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Vuzix Corp. : Coins are slowly falling into place (NASDAQ: VUZI)

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Vuzix Company (NASDAQ:VUZI) is a small technology company that designs smart glasses that can be applied to many practical situations with the goal of improving customer outcomes.

Since peaking at a share price of just over $32.00 per share on May 5, 2021, it has since taken a hit, falling to a 52-week low of $3.88 per share on May 9, 2022, and has since fought slightly above- above $10.00 per share on August 8, 2022, before falling again to trade in the mid-$4 range.

The smart glass market has been growing slowly due to the need to expand its use cases, and in the case of Vuzix, it is starting to gain traction in several verticals that promise long-term growth.

In this article, we’ll take a look at some of his recent revenue numbers, some of the projects he’s advancing along with their potential, and the role his acquisition of Moviynt could play in the company’s future.

Last earnings

Third quarter revenue was $3.4 million, up $400,000 from the $3 million in revenue generated in the third quarter of 2021, an increase of 14%.

Gross profit in the reporting period was $0.9 million, up more than double from gross profit of $0.4 million last year in the same quarter.

Net loss for the quarter was $9.5 million or $0.15 per share, an improvement from net loss of $10.5 million or $0.17 per share a year to the other.

Sales and marketing expenses in the third quarter were $2 million, down from sales and marketing expenses of $1.7 million in the third quarter of 2021. The increase was attributed to an increase in the number of employees.

VUZI has a strong balance sheet with a cash and cash equivalent position of $90.4 million at the end of the third quarter, with net working capital of $100.8 million.

The company has no existing or long-term debt outside of licensing fees and ongoing backplane work with Atomistic.

Towards the end of the third quarter, VUZI added Hongke Tech to support its global sales channel to support the Chinese market development of its Smart Glasses business. It also worked to strengthen its support team in Europe by increasing the number of its employees there to support existing key accounts and drive sales growth in the EMEA region.

Waveguide Manufacturing Capabilities

In an effort to expand and improve its waveguide manufacturing capabilities, VUZI entered into a lease in October for a new manufacturing space, conveniently located across from its existing facility. The lease includes an option to expand if and when required.

The primary focus of the plant will be to support the development of the advanced capabilities the company needs for its latest waveguide technology to meet the needs of its OEM and Vuzix customers.

As the business scales, the facility will increase its unit capacity while reducing the unit costs associated with manufacturing its waveguides.

Acquisition of Moviynt

Vuzix completed the acquisition of Moviynt during the quarter, which is a SaaS provider that supports SAP (SAP) in its important warehousing and logistics verticals. Moviynt will help Vuzix expand its strategy for customers and ISPs using SAP in the warehousing and logistics market.

An interesting feature of the Moviynt architecture and workflow solution is that it can be used without an online connection or middleware to operate. Since it is ERP agnostic, the company believes it will be adopted as an ERP back-end system for tech giants like Oracle (ORCL) and others.

It is currently in use in various locations in Europe and the United States and is considering expansion into Canada.

While Moviynt’s solution now supports handheld scanners and smart phones, VUZI sees it as a way to transition them to Vuzix smart glasses. In other words, it will be marketed as an upgrade to customers. The benefit to the end user will be the ability to select hands-free in warehouse environments.

Another reason for the acquisition is that management believes it can use Moviynt’s solution technology and architecture to integrate it into APIs that can then be used by Vuzix’s ISVs to bolster its software offerings. existing ones, which should allow it to expand the markets in which it currently operates. while having the potential to open new markets for its smart glasses in warehousing and logistics.

Regarding the impact on its performance, Moviynt is expected to generate revenues in the six figures in the fourth quarter of 2022, with revenues for 2023 expected to be in the seven figures. It should be able to do this without too much impact on operating costs, according to management. One key thing for investors to know is that warehousing and logistics are seen as most important in their growth plans right now, so monitoring this vertical and what the business is doing with it, and how well it is performing, will be the key to determining the performance of the business as it stands today.

Further developments in OEM

Defense

With the introduction of its OEM platform, the company ramped up communications with a growing number of companies, which numbered “well over a dozen” during the third quarter earnings call. Management said they already have projects underway with some of them. Since Vuzix is ​​the only waveguide manufacturer in the United States, it has attracted the interest of the United States military. The company believes it is well positioned to grow in this segment of the market.

Since the outcome of modern military conflicts is largely determined by available and timely information, the company believes that the most effective way to provide this information is through the use of a portable display.

To this end, VUZI has entered into an agreement with defense contractor L3Harris Technologies (LHX) to develop “a new head-mounted display engine based on a custom waveguide for use in their existing L3Harris programs and to new ones in progress”.

Based on the many projects and use cases being researched by L3Harris Technologies, it has the potential to generate significant revenue over a multi-year period for VUZI.

L3Harris is not the only defense company coming to VUZI for interviews, there are nearly a dozen in communication with the company, and management expects there to be many more. in the future.

Consumer electronics

Vuzix believes that the strong demand for AR glasses from the consumer electronics side represents a potentially huge market. It’s no secret that a number of tech companies are letting the public know that they’re working on AR glasses that appeal to the masses.

Vuzix Corp. believes it is strongly positioned to supply large-scale waveguides to this market, as well as display engines and other reference designs. He believes he has a chance to make some noise in this vertical, as many tech companies find it very difficult “to design and build a pair of highly functional and cost-effective consumer smart AR smart glasses.”

Health care

In the long term, the use of Vuzix for surgical solutions will expand. Currently, a number of trials are underway in space for potential use cases.

Medacta, Pixee Medical, and Rods & Cones are among the leading ISVs increasing the availability of “Vuzix-powered surgical solutions” globally.

According to the company, among the growing number of use cases for Vuzix smart glasses are “outpatient emergency medical care, Toppan for order picking for the homebound elderly, and Xpertinc for the deaf and hard of hearing.”

The main challenge and opportunity for Vuzix is ​​to increase the number of use cases for its products in order to significantly increase brand awareness and scale.

These aren’t the only verticals Vuzix competes in, but it does give an idea of ​​the potential demand for its products.

Conclusion

I like the measured and patient way in which VUZI builds its business. Often in the technology sector, the strategy is to grow at all costs in order to capture significant market share before competitors do. While a few well-capitalized companies succeed with this strategy, most fail.

In the short term, i.e. until 2023, it looks like VUZI will grow at a modest pace and will have more than enough capital to invest in what it needs to continue its growth momentum.

Where is the company today, I think its price is around $4, and as it pushes forward some of its projects in its various segments, it should gradually increase the value of the company and likely push the price sustainably above the $5.00 per share.

Nonetheless, with a P/S at 23.50 on a TTM basis and a P/S on a FWD basis of 22.68, the company will need to improve on these numbers to boost investor sentiment in the coming quarters, given that the sector medium is TTM. 0.48 and AV 0.86.

The industry it competes in has tremendous long-term potential, but there is a lot of education to be done and use cases identified for the industry to take off to its full potential.

VUZI is positioning itself well for the inevitable mainstream adoption of smart glasses and related products and services, and when the time comes, it looks like it will become an important player in the industry.

One way to really understand this is to think in terms of the technology that’s being used now by holding it in your hand and then how freeing up a person’s hands using AR smart glasses will improve the efficiency and experience of the final user.

I think Vuzix deserves to be placed on watchlists. Under current economic conditions and with technology out of favor, it could fall further before it finds a bottom, but at this entry point and using a dollar cost averaging strategy, investors could build a nice cost base in anticipation of the company building on the solid foundations it has laid.