MicroVision, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Financial statements are unaudited; amounts below are in millions of dollars except per-share data and where noted.
Business context
MicroVision is developing its first-generation Long Range Lidar (LRL) sensor for automotive safety and autonomous-driving applications. It completed an A-Sample in April 2021 and was verifying features and conducting reliability and compliance testing. The company also continues to explore strategic alternatives, including a potential sale or merger, while developing LRL. It reported no agreement or commitment for a specific strategic transaction.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.746 | $0.587 | $1.225 | $2.056 |
| Gross profit | $0.777 | $0.588 | $1.261 | $0.658 |
| Operating expenses | $15.731 | $2.887 | $22.440 | $7.891 |
| Operating loss | $(14.954) | $(2.299) | $(21.179) | $(7.233) |
| Net loss | $(14.962) | $(2.304) | $(21.193) | $(7.238) |
| Net loss per share | $(0.09) | $(0.02) | $(0.13) | $(0.05) |
- All Q2 2021 revenue was license and royalty revenue from Microsoft; the customer represented 100% of revenue. No product revenue was recorded in the quarter or first half.
- Reported gross profit exceeded revenue because cost of product revenue included credits reversing previously accrued warranty liabilities. The filing does not present this as a recurring margin measure.
- R&D expense rose to $7.4 million in Q2 and $11.8 million for the first half, mainly due to lidar development, increased headcount and materials/equipment, and higher non-cash compensation. SG&A rose to $8.4 million and $10.6 million, respectively, primarily due to non-cash compensation and professional services.
- Six-month operating cash use was $11.3 million, versus $8.4 million in 2020; investing cash use was $1.9 million, versus $0.4 million provided in 2020. Financing provided $131.6 million, principally from common-stock issuance.
- Cash and cash equivalents were $135.3 million at June 30, 2021, up from $16.9 million at December 31, 2020. Current assets were $136.3 million and current liabilities $10.4 million. Management said cash was sufficient for at least the next 12 months under its current operating plan.
- Total debt was approximately $1.6 million, excluding lease liabilities; total liabilities were $11.5 million. The balance sheet also included $1.2 million of operating lease liabilities and $0.1 million of finance lease obligations.
- Shareholders’ equity increased to $128.9 million from $9.0 million at year-end, reflecting substantial equity issuance, while accumulated deficit reached $607.4 million. Shares issued and outstanding rose to 164.0 million from 152.9 million.
Changes and notable items
- Revenue declined 40% for the first half year over year, while the net loss increased to $21.2 million from $7.2 million. The expense increase reflects a significant step-up in lidar development and share-based compensation.
- License and royalty revenue increased 30% in Q2 and 56% for the first half, but these royalties reduce a previously received $10.0 million Microsoft prepayment; no cash is received for them until that prepayment is exhausted. The filing estimated $1.1 million of additional revenue application in the remainder of 2021.
- MicroVision raised $125.5 million net from common-stock issuance during the first half. Its June 2021 ATM agreement permits up to $140 million of additional sales; $67.8 million had been raised under it by June 30. Shares outstanding increased about 7% from year-end.
- During Q2, the company recorded a $0.54 million non-cash compensation adjustment for an amount omitted in Q1. Management determined it was not material to previously reported periods.
- In July 2021, the lender approved forgiveness of approximately $0.69 million of the company’s $1.6 million PPP loan. The gain was expected to be recorded in Q3 2021.
Outlook, risks and controls
- Management expected the first-generation LRL might be available for sale in small quantities in Q4 2021, subject to verification and testing. This was a possibility, not a firm sales forecast. The company expected significant losses during 2021 and likely continued losses and negative cash flow beyond 2021.
- Major risks include dependence on one customer for all revenue, lack of commercial-scale LRL sales, execution and market-acceptance uncertainty, reliance on single- or limited-source suppliers, COVID-19-related supply constraints, and the possibility that strategic alternatives or future financing may not be achieved on acceptable terms.
- Disclosure controls were not effective as of June 30, 2021 because of a material weakness in controls supporting determination of equity-award grant dates. Management said remediation activities were being implemented after quarter-end.
- The company disclosed ordinary-course claims and lawsuits but said none were believed reasonably likely to have a material adverse effect.
Most important facts for investors to verify
- Whether LRL verification, reliability/compliance testing, and the potential Q4 2021 limited availability proceeded as planned.
- How quickly cash is consumed relative to management’s stated 12-month liquidity outlook, and whether further capital raises are needed.
- Progress, if any, on strategic alternatives and whether any binding transaction or partner agreement emerges.
- Revenue concentration, Microsoft royalty/prepayment accounting, and the timing of cash receipts after the prepayment is exhausted.
- Remediation and testing of the equity-award grant-date control weakness, alongside the effects of continued share-based compensation and equity issuance on dilution.