MicroVision, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited results. MicroVision develops lidar sensors and perception and validation software for automotive ADAS and other markets. It completed its acquisition of selected Ibeo assets on January 31, 2023.
Financial performance
Amounts below are in millions of dollars except per-share data. Comparisons are with the corresponding 2022 period.
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $0.329 | $0.314 | $1.111 | $0.664 |
| Gross profit (loss) | $(0.372) | $0.296 | $(0.134) | $0.642 |
| Operating expenses | $23.528 | $13.965 | $44.957 | $27.435 |
| Operating loss | $(23.900) | $(13.669) | $(45.091) | $(26.793) |
| Net loss | $(20.609) | $(13.597) | $(39.636) | $(26.765) |
| Net loss per share | $(0.12) | $(0.08) | $(0.23) | $(0.16) |
- Revenue rose 4.8% in Q2 and 67.3% for the first half, mainly from activity on Ibeo contracts. Revenue remains very small relative to expenses.
- Gross margin turned negative: cost of revenue exceeded revenue in both 2023 periods, partly reflecting increased contract activity and amortization of acquired Ibeo intangibles.
- Research and development expense rose 79.9% in Q2 and 73.6% in the first half, primarily due to salary and benefit costs for employees transferred with Ibeo. Sales, marketing, general and administrative expense increased 54.7% and 51.8%, respectively.
- Q2 other income was $3.570 million, including a $3.0 million payment for terminating a former building lease. First-half results also include a $1.706 million bargain-purchase gain related to Ibeo.
Cash, liquidity and obligations
- At June 30, cash and cash equivalents were $62.3 million and available-for-sale short-term investments were $31.6 million, for reported total liquidity of $93.9 million. Restricted cash was an additional $4.2 million.
- First-half operating cash use was $30.1 million, versus $20.6 million in 2022. Investing activities provided $18.7 million, including net investment-security sales, and financing activities provided $56.0 million, principally from common-stock issuance.
- MicroVision raised approximately $55.9 million net through common-stock sales in the first half. Shares outstanding increased from 170.5 million at year-end 2022 to 187.6 million at June 30, 2023; further shares sold under the June ATM agreement settled in early July. The company said no shares remained available under that agreement.
- The balance sheet reported $36.2 million of total liabilities, including $15.7 million of operating lease liabilities and only $0.008 million of finance lease obligations. The filing reports no material conventional long-term borrowing at June 30.
- Current assets were $103.3 million and current liabilities $22.7 million. Management stated that, based on its current operating plan, cash and cash equivalents should fund operations for at least 12 months.
Material changes and notable items
- The Ibeo acquisition added employees, technology, contracts, inventory and property and equipment. Consideration was approximately $21.6 million, subject to working-capital settlement; the preliminary allocation included $18.0 million of acquired technology and a $1.7 million bargain-purchase gain. The allocation remained subject to change.
- Ibeo contributed $1.1 million of revenue and $15.1 million of net loss from acquisition through June 30, 2023. The filing’s unaudited pro forma figures show first-half 2023 revenue of $1.7 million and net loss of $42.2 million as if the acquisition had occurred at the start of 2022.
- Customer concentration remains significant. In the first half, three customers represented 33%, 22% and 11% of revenue. The corresponding 2022 revenue came entirely from one customer.
- The $4.6 million Microsoft-related contract liability is current; the agreement is scheduled to expire December 31, 2023, but the filing says timing of revenue recognition is uncertain. Approximately $1.0 million of Ibeo-assumed contract liabilities remained at June 30.
Outlook, risks and contingencies
- Management expects a significant loss for full-year 2023. The filing says losses and negative cash flow are expected at least through 2023 and likely beyond; profitability and positive cash flow are not assured. No revenue or earnings guidance was provided.
- Key risks include failure to win automotive series-production awards, uncertain timing and adoption of lidar/ADAS, competition from lidar and alternative technologies, and the possibility that OEM qualification and commercialization take years.
- Other disclosed risks include dependence on a limited number of customers and suppliers, potential supply-chain interruptions, execution and integration of Ibeo, need for future capital and resulting dilution, intellectual-property disputes, product reliability or liability claims, and foreign-exchange and international operating risks.
- Management reported no litigation it believes is reasonably likely to have a material adverse effect. It concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Track cash burn against the stated 12-month funding outlook, particularly as operating expenses scale after Ibeo.
- Verify progress toward OEM production awards, customer commitments and commercial revenue; current reported revenue is limited and concentrated.
- Monitor gross margins and the costs and revenue contribution of acquired Ibeo operations.
- Check final Ibeo purchase-price and working-capital adjustments, including the escrow and holdback settlement.
- Assess the impact of equity issuance and potential additional capital needs on share count and existing shareholders.
- Confirm timing of recognition of the Microsoft and Ibeo contract liabilities and the related customer agreements.