Rarely do I pay as much attention to a stock as I have been lately with MVIS. (Okay, I watch DNDN a lot, too.) My increased attention may be because MicroVision is entering exciting times, or because I’ve grown impatient over the 15 years of owning the stock, or because I need the money, or because of a combination of all of those reasons and more. Today was the coincidence of a few events: I read the Annual Report recently, the company announced earnings and had a conference call, we’re one-third of the way through the year, and the stock went down 8.2% today but is up 86.8% since the beginning of the year. It is a good time to compile the progress and assess the situation, or at least guess. (Because, guessing is what every analysis is if any assumptions are involved.)

For those unfamiliar with MicroVision and MVIS (and if you’re reading this blog regularly how could you miss the topic) I wrote a bit of a synopsis a few years ago. The synopsis is due for an update, but like I said, MicroVision is not the only thing in my life. Go read Micro Vision for a slightly out-of-date primer. For the ultra-short primer, MicroVision may help make projectors as ubiquitous as those cameras in laptops and phones – and more.

Things I Knew already

There are two identified customers: Sony and Celluon. Sony has yet to announce any products, but they have paid $8M for a multi-year contract, and $14.5M for components, and will also pay royalties as the products sell. Celluon was a surprise, but they’ve launched two products (the PicoAir and the PicoPro) and have stated an intent to launch more because they are so enthused by the technology. The products are getting excellent reviews, but no sales figures are available yet. There is lots of tantalizing talk about other customers and products, but no details because everyone is guarding competitive secrets. Secrets turn investing into speculation. Business in 2015 has already set records for true commercial production and product revenues. Congratulations. MicroVision is not, however, profitable – yet.

The Annual Report

I just finished reading the Annual Report. Yes, that can be dull. Yes, it can be repetitious. No, I don’t read every word; but, I do skim for key phrases in familiar places or in sections where I have questions. The quick summary: there was very little that was news, partly because I read the press releases, follow the twitter feed, and because discussion boards (particularly Investor Village) keep me informed well enough informed that there were few surprises. (Follow my blog tags for MicroVision and MVIS for posts about previous news items.)

The only small surprise worth mentioning was that under ‘not currently major areas of focus’ was the ‘pair of glasses’, which I take (and there’s an assumption) to include Hololens (an impressive Microsoft initiative). This is a disappointment because I think eyewear displays will be easier to use than projections that have no privacy. The embedded projectors have a large market for replacing or supplementing conventional displays (and are a great improvement for sharing videos) but I think (think) personal use will exceed public use.

The Earnings Report and Conference Call

Dutifully, MicroVision announced their quarterly earnings and held a conference call to discuss the results. Yes, that can be dull. Yes, it can be repetitious. Yes, I did listen to the entire 42 minute call; but, considering the implications, it was worth the investment in time. For the full set of financials, check their press release. If you prefer data, read the report. If you need to hear from management, listen to the call. If you have the time, do both. If you don’t have the time and are only relying on me, well, remember that this is free and you may get what you pay for.

The Report

Revenue was $0.9 million.
– Which is less than the price of many homes in the Seattle market. The $8M and $14.5M orders came in, but the accounting is spread out.
– Revenue was from selling goods rather than services, which is a switch and a sign of maturity.
Operating loss was $4.0 million.
– Oops. That’s bigger than the revenue, but includes non-recurring costs of building the business.
Net loss was $0.09 per share.
– But -$0.09 is better than last years -$0.23 quarterly loss. Keep up that trend and be positive, and extrapolations are dangerous.
Backlog was $18.7 million and cash and cash equivalents were $16.7 million.
– Those are like, real numbers from a real business. Yay! Dilution may be held at bay.

The Call

• The $8M Sony deal (and they’re actually calling them Sony instead of a Fortune 100 company) is a deal for eight years.
  – Some were hoping for $8M every year, with follow-ons.
  – Some were hoping for $8M over a couple of years, with follow-ons.
  – Some are cheering the 8 year deal, while others are lamenting the fact that $8M spread out over 8 years is only $250k per quarter.
• The $14.5M Sony deal includes shipping display modules (made by another firm) to Sony from 2H15 through 2016. There is no public information about when Sony will announce and release the product.
• Celluon’s 2 products (PicoAir and PicoPro, available on amazon) were launched in February and April and have received almost exclusively positive reviews.
• The Fortune 500 company working on an innovative smartphone continues to work on an innovative smartphone.
• Several companies privately demonstrated products at CES15.
  The customer list is growing.
  All of the customers are maintaining secrecy.
• There were no updates from auto and industrial, which does not sound encouraging.
• MicroVision is increasing supply capacity, and expects growth in product and licensing revenues – but stockholders don’t know the details.
• Research and Development is working on increasing brightness and helping develop applications beyond projection. (See Mark Bridger’s guest post for an example.)
• Questions & Answers – paraphrased (and drastically reduced)
  – Every quarter should exhibit increasing output and revenues.
  – With Sony entering a new phase, employees are being shifted to other customers and neglected projects.
  – Royalty revenue has a one quarter lag before it is reported.
  – MicroVision is looking beyond projection. (Pun thanks to paraphrasing.)
  Sony is very bullish.

First Third of the Year
Nothing I read or heard inspires much of a change in the list of catalysts I posted earlier, except to mark off another month and Celluon’s launch of the PicoPro. There are lots of tantalizing potentials, but the graph already has too much speculation built into it. It sounds like the pace should pick up, and that bars will be replaced with stars (or deleted), and that a few other bars can be added; but that level of speculation is the too frequent norm.

The Stock

I’ll add my synopsis below, but the market made its synopsis apparent today. As I said above: MVIS was down 8.2% today but is up 86.8% since the beginning of the year. The stock is trading about where it was three years ago when the company executed a one for eight reverse split. The Sony news has been the biggest catalyst, and has the potential to be followed by far larger news items; but today’s news wasn’t good enough for many investors. Every day on the market is different. Noise happens. News happens. Rumors happen.

My Synopsis
Let’s take the above items in reverse order.
The Stock: I look longer term. Five years ago, back when many of today’s shareholders bought shares, MVIS was trading at over $22. A seven-fold increase in the stock price would make headlines, and yet it would simply take the stock back to the entry point for many. If they expected a 15% return because it was a startup, they were looking forward to a $44 stock today, a 14-fold increase. Dilution affects that but the reaction to a $44 share price is still more emotional than logical. I have to remind myself that the math doesn’t care about what makes sense. Multiple previous analyses (see Peter’s MVIS blog for a collection) have suggested far higher eventual targets, like $400 and eventually $3,000. That last one is possible, but would require so much success built on success that MicroVision would become one of the largest companies in the workd.
The Call: I spent the time. I heard the words. I took my notes. My opinion hasn’t changed. There are so many hidden details and NDAs that any story can be produced.
The Report: Without perspective, the financials do not tell much of a story. But, for anyone who’s followed the company for years, the data are encouraging, and yet not sufficient because profitability has yet to be reached.
The Annual Report: Aside from the eyewear disillusionment, I’m glad I read/skimmed the report; but found the details about the stockholders meeting to be the most actionable item. (Only a bit over three hours by bus to get there. Oh, goody. Thanks for the ride offer, folks.)

My Conclusion
This has been more work than I wanted to spend on a Thursday night, but it is part of the due diligence of investing. I don’t do this all the time for every stock. As the title of my book Dream. Invest. Live. suggests, investing is only a part of the story. I’ll continue to hold because I am cautiously optimistic and because the potential is so great. Logically and mathematically, the present value of future revenues discounted for risk is improving because the risk is diminishing. Emotionally, however, my optimism for MVIS has been worn out by years of slight progress and large disappointments. I look forward to being pleasantly and profitably surprised. My math says it can happen. My emotions won’t believe it until they see it. That’s why I am watching.