We thought it’d be interesting to start a new series spotlighting some of our MicroVision experts to better understand their roles and to get their unique perspectives on the lidar industry. We’re kicking off this series with Anubhav Verma, who assumed the role of Chief Financial Officer of MicroVision in November 2021. Anubhav brings over 13 years of capital markets, strategic finance, M&A expertise, and financial planning and analysis (FP&A) to MicroVision.
Thanks for taking the time to talk with us, Anubhav!
AV: My pleasure.
It’s been almost a year since you joined MicroVision, so let’s start at the beginning. Why did you want to join? What was most intriguing about this opportunity?
AV: The lidar space, automotive tech, and the autonomous vehicle industry, in general, are so fascinating to me. It’s incredibly meaningful work that’s going to have a significant impact in the near future, making our roads safer and reducing driving fatalities. MicroVision seemed poised to play a tremendous role in supporting these safety improvements, so the opportunity to join the team was very exciting to me.
This space was so interesting to me because there were a number of new entrants with crazy valuations and projections, and MicroVision was the complete opposite. Founded almost 30 years ago, I found the management team and the board to be thoughtful, disciplined, and deliberate. I knew MicroVision had not only the pedigree but also the track record of delivering technology to OEMs. Hence, it was clearly the most experienced in a sea of new entrants, so I felt confident that the team knew what it needed to do to deliver to big partners and OEMs. To me, the single most important factor that made MicroVision stand apart from its lidar peers was that in a world where companies were pursuing the “spend heavily” model in the name of exponential future growth, MicroVision’s thoughtful and steady approach coupled with our ground-breaking technology would be a winning combination and differentiate it from its peers.
Can you talk more about the crazy valuations and projections?
AV: Well, in the lidar space, there are a number of new entrants that IPO’d as a result of de-SPAC transactions, raising significant amounts of capital. A SPAC is a special purpose acquisition company, or blank check company, which is created to raise money through an initial public offering (IPO) without any operational business but instead with the intention to eventually merge with an operating company. At the IPO, SPACs do not have a stated target for acquisition yet. You can find more about the SPAC model here. SPACs shot to fame and became a darling of the street, especially after COVID in 2020, when there was a lot of liquidity in the markets. Markets started seeing companies raise significant amounts of money on the promise of forward-looking projections going as far out as 2025. In particular, the electronic vehicle and auto tech spaces saw a lot of young companies accessing the capital markets and raising several hundreds of millions of new equity capital each on the back of lofty projections. Traditionally, publicly listed companies only provide expectations and/or guidance for the following quarter or year and typically in the form of ranges. Conversely, SPACs were providing detailed and precise revenue figures going as far out as 2025 in public filings making them appear very valuable–on paper.
What we’re seeing now with these SPAC-formed companies is that their IPO valuations, revenue projections, projected cash burn rate, and more are now regularly reduced every quarter because the actual numbers are just nowhere near those early projections. Sure, this is a challenging space to forecast because it is very difficult to predict when series production of lidars for OEMs will actually begin given the long sales cycle accompanied with detailed qualification and evaluation process. But the problems with those early projections seem to go beyond the forecasting challenge.
Can you help our readers understand what they should be looking for when they’re reviewing these math models?
AV: Sure. From a high-level perspective, I encourage our readers to check out the IPO financial expectations and then take a look at recent reports of the financial analysts who follow the industry and, in particular, what their adjusted expectations are for the lidar players. You’ll see major changes and reductions every quarter because the cash burn is so much higher or the projected revenue is so much lower. Another very important place to check out is the actual reported financials of these companies versus the IPO expectations. That has been true across the spectrum for almost all companies that became listed companies in the 2020-2021 timeframe.
You also want to keep an eye on things like “Sold by Stages” or “Revenue Backlog” that are forecasted for more than a year out. At MicroVision, we’ll always be clear that these numbers are “Projected Revenue” because it’s misleading to portray something as simply “Revenue” (meaning committed revenue) when it’s not. You’ll also see companies use the phrase “Order Book” or “Revenue Backlog,” which is another way they’re trying to make the reader believe that rather than a projection, this is a committed revenue amount. That’s not the case.
You’ll also see MicroVision is very careful to never give guidance beyond one year because it’s really impossible to do right now. This is why we see financial analysts reducing revenue by half for some of these companies or flagging major jumps in R&D when production isn’t going up. Or we see the cash burn is nearly double what was provided at the IPO. At MicroVision, I’m proud that we have 20+ years of audited financials with the SEC, demonstrating strong financial discipline by making sure our actual reported numbers are always in line with the expectations/guidance communicated to the markets. In addition, we have the most disciplined OPEX profile of all lidar companies with the lowest cash burn and ability to scale up as and when needed.
What about some of the common phrases we hear in the industry? Can you talk to us about the phrase “Design Win”?
AV: You’ve also got to watch things like announcements that companies make and what they’re saying versus what it really means. For example, you’ll hear a company say they have a “Design Win.” Some companies use the phrase “Design Win” to designate when an OEM is running custom tests on a technology. Maybe we’re conservative (and I’m ok with that!), but we won’t announce a Design Win until the design has been selected. That means the design is frozen, has been selected with the estimated costs and specs locked in, and now the OEM is advancing to the next stage of implementation.
Would the same be said for “Series Production Win”?
AV: For MicroVision to announce a “Series Production Win,” this would mean that our technology has been selected and we have an estimated build and year designation, that we know the location of the unit with respect to the design of the car, the power specs, the ASIC (chip) inside the lidar unit is frozen, and the code is finalized for that production plan. The Tier 1 capabilities will play an important role as then the supply chain is identified and locked in to be able to produce those units in mass production volumes, have standard quality and reliability testing processes in place, and finally, delivery logistics to the OEMs and aftermarket service.
We believe that all lidar companies are currently competing for the “Series Production Win” with the OEMs.
We hear some people use the term ‘Becoming a Tier One Supplier.’ What does that mean for MicroVision?
AV: This is another term that’s being used pretty loosely in the lidar space. At MicroVision, we believe you’re a Tier One Supplier only in two scenarios: either you acquire an existing Tier One Supplier, which has a strong track record of supplying automotive grade products to OEMs or you build out facilities, acquire state of the art production lines, establish clean rooms, and are actively handling all end-to-end manufacturing and delivery today. Both these options require significant amounts of capital expenditure or cash used in investing activities.
At MicroVision, we believe if you are partnering either through a contract manufacturing relationship or anything similar with another company to deliver your technology–even if the partner is a Tier One Supplier, this doesn’t make you a Tier One Supplier. A Tier One Supplier to automotive OEMs is a very standard and sacrosanct definition in the industry.
Do you worry about the challenges of navigating this lidar space with announcements popping up and attention on different companies and their changing financials?
AV: I’m focused on MicroVision, and I know the way that we approach this industry. Our goal is to do what we say we’re going to do. We want to be disciplined and diligent with our financials. We’ll only announce something when it meets the criteria we’ve discussed here. And when people are looking at the technology images and point cloud output of some of our competitors with skepticism, wondering if it was doctored in post-production, I just want to reassure them that MicroVision will never do that. When you see our point cloud imagery, you can know with 100% certainty that it’s pure live point cloud straight from the lidar with no post processing or any other enhancements or fusion with vision-based systems…period.
Thank you for your time.
Always happy to chat with you.