MicroVision, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Financial statements are unaudited; dollar figures below are in millions unless stated otherwise.
Business context and reporting period
MicroVision is developing MEMS-based lidar sensors and perception software for automotive advanced driver-assistance systems (ADAS), targeting L2+ and L3 applications. It reported completing its A-Sample long-range lidar module in 2021 and continued testing and demonstrating its solution in the first half of 2022. The company said it had not secured the customers needed to launch its products. Microsoft remained its sole customer, generating royalty revenue from an earlier display-system arrangement.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0.314 | $0.746 | $0.664 | $1.225 |
| Gross profit | $0.296 | $0.777 | $0.642 | $1.261 |
| Operating expenses | $13.965 | $15.731 | $27.435 | $22.440 |
| Operating loss | $(13.669) | $(14.954) | $(26.793) | $(21.179) |
| Net loss | $(13.597) | $(14.962) | $(26.765) | $(21.193) |
| Basic and diluted loss per share | $(0.08) | $(0.09) | $(0.16) | $(0.13) |
- All revenue was license and royalty revenue from Microsoft; there was no product or contract revenue. Q2 gross margin was approximately 94%, but revenue was very small and 2021 cost of revenue included warranty-liability reversals, making period comparisons less representative.
- Research and development expense was $7.7 million in Q2, up 4% year over year, and $15.3 million for the half, up 29%. Six-month SG&A increased 15% to $12.1 million, while Q2 SG&A declined 25% to $6.3 million, primarily reflecting lower non-cash compensation.
- Cash used in operating activities was $20.6 million for the first half, versus $11.3 million in 2021. Cash used in investing was $24.8 million, largely reflecting net purchases of short-term securities; financing provided $0.009 million.
- At June 30, cash and cash equivalents were $37.0 million and short-term available-for-sale investments were $55.9 million, totaling $92.9 million of reported liquidity. Cash, cash equivalents and restricted cash together were $38.4 million, down from $83.7 million at year-end 2021. Total current assets were $95.8 million and current liabilities $8.1 million.
- Borrowings were minimal: $9,000 of current long-term debt remained, and the company reported $5.7 million of operating lease liabilities and $32,000 of finance lease liabilities. It repaid $392,000 of PPP debt during the half. Shareholders’ equity was $94.1 million; accumulated deficit was $656.2 million.
Material changes versus the prior comparable period
- Revenue fell 58% in Q2 and 46% in the first half, attributed to fewer royalty-bearing products distributed by Microsoft. Microsoft represented 100% of revenue in each period.
- Q2 net loss improved to $13.6 million from $15.0 million, while first-half net loss widened to $26.8 million from $21.2 million. Higher first-half R&D and SG&A contributed to the increased loss.
- Operating cash use increased by $9.3 million year over year. The sharp reduction in the combined cash-and-restricted-cash balance also reflects investment purchases; it should not be read as operating cash burn alone.
- Available-for-sale securities increased from $32.7 million at December 31, 2021 to $55.9 million at June 30, 2022. The company recorded $0.159 million of first-half unrealized investment losses in other comprehensive loss.
- Shares outstanding were 165.4 million at June 30, versus 164.4 million at December 31, 2021. The company granted 6.0 million performance stock units to executives in June, subject to share-price thresholds and subsequent time-based vesting.
Outlook, management commentary, risks and contingencies
- Management said it expected small quantities of ADAS sales in 2022 but did not expect significant, sustained revenue from the solution in the near term. No quantified revenue or earnings guidance was provided. The company expected a significant loss in 2022.
- Management stated that, based on its current operating plan, available cash and cash equivalents were sufficient to fund operations for at least 12 months. It also warned that additional capital might be needed beyond that period or sooner if revenue, costs or development requirements differ from plan; future financing could dilute shareholders.
- Risks emphasized include continued losses and negative cash flow, no automotive production wins, lengthy OEM qualification cycles, competition from lidar and alternative technologies, supplier concentration and supply-chain disruption, COVID-19-related development and business-development impacts, and dependence on a single revenue customer.
- Lease commitments include a forward-starting Redmond office lease with approximately $13.0 million of minimum payments, excluded from the reported lease-liability tables, and a German office lease with approximately $0.38 million of minimum payments. The existing Redmond lease was amended for early termination by October 31, 2022 at the latest.
- The company reported various claims and threatened or pending lawsuits in the ordinary course, but no proceedings management considered reasonably possible to have a material adverse effect. It also disclosed a material weakness identified in 2021 relating to controls over determining equity-award grant dates; management concluded disclosure controls were effective as of June 30, 2022 and reported no materially affecting control changes during the quarter.
- Management cited inflationary pressure on labor costs, potential supplier constraints, and market and interest-rate exposure on investments, though it considered current interest-rate and investment market risks not material. A $17,000 inventory write-down was recorded in Q2.
Most important facts for investors to verify
- Whether MicroVision can secure automotive OEM or Tier-1 production awards, and the timing and requirements of customer qualification.
- Progress in product testing and demonstrations, the feasibility of the stated 2022 small-sales expectation, and the absence of significant near-term recurring revenue.
- Cash runway assumptions against the $20.6 million first-half operating cash use, and whether additional financing or equity issuance may be required.
- The concentration of all reported revenue in Microsoft royalties, the remaining $4.6 million contract liability, and expected recognition of $0.864 million in the remainder of 2022 and $1.939 million in 2023.
- Execution and cost implications of office leases, including the forward-starting lease commitments, and the status of remediation of the previously reported equity-award control weakness.