VUZI - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Vuzix Second Quarter for the Period Ending June 30, 2024 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded. And now I would like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Thank you Mr. McGregor, you may begin.

Edward McGregor

Thank you, operator, and good afternoon, everyone. Welcome to the Vuzix second quarter 2024 ending June 30, financial results and business update conference call. Vuzix's Travers; are Grant our today Russell. us CEO, and Paul CFO, With

are Reform the Securities forward-looking Paul, retain development differ conditions, forward-looking claims certain prepared business to, Private the the plans, over to I personnel management the a forward-looking subject XXXX. Actual materially limited call Before turn company uncertainties, and from to statements the Act attract and or as forward-looking which well as that, Harbor of Litigation of statements, contained and competitive Safe question-and-answer this to Therefore, the ability to risks results contain make in factors, remind on those of changes I during factors, call, the result the qualified any may not management's requirements. in additional that economic could including, protection changes but remarks contemplated may and statements, for regulatory are statements legal in you by general like strategy would as and business session.

market projections future the its projections Vuzix with press XQ, no company's today, and its these SEC. to results to the filed August management's announcing change. conditions assumes XX-Q the the represent afternoon, company addition, any issued update as In XX, estimates as as XXXX. future This release performance obligation of in a XXXX financial

on may in filing financial in wish to www.vuzix.com. I'll outlook. give discussed only results at at will financial measures call the CFO, Vuzix overview required, at then can Grant CEO, So participants Travers, look second Vuzix Paul be provide company's overview available session. to results, so over comparable also results of the found the over an company's directly financial include accordance on Paul may this operating and not call. Today's call who to the who summary on GAAP the Russell, certain quarter done reconciliation of the call move non-GAAP who When documents an already Paul? with call will company now a business will calculated the turn as and to may turn presented is of which to those we'll Q&A the most provide today's measures. which the will after sec.gov, company's have

Paul Travers

you, consumer Ed. Thank We waveguide and better high-performance the the believe than produced a smart conference that in Vuzix. critical markets. A there for component this to the of Hello, the a can and be everyone, optimal in enterprise at on QX, positioned Vuzix regard next welcome millions points, generation for is the call. not is enabling glasses planet price XXXX company

Our over of investment of competitive extensive technology unique scalability, decade been competitive development and and forged competencies have a production design manufacturing and capability, volume from cost, waveguide well this evolution product in core and space.

to waveguides and support Our many can that waveguides than difficult conviction, glasses built that intend high-volume ability want working manufacturing the correction, supply I deal near process smart industry. cash know We're to enterprise the would understand trade at of to market required level OEMs in Vuzix and the which the expectations. We meet multi-year costing manufacturing ever to you for and role This sort cash be developed to regard. and strategic on second-to-none evolve custom to provide with we smart very pending, for plans strategy believe ODMs, is facilities this this future. Back improvement and a manufacturing and challenged. would-be supporting share technology production vision production like waveguides glasses era for us Vuzix believe optical about the competitors, again of have and innovation. partners models very just micro-touch game-changer. for future there for supply partner, and stated other where predicted production low-index smart industrial capabilities a a we fully designs Vuzix of time for else and be supply the the currently Meta's ability the game-changing. It's consumer and the product a will of will competitors. The with plans, is in to innovation are been, compete in capabilities, with the of yields, to that Vuzix broader and glasses wearing is like just we product years patents see-through The a more needed unique. volume produce secrets. The that actively with a further the industry just high-performance the here we and unlike in portfolio millions rates, technologies others, believe realize we of and may can production an capability that global markets optical smart technology manufacturing double continual almost and that IP offer then speeds, to challenges in broad is The And We of that coming in significantly the high-volume patents of are is smart to part will for relationship the people component close waveguide development support X can glasses products. previously enabling support are be industry. We for our consumer market our the nobody smart waveguides array of needed hundreds at game-changing it's provide important a ago, materials, a XXX mass a CEO required volume key waveguides, of and of to week, our key can substantial, glasses market. Without and relative our of assets have quality believe that especially ultimately cost understand integrated those to and some market, industry. chain around commence through access. They for process in a to our glasses capabilities suppliers and the and you that fraction in and market broader and cornerstone Vuzix a of play chain facility hit value distance large hopeful path produce is position consumer that with INCOGNITO, AI-powered a smart role commitment waveguide smart for in is will can offer, announced component investors solutions world-class glasses. What for AI-driven same adoption. is is our to glasses our millions most the their stronger and capabilities consumer, flexible optical at clearly the deliver and mechanical play regularly core will designs a Vuzix this design concerns about Vuzix the approaching is unique has

the waveguides technologies in other in why investment And either Our of beyond option great why the many there and current are and full-color the capacity drive like of some until is with is These facility X a units with be display has the reasons level announcement of as smart capability scalable the are expectations. fashion-forward is could a much we just that practically and of corner, interested They critical investing glasses. note operating interesting viable are these Vuzix which minimal for or costs. investing perform in and end years. Knowing to million to for third-parties opportunity are them, couple efficient the the working working be volume display our in components supply now that right that second can this to source arrive to it annually are partnerships compact, this delivered more microLEDs, image there about waveguide very companies LCoS into on these a multiple Today, to most potential projection excited to make for recent be glasses smart help of the scene, new, LCoS happen. The customer with are Vuzix Avegant, engines. will on is drive based companies handfuls around micro cost-effective display solutions. several as

opportunities robust. remain Our OEM business

a deliver our and have to at move production into we this least contractors one of and of backlog defense of expect against, later enterprise customers business year. We commercial to one our

will Our versus current we technologies. products help projection significant partnership relationship. that with custom to them are solutions space factor with deployed with whom Garmin, developing optical and full offer milestone form waveguide-based savings cost, engines, Garmin will for power another systems These is

demand the as from the process manufacturing we continue broader we will On front, support capabilities prepare implement to to in partners underlying improvements markets. to ramp production waveguide

programs up a with again, smart waveguide supplier underway. a partners increasingly As us. currently a and unannounced partner future to Vuzix projection And optical with and in of handful lining use collaboration relationships to choice, the glasses, other as waveguide and engine announced recently we are AI-enabled more industry optimized modules views for of develop more have discussions, Avegant we

can All affordable display Most to ones stand must of viewing produced these firms available high products alone. paired waveguide the volumes experience. can't end-wearers in that with the allow at They realize optimize their importantly, that projectors be be to prices. finished best solutions

on select be this of Vuzix competitiveness strategy manufacturers and and third-party cash uniqueness products our to costs. based needs, underestimated. Cognizant cost projected volumes space and will Our cannot be for our OEM branded in utilize

of ROI solution Of here enterprise we involving whole a a defense will smart proven an for be said, which be our deliver glasses the their and just smart deployment New business include right course, path products, slowly to that continues to times, errors. number onboarding we product, matures. nor of enterprise glasses improved pilots, are of productivity, as accounts is Deploying on to waveguide among nice pipeline in software, manufacturing, planned environment our and and things. That solutions integration, IT Rochester, a market and have in production opportunities, yet, lower other to not journey market fewer have a industrial this has our York. The operations volume within determination, challenged

markets also working ourselves, advancements will use intelligence, customers. importance and strategic due course. At continue are in as language to aspirations technology the the core house. And to broader artificial to of on the such emerging significant we cell evolve, OEMs, reductions board Although, revenue and management the a result, right-size provide liquidity Grant? was top-line after close refocusing our R&D of time, also and has and will help volume ISVs the would as a said, and and as we move value and and across transcription, provide will our to previously, enterprise transcription. Moreover, on our the deliver accelerate with absolutely our as we of and our to tablets, take Q&A. applications, now sight are for to and These resellers, organization end which partners without I believe deal penetration to mentioned with access with our cash committed with in network partner, access. Grant that Vuzix the we we I ecosystems Vuzix of adoption as attract you same remain we and to wider cash made waveguides manufacturing numbers, market recognize losing phones through case side and case

Grant Russell

you, Thank Paul.

Ed this a the we our afternoon offers As the of mentioned, explanation XX-Q detailed filed quarterly SEC financials. with

bit you some going the of numbers. So just I'm to color of a with provide on

year's was substantially order Asian prior large the X $X.X prior sales distributor quarter months glasses, XXXX period, particular million from for due very $X.X in revenues were to XXXX quarter which June had benefited second period. versus of service of our million the XX, decreased ended smart year's an in million, a from second in down XXXX. Engineering MXXX, sales the year-over-year, Our $X.X

for XXXX exclusive exercised due X The related related ended accounting equity in XX, to asset, Vuzix development in that as is book and assets further administrative in gross expenses absorb overall end advertising remainder X, June. General $XX.X June of to the costs $X.X development is XXXX, of path a as to of to is overhead technology and to $X.XX fixed credit fully our license Atomistic a decrease in June million to ended net XXXX. Notwithstanding the largely in distributed salary value was the that related to was XX, had a XX%. our XXXX. which assets, $XX.X company expenses our loss period, of our a X company of a future the for continue ended having to of its revenues XXXX, a XXXX, million approximately in and operating realize or in this of granted $X.XX full million $X.X a increase XXXX, months months determined for loss shares, to a well of to million approximately the it termination XX, X% liquidated, non-cash license intangible entitled share at lower million and on, July million impairment the the versus $X.X $X in million in loss remaining months its $X.X expense of unable waveguide costs to Atomistic, expenses compared in under $X.X time of development impaired X%. for same costs, with had private developing, result. Research write-down R&D for period reasonably it the of severance and the XXXX. drop June the June marketing ended Atomistic plant its and severance same licensing lower These our assets, XXXX recorded charge decrease in the of the resulting X the impairment show manufacturing in costs by XXXX, partially for million is audit, manufacturing, certain investment an no $X.X compared the and reduction a its of performance or the benefits the XXXX, implemented as project, external XXXX June period June The for of million an was filing. Included which gross was product June. Sales allowance $XX.X the and technologies June $X.X the was company, $X.X XXXX, impairment related approximately $X.X $X.X losses, XX, X and net the a in an we use. The ended months the for was million and completed compared event total a million granted decrease period in and million our the a Reduction XXth, value, Atomistic of point of was XXXX XXXX million as of of due in investment was the we expect June relatively a result XXXX. There and The of comparable option As XX%. million have share longer these development versus dollar per obligations $X audit increased percent company to related XX% previously X related had the to that on X company $X.X license further benefit royalties. Overall, Atomistic. Atomistic preferred June costs. expense, reduced company per net was overhead our been S-X at previously profit salary equity rights French to same comparable to period, the the and to period as implemented in being costs rise months the indicated the microLED in to months million of its from approximately for same XX% the increase trade for legal determined interest sales as primarily therefore period result million, of of terminate in many for as technology charge the fees expense XX, as to and primarily XX% we increased a spending $X.X have XX, for XXXX was increase ended at loss XXXX a finalizing million was for XX, due end gross and of XXXX of license, ended XX, support certain expense effective offset for and after estimate was and of

and sheet for cash Now balance flow some highlights.

$X.X second investing period $X.X second as XXXX the the equivalents and asset period, compared in for quarter cash $XX.X for was the The for fee in year's $X.X million, in second XXXX our and the and million XXXX, of was use license $X.X million networking net for cash was activities investment June activities million being of current used of cash quarter as was to quarter position XX, none million a the prior Our net XXXX. Cash to compared operating used with capital $X all flows fixed in of purchases as of million. payments.

$X.X XX% plan to During period the wage be program voluntary for respective company's June optional level in reductions. After while of and in the gross company-wide will XX, XXXX. upon plans with smart the investment the of of second CapEx salary for all for the 'XX their The approximately April weekly impact the intend current equity, to reduction XX.X% inventories. balance stock January for company and individuals reduced the large X the million quarter XX% decreased into and base basis. And depending rounds of cash and XXXX net options salary on reductions XXXX, glass or issuance current reduce XXXX staff cost result salary XXXX $X.X reduction implemented the of and to we annual will payroll major greatly reductions running XXXX achieves payroll awards in X, our have expected an May savings for stock we million, for

turn assemblies our higher reduce finished discount As plan a their and volume levels of we a products prices goods result, selling to cash. of as and into inventory for to offer existing much

production models as cash smart we glasses paused Rochester, over to million technologies. Furthermore, semi-finished move that and in and forward, forward, of non-waveguide products, the seeing finished are we for our in able manufacturers production have of volumes. production costs pursuing goods needs are Vuzix. have if going most MXXX good $X achieve future and with to we higher opportunities into turn and some use especially we We to reduce are Currently external we of further intend the manufacturing we actively

our technologies receipt ongoing of also licensing over as conditions that continuing the time-to-time ATM if with would an at raising are and stock as common to you strategic debt in the and most XX, that, firm effective around Form statement pursuit waveguide from continued capital an a with on upfront to supply sale sales obligations over went a current volume with agreements. And OEMs, would on offering. Management of agreement the fees, And market capital of actively I investment the are long-term and the via opportunities or the no company issued million the up monitors may be S-X of basis, included sold We aware, an banking favorable turn licensing may for call with new of the or in May June which and potential the which issuance consider XXXX, market have registration like to include company and markets the develop. ATM ongoing $XX finally XXXX to outstanding. With Q&A. operator for

Operator

question from Instructions] the the of And comes line [Operator first with Matt VanVliet BTIG.

Matthew VanVliet

level I the fairly that year. recognized anything go you the you into side expect feel future? engineering of be you should you that guess, or later sense else of mentioned of what that from Can in at this those could a couple give in? some either us confident a one production point will pipeline going into opportunities services in on the production And revenue you potentially of both first have then, go

Paul Travers

qualify first let's those X. just So

of them side is the them one is and of One opportunity. defense commercial a on

going side, of sell $X,XXX filling the defense we upwards going it's of that of pieces. that to piece salable be is probably $X,XXX opportunity And be into it's or first that X,XXX to sort the asset to On business. per

designed worth is the one initially pretty can million So, and like, spot $XX built it's just math, we've places this it do was that for. -- easy. multiple million different go of I for that the business, It's think, to and $XX into that -- solution

maybe for So inside an operations that's around, motors temperature-related one get then, for where imaging there's enterprise system pretty equipment one a places project. And of might is just hot that significant other revenues hot. its or the

put I'm whatever. can that's with there's help hoping in product upwards it, issues kind of You an they that XX,XXX end sure or maintenance by significant volumes it on of could the the frankly. year. XX,XXX of safety to glasses determine and And that associated or when starts or We're out volumes, this not to to pieces. you going have not whether quite that enterprise that's move roll

Matthew VanVliet

or Any ones it Okay. be do And in think going have quarters, these you X there? still a with further are but X sounds on may of couple like the those? viability works the projects I X long-term and had back other along, you update

Paul Travers

which other is that one than in we Yes, to we mean, there's is along And are a project develop next-generation earlier mentioned that And products. definitely do. companies I nicely. handful them of the moving yeah, Garmin, of more Vuzix their call. with working

Matthew VanVliet

partners, looking lastly, kind are certain bit of I then of what in it you a little talking overall of be pre-order guess, for kind place? in Vuzix? could into potential at? about what investment Or waveguides give you Would might be kind performance of, or terms more arrangements blocks And detail strategic arrangement of of potentially a

Paul Travers

for waveguide, lot whole business is these corner. waveguides only problem and at time. so than at volume hours guys right that you production literally Matt, a is for other take amazing potential. There's a share just market a The around can't make impossible. making today say price almost that, to the do to point a key. works Yes, solutions is Competitive This can many the I is

be can Vuzix of fully ought about Zuckerberg And things it waveguide. And per it's what it's in. in all out There's interested never of our of hundreds to that of make waveguide So pump X the when it revolving all users kind a mass that's are guys current super you the well, higher expensive. and Mark interested revolving talk is it's facility, turned -- more these than able on, with And that. in will smart to Well, prices like every actually them. literally enable millions markets. those market. price glasses hear are those business around one and around that seconds,

you imagine components some will to some there's be part will it. that and it might be probably So, there of that supply investments

Operator

Schwab last Craig-Hallum the Christian from Group. comes Capital of with And question the line

Tyler Burmeister

of Tyler just on last first on Maybe commentary following behalf is of question, kind line Christian. This up that there. last of the

your investment to produce competitively, about the to do expensively? leader going themselves? someone they production more make talked use wasn't to efficiently, Just someone you less guess, waveguide, Or come competitively, Have that You waveguide being produce otherwise? a what their to them competitively, to for and market I going there. weren't you would if what would if they waveguides? ultimately use do

Paul Travers

So, is great more It's question. a even manufacturing. than Tyler, this

got a how do You design. to to know

finally And company how these systems that that the do to know it make got with components we to services you that. of production how with for rest associated have when there. a And of the optical know to it's to design all like work. the when You you it the Vuzix, to, in come integrate offer

trying companies nuts. There soup waveguide with are the out are it's to there So, you're and one-size-fits-all. make a that stuck other to

volume. then, to X waveguide just you they You with, people what literally for kind to customized you every of we're of then, get And have. seconds. easily problem comes And these want a the working XX times can't it want down some that get how

somebody's a million That of and about get be pile sold. to have that third-party basis, glasses on annual one is smart like be competitors be or XXX it's to a an or it waveguides. And able steps make would you could buy could you they but million produced property that them think you you go XXX If that XXX that might to to so waveguide. XXX the set to produce expensive might up you them, today,

how price, yield, stuff difficult the it's could the there. get to that the see quality, really, ultimately any of really so, And

work glasses. We ability making the actually in circumstance, with to produce and the are to in can we it in our services volume a very way the unique associated offer

Tyler Burmeister

revenue Grant, of maybe, a to with maybe now all are then we get efforts to cost putting saving kind at what And summary point? level these in guys type kind looking just you of are update, a breakeven place,

Grant Russell

we're in -- less still going of is operating goal effectively quarter between million we're lot to costs. and I $XX to about to because need down refinements. a it's to achieve $X making get breakeven, Well, million I so margin But potentially think our per mean,

the to we're margin of on million. the to So, $XX line $XX top million going need

Operator

time, have this would back over to I end the Paul turn we closing any call question-and-answer at the And the reached comments. of for like Travers And session. to

Paul Travers

Vuzix. should you enthusiastic thank a industry know The ride. us, It's know is Look, rough never happen fall an been Everybody, be it it's I a for but more listening exciting to fantastic glasses Yes. in. I be is smart and for person, business a around challenge, but for been this I is coming. it and right the corner

times. appreciate to the are fall Look really to coming. tough the there hanging forward you Thanks as through with next again, better in share The you and the unfolds. we everybody. So parts call,

Operator

conclude that today's gentlemen, does and ladies And teleconference.

time. participation. this You Thank may disconnect your lines for at you your

Vuzix (VUZI) 14 Aug 242024 Q2 Earnings call transcript