Vuzix Corp Q3 FY2024 earnings call

• Strategic partnerships: Partnership with Quanta Computer with $20 million multi-phase investment, first $10 million received, remaining tied to milestones. Collaboration with Thales in defense and industrial sectors. - Transition to OEM markets: Shift from enterprise to consumer OEM sector, leveraging waveguide manufacturing capabilities. - Z100 smart glasses: Expanded from developer kit to consumer/enterprise ready, price reduced to $499, functionality growing with AI integration. - Cost reductions: Quarterly cash operating expenses declined 28% to $4.8 million driven by workforce optimization and discretionary spending cuts. - Market potential: Global smart glasses market projected to grow, AI revolutionizing use cases, fashion brands entering space validating market potential.

For the three months ended September 30th, 2024, total revenues decreased by 36% to $1.4 million versus $2.2 million for the comparable period in 2023. The decrease was due to a 28% decrease in smart glass product sales and a 51% decrease in Engineering Services revenues. Cash operating expenses declined 28% year-over-year this quarter to $4.8 million. As of September 30th, 2024, the company had $2.2 million of remaining performance obligations under a waveguide development project, including an initial production run. The net loss for the three months ended September 30th, 2024, was $9.2 million or $0.14 per share versus a net loss of $11 million or $0.17 per share for the same period in 2023.

• Scale waveguide production to meet demand from defense and commercial OEM clients. - Secure additional partnerships with Fortune 500 companies. - Expand product portfolio to include additional lightweight, high performance solutions as reference platforms to white label. - Capitalize on defense OEM markets as a significant growth area.

• General economic and business conditions. - Competitive factors. - Changes in business strategy or development plans. - Ability to attract and retain qualified personnel. - Changes in legal and regulatory requirements.

Q: What are the next steps in your waveguide supply relationship with Quanta once you meet the milestones? And what are your ultimate production and supply goals with them?

A: Current goals are to reach 1 million plus waveguides on an annual basis. Ultimate goal is to achieve significantly higher volumes, aiming for order of magnitude plus over smartwatch market levels. Step one is 1 million plus, step two is a significant jump.

Q: Can you size the market opportunity around your mention of the Thales head-mounted display product?

A: Defense space devices can have price per waveguide system from $4,000 to $7,000. Partnerships with companies can range from 2,000 per year to five-year programs with 5,000-10,000 piece quantities. Thales relationship is confidential now but more to come in new year as program is announced.

Q: Are there other players trying to make waveguides? And who do you think stands to be your biggest competitors in this space over the next year or two?

A: Few companies make waveguides. Many use semiconductor-based process equipment with limited run rate capacity and high cost. Vuzix's cost efficiency and scaling capabilities give edge. Some Chinese companies working on it but face same challenges as others using semiconductor equipment.