Microvision Inc 2026 Q3 Earnings Call

Please go ahead. Thank you, Matthew.

Good afternoon. I am here today with our Chief Executive Officer, Glenn de Vos, and our new Chief Financial Officer, Christine Chambers. Following their prepared remarks, we will open the call to questions. Please note that some of the information you will hear in today's discussion will include forward-looking statements, including, but not limited to, expected near-term and future revenue, operating expenses and cash usage, strategic plans and execution, expectations regarding product deliveries and commercial growth, impact of cost reduction activities, product applications and use cases, market opportunities, cash flow forecasts, liquidity and financing activities, availability of funds and access to capital, as well as statements containing words like believe, expect, plan, and other similar expressions. These statements are not guarantees of future performance. Actual results could materially differ from the future results implied or expressed in the forward-looking statements.

We encourage you to review our SEC filings, including our most recently filed Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update this information. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G.

For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as for all the financial data presented on this call, please refer to the information included in our press release and our Form 8-K, dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC Filings tab. This conference call will be available for audio replay on the investor relations section of our website at www.microvision.com. Now, I would like to turn the call over to Glenn de Vos, our Chief Executive Officer.

Glenn? Thank you, Drew, and good afternoon, everyone.

Welcome to MicroVision's third quarter 2026 earnings call. Over the past several quarters, we have talked about the transformation underway at MicroVision and our strategy to build a fundamentally different lidar company. Our goal was to broaden the portfolio to enable MicroVision to have the right solutions for our three primary end markets: industrial, security and defense, and automotive. Now, as we enter the final months of 2026, I can state with confidence that our strategy is working, and Q3 was a very important quarter for us. It achieved significant progress across all areas of the business, the portfolio, commercial success, as well as the organization. Our progress in Q3 positions MicroVision for near and long-term revenue growth with an operating model that will drive positive cash flow.

We will first take a look at the financials, and then I will go into more detail about the key developments in the quarter that are delivering these results. One of those key developments was the addition of Christine Chambers to our team as our Chief Financial Officer. It is a pleasure to have her with us on the call today. With that, I am going to turn it over to Christine to go through the financials.

Thank you, Glenn, and good afternoon, everyone. During my first two months in MicroVision, I have spent time with our employees, customers, and shareholders. What I have seen and heard reinforces two priorities that will define our financial strategy going forward. First, improving operating efficiency and reducing cash burn. Second, building a strong financial foundation that supports long-term growth and attracts long-term capital. Today's results demonstrate progress against both of those objectives. Before I provide an update on the Q3 results, let me start with operating discipline, cash flow, and how we fund the business while we execute our roadmap. For the nine months ending September 30, 2026, cash used in operating activities totaled $49.2 million. We remain on track to finish the year near our target operating cash burn of $60 million, depending primarily on the timing of certain working capital items.

Looking ahead at 2027, we are targeting approximately $40 million of operating cash burn, a reduction of roughly one-third from current levels. To support that objective, we recently implemented a workforce reduction affecting approximately 28% of our organization. These functions focus primarily on non-revenue generating functions while preserving the resources required to support customer shipments, commercialization activities, and continued HALO development. These decisions were not made lightly. They were intended to create a leaner, more efficient organization while positioning us to support growth and improved operating leverage as revenue scales. Reductions focused on R&D and G&A groups while strengthening our operations and our supply chain resources. The more efficient operating cost structure aligned with commercial priorities is real and underway. Turning to revenue, we remain confident in our full year 2026 revenue outlook of $10 million-$15 million.

To date, we have approximately $10 million of customer purchase orders awaiting shipment, with a majority of inventory already built and available for delivery. These orders, together with the $4.8 million of revenue recognized through September, give us visibility into our full year revenue outlook. The primary variable is going to be shipments rather than customer demand. While certain supply chain dependencies remain, our focus is on shipping products and continuing to scale commercial operations. The second question I frequently get asked is how we intend to fund the business while we execute our roadmap. For the remainder of 2026, our priority is maximizing non-dilutive sources of liquidity. This includes active working capital management, monetization of non-core assets, and other opportunities to unlock value from assets already on our balance sheet.

We also continue to maintain access to existing financing tools and have approximately $40 million remaining on the ATM facility should we determine it appropriate to use. As we look ahead to 2027, we expect revenue to double from our 2026 level. 2027 is supported by committed purchase orders exiting 2026, expansion of IRIS sales to existing customers, as well as sales of our MOVIA product to existing and new customers. Alongside expected lower cash burn, we're evaluating financing alternatives to secure what I would describe as clean capital. This includes strategic partnerships and commercial and licensing opportunities, together with continued balance sheet improvements that strengthen our ability to attract long-term capital. We also continue to evaluate strategic alternatives for certain non-core assets, including opportunities to monetize technologies or establish partnerships that can generate value while maintaining focus on our commercialization priorities.

The combination of sustainable commercial growth, the lower cash burn, and disciplined financing will create a significantly more attractive financing profile. Turning to our third quarter results, the most important takeaway is that we're beginning to see commercial progress translate into financial results. Third quarter revenue was $2.4 million, compared to $0.2 million in the third quarter of 2025 and equal to the $2.4 million generated during the entire first half of 2026. Year-to-date revenue was $4.8 million, nearly five times the $1 million reported through the first nine months of 2025. Just as important as the growth in revenue is the change in the revenue mix. This time last year, revenue was largely driven by software licensing and royalties. Today, the business is increasingly being supported by product shipments into industrial, security and defense, and automotive sectors.

Commercialization progress is beginning to show up in financial performance, and Glenn will describe details of this progress in a moment. Gross profit was $1.2 million, or 50% of revenue, compared with a negative gross profit of $0.7 million in the third quarter of last year. Year-to-date gross margin improved to 46%, compared with -126% in the same period of 2025. The improvement in gross margin was driven by our ability to leverage inventory and assets purchased as part of the Luminar acquisition, including the new manufacturing facility in Orlando. While gross margin will continue to fluctuate based on product mix and shipment timing, these results demonstrate the operating leverage available in the business as revenue scales. Total operating expenses were $22.5 million in the quarter, down approximately 7.5% from our first half quarterly average of $24.4 million. Research and development expenses declined to $13.2 million.