Vuzix Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 6 speakers on the call.

Operator

Greetings, and welcome to the Vuzix Third Quarter Ending September 30, 2023 Financial Results and Business Update Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. Call. As a reminder, this call is being recorded.

Operator

I would now like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin.

Speaker 1

Thanks, operator, and good afternoon, everyone. Welcome to the Vuzix Q3 and 2023 ending September 30 financial results and business update conference call. With us today are Vuzix's CEO, Paul Travers and our CFO, Grant Russell. Results. Before I turn the call over to Paul, I'd like to remind you that on this call, management's prepared remarks may contain forward looking statements, filings, which are subject to risks and uncertainties, and management may make additional forward looking statements during the question and answer session.

Speaker 1

Filings. Therefore, the company claims the protection of the Safe Harbor for forward looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward looking statements as a result of certain factors, including, but not limited to, general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, November 9, 2023. Vuzix assumes no obligation to update these projections in the future as market conditions change.

Speaker 1

This afternoon, the company issued a press release announcing its Q3 2023 financial results filings and filed its 10 Q with the SEC. So participants in this call who may not have already done so may wish to look at those documents as the company will provide a summary of the results discussed on today's call. Today's call may include certain non GAAP financial measures. When required, reconciliation to the most direct comparable financial measure calculated and presented in accordance with GAAP can be found in the company's Form 10 ks annual following atsec. Gov, which is also available at vuzix.com.

Speaker 1

I'll now turn the call over to Vuzix CEO, Paul Travers, will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Grant Russell, Vuzix's CFO, will provide an overview of the company's Q3 financial results. Paul will then return to make some closing remarks, after which we'll move on to the Q and A session. Walt?

Speaker 2

Thank you, Ed. Hello, everyone, and welcome to the Vuzix Q3 2023 conference call. Call. On this call, we're going to review our operating results and recent developments and then give you some perspective on where we see things headed in the Q4 and into the first half of twenty twenty four. Grant will cover our financials in detail a bit later in the call, but I want to start by providing some additional color regarding our Q3 financial results.

Speaker 2

During the quarter, we saw lower than planned smart glasses sales, primarily due to the order placement timing associated with several larger channel partner deals. Most of them we fully expect will close in the coming months. As previously stated, We are focused on the growth and expansion of our strategic channel partner program at Vuzix. This program allows us plans to expand the size of the qualified expert sales team that Vuzix has in the market without the cost and efforts of having to grow an internal sales team. We now believe this longer term strategy is the most cost efficient path while allowing Vuzix to best address the growth We are confident is coming in the overall smart glasses enterprise space.

Speaker 2

Expected third quarter revenue related to our OEM business was also negatively impacted by macroeconomic business conditions, specifically with a few large corporations having delayed their investments in new technology in favor of maximizing their current earnings and cash flows. Again, we believe this represents a shift in their timing and we fully expect over the next several quarters that we will close on the bulk of these transactions. Despite the soft third quarter revenue, I am pleased to report that we have our largest pipeline of smart glasses sales opportunities in the company's history. Therefore, the outlook over the next 12 plus months, we believe, is for continued growth. Our OEM business continues gaining momentum.

Speaker 2

Our OEM group ended Q3 with the largest OEM backlog in our history, largely driven by continuing defense and aviation related engagements. Customer's projects are all focused ultimately on volume production programs. During Q3, we also made significant advancements in what is at the heart of Vuzix's value proposition to the entire AR wearable industry, our waveguides and microLED display technology. This industry is expected to represent many 1,000,000,000 of dollars in value for just the required display and optical components and technology that Vuzix can deliver today and as such, I'll spend a little more time discussing this shortly. Results.

Speaker 2

Lastly, and as mentioned in our Q3's earnings release, our company has reached a point to where we have both the ability and need to realign certain parts of the organization to take advantage of scale and realign our operations to better serve our customers. Results. As a result, we are making changes that are expected to lower operating costs by as much as 20% annually once fully implemented. The process is underway and will continue into 2024. It impacts everything from operations to product development as well as marketing and sales.

Speaker 2

We expect these adjustments will not only better support our growing customer base in all parts of our business, but also extend our operational runway and improve enterprise product margins. We have a bullish stance on the future, and we are focused on realigning our company to become more efficient, lower our cash operating burn and put ourselves on a faster and more visible path to profitability. The Vuzix patent portfolio continues to expand and currently includes 346 patents and patents pending, an impressive 50% increase over the last 24 months. Our portfolio covers a broad range of technologies cost. Bottom line, we feel Vuzix has a strong intellectual property position, which will be able to create a significant value for us across solutions, including waveguides, micro display engines, full systems, white label products and of course, enterprise AR Smart Glasses.

Speaker 2

As Slide 6 shows, the projected total market opportunity for products and key technologies that Vuzix is and can ultimately deliver on using its intellectual property we believe is massive. Vuzix fields a family of competitive solutions within the enterprise smart glasses space and expects to win and maintain a meaningful share of this market as it ramps and ultimately grows our annual revenues to the 100 of 1,000,000 and potentially up to in excess of $1,000,000,000 annually. As exciting as our enterprise business is, it is dwarfed by the potential represented by the much larger broader market opportunities for AR Smart Glasses. And producing components and technology for this broader consumer market is where the lion's share of our development efforts and IP is ultimately focused. Such expected demand is a strong part of the reason why some of our competitors, waveguide and display makers, have commanded purchase prices of $500,000,000 to $1,000,000,000 in recent years.

Speaker 2

Key suppliers of these technologies to third parties should be able to realize 1,000,000,000 of dollars in annual sales in due course. And we are positioned to be one of the leading suppliers of the critical OEM components and a highly profitable one at that. I'd like your takeaway from this slide to simply be in ship in any given quarter. Maturing markets are historically choppy in terms of demand and implementation schedules. Goals.

Speaker 2

We believe our enterprise has a long term incredible value and IP and that we are in the throes of leveraging it become the leading supplier in a market that is touted to equal or exceed the mobile phone market. That market alone currently exceeds $1,000,000,000,000 and hardware revenue annually. Vuzix WaveGuide Mega Factory is now operational and dedicated to the production of wave slides. This state of the art manufacturing plant is a one of a kind facility that increases our waveguide unit capacity, lowers manufacturing costs and allows us to utilize the more advanced processes needed for our latest waveguide designs. This new facility which is adjacent to our headquarters provides an additional 10,000 square feet to our existing 12,000 square foot facilities at our headquarters and has the option to expand into the full approximately 40,000 square foot building as needed.

Speaker 2

This facility is home to class 1,000 and 10,000 clean rooms and will enable the use of higher index materials, advanced glass substrates and unique waveguide configurations. Vuzix now has broad in house capabilities that include rapid specification to design, mold production, replication and test, system integration and waveguide fabrication. This unique facility enables not only the manufacturer of waveguides augmented reality smart glasses market, but also other potential markets like large format or direct view heads up displays for in vehicle use cases I'm sure everyone has seen pictures of competing see through AR glasses where the glasses literally look like someone has forward eye glow typically associated with waveguide based smart glasses. As you can clearly see, eliminating the eye glow is critical technology for the broader markets to accept smart glasses. Vuzix Incognito is the 1st waveguide based technology in the world to achieve this level of performance.

Speaker 2

Vuzix Incognito manages internal light reflection, minimizes and manages forward light leakage within a waveguide, enhances low light optical performance, significantly advances Vuzix's already industry leading forward light ratio of 1:8 improves the contrast of virtual images in AR glasses and interaction with the external environment. These refinements have been accomplished with no increases in Vuzix manufacturing OSPR waveguide. This new game changing waveguide functionality will be targeted for introduction into certain of the company's defense, industrial, enterprise and ultimately broader consumer market applications. Wave guides and ultimately the micro LED displays that drive them are essential components for lightweight AR smart glasses and other wearables. We believe our increased capacity, lower cost waveguide offerings and our ongoing investments in next generation microLED displays will fortify Vuzix position to play a critical role in an industry that should ultimately represent many 1,000,000,000 of dollars of revenue annually.

Speaker 2

As we've discussed in the past, MicroLEDs have the potential to be a driving force in providing the performance, size and cost needed for AR and MR to achieve success in the mass market. MicroLEDs have the potential to be much more efficient, lower power to drive high brightness with the resolution and form factor to enable small, lightweight, fashion forward smart glasses. But the current market technology approach, primarily using GaN, Gallium Nitride And Gallium Arsenide Material Systems has its challenges with cost, scalability, power efficiency and spectral performance that is constraining existing microLED cost, manufacturability and performance. We believe our technology partnership with Atomistic that is developing new microLED technology that will address these fundamental market requirements is much better than others. And as a result, we'll have a profound impact on the AR micro display market and beyond.

Speaker 2

Atomistic with its revolutionary applied material science and unique atomic structure approach with a focus on required fundamental material characteristics has been operating under stealth mode out of the public eye for the last 24 months and it is making great progress on many fronts. And while that might seem like a long time in the tech industry, the micro LED design process takes time and portions of the fabrication process need to use very complex and customized equipment. The Atomistic team is making excellent progress against milestones. Their highly specialized fabrication equipment that has been designed and built from the ground up by Atomistic is nearing completion and is on track to be qualified in the coming months. Atomistic has also just opened a website atomistic.com.

Speaker 2

It is simple just yet, but it is the beginnings of sharing more information about what they are doing with all of us. This website should be updated periodically as progress is made over the coming year. Suffice to say, Atomistic's technology has great potential to create incredibly advanced full color high efficiency microLED displays, displays that have the potential to upend the entire microdisplay industry with very compact, full color, exceptional brightness and all day battery performance that can be incorporated in fashion forward smart glasses form factor that everyone will want to wear. Vuzix smart glasses are assisting enterprises across multiple key markets, including warehousing and logistics, healthcare, education, language assist and others. Early adopters of smart glasses understand the value proposition that our technology affords and are adopting wearable technology to eliminate costs such as expensive and time consuming travel and to deliver ROIs and productive KPIs.

Speaker 2

As I mentioned earlier, our smart glasses pipeline is arguably our largest in our history with key accounts across all of the key markets. Results. Outside of traditional enterprise, we are beginning to see not only interest, but traction in the marketplace coming from emerging applications that are utilizing artificial intelligence. The combination of AI and smart glasses have created a new value proposition and business opportunities for smart classes. AI enabled smart glasses can deliver rich new experiences to support education, e commerce, healthcare, communications, defense, security and more.

Speaker 2

The possibilities are almost endless with this new technology. Examples that exist today include visual search, language translation, voice control, fact checking, hearing impaired solution, sign language smart glasses and real time human enhancement in the field. We expect this marriage of technologies to accelerate and help define the specifications and use cases for the next generation of lightweight all day wearable AR Smart Glasses. First, I want to be clear that when we talk about OEM products, We mean the entire broader market segment. This is everything outside of the enterprise medical and defense market segments we play in today.

Speaker 2

On the OEM products and engineering services front, Vuzix has a growing list of companies under contract and opportunities in the queue with new and existing customers. Our investments into new manufacturing and research equipment and enhanced production processes are beginning to yield fruit in the OEM portion of our business. Our recently opened state of the art manufacturing plant for optical waveguides with significantly increased capacity is another solid foundation to further enable Vuzix to be the preeminent supplier cycle waveguides for our own internal production needs and our 3rd party OEM customers. We continue fielding new interest to In defense, Vuzix has many major customers that have been or are developing our waveguides into their head mounted programs. Some are desiring full custom waveguide and display engines, while others will employ our standard waveguide and display engine offerings.

Speaker 2

We continue to anticipate several of these defense accounts to move from R and D projects and begin scaled production by the end of this year standing leaders in the AR industry today and it is evident in multiple areas. Vuzix has critical waveguide technology from design right drew to a one of a kind mega factory for high volume production at broad market enabling price points. Vuzix has a major stake in what should prove to be the most advanced microLED display technology available, solving for the critically needed high efficiency full color displays for the ultimate AR glasses solutions of the future. Most importantly, we feel we are positioned well to win and see significant growth, especially considering we are a company that is cornerstone to a market touted by industry experts to ultimately be greater than $1,000,000,000,000 plus within a decade. I'd like to now pass the call over to Grant for his financial review.

Speaker 2

Plans.

Speaker 3

Thank you, Paul. As Ed mentioned, the 10 Q we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials. So I'm just going to provide you with a bit of color on some of the numbers now. Our Q3 total revenues for the 3 months ended September 30, 2020 3 was $2,200,000 as compared to $3,400,000 for the prior period in 2022, an overall decrease of 36%. The revenue decline was primarily the result of lower smart glass product sales, which fell 46% year over year.

Speaker 3

At this time, we feel that several anticipated product orders from direct and channel partner customers were delayed quarter or 2 as opposed to being canceled. Sales of engineering services for the 3 months ended September 30, 2023 was $800,000 as compared to $900,000 in the comparable 2022 period. Please note that as of September 30, we had approximately 3,000,000 results of remaining performance obligations under 4 current waveguide and projector development projects, which represents the remainder of transaction prices totaling approximately $4,400,000 under these active development agreements. The company expects to complete and recognize revenues from these projects over the next 3 to 18 months. There was an overall gross loss of $200,000 for the 3 months ended September 30, 2023 results as compared to a gross profit of $900,000 for the same period in 2022.

Speaker 3

The decline was due to lower sales volumes resulting in Higher overall cost of sales as a percent of revenues due to lower absorption of fixed manufacturing overhead costs over our reduced sales base. Research and development expense was $2,900,000 for the 3 months ended September 30, 2023 versus $3,400,000 for the comparable 2022 period, a decrease of approximately 15%. The decrease was largely due to a reduction external development expenses and contractors related to our existing and new upcoming products. Selling and marketing expense was $2,800,000 for the 3 months ended September 30, 2023 versus $2,000,000 for the comparable 2022 period, income, an increase of approximately 43%. This increase was primarily due to higher salary and benefit expenses associated with increased headcount as compared to the previous year's comparable period.

Speaker 3

Dental and administrative expenses for the 3 months ended September 30, 2023 was $4,500,000 versus $4,900,000 for the comparable 2022 period, a decrease of approximately 8%. The decline was primarily due to a decrease in non cash stock based compensation expense. Depreciation and amortization not included costs and cost of sales increased to $1,000,000 for the 3 months ended September 30, 2023 versus $500,000 in the prior year's period. Income. September 30, 2023 was $11,000,000 or $0.17 per share versus the net loss of $9,500,000 or $0.15 per share for the same period in 2022.

Speaker 3

Now for some balance sheet highlights. Our balance sheet remains strong with cash and cash equivalents of 38,000,000 as of September 30, 2023 and a net working capital position of $54,500,000 The net cash flows used in operating activities was $8,000,000 in the Q3 of 2023 as compared to a net cash use of $6,900,000 for the Q3 of 2022. The bulk of this increase in cash was due to investments in accounts receivable and a comparatively larger net loss in the period versus the prior year Q3. Cash used for investing activities for the Q3 of 2023 was $2,500,000 as compared to $3,300,000 in the prior year's period, with the majority of this being a $1,500,000 payment towards our Atomistic technology licensing fee commitment. As of the date of this call, there remains the final outstanding licensing fee commitment to Adamistic of $1,500,000 due on December 31, 2023.

Speaker 3

Other investments in Q4 2023 will be modest as we complete the installation of final additional equipment to our waveguide plant expansion. Capital and licensing expenditures will be significantly less in 2024 as compared to 2023. As of September 30, results. The company continues to have no current or long term debt obligations outstanding. As Paul mentioned earlier, we are taking proactive steps to reduce our cost structure and position us better to respond to demand fluctuations while continuing to invest in new product development and maintaining our high standards of customer service and support.

Speaker 3

Vuzix will remain not only a growth oriented organization, but ideally also a more cost effective organization. We expect these transformation actions can produce many benefits actions will include improving the economics of our smart glasses business, resulting in improved gross margins and reducing operating costs in absolute terms and as a percentage of revenue, implementing a headcount freeze throughout the organization after our last several years of additional operating cost investments. This will also include reassignment and combination of functions and focus. But of course, we will respond to the product demand fluctuations and continue to staff our production teams appropriately. Outsourcing more of our non differentiating capabilities and activities to external contractors and partners.

Speaker 3

Outlook. This should allow us to reallocate resources to focus on important investments in what we do uniquely and gives us a competitive advantage. We will strive to operate more efficiently and expect to create durable savings to fund investments in our key technologies and product capabilities. These cost transformations are expected to deliver results in the short, medium and long terms. Outlook.

Speaker 3

Looking forward, we are confident we have the resources to execute on our growth business plan and further invest in our future. With that, I would like to turn the call back over to Paul.

Speaker 2

Thanks, Grant. As our business continues to grow on multiple fronts, Our line of sight to achieving profitable operations gets clearer. We expect the pace of our growth in the coming quarters will continue and with our shift more to 3rd party channel partners and resellers in our enterprise smart glasses segment, this should allow us to more effectively manage our sales and marketing costs. And of course, we will be looking at further ways across the company to reduce costs and improve productivity, so we can bring as much of our revenues as possible as income to our bottom line. It is a focused effort for Vuzix.

Speaker 2

And as Grant just said, we have the resources we need to execute on our plans going forward. With that said, I would like to now turn the call back over to the operator for Q and A.

Operator

And a confirmation tone will indicate your line is in the question for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question comes from the line of Matt VanVliet with BTIG. Please proceed.

Speaker 4

Good afternoon. Thanks for taking the question. I guess first, what gives you confidence that some of the larger orders that you were anticipating that sort of failed to come through this quarter will be that sort of failed to come through this quarter will be coming through in the next 1 to 2 quarters as you mentioned And maybe not even longer beyond that or outright making a cancellation or decision to move away from the technology?

Speaker 2

Yes. There were 2 categories, Matt, of orders that got delayed. Let's talk about the product side of the business first because there's It's really 3 categories of where order books get filled at Vuzix. We've got the channel business that we're building right now. And building that business, it's not just as simple as you got a new guy and you bring him on board.

Speaker 2

It takes work to vet and make sure that you've got folks that are compatible with Vuzix, that understand the markets that we're trying to sell into and can support them well. And between doing that vetting and getting the negotiations done on bringing those folks on board, it just slipped into the next quarter. We have other folks that we're bringing on here in the Q4 and that has not been impacted. It's Just taking a little bit longer for these those channel partners to come on board for us. And then there's the direct sales.

Speaker 2

And the one category that is Really the front end of seeing a lot of growth, which was in our expectations for Q3 Revolves around the whole supply chain marketplace. And there are more than a handful of companies that are in that box That just like they've been doing for some time now, sliding sideways a bit. That said, there's 3 or 4 of them, which Significant business opportunity for Vuzix. Literally, it just was a function of this excuse or that excuse revolving around Things like new systems that got installed or they took a smaller order because they're not going to roll out quite as fast because part of what's going on in the world right now is they want to make sure that they're not But there is nobody in the warehousing and supply chain side of the business that is saying we're not doing this. So that's why I say Q4, Q1 possibly because some of those supply chain side of the house, In Q4, they got awfully busy with year end sales opportunities and the likes.

Speaker 2

And on the channel side of it, it's just Vuzix has got to get the deals in place and rolling. So our Q4 still looks like it's a great going to be a fine quarter for us. And some of that business that we were planning on in Q3 should roll into our Q4. On the OEM side of the business, You can see we've actually got a backlog now of like $3 plus 1,000,000 and there's another $3,000,000 to $4,000,000 that Dial Rights should have closed in the Q3. And the only reason why it didn't is because you have companies that are saying, look, we're not bringing on new projects until the New Year period.

Speaker 2

Across the board, it's almost like freezing hiring. And so For 2 of those, we're 100% certain that these guys are moving forward. We've got zero reason to believe that they're not. And it's possible that at least one of them will sign up in the Q4. The other one is probably going to be the Q1 of next year.

Speaker 2

We're not seeing the business going away at all. It's just timing and issues in the world as such as they are.

Speaker 4

All right, helpful. And then Grant, when you look at the cost reduction steps that you've taken, how much of those are headcount reduction versus just pulling back on discretionary spend and maybe any level of magnitude At least on the structural cost reduction that you're going through?

Speaker 3

Well, our goal, as Paul said, was Overall achieve about a 20% reduction. So if you look at our OpEx and We'd expect to see a 20% reduction that could be implemented by the middle of next year. As far as Discretionary versus people, I mean, I think there's probably going to be more discretionary stuff. We're going to adjust and tweak rather than necessarily headcount. I mean, we've got a good team here and we want to keep some of The great people we have.

Speaker 3

I mean, we're going to look at, as I said, none stuff we do that's none differentiating You know, not necessarily proprietary and push it out to some other third party. Growth. So we can still keep active moving ahead without having to make the commitments of hiring more people. As we said, we do have An absolute headcount freeze going on right now. The only exceptions might be in production to respond to needed demand.

Speaker 3

But We think we got good opportunities to reduce costs and our future products are spending more time to improve the gross margins going forward on future generations. And it's a competitive business. We're all in. So and we're going to do our best to win.

Operator

Thank you. Ladies and gentlemen, there are no further questions at this time. Actually, our next question actually comes from the line of Christian Schwab with Craig Hallum. Please proceed.

Speaker 5

Hey, guys. So just on the decision to make the OpEx reduction at this time, Listening to the prepared comments, it seems like there's a tremendous amount of opportunity in front of you Between different customers and many different applications. I mean, how are you going to satisfy those markets with a reduced workforce?

Speaker 2

There's a balance there, Christian, on where those Cost savings are coming from. And I will admit, there will be changes in some of the workforce. But as Grant mentioned, it's related to things like where you might get work done, etcetera. We've got What we need to be able to deliver, quite frankly, Vuzix has got a great infrastructure to deliver way beyond even what the current run rates are. So our production capacities, our sales teams,

Operator

as you can see, there's a

Speaker 2

shift in how our sales are starting to operate with Bringing the channel partners on board the way that we are. So yes, we've got The right infrastructure right now. And in fact, we could even lower some of the infrastructure that we have right now, bring it more aligned and still deliver very, very well for the customer base.

Speaker 3

And part of it will also have an increased focus. We might try to do a few less things simultaneously than we might have had in the past. We know what's working and We're going to focus and we're not going to frankly just chase every opportunity if we feel that market isn't ready to mature as fast as some of the other markets we see as opportunities.

Speaker 2

And Christian, there's some natural things that are happening, our investments and things like the new waveguide facility.

Operator

It's just not going

Speaker 2

to be anywhere near the amount of money in 'twenty four that went in in 'twenty three because that That needs to go into the microLED development efforts is a fraction of where we have been in the past. So there's a lot of reductions that are coming just out of those kinds of things also.

Speaker 5

Okay. I guess following up on the answer there, I guess it wasn't clear to me, given the broad set of opportunities then. So if we're narrowing our focus And that's trying to be all things to all people. What should investors focus on? What is the 1 or 2 applications Or 1 or 2 customer segments that you anticipate to drive revenue growth in calendar 'twenty four?

Speaker 5

I understand the OEM push outs. I'm not talking about that. I'm talking about where the smart glasses are going to be used And to drive revenue growth.

Speaker 2

In healthcare? Yes. In healthcare, in remote support applications, in warehousing. And finally, there's a new category that's coming on board that is part of this AI world where there's a handful of companies that are using our glasses to help with hearing impaired. And so it's a medical device that's a replacement for hearing aids and the like and for people who need sign language kinds of support.

Speaker 2

And It's a big marketplace just in the veterans of the world. In America, there are 3,500,000 folks That have hearing impairment problems. And these glasses work way better than hearing aids for people that have bad enough, severe enough hearing impairments. So the medical side of our business is happening all over the place with the companies like Pixy and Proximi and rods and cones and the likes. The business is it just keeps going and it's exciting.

Speaker 2

And then the warehousing side of the business, we have A large number of companies that are going beyond pilots now, they are deploying. It's just It's taking a little bit longer as usual, which is frustrating in that side of the space, but you'll see it there. So those are the 3 or 4 areas that We're focused on right now to make it happen.

Speaker 5

Great. Thank you for that. No other questions.

Speaker 2

I will add, Christian, just Because you asked on the side of the OEM business, defense, aviation, Wireless carriers, glasses companies, and then finally the broader markets. And this one is so much easier to address for Vuzix Because it's lots of inbound. Very few trade shows are needed. People know that we're doing this now. It's outreach that can be done direct.

Speaker 2

So it's a very inexpensive marketing and sales side of the business to address

Operator

results. Thank you. Ladies and gentlemen, there are no further questions. I'd like to turn the call back to Paul Travers for closing remarks.

Speaker 2

I would like to thank everyone for your interest and participation on today's calls. There's going to be a lot of exciting developments and news in the coming months Between now and the Q1 of next year, there's often lots of things. There's a pile a slew more that are going on around things like our OEM business and some of our select partners that we're going to be able to share much more with. So please stay tuned. It should be an exciting month and a half to Let's say 3 or 4 months.

Speaker 2

Thank you. Have a good evening, everybody.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • Vuzix reported Q3 2023 revenue of $2.2 million, down 36% year-over-year, primarily due to timing shifts in smart glasses orders from channel partners and delayed OEM investments, with management expecting most of these deals to close in Q4 2023 or Q1 2024.
  • The company is realigning operations to reduce annual operating costs by up to 20% through a headcount freeze, outsourcing non-core activities, and improving product development efficiency, aiming to extend its cash runway and boost margins.
  • Despite softer near-term sales, Vuzix boasts its largest-ever pipeline and OEM backlog—driven by defense, aviation, and enterprise engagements—and remains confident in sustained growth of the enterprise smart glasses market over the next 12-plus months.
  • Operational capabilities expanded with the new “Waveguide Mega Factory,” adding in-house clean-room production to increase waveguide capacity, lower unit costs, and launch the Incognito waveguide tech that virtually eliminates forward light leakage.
  • Vuzix continues to invest in next-generation displays through its Atomistic partnership, targeting advanced full-color microLED engines for lightweight, high-brightness AR glasses, supported by a growing IP portfolio of 346 patents and pending applications.
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Earnings Conference Call
Vuzix Q3 2023
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