proving technology, innovation, et cetera, where is the space or call it the justification to be to exist for lidar in addition to or augmenting camera and radar. Now it is about delivery. And that is not only operational delivery, because you are obligated to "to deliver returns to your shareholders." So delivery also means commercially successful. If you wouldn't mind, can you elaborate a little bit and why you are so confident that, that is the pathway to go?

Yes. Yes, you're exactly right. And I've lived through this in decades in the automotive world where the kind of the fun and quite honestly, the easier part is demonstrating a technology that gets the market's interest. And while that's great, execution is what drives the outcomes. I mean that's you have to deliver. You have to go from delivering prototypes for small volumes to being able to deliver hundreds of thousands and millions at the right price, at the right reliability and at the right performance over the full lifetime of that product. That's what we kind of call automotive grade. Industrial and security and defense, they have the same expectations. So it's no different in those other markets. You can't -- you don't get to get a pass on performance, reliability in the other markets either. So it's that automotive-grade mentality. And what we're doing with the team and what we're building with our team and in particular, our leadership team and then the key talent that we have in the organization is just that, experienced leaders that understand how to deliver into the automotive market and how to support customers all the way through development through launch into production over the full life cycle of that product, which when you add up -- add the whole thing up, it's like 20 years of support on these programs in the automotive space. It's not -- I mean it's a long-term commitment. And so we have that leadership team. We have -- with the combined organization now, we have just an outstanding talent in our engineering and our commercial team. So these are individuals that really know how to serve the market, understand the expectations of the customer. That gives me the confidence we can execute on our plan. And so as we sit here today, what we're doing right now is we're reenergizing the near-term activities with our customers. We're delivering product. We're shipping against the POs that we transferred from Luminar to MicroVision. So we make [indiscernible] started this week. So we're beginning that process. Customers have a right to be skeptical and critical. They should be. We have to demonstrate and prove that we can deliver. I'm confident with the team that we have, we can do that. And that's -- that's been a big part of that year we talked about since I've been here, that's been a huge part of my focus is putting the team together that is able to really understand the customer needs and execute to them. And it's exciting to be in that process now. And that's -- like I said earlier, it's the best part of my job to be with the customer and delivering to them.

Yes. At the end of the day, the existence of any company is that you solve the customer's problem. Sometimes the customer is aware of the problem, you can describe what state you [indiscernible] Sometimes not. And that's also your job to actually lay out the opportunity of additional customer benefit. When you talked quite a bit about the blueprint for the future MicroVision strategy in auto, non-auto near-term opportunities in non-auto markets, obviously, larger volume, total addressable market coming, but also needs a convincing obviously of automotive OEMs and frankly, the end consumer. Let me stay for a moment with the element and the importance of talent. How do you integrate the best of best, Luminar brought great leaders, engineers, MicroVision has great leaders and engineers and different footprints in Europe here in the U.S. How do you bring the 2 teams together to be one joint, call it, uniform team?

Yes. That's a really important question because I've been through a lot of acquisitions and integration activities in my career. I mean that's been -- and there's -- when you acquire a company or you bring in a new group, that integration is really critical. And you have to manage it carefully. And what I would tell you is there's a couple of things we do. And the first, and I think this is the most important thing, is to align on a strategy, both from a technology standpoint, where are we going from a technology standpoint and a product standpoint. So everybody understands and has a common vision for what the business is doing on the product side. And that -- for engineers, in particular, it's incredibly important that the engineering community understands what we're trying to do from a technology and a product development standpoint. So aligning on that strategy, critical step. The other step, and this is more on the soft side is spending time with the teams and I mean, every level. And that is communication, whether it's all-hands meetings, skip-level meetings. It's just the blocking and tackling of good management, if you will, where you engage with the team and you have real-time feedback on the concerns and the needs of the organization. As you're bringing 2 organizations together, you're talking about different cultures coming together, different ideas coming together, different philosophies. Sometimes these philosophies can be very orthogonal to each other, and you have to unify them. And you do that with time spent with the team, with really explaining and communicating why we're doing what we're doing. So you have the product strategy, you need to explain why you're doing what you're doing. And then the final piece is really kind of wraps around culture. And it's important to make sure that as people are joining, that -- everybody understands what's important from a cultural standpoint. What is the culture of our organization and what are the guiding principles and how we do our business for everybody in the organization, every role, every person in the organization. For me, those are the 3 critical things at this stage where it's very new, it's very fresh. And you have to make sure you have your finger on the pulse of how the organization is feeling about things. You are providing direction and then you're providing constant reinforcement of those things, including the culture and how you want your organization to behave, that mindset. And so for us, what I would tell you is the -- being these 2 organizations being in automotive, being in lidar, there's a lot that fully aligns already and is complementary. So it's really focusing now on making sure we have our hand on the pulse of how people are feeling, how the work is going and then really driving the expectations and the cultural elements.

Thank you. Thank you, Glen. I'm glad you -- that was also the reason why I asked the question you're pointing out the importance of developing a joint culture and culture ultimately is defined first by mindsets and then how we behave based on these mindsets and convictions and beliefs each single individual holds. So thank you for emphasizing that importance of culture, bringing 2 organizations together. I think with that segue, I think we can transition to the open Q&A session. I know we have quite a few folks who have submitted questions or real-time submitting questions. And Jeff, if you wouldn't mind to guide us a little bit what's on the audience's mind and how can we help?

Sure. Yes. Thanks for the discussion, gentlemen. We've been monitoring the questions throughout the conversation and also took a lot of questions over the last 24 hours. So we'll try to get to as many as we can here. I think the first one that people seem to be really interested in is just a really succinct distillation, Glen, around what you believe the real differentiators are for this new MicroVision and this new landscape. How would you sort of boil that down to the key points of differentiation that set MicroVision up to kind of lead this renaissance in lidar and be more successful.

Yes. Great question. I think there's -- I would highlight a couple of really important factors. One is I would start with portfolio. And we have now with Scantinel with Luminar, with what we've done with what MicroVision has developed, we have the broadest portfolio in the industry, in my opinion. We can cover all the different use cases in terms of short range, long range. We have solid state. We have polygon scanning. We have MEMS scanning. We have all the different building blocks that allow us to really go after those end markets, the 3 end markets that we talked about, automotive, industrial, security and defense. And so that broad portfolio is, I think, a critical differentiator for us. The second is I think we have -- if you think about our U.S. and our Germany-based team, we have some of the very best talent in this space, bar none. And the fact is, as a U.S. and a Germany-based company, we have an advantage as we think about some of the markets we serve. So there's a fundamental advantage there. The third thing I would say is our approach around software is, I think, unique in the industry in that we've talked about our open software framework, and it's really about opening and integrating our software with our customers' system architecture and their software architecture. So giving full access and visibility to the software that's in our sensor to our customers to make their system integration. We're a sensor company, which means we integrate with a perception system and a control system that's on the customer's platform. As such, we want to make that integration as easy as possible. So the software strategy is, I think, unique as well. And then the final thing I would say is our maniacal focus on cost. And the design-to-cost mentality that we have. And the way we look at these markets is the first thing we look at is what makes sense for this market from an economics and a pricing standpoint. How do we enable that? And so that design-to-cost mentality, that relentless focus on how do we enable our customers to create value for themselves and for their end consumer, I think, is also really an important differentiator for us. It's just not -- it just hasn't been part of the landscape in lidar 1.0 that we see as critical to lidar 2.0.

Yes. Jeff, I just add or reinforce maybe 2 points what Glen mentioned. Let me start quickly with the cost point. Always in the past, the long-held believers indeed wait for volume, you divide all your investments, be it R&D and CapEx to a bigger denominator, we call it scale and bring cost per unit down. I think what Glen mentioned around the design to cost mentality and approach and that relates to product architecture, where you're going to transition to solid-state scanning, how do you really change the product nature in terms of the pathway of the light and then you need to collect the light back. We don't want to get too technical here today. But there is quite some space in optimizing product architecture and taking bill of material costs down. And that indeed helps to bring prices down. But to actually sustain and also defend and earn viable margins for any player. And in that case, obviously, also MicroVision. And the point around open software capability to integrate in the ADAS stack of the OEM is very critical. Most OEMs, if not all, they do want to have a proprietary ADAS, advanced driver assistance systems. And that has different layers and different notions, et cetera. But you need to provide an output of the lidar system, which is easier to integrate and makes the ADAS offering just more viable, more safe for the end consumer, et cetera, and affordable. So that's only 2 points I would just highlight in addition.

No, great point, Hans.

Yes. I think the second question here I'm seeing come up, it sort of rooted in some of your comments, Glen, around the transition from lidar 1.0 to lidar 2.0 and going from proving the technology to proving the value. And I see people asking what are the real customer problems that MicroVision can solve that they can help create value for customers around. And maybe that's something you can both speak to when you look at the landscape, what are the problems that need to get solved and what are the problems that MicroVision is uniquely positioned to solve and create value around?

Yes. It's -- ultimately, that gets to the core of what we are trying to do as a business is how do we solve those customer problems. It's a little different for each of the end markets that I talked about. In automotive, it's -- when you think about providing lighter end of the automotive, it's all in the safety domain. That's the whole point of the perception system is really around safety, safety and convenience functions, kind of what we put under the ADAS umbrella. To that point, there's -- there's 3 things that the OEMs, I think, are really trying to provide to their customers. One is just safety. They want the vehicle to be as safe as possible. So providing the most reliable, the most robust safety system, whether that's Level 1, 2 or 3, is critical. And so providing them with a perception system, which determines the efficacy of the ADAS system, providing them with a really robust perception system makes their job of ensuring that they have a safe vehicle that much -- just that much easier and that much better. The second is they have a regulatory pressure and the regulatory requirement, whether it's FMVSS regulations or it's the NCAP type of the insurance industry or the NCAPs that are demanding, hey, your vehicles need to have certain capabilities, automated emergency braking, backup cameras, whatever it might be, vulnerable road user detection. So we're helping them achieve those requirements, but at -- and achieve them robustly, but at an affordable on cost of the vehicle. And then the third is really differentiation. So one of the areas you can still differentiate, and this is why Level 3 is still really interesting for the OEMs is that's an area for differentiation. It's an area where they can establish unique functions to draw -- that make people want to buy their car. And so that they're drawn to, hey, I'm going to buy this brand versus the other brand because this thing has -- this car, this OEM has these features. And so those -- when you think about it, we're helping them solve for each of those and to do it in a financially viable manner so that for them, it's a good value prop. It solves the 3 aspects that they're trying to do for their brand, the regulators and for market differentiation, but it does it at an economically viable and sustainable level. And so that's automotive. For industrial, it's a little different. It's really -- there, you're not talking about so much brand differentiation or convenience functions. You're talking about economics. How do I make the cost of moving goods, materials in a warehouse lower. It's about efficiency. It's about a cost and economic value prop. And so lidar is a key part of automation for warehouses and factories. It's the lower cost that I can provide to the forklift or the robot or whatever, the stronger their value prop is, the greater the rate of adoption. And so there, it's -- you're solving for an economic model that lowers total operating costs for basically the warehouse of the plant. And then when you talk about security and defense, those are, again, very different. You're really solving the question around autonomy. And so that you can deliver logistics, you can provide material out into the field. You can do things without putting your personnel at risk. It's a very different model, but it demands a really capable solution. And that's -- and so it's -- like I said, those 3 end markets, very diverse and different in terms of what you're solving. But ultimately, it's the same underlying technology. And that's what gets us really excited about being able to -- to be able to pursue and commercialize in those 3 spaces.

Anything you want to add there, Hans Werner?

Yes. You know what I think Glen laid out and glad you framed it so well across those different verticals or we call them end markets. That notion of solving a customer's problem or customer benefit, it should not be underestimated. Sometimes we all take it a little bit lightly, but articulating that very crisply together with the customer, like in the case of providing a lidar system as input or part of an old ADAS stack or software platform, software/hardware platform to be more precise, is critical because when you're driving at a higher speed, 60, 70 miles per hour on a highway and you have an obstacle in darkness, a small obstacle, frankly, there are very specific even test cases defined by some OEMs on that, that can indeed help to actually avoid significant or severe accidents. And that makes you as a customer really, really safer and you as an end consumer and articulating that to the OEM, OEM to end consumer is so important. So I just picked one of the end markets, what Glen highlighted.

That's great. I mean the next question I see here is kind of rooted in what you talked about there, Glen, around economics and cost. I think people are reacting well to the notion that cost drives volume, not the other way around. You've said it a couple of times. The question I'm seeing come up is what is your expectation for pricing in the market moving forward? What does that look like?

Yes. I think the key is, as we think about this next cycle, and I'll talk about automotive, I'll focus on that for this discussion. As you think about it, automotive is kind of in this period where there of reformulation. They're looking at going forward. Lidar is still viewed as an essential part of Level 3, Level 4. So a lot of activities on that front. The general expectation is to be able to get into a Level 3 type of activity, driver out of the loop, you got to be somewhere between -- below the $500 per unit for the long-range component and below -- at or below about $200 per unit for the short-range component. So as you think about that system. Now that gets you to Level 3 and Level 3 is still an expensive option. So that's great. That's a good step. But the reality is for mass adoption, you need to get to -- into the Level 2 vehicles. You need to get further down into the ADAS applications where we know the pricing is incredibly sensitive. If you think about it, just to put some numbers around it, if you think about a car you buy today, maybe it's $60,000, $70,000 purchase price for the vehicle to bring on or the sticker price for all of the advanced driver assistance features, Level 2 features typically somewhere around USD 2,000, which is when you look at the benefit and to the cost for the end consumer, that's a great value. That's why virtually all the cars have it now. When you look at Level 3, it's a significant step more than that, and that's been the problem basically is, how much more value do I get for that, and that's been the struggle. And so as we think about now I got to fit lidar into an on cost to the end consumer of $2,000 that is -- that requires aggressive price reductions on the lidar sensors. And that means that's a completely different way of thinking about it and a way of penetrating. And that's what -- that's what we're focused on where you're well below $100 for a short-range sensor. You're well below $250 for the long-range kind of play. Even at that, I mean, it's -- that's still a lot. It's a lot to fit into that price point on that car. Average car this year in the U.S. exceeded $50,000 for the first time, right? I think it's $50,300. That's close to the average annual household income. It really is a challenge. So affordability of that vehicle, that cost sensitive, that's why we're so focused on cost and how do we rethink kind of the cost of lidar for lidar 2.0. So we'll be talking a lot about that this year as we get into '26. That will be a big focus for us. We'll share a lot more on that. But we think we have a pathway to get there. And so it's -- and again, I'll kind of come back to that's the engineering talent that we brought in. That's the direction we're driving, and that's the -- that is that maniacal focus on system costs and our end customer value that we have.

Yes. And there's something, Jeff, even though lidar is obviously a different technology compared with camera or radar -- but in the early days of camera and radar adoption in the early years of 2000, you know it from the Delphi and certainly in the Aptiv days, we talked also about much, much bigger numbers today, camera, radar, obviously, short-range, long-range, mid-range radar. But we are well below the $50 area. So just keep in mind how the evolution -- by the way, as you should all be aware of, we should not take 15 or 20 years to get to the price numbers, which Glen just stated, that has to go faster to make a difference with OEMs and customers, auto, non-auto, but also for the end consumer.

Yes. And I got to say, Hans, that is -- your point is spot on. It took us 15, 20 years for ADAS to go from the very first introductions of adaptive cruise control and radar back in 2000 to where we are today. I mean we don't -- we can accelerate that. We can take the lessons we learned from that whole experience. We apply it to lidar, we accelerate. We're talking a much shorter time horizon. Ultimately, it delivers more value to our customers and the end consumer. It delivers greater levels of safety, which is one of the best parts of being in this space, you get to work in great technology, but also technology that brings a societal benefit, safety, saving lives, avoiding pedestrian fatalities. This is -- that's what gets our engineers passionate about what they do. And so -- but it has to happen much faster. It can't be 15 years. That's a fact.

We got a few minutes left, and there's a couple of important questions I want to make sure we hit on. You mentioned customers. What's the state of the Luminar customer relationships, Volvo, Nissan, Caterpillar? Have you delivered to any of these brands yet?

Yes. Yes. I won't go into specific customers, but I would tell you, we've reached out and we're engaging with, I think, now all of the customers. We've had those engagements. And I've been meeting personally with them. And just to -- I mean, they have all the questions that you can imagine. Hey, what about MicroVision? Tell us about what are you doing? And what's the next steps? And so one of the first priorities, of course, was, hey, they have POs in the system. They need product. They have to continue to do their work. And so to that -- to the question, we began shipping product this week to a European customer. So that is now happening. And what's exciting about that for me is, hey, that's how you drive revenue. You're shipping product, you're delivering, not just discussing, you're delivering, you're executing. And so this is the beginning of where MicroVision can demonstrate to those customers, we've got you back. We have you covered. We're going to provide the support you need, both from a product standpoint, from a development standpoint and then from a long-term commercial partner standpoint.

And then last quick question here. You've talked about kind of filling out the leadership team with the right skill sets, right expertise. A number of folks asking what's the status on the CFO hire?

Yes. The CFO hire is in process. And so we really -- our plan is really as we come into Q2 to kind of finalize that. I would also say, though, and this is really a credit to the finance and the finance team and the legal team here at MicroVision. We have -- with Steve, we have a great leader in place with Simon Biddiscombe, who is our Executive Vice Chair, tremendous experience as CEO, CFO. We have a great team. And why that's important is it allows us to execute on our near-term activities as we need to both from a financial discipline standpoint and compliance standpoint, but also from a fundraising standpoint as we saw here recently, we announced yesterday. But it also means we can take the time for what is, in our opinion, a really critical hire. All hires are critical. This one for MicroVision. We want to get it right. We want to take the time. And we're fortunate to be in a position with the team that we have to be able to do that. But we're still looking at the Q2 time frame to get that wrapped up.

Great. I know time is running out here. There's still a ton of questions that we'd love to answer. We'll try to get to all those questions through the Investor Relations team and the MicroVision blog and social handles over the coming days. But since we're tight on time, I'm going to turn it back over to you, Hans Werner, to wrap things up.

Thank you, Jeff. First of all, a big thank you to Glen for sharing your insights, frankly, at a very important inflection point for MicroVision and also for Luminar, obviously. But also thank you for all the participants. I know we could -- and we hope we could touch on the key questions. We also know, as Jeff mentioned, we could not answer given the constraint of time we have all the questions, but there are different forums in the future to address that. I really would like to thank you. And with that said, I would like to wrap it up. There will also be a short video coming now. So please do not sign off yet. That will provide potentially a few more highlights. And I can assure you it's insightful to watch. And with that said, the video will be coming. And again, to everybody, thank you, Glen. Thank you to entire combined MicroVision Luminar teams behind you and with you. It was a pleasure to have you.

Very good. Thank you, Hans Werner.

Thank you.