Vuzix Corporation (VUZI) Earnings Call Transcript & Summary

Thank you for joining us today for our webinar titled Accelerate AR Adoption for the Frontline Worker: Five Easy Steps to Evaluate and Deploy AR Solutions. My name is Mike Hallett, and I'm the Event Manager here at Vuzix. The format for today's call will consist of a presentation from Karl Dahlin of Vuzix and Thom Strimbu of TeamViewer. At the end of the presentation, we'll open it up to a question-and-answer session. So feel free to type any questions in the Q&A section of Zoom, and they'll be happy to answer those. Today's call is being recorded, and we'll have that later available on our website. With that, I'd like to introduce Karl Dahlin from Vuzix and Thom Strimbu from TeamViewer.

Great. Thank you very much, Mike, for the hand-off. Good morning, everyone. Good afternoon, good evening, depending on where you're coming from. We're going to be talking for the next 30 minutes about accelerating enterprise AR adoption. And for those of you that have tried or are thinking about trying augmented reality, a lot of people end up getting stuck in what we call pilot purgatory. And they're testing it, looking at different use cases, and it never seems to go anywhere. We're going to be talking today about some important steps you can take to ensure that your AR initiatives move forward and through that space. So we'll start with a couple of intros and company background, and we'll get into the 5 steps, talk about the way that we can help you get started and then open it up for the Q&A, as Mike said. So I'm Karl Dahlin. I'm running the strategic partnerships here with companies like TeamViewer. I got started in AR about 8 years ago when I was with Cisco, and we ended up developing a Webex client for running on AR smart glasses, and I got hooked. And after a few years, I moved to Verizon and helped launch the augmented reality initiatives at Verizon, and Vuzix was one of our partners. And I ended up here about 1.5 years ago, helping to push forward the AR agenda globally. And I'm very happy to be joined by my friend and colleague, Thomas Strimbu from TeamViewer. Thom?

Okay. Thanks, Karl. Everyone, my name is Thom Strimbu. I'm the Strategic Alliances Manager at TeamViewer. I hone our relationships with systems integrators and hardware partners in the Americas. Before coming to TeamViewer, I spent a lot of years as a consultant for enterprise deployments of augmented and virtual reality solutions. So I've kind of been at the front line. I was also the host of XR Dublin by Walmart Labs, which was in Dublin in Ireland, where I lived at the time. It's just a real pleasure to be with you here today. Thanks, Karl.

Great. So let's do some quick overviews of our companies and make sure everybody is familiar. Vuzix is actually a publicly traded company, our IPO in 2009, but we're local here to the United States, headquartered up in Upstate New York in West Henrietta, got a little over 100 employees. And we're really focused on 2 really important areas of augmented reality. We have a big part of our business that's focused on building complete solutions for AR smart glasses, and we offer not just one pair but an entire portfolio of AR smart glasses. So depending on your use case and what you want to do, we put together the right hardware and software to help meet the requirements of your business. We also have a division that's focused on OEM. So we provide a lot of components for building AR smart glasses and for integrating augmented reality into the other solutions that companies may be developing. And our expertise around optics, displays and systems come in very handy for what those companies are trying to do. All of this is done right here in good old U.S. of A., and we're very proud of that fact. Let's take a look at TeamViewer.

So from our side, TeamViewer is a global leader for remote work solutions. We bring value to IT and OT, or operational technology groups. We combine remote access, remote management solutions, which is our Tensor platform as well as support for frontline workers with augmented reality workflows and warehouse picking solutions. That's our front line or our augmented reality platform. Additionally, we offer support for embedded devices in industrial environments. So the full-spectrum support here offers kind of faster time to resolution, reduce travel, which is great for the environment, I love that, and also increase the longevity of our assets. Today, for the purposes of this webinar, we're going to be focusing on our frontline AR suite. Before we get to our 5 steps, though, I think it's worth taking a moment to kind of get levels that, Karl, digital transformation can mean a lot of things to a lot of people. And so...

[indiscernible] Upfront, we have mentioned it in the beginning, driving transformation. And as you stated, Thom, it looks like a lot of different things to a lot of different people, but it doesn't have to be brain surgery. People talk about transformation, more like special effects in movies and stuff. And the objective is not to win an Oscar or an Academy Award for something. The objective is to drive relative change in improvements in the business actually. And so you can do a lot more by shaving 5 minutes off the time it takes to stock a warehouse shelf or pick an order for shipment, right?

Yes. Yes, I think if we're thinking of digital transformation is kind of the aggregate of incremental improvements from individual workers, then we really need to be focusing on the individual, which I think that's what we're looking at today by talking about increasing adoption. That comes all the way down to the individual person. So that brings us to step #1.

Yes. So obviously, a very, very important step is making sure that you have the right use case because as anyone who's ever tried on a pair of AR smart glasses knows, immediately, hundreds of things begin to come to mind with what you can do with these amazing pieces of technology. And we find that a lot of companies start moving down the wrong path by picking something they think is cool versus something that's really practical. And so you want to be looking at making sure that it really pertains to the business and that it's going to make changes to a business process as being measured today and that has support by the business and business executives. And it's actually something that's doable and you can use technology today off the shelf or that's easily put together. And probably most importantly, it makes people's jobs easier. But this is best shown by looking at a couple of examples. So let's talk about some real-world cases in both of these involving Vuzix and TeamViewer. So one of them comes out of the food processing industry. And the customer had an emerging technology group that was looking at how to streamline the training of new butchers coming into their workforce. And by putting on the AR smart glasses, they were going to look at the sides of beef or whatever and then show them where to make the cuts and how to separate the ribs from a steak, from a rump roast or whatever you happen to be doing. And when we came in and did an assessment of the business and TeamViewer was particularly helpful of looking at all of the different things going on, it turned out that the killer use case they had was actually using these things to speed up the maintenance and repair of equipment they have. So they were going in. And as a regulated industry, they were taking measurements on equipment and making sure that things were in the spec. And all those things had to be written out, recorded in systems of record. And by wearing the AR smart glasses, they cut that time like in half. And they have business sponsorship right away, and executives stepped forward and said, "Oh my god, if you can make those changes, that would be incredible to my business." And that's the kind of reaction we're looking for. On the telecom side, we had, with one customer, what we thought was a straight-ahead case of using work instructions to go out and install equipment in the field. And as we got into testing this with the users, it turned out that all of these guys really knew everything they needed to know about installing this equipment. We weren't adding a lot of value to the process there, but the issue turned out to be stepping back and taking a larger look at what they were doing. In the mornings, they were going to a warehouse and selecting all the parts they needed for a job, and they kept coming up short on 2 or 3 different components for the different jobs they were being dispatched to. So we use augmented reality to streamline the workflow of them going in, identifying equipment knowing where it was at, getting it added to their truck to take out, and they were able to complete more jobs on time during that installation or it didn't have to be scheduled. So 2 really good examples. And Thom, this just shows how important it is on the front end when you're working with companies taking a look at what they have to be...

Yes. I think it's a trap, Karl. I think it's a trap that technologists can find themselves in. And I don't just mean ISVs like TeamViewer or hardware makers, or I think it's even within an organization, anybody who's got the purview of innovation, they can walk around, and they're looking at their solution and trying to find a problem for that solution and not the opposite. So in this instance, on the first one here, the value really wasn't in the art of the possible. It was kind of in the relatively mundane but more valuable part of machine maintenance, right? I like that it was straightforward. It was repeatable. It was easily scalable, these maintenance tasks. And that could go all the way throughout the operational environment.

Yes. It's back to our talk about transformation. It's not necessarily the big sci-fi effects. It's getting the real business solutions implemented that drive your operational savings and ability to do things in a better way. So step 2 is really important because if you're just selling a single part of the solution, [ you're going to ] end up delivering total value to the customers. And it's hard to work with one company that can deliver at all, which is one of the reasons why we partner with people like TeamViewer. It's not only the smart glasses and the frontline software that you're running but how it gets implemented and how you set up a new training for the customer. And a lot of cases, if you're using picking software, for example, there's back-end integration work that has to be done with your systems of record and inventory control and management and whatnot. And on and on, right? You have software that allows you to go in and digitize your workflows because somebody has to develop that content. Sometimes, a company can do it themselves. Sometimes, they can't. So this whole ecosystem of partners is really important to consider when you get into this. So we have a chart we can look at that talks about how we see partnerships at Vuzix. And it starts with a couple of the things that we talked about initially. And so at the top of the pyramid, we have what the customers want to do. And the customers are obviously needing executive sponsorship and needing to have a real valid use case, right? We've talked about those things. So now when we're going to deliver against those things and let's make sure that we look at this chart here.

It's up, yes?

Just a little bit delayed with it getting refreshed. I'm still seeing the other chart. So once you take a look at having an executive sponsor and you have the use cases down, then you need to have the ability to deliver all of these things for a complete solution. And we tend to look at hardware and software and who's partnering and what the application is, on one hand. Then how we do the integration, all those other things can involve systems integration partners, for example, and then getting it all connected. A lot of the use cases where you have people out in the field and there are very large spaces with poor WiFi connectivity, meaning you have the cellular providers that come into play. And that typically means that you're looking at the large telecom operators there. So putting this all together, these partners can help you deliver and be successful.

Yes. Yes, I agree with everything there. I have to say from my perspective and, of course, maybe I'm a little bit biased because this is my area, but I think that global systems integrators like the Accentures and Deloittes, Tech Mahindras are among our most valuable partners. So many multinational corporations, folks that are on this call here already have existing relationships with systems integrators. We are their trusted partners for transformation projects of all stripes, really. So SIs understand the holistic transformation encompasses your hardware upgrades, your software stack and then critically changing the way that humans work, the change management element. So Vuzix or TeamViewer or most companies on their own are able to introduce a point solution. But if you really want change to happen at scale, I think you want an SI. As an additional, I think it's possible depending on the organization, you already have a preferred SI kind of with budgets or budget pathways that are already in place, which could help expedite a new AR project as well.

Yes, exactly. All right. [ Get us ] into step 3, if you will.

Yes. With that, yes, let's switch gears here. So we're talking about success here, really. And I'm going to say that people are hard. We already know that there's early adopters and there's laggards. And so in the world like this, when you show up with an AR headset, there's going to be some people that love you and some people that hate you, even before you've said really anything about your project at all. Focusing on these folks who love you, along with your project sponsor, these people are your champions. And I would encourage people to formalize this role, formalize the role of champion and ask your executive sponsor to give them the bandwidth they need to support things like training and project improvements like processes that help make the entire system better. Second -- and this is worthy of its own presentation, honestly. But if you're going to -- you need to bridge the gap between IT and OT, you're going to need representation from both sides of the organization in your sponsorship. So have -- a committee sounds like a slow death, but do have representatives that are involved in your project from both IT and OT. Third in this one, gosh, this is -- really stands out for me is focus on usability. Adoption is so often hampered by simple things like dead batteries or not knowing where the headset is or just these little minor points that prevent people from picking up the system and using it. So focusing on storing, charging, updating software, having a plan for these things goes a long way towards being successful. Finally, my #1, AR is more successful when it's integrated with existing business systems, whether that's your MES, your LMS or your WMS, for instance, TeamViewer is preintegrated with SAP's field service manager or a service and asset manager as well as extended warehouse managers. So integrations with existing systems of record go far on the change management front. So that it doesn't necessarily feel like a separate system but just simply a new way of accessing the existing system.

And Thom, when you do all of these things, I think we end up finding that employees tend to believe their job is easier to do. And after a while, they don't want to take those smart glasses off, saying, "I really can't do it without these. These make me a better worker, or these help me with my job." And that's what we want to get to, right? Do they help? And I think your acceptance model here talks about that.

Yes. Yes. The technology acceptance model is a well-established model that can be applied to any technology. And its name isn't cryptic here. Just as it sounds, it's used to measure what attributes of the technology or attributes of technology usage impact its long-term success. So these things aren't only positive, right? It's saying that if you do them right, you'll have success. If you do them wrong, it will be failure. So our research team in the U.K., I think, William Guest applied this specifically to wearable technology and came up with these 2 green factors that you see here at the top, impact the success and the failure of AR the most, and that's performance expectancy and effort expectancy. Performance expectancy is the extent to which a user believes that AR will help them do their job well. And effort expectancy is essentially, is it easy to use. And this is the hierarchy of where to concentrate your efforts to support customer success in your AR projects. So success in these green areas is going to have an outsized impact on the project -- on the successful project overall. So I hate to give you homework because it's summertime, but I would encourage anybody here to kind of dig in and take a look at the actual paper that the title is at the bottom here. Next up, step 4 is demonstrate the business value. I think this is critical if you don't want to get trapped in pilot purgatory like Karl was talking about. Generating value, it has to be intentional. It has to be focused. For example, in the warehouse, our KPIs might be decrease the pick time and increase accuracy. For MRO, maintenance, our KPIs might be improve maintenance quality and documentation. So I'll offer a side note here that it can be difficult to be clear with your KPIs if you're lacking baseline metrics. So for folks out there, it's -- I think it's really critical to know that you've got a good starting measurement. If you're going to try and determine what is success or failure for a project. The second point is short and sweet. You must have a critical mass of adoption if you're going to have viable results. So don't try and make claims about the success or failure of the project if you've only had a couple of people working in the project. One that stands out for me is -- one way to improve results and early efforts is by incentivizing usage. I don't necessarily mean here actually -- almost certainly don't mean financial incentives, but there's a lot of systems that teams have and managers have to incentivize their teams today. I work with those. I've seen like -- this sound a little bit elementary about it, even like star charts at morning stand-ups where people get kind of acknowledged or rewarded for using these new systems, and that feels good. So the last thing, and I've actually got a demonstration here, is it's publish the results across the organization. Here, I'll show this, and maybe, hopefully, the video gets started here. Yes. I use an example of a dashboard that was created where we plugged in the output of frontline, [indiscernible] reality platform, into the client's business intelligence system. So they shared this around the organization. And this is different than like when you read, share the information, it could -- in some ways, it could just be an e-mail or something like that. But a sharing access to this BI, people were able to kind of play around with it and make their own determinations. So they unlocked insight. I mean the folks reported back to us, they found insights about transit times, about replenishment times, things that weren't necessarily part of the KPIs but, as their personal interest took over, they uncovered, which is great. I think this is a fabulous, Karl.

Thom, before you move on, I'd like to talk a little bit about the importance of what you're saying here, especially when it comes to driving adoption and the incentivizing employees, so I believe we share one of our customers that implemented AR. And initially, it was for the newbie workers, the ones that were coming on, so they weren't as familiar with the routine. They weren't as familiar with the workflows. And the older, more seasoned veterans, "Oh, I don't need that AR stuff. I'm not going to wear glasses with my thing. I know how to do my job." But these newbies that were coming on board and, usually, they take a couple of years to train, they started performing better than the existing employees that have been in their jobs for dozens of years, and they began to get incentivized for it. And before you know it, the older employees were saying, "Hey, I want a part of that, too. Why are they getting recognized?" They had faster pick times than other -- than those seasoned veterans, right? So super important stuff. All right. Step 5, this is the basic principle of starting small, getting a success, getting a win in one area, one team, one use case and then tweak that as you go, but find an area that you can really focus on and drive the business changes, drive the business outcomes that you're going for, and then you can begin to expand from there. And when we talk about expanding from there, we have a chart that shows 2 different axes that you want to be able to grow this on, right? So in this chart, we show starting with one use case, one team, for example, for your initial implementation, make that successful. Then you take that existing success, that existing use case, and you take it to another team. So you begin to add different teams or different geographies, different departments. Let's say, you were starting with the remote assistance use case, for example. So you do it successfully in Department A, then you move it on Department B and so on. Meanwhile, at the same time, you take the place you started in the Department A, and you add use cases onto that. So if you started with being able to have remote assistance, now you start looking at workflow and say, "What if we digitize this particular workflow?" And you add things on, and in that fashion before you know it, you've got this thing rolled out across the company, but you've done it in ways that are easy to track and easy to talk about and share the success with everybody as you go along, right?

Yes. We've come to my favorite slide, Karl.

Well, this is an example here of what we were talking about where the first team and the first use case gets expanded in 2 different directions. You take that team and begin to give them new applications to do. And before you know it, they don't take the glasses off. They're wearing them all through the day. But at the same time, you take that first use case to another department and another team. And then you have all of the teams using remote assistance, and then all the teams, they're doing everything with some kind of augmented reality assistance. And this is the chart -- the simple chart to follow for how you end up getting this company wide.

Yes. The idea is that as a company uses it more, they grow on the experience curve. And so the second use case, the second sector that's going to use it or business unit that's going to use it, the organization already has kind of in-house knowledge about how to be successful. It's going to be easier each time they do it and grow. So I think that really -- they start to see the return on investment improve over time for that reason.

Yes. I love this slide, makes it seem so easy. Doesn't it?

Yes, yes.

And that's it. That's number 5. So let's take a look at our summary of what we talked about. Identifying the right use case upfront, making sure of all the hundreds of things that you can do with AR smart glasses, you're finding the best most relevant case for the business that can be easily implemented. And then you bring in the right partners to make sure you're delivering a complete solution. And we want to have all those.

[indiscernible] On specific points, be intentional about the way that you're going to implement in order to get more success. Bring business value -- bring evidence of business value back to not just the sponsorship team but also to the business at large so they understand it and get excited about growing the project.

Yes, and start small and grow from there. Find your landing point, find that place where you'd have your first success, the first department, the first use case and then add use cases from there and add departments from there. It's the best way to go. And if any of that seems confusing or you have questions around it, we have a way that we can help you. So if you're trying to do this or you're in the middle of doing this and it's not moving as quickly as you want or you want to consider it, please reach out to us, and we're happy to get together and talk to you about a number of things from reviewing your business objectives on and on. Thom, this is a great way for people to sort of get over the hump or even get started in the first place, yes?

Yes. I think so. So all right. So the 5 steps that we covered today are, I think, are the right start, and it's good information to have, but just -- I think there's value in having a support team of experts. So the offer today is exactly that. We're going to offer this kind of support. If you e-mail Karl with the e-mail that's on the screen here and then just let them know that you're interested, what we'll work to do is set up the session, where we review your business objectives and then apply the best practices that we have to come up with practical solutions, solution-oriented options that work for you. From there, we'll develop an AR implementation plan that you can use to move forward. And Karl, I do believe that this is a good head start.

It is. This is what you need, especially for that first department, that first use case. Or if you started to implement it and you're having trouble growing, the best way forward is to leverage experience. And between Vuzix and TeamViewer, we have a lot of experience in doing this with customers. We know a lot about what works and can help you avoid a lot of the problems and stay out of that nasty danger zone with your assessment of this thing. So please, please do reach out.

Yes. I'd like to say thank you to everybody for joining us today. Karl, this was a real pleasure. Thank you as well.

My pleasure as well, Thom. Thanks so much for joining us. And I think we should kick this open for some questions. Mike?

Yes, guys, great job. We do have a couple of questions that came in, and I want to remind everyone else. If you do have a question, you can type it in the Q&A section at the bottom of Zoom. So the first question, guys, what can we do to get buy-in from the workers that have to wear the smart glasses?

Boy, I think that's something that gets down to making sure they feel like they can do their job better. So one of the examples that we were given where we had newbie workers coming in that weren't as familiar with the procedures and the workflows, to them, it was super helpful because they didn't know what to do otherwise. And it turned out they became more proficient than the people have been there for a long time. So I think taking what they're doing and incentivizing them, as Thom had mentioned, making sure that you're publishing the results and tracking what's there goes a long ways in getting them to understand how important it is and giving them the pats on the back they need as they're successful with the solution and rolling it out, right?

Yes. I couldn't agree more. I would draw attention back to that technology acceptance model and understanding that the first or the top 2 priorities to help with adoption there are -- is it -- are they perceiving that it's helping them to do their job. And so first off, the task is for you to make sure that, that is actually the case. And then the second one is, is it easy to use, and I would solicit feedback from the folks that are participating in the project to ask if there's any pain points to using it, what are they? And are they something that can be resolved or made better?

Yes. Great. And let me just add before we go on to the next question that I've seen some come in about a link to the replay of the webinar, the e-mail and so on and so forth. It will be available shortly after this demonstration, Mike. So if you want to touch on that before jumping to the next question.

Yes. I see a couple of other questions there. And yes, it will be e-mailed to everyone that did attend today. So you'll be able to see the replay of today's webinar absolutely. Great. And another question, how do we know which are the right kind of smart glasses for our use case?

Well, obviously, the Vuzix smart glasses, I'm assuming. But outside of that, since we do have a complete portfolio, it really depends on the particular task, the particular user's role. And that's why we make more than one type of AR smart glasses, right? If it's something that needs to be attached to a certain type of head gear, whether it's a bump cap or a helmet, if it's something you're going to be wearing for long periods of time, we specialize in making the lightest, most comfortable AR smart glasses that are out there, so you can wear them for complete shifts. Is it something that you're just putting on and you want built into safety glasses for the type of tasks that you're performing? We do that. Do you need 1 display, 2 displays? So we help you with that selection depending on the use case and finding the right one for the job and how long they need to be worn and the brightness and the elements of the particular environment they're in and what that is like to make sure that you select the ones that are most comfortable and the ones that are most relevant to the role that, that worker is playing.

No. I couldn't add anything to that. That's exactly the answer.

Good question.

We're having the hardware question. Now we'll go to software. What kind of software do you recommend for building the metric dashboards?

So I wouldn't advise anyone to reinvent the wheel. It is explicitly our intention to make our platform integratable into whatever your existing systems are. And so whatever you're using today for business intelligence is the right thing. Whatever people have within your organization, whatever people are familiar with is what they're going to use. So focus there first is what I would say.

And can we get assistance in building up the content and work instructions?

Thom, at a good one for TeamViewer.

That is great. Yes. So there's a lot of different ways to go about that. And scale is obviously the most important element of a successful project over time. I think that what I've seen personally is that you can start with a partner on those to get the best practices and get your organization ready to be able to do that on its own. So whether that's a systems integrator, which I personally think is a very good start, a systems integrator is going to be able to quickly ramp up the people that you need to be able to draft the first round or first wave of instructions during the POC, and they're also going to spend that time making sure that you have the right staff in place for you to be able to do it after they leave and make that successful and grow.

Yes, exactly.

So we have 2 more questions. How can we get our execs interested in AR and supporting our activities?

Oh, boy, let me take this one. This is a really good question. And obviously, it's being asked by someone who's not the executive for doing this. So we tend to find that a lot of places that are kicking off the initial use of these augmented reality solutions actually come from either the IT side of the business where they're really just looking at the technology and how it connects to the impact on the network and so forth or from emerging technology teams. And again, it's an evaluation of what is possible that don't necessarily look at the business. So when you want to get the executives bought into this thing, you need to make sure that you find some things about the business. And when I say about the business, I mean about the ones relevant to them. Pick somebody who's in operations, for example. Pick somebody who's on the line responsible for managing the warehouse and for the stocking inventory or something and understand what's important to him and then show him the solution in terms of the impact that makes to his business. And to some of the metrics we talked about that Thom was looking at in the dashboard, whether it's improving the time to pick, increasing the accuracy, whatever those things are have to be relative and tied to an executive. So anybody that you want to get on board, figure out how to draw those lines, right? What are you going to do to impact the business and who are those executives and get them to sign up for it. Most of the time, you'll be pleasantly surprised. And if you do this correctly, if you draw the lines back with the right things that you're going to be able to impact and move them significantly enough, it will be saving him so much money that budget won't be an issue for you to go out and implement the solution because the ROI is so fast, right? And I think, Thom, you guys do a lot of looking at this ROI stuff. So if you really are tying this to business initiatives, it's -- the question is, why wouldn't they do, right?

Yes. I'd say, obviously, you're not going to have anything internally to show from a proposal standpoint. So what you're looking for there is business cases. I'd rely on TeamViewer, on Vuzix to [indiscernible].

Well, I think we lost some there, unfortunately, but that actually comes at the end of the webinar. So we would like to thank everyone for joining us today. As a reminder, it will be available on our website. And stay tuned for future webinars in the future. And thank you, and have a great day.

Thanks, everyone.