VIEW, INC. The following management's discussion and analysis is provided in addition to the accompanying condensed consolidated financial statements and notes, and for a full understanding of the Company's results of operations and financial condition should be read in conjunction with the condensed consolidated financial statements and notes included in this Quarterly Report on Form 10-Q included in Part I, Item 1, "Financial Statements (Unaudited)" and the consolidated financial statements and notes for the fiscal year endedDecember 31, 2021 included in the Company's 2021 Annual Report on Form 10-K filed with theU.S. Securities and Exchange Commission ("SEC") onJune 15, 2022 . Overview Our Business
View is a leading smart buildings platform and technology company that transforms buildings to improve human health and experience, reduce energy consumption and carbon emissions, and generate additional revenue for building owners.
Our innovative products are designed to enable people to lead healthier and more productive lives by increasing access to daylight and views, while minimizing associated glare and heat from the sun and keeping occupants comfortable. These products also simultaneously reduce energy consumption from lighting and HVAC, thus reducing carbon emissions. To achieve these benefits, we design, manufacture, and provide electrochromic or smart glass panels to which we add a 1 micrometer (~1/100th the thickness of human hair) proprietary electrochromic coating. These smart glass panels, in combination with our proprietary network infrastructure, software and algorithms, intelligently adjust in response to the sun by tinting from clear to dark states, and vice versa, to minimize heat and glare without ever blocking the view. In addition, we offer a suite of fully integrated, cloud-connected smart-building products that are designed to enable us to further optimize the human experience within buildings, improve cybersecurity, further reduce energy usage and carbon footprint, reduce real estate operating costs, provide real estate owners greater visibility into and control over the utilization of their assets, and provide a platform on which to integrate and deploy new technologies into buildings. View's earlier generation products are described best as "smart glass," which are primarily composed of three components that all work together to produce a solution:
•the insulating glass unit; which is either double or triple pane with a micrometer semiconductor (or electrochromic) coating.
•the network infrastructure; which is composed of the controllers, connectors, sensors, and cabling.
•the software: which includes the predictive algorithms, artificial intelligence, remote management tools, and user-facing iOS and Android apps, to control the tint of the glass.
After the Company completed installations in a few hundred buildings, it identified an opportunity to use its network infrastructure and cabling as the backbone on which different smart and connected devices in a typical building could operate. We believe customers using View Smart Glass can leverage View's network as their building's operations technology infrastructure to reduce duplicative labor costs, reduce materials usage, provide better cyber security, improve visibility and management of connected devices, and future-proof the building through easy upgradability. Recognizing the opportunity to significantly improve the human experience, energy performance and carbon footprint in buildings, and real estate operating costs through adoption of technology, View began selling aSmart Building Platform, which is a fully integrated smart window platform, to building owners starting in 2021. Concurrent with the commencement of the sales efforts, View also began hiring an extensive team of construction managers, project managers, and building specialists to enable the Company to work towards delivering the fully installed and integrated SmartBuilding Platform , which had historically been the responsibility of the general contractor's glazing and low-voltage electricians ("LVE") subcontractors.
The Smart
•To optimize the design, aesthetics, energy performance and cost of the entire smart façade (or digital skin) of the building, rather than just one component (smart glass), thus benefiting both customers and View.
•To elevate the window selection and purchase decision to a customer and
decision maker that has a more global view of the project and is in a much
better position to make an informed decision regarding all the benefits provided
by View's Smart
•To accelerate the integration of new technologies into the fabric of the building. Today, this includes integrating environmental quality sensors and immersive, transparent, high-definition displays into smart windows. Importantly, our smart façade design enables future hardware and software upgrades into the building infrastructure.
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•We believe delivering a digital, connected façade and smart building platform will enable future business opportunities and pricing models as buildings, both existing and new, incorporate additional technology and connected products. View's next generation, smart building network is designed as a scalable and open infrastructure in which the smart window is now another node of the network; in addition, the network is now equipped to host other connected devices and applications, from both View and third parties, as additional nodes on the network. The network has its own 48v direct current power and power-over-ethernet ports to incorporate other connected devices on a standard protocol. Also integrated into the network throughout the building is gigabit speed linear ethernet coaxial cable, as well as optical fiber. Computer processing is also built into the backbone of the network with x86 and ARM processing cores. The network also includes an operating system with capabilities to run third party applications and services, security protocol to protect buildings from cyberattacks, and several elements of a digital twin of the building. View's smart building network also hosts artificial intelligence and machine learning engines, which View developed, and also provides access to artificial intelligence and machine learning engines that are in the cloud. The exterior of the building is the largest in surface area. With the smart building network, the entire exterior of the building can be digitized. Activating the exterior through digitization creates multiple opportunities for building owners and occupants. View's SmartBuilding Platform enables other devices and smart building applications to be built and connected to the View smart building network. A few applications View has already built and deployed on its next generation network include: •Transparent Displays: View Immersive Display. Integrated into the smart window and connected to the same network as the glass, Immersive Display allows users to turn their windows into the equivalent of an iPad or tablet - an interactive digital display that allows users a new way to digest multi-media content. Immersive Displays are large-format (55 inches and larger), digital, high-definition, interactive canvases that can be used to broadcast content, host video calls and display information and digital art to large groups of people, while maintaining a view of the outdoors through the window on which it is integrated. •Personalized Health: View Sense. An integrated, enterprise-grade, secure, sensor module that monitors multiple environmental variables (e.g., CO2, Temperature, Volatile Organic Compounds, Humidity, Dust, Light, and Noise) to provide illustrative data and information to building management teams in order to improve building performance and enhance human health and comfort. View's R&D continues to focus on not only improving the smart glass product but also on continually bringing more smart building applications and capabilities to market, as well as collaborating with other industry partners to integrate their devices and applications with View's smart building network, with the aim of making building occupants more comfortable, healthier, and more productive, making buildings more sustainable, and providing better information to building owners to streamline operations and reduce operating costs. In terms of the value propositions to View's customers, its earlier generation smart glass product focused primarily on improving occupant experience and reducing energy costs through adjustments of the glass tint. The current generation of the product focuses not only on improving energy savings and user experience through smart glass; it also focuses on increasing occupant productivity, creating healthier buildings, and using data from other devices to develop broader insights that further improve building operations and reduce energy usage. Current scientific research supports that cognitive function and in turn, productivity goes up when building occupants are exposed to more natural light and comfortable workspaces; they sleep better, and they experience less eye strain, fewer headaches, and lower stress. In a study published in theInternational Journal of Environmental Health and Public Health in 2020, researchers at theUniversity of Illinois andSUNY Upstate Medical University found that employees working next to View Smart Glass during the day slept 37 minutes longer each night, experienced half as many headaches, and performed 42% better on cognitive tests. The research was sponsored in part by View. View also recognized that the new SmartBuilding Platform offering would potentially enable the company to move 'up' the supply chain of the construction industry. Whereas the Company's traditional offering placed it in the role of a supplier to subcontractors of the General Contractor ("GC"), the level of integration and oversight needed to ensure a quality installation and integration of the complete smart building platform is designed to incentivize building owners and GCs to engage directly with View, engaging View to assume the role of the prime contractor for the platform rather than supplier of subcomponent materials. This would also better position View to upsell additional goods and services to the building owners in the future, which could be more efficiently integrated into the smart building platform than with the traditional offering. Today, View's Smart Glass products are installed into over 40 million square feet of buildings, including offices, hospitals, airports, educational facilities, hotels, and multi-family residences. In addition to our SmartBuilding Platform , View continues to sell smart windows through our Smart Glass offering and several individual smart building products through our Smart Building Technologies offerings.
To date, we have devoted our efforts and resources towards the development, manufacture, and sale of our product platforms, which we believe have begun to show strong market traction. We have also devoted significant resources to enable our View
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SmartBuilding Platform , a new offering beginning in 2021. For the three months endedJune 30, 2022 and 2021, our revenue was$16.3 million and$16.9 million , respectively, representing period-over-period decline of 3.6%. For the six months endedJune 30, 2022 and 2021, our revenue was$33.3 million and$26.7 million , respectively, representing period-over-period growth of 24.8%.
Key Factors Affecting Operating Results
Execution of Growth Strategies
We believe that we are just beginning to address our market opportunity, which
we expect to be driven by four multi-decade, secular trends: (i) climate change,
Environmental, Social and Governance ("ESG") and sustainability, (ii) a growing
focus on human health inside buildings, (iii) an increased desire for better
human experiences in buildings, and (iv) a growing demand for smart and
connected buildings.
To capitalize on these trends and our market opportunity, we must execute on
multiple growth initiatives, the success of which may depend on our ability to
develop mainstream acceptance of our products, including (i) increasing
awareness of our products and their benefits across major markets in North
America and internationally, (ii) increasing recurring sales, (iii) expanding
our product portfolio, (iv) expanding our sales channels to include real estate
brokers, (v) continuing to develop strong relationships with ecosystem partners
such as building owners, developers, tenants, architects, contractors, low
voltage electricians and glaziers, and (vi) expanding outside North America into
international markets.
The above growth strategies depend upon our ability to continue as a going
concern. As of the date of the filing of this Form 10-Q, the Company has
determined that there is substantial doubt about its ability to continue as a
going concern, as the Company does not currently have adequate financial
resources to fund its forecasted operating costs and meet its obligations for at
least twelve months from the filing of this Form 10-Q. The Company's continued
existence is dependent upon its ability to obtain additional financing, enter
into profitable sales contracts and generate sufficient cash flow to meet its
obligations on a timely basis. The Company's business will require significant
amounts of capital to sustain operations and the Company will need to make the
investments it needs to execute these long-term business plans.
Technology Innovation
With more than 1,400 patents and patent filings and over 14 years of research and development experience, we have a history of technological innovation. We have a strong research and development team, including employees with expertise in all aspects of the development process, including materials science, electronics, networking, hardware, software, and human factors research. As we have since inception, we intend to continue making significant investments in research and development and hiring top technical and engineering talent to improve our existing products and develop new products, which will increase our differentiation in the market. In 2021 and 2020, we introduced a new suite of products to complement our market-leading smart glass and optimize the human experience while making buildings more intelligent. These products are collectively referred to under the umbrella brand name "The Smart Building Cloud": •View Net. Our next generation controls, software, and services ("CSS"), a cloud-connected, network infrastructure offering that powers View's smart glass products and can incorporate and power other smart building devices from View and other companies. This high bandwidth data and low voltage power network serves as the backbone to an intelligent building platform and provides future-proofing by enabling the addition of new capabilities during a building's lifetime. •View Immersive Display. Our transparent, digital, interactive surface product that incorporates see-through, high definition displays directly onto the smart window.
•View Sense. Modules that provide the ability to measure and optimize light, humidity, temperature, air quality, dust, and noise to improve occupant wellness.
•View Secure Edge. Our plug-and-play edge-to-cloud solution that enables IT and digital innovation teams to securely connect new and existing buildings to the cloud; centrally manage building networks, systems, and data in the cloud; and deploy edge applications for real-time processing, insights, and optimizations. •View Remote Access. Our secure access portal that enables IT teams to reduce the cost and cybersecurity risks of maintaining smart buildings by providing vendors and technicians with secure, auditable, time-bound remote access to building networks and devices. •ViewBuilding Performance . Our configurable application and web-based tool that enables building managers to measure, optimize and automate building performance with comprehensive, contextual, and actionable insights consolidated from disparate on-premises and cloud-based systems. 35
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•View Workplace Experience. Our configurable application and web-based tool that enables corporate facilities managers to create healthier, more efficient, and more productive workplaces by uncovering actionable insights related to building health, space utilization and workplace operations.
We expect our research and development expenses to increase in absolute dollars over time to maintain our differentiation in the market.
Competition
We compete in the commercial window industry and the electrochromic glass industry, as well as within the larger smart building products industry, each of which is highly competitive and continually evolving as participants strive to distinguish themselves within their markets, including through product improvement, addition of new features, and price. We believe that our main sources of competition are existing commercial window manufacturers, electrochromic glass manufacturers, and companies developing smart building products and intrusion detection solution technologies. We believe the primary competitive factors in our markets are:
•Technological innovation;
•Ability to integrate multiple systems efficiently and effectively;
•Product performance;
•Product quality, durability, and price;
•Execution track record; and
•Manufacturing efficiency.
Capacity
View currently manufactures the insulating glass units ("IGUs") included in the
View Smart Glass and View Smart Building Platform product offerings at our
production facility located in Olive Branch, Mississippi . We operate a
sophisticated manufacturing facility designed for performance, scale,
durability, and repeatability. Our manufacturing combines talent, equipment, and
processes from the semiconductor, flat panel display, solar and glass processing
industries. Our proprietary manufacturing facility has been in use since 2010.
We currently operate one production line in our facility with a name-plate
capacity of approximately 5 million square feet of smart glass per year. In
addition, we have partially completed the construction of a second production
line at our Olive Branch facility. Once operational, we expect our facility's
name-plate capacity to increase by an additional 7.5 million square feet of
smart glass per year, bringing our total name-plate capacity of our facility to
12.5 million square feet per year.
As of June 30, 2022 , we have invested over $400 million in capital expenditures
primarily in our factory. We expect to incur additional factory capital
expenditure of up to approximately $90 million over the next four years with
respect to facility automation and completion of the second production line to
support the expected growth in demand for our products. This will require
additional financing in order to make these additional investments. Refer to the
Liquidity and Capital resources section below for further discussion. We believe
our facility, including the second production line, will enable us to achieve
economies of scale, meet future demand, and achieve profitability.
Components of Results of Operations
Revenue
View Smart Glass
We generate revenue under our View Smart Glass offering from (i) the
manufacturing and sale of IGUs that are coated on the inside with our
proprietary technology and are designed, programmed, and built to customer
specifications that include sizes for specific windows, skylights, and doors in
specified or designated areas of a building and (ii) selling the CSS, which
includes sky sensors, window controllers and control panels with embedded
software, cables and connectors, that, when combined with the IGUs enable the
IGUs to tint. Also included in CSS is a system design service, in which a design
document is prepared to lay out the IGUs and CSS hardware for the building, as
well as a commissioning service, in which the installed IGUs and CSS components
are tested and tinting configurations are set by the Company. The glaziers and
LVEs subcontracted by the end user are responsible for ensuring satisfactory
adherence to the design document as the products are installed.
Our View Smart Glass revenue primarily relies on securing design wins with end
users of our products and services, which typically are the owners, tenants, or
developers of buildings. We start the selling process by pitching the View Smart
Glass benefits and business outcomes to the building owners, tenants, or
developers. The pricing for a project is primarily driven by the make-up, size,
shape, total units of the IGU, and associated CSS. The design win is typically
secured through a non-binding agreement with the owners, tenants, or developers
of the buildings. Once a design win is secured, we negotiate and enter into
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legally binding agreements with our Smart Glass customers (typically glaziers for the IGUs and LVEs or general contractors for CSS) to deliver the Smart Glass products and services. Our IGUs are custom-built and sold to customers through legally binding contracts. Each contract to provide IGUs includes multiple distinct IGUs. We recognize revenue from our IGU contracts over time as the IGU manufacturing work progresses. Our contracts to provide the CSS network infrastructure include the sale of electrical connections schema, sky sensors, window controllers and control panels with embedded software, cables and connectors, and professional services to provide a system design and commission the installed products. The Company recognizes revenue at a point in time upon shipment of the control panels and electrical components, and upon customer acceptance for the design and commissioning services, both of which have a relatively short period of time over which the services are provided. In limited circumstances, we contract to provide extended or enhanced warranties of our products outside of the terms of its standard assurance warranty, which are recognized as revenue over the respective term of the warranty period.
View Smart
Our View SmartBuilding Platform is a complete interrelated and integrated platform that combines our smart glass IGUs, the fabrication, unitization, and installation of the framing of those IGUs, any combination of View Smart Building Technologies, and installation of the completed smart glass windows and CSS components into a fully installed SmartBuilding Platform . We enter into contracts to provide our View SmartBuilding Platform with our customers, which typically are the owners, tenants or developers of buildings, or the general contractor acting on behalf of our customers. In contrast to the View Smart Glass product delivery method, we are the principal party responsible for delivering the fully integratedSmart Building Platform. In doing so, we take responsibility for all activities needed to fulfill the single performance obligation of transferring control to the customer of a fully operational SmartBuilding Platform deliverable; from design, fabrication, installation, integration, commissioning, and testing. Underlying these activities is our responsibility for performing an essential and significant service of integrating each of the inputs of its completed solution. These inputs include our smart network infrastructure and IGUs, both of which are integrated into the window glazing system, which is fabricated by an unrelated subcontractor contracted by us to work on our behalf, as well as designing how the entire SmartBuilding Platform will be integrated and installed into the customer's architectural specifications for the building that is being constructed or retrofitted. Our integration services also include the activities of installing, commissioning, and testing the SmartBuilding Platform to enable the transfer of a complete and operational system. We also use subcontractors we select and hire for portions of the installation labor. Given that our responsibility is to provide the service of integrating each of the inputs into a single combined output, we control that output before it is transferred to the customer and accordingly, we are the principal in the arrangement and will recognize the entire arrangement fee as revenue, with any fees that we pay to our subcontractors recognized in our cost of revenue. The pricing for a SmartBuilding Platform project is primarily driven by the make-up, size, shape, total units of the IGU, associated CSS, and costs associated with the management and performance of system design, fabrication, unitization, and installation efforts. We assume the risk of delivery and performance of the SmartBuilding Platform to our customer, and manage this through three key elements to ensure a pleasant end-user experience: 1) we have a contractual right and obligation to direct the activities of the subcontractors; 2) we perform quality inspections; and 3) we engage qualified personnel to protect the company's interest and direct the actions of the subcontractors. The end product to the customer is a single-solution SmartBuilding Platform that uses artificial intelligence to adjust the building environment to improve occupant health and productivity, as well as reduce building energy usage and carbon footprint. We recognize View SmartBuilding Platform revenue over time as services are performed using a cost-to-cost input method where progress on the performance obligation is measured by the proportion of actual costs incurred to the total costs expected to complete the contract. In the course of providing the View SmartBuilding Platform , we routinely engage subcontractors we select for fabricating and unitizing the specific smart glass products and for installation of the framed IGUs and smart building infrastructure components and incur other direct costs. We are responsible for the performance of the entire contract, including subcontracted work. Thus, we may be subject to increased costs associated with the failure of one or more subcontractors to perform as anticipated.
View Smart Building Technologies
Our Smart Building Technologies offering includes a suite of products that can be either integrated into the View SmartBuilding Platform , added-on to View Smart Glass contracts or sold separately. These products, collectively referred to under the umbrella name "The SmartBuilding Cloud ", include the View Secure Edge, View Remote Access, ViewBuilding Performance , and View Workplace Experience products related to our acquisition of ioTium and WorxWell during 2021. Our customers are typically the owners or tenants of buildings. Revenue generated from these products has not been material to date. 37
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Some of our View Smart Building Technologies contracts offer software as a service pricing, which includes the use of our software applications, as a service, typically billed on a monthly or annual basis. Our contracts associated with these products, including implementation, support, and other services, represent a single promise to provide continuous access to its software solutions and their processing capabilities in the form of a service. Revenue on these services is recognized over the contract period. Revenue recognized for these contracts has not been material to date.
Cost of Revenue
Cost of revenue consists primarily of the costs to manufacture and source our products, including the costs of materials, customer support, outside services, shipping, personnel expenses, including salaries and related personnel expenses and stock-based compensation expense, equipment and facility expenses including depreciation of manufacturing equipment, rent and utilities, and insurance and taxes, warranty costs, and inventory valuation provisions. The primary factor that impacts our cost of revenue as a percentage of revenues is the significant base operating costs that we incur as a result of our investment in manufacturing capacity to provide for future demand. At current production volume, these significant base operating costs result in higher costs to manufacture each IGU when compared to the sales price per IGU. As demand for our products increases and we achieve higher production yields, our cost of revenue as a percentage of revenue will decrease. Additional factors that impact our cost of revenue as a percentage of revenues include manufacturing efficiencies, cost of material, and mix of products. We expect to continue to incur significant base operating costs that will be absorbed over larger volumes of production as we scale our business. Cost of revenues also includes the cost of subcontractors engaged to fabricate and unitize the specific smart glass products and for installation of IGUs and smart building infrastructure components. Further, and in contrast to View Smart Glass contracts in which losses associated with IGUs are recognized over time, our cost of revenue for our SmartBuilding Platform contracts includes the recognition of contract losses recorded upfront at contract execution within an initial loss accrual when the total current estimated costs for these contracts exceeds total contracted revenue. Revenue for these contracts is recognized as progress is made toward fulfillment of the performance obligation and cost of revenue is recognized equal to the revenue recognized. Actual costs incurred in excess of the revenue recognized are recorded against the initial loss accrual, which is then reduced. Given the growing nature of our business, we incur significant base operating costs attributable to our IGU production costs, which is a significant factor to the losses on these contracts. As we continue to ramp up our manufacturing volumes, we expect to absorb these base operating costs over larger volumes of production; therefore, we expect that the contract loss for individual contracts will decrease over time as a percentage of the total contract value. These economies of production have not been realized to date and the total amount of contract losses may not decrease in the near term as we continue to grow this business.
Research and Development Expenses
Research and development expenses consist primarily of costs related to research, design, maintenance, and enhancements of our products, including software, which are expensed as incurred. Research and development expenses consist primarily of costs incurred for salaries and related personnel expenses, including stock-based compensation expense, for personnel related to the development of improvements and expanded features for our products, materials and supplies used in development and testing, payments to consultants, outside manufacturers, patent related legal costs, facility costs and depreciation. We expect that our research and development expenses will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in the development of new products and offerings. However, we expect that our research and development expenses will decrease as a percentage of our revenue over time.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses consist primarily of salaries and related personnel expenses, including stock-based compensation, costs related to sales and marketing, finance, legal and human resource functions, contractor and professional services fees, audit and compliance expenses, insurance costs, advertising and promotional expenses and general corporate expenses, including facilities and information technology expenses. We expect our selling, general, and administrative expenses to increase in absolute dollars for the foreseeable future as we scale headcount to grow our presence in key geographies to support our customers and growing business, and as a result of operating as a public company, including compliance with the rules and regulations of theSEC and Nasdaq, legal, audit, higher expenses for directors and officer insurance, investor relations activities, and other administrative and professional services. Over time, we expect our selling, general and administrative expenses to decline as a percentage of revenue.
Interest Expense, Net
Interest expense, net consists primarily of interest paid on our debt facilities
and amortization of debt discounts and issuance costs during the first quarter
of fiscal year 2021, interest paid on our finance leases and interest received
or earned on our cash and cash equivalents balances.
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Other Expense (Income), Net
Other expense (income), net primarily consists of penalties we expect to incur for the proposed settlement of an environmental matter in 2021, and foreign exchange gains and losses.
(Gain) Loss on Fair Value Change, Net
Our Sponsor Earn-out Shares, Private Warrants and redeemable convertible preferred stock warrants are or were subject to remeasurement to fair value at each balance sheet date. Changes in fair value as a result of the remeasurement are recognized in (gain) loss on fair value change, net in the condensed consolidated statements of comprehensive loss. The redeemable convertible preferred stock warrants were converted to common stock as a result of the Merger. We will continue to adjust the remaining outstanding instruments for changes in fair value until the Earn-Out Triggering Events are met, which is the earlier of the exercise or expiration of the Warrants.
Loss on Extinguishment of Debt
Loss on extinguishment of debt comprises a loss arising from the extinguishment of debt as a result of repayment in full of our revolving debt facility in the first quarter of 2021. Provision for Income Taxes Our provision for income taxes consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in tax law. Due to the level of historical losses, we maintain a valuation allowance againstU.S. federal and state deferred tax assets as we have concluded it is more likely than not that these deferred tax assets will not be realized.
Results of Operations
The following table sets forth our historical operating results for the periods indicated (in thousands, except percentages):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue
Revenue $ 16,316 100.0 % $ 16,926 100.0 % $ 33,328 100.0 % $ 26,695 100.0 %
Costs and expenses:
Cost of revenue 39,531 242.3 % 49,610 293.1 % 80,093 240.3 % 85,789 321.4 %
Research and development 20,908 128.1 % 21,040 124.3 % 40,603 121.8 % 37,610 140.9 %
Selling, general, and
administrative 40,755 249.8 % 34,633 204.6 % 83,714 251.2 % 56,333 211.0 %
Total costs and expenses 101,194 620.2 % 105,283 622.0 % 204,410 613.3 % 179,732 673.3 %
Loss from operations (84,878) (520.2) % (88,357) (522.0) % (171,082) (513.3) % (153,037) (573.3) %
Interest and other expense
(income), net
Interest expense, net 69 0.4 % 316 1.9 % 266 0.8 % 5,619 21.0 %
Other expense (income), net (187) (1.1) % 4,978 29.4 % 141 0.4 % 6,420 24.0 %
(Gain) loss on fair value
change, net (1,904) (11.7) % 2,065 12.2 % (6,285) (18.9) % (5,348) (20.0) %
Loss on extinguishment of
debt - - % - - % - - % 10,018 37.5 %
Interest and other expense
(income), net (2,022) (12.4) % 7,359 43.5 % (5,878) (17.6) % 16,709 62.6 %
Loss before provision of
income taxes (82,856) (507.8) % (95,716) (565.5) % (165,204) (495.7) % (169,746) (635.9) %
Provision for income taxes 30 0.2 % 4 - % 54 0.2 % 9 - %
Net and comprehensive loss $ (82,886) (508.0) % $ (95,720) (565.5) % $ (165,258) (495.9) % $ (169,755) (635.9) %
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Revenue
The following table presents our revenue by major product offering (in thousands, except percentages):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change ($) Change (%) 2022 2021 Change ($) Change (%)
Smart Glass $ 4,306 $ 11,580 $ (7,274) (62.8) % $ 9,489 $ 19,795 $ (10,306) (52.1) %
Percentage of total revenue 26.4 % 68.4 % 28.5 % 74.2 %
Smart Building Platform 9,055 5,136 3,919 76.3 % 18,261 5,136 13,125 255.5 %
Percentage of total revenue 55.5 % 30.3 % 54.8 % 19.2 %
Smart Building Technologies 2,955 210 2,745 1,307.1 % 5,578 1,764 3,814 216.2 %
Percentage of total revenue 18.1 % 1.2 % 16.7 % 6.6 %
Total $ 16,316 $ 16,926 $ (610) (3.6) % $ 33,328 $ 26,695 $ 6,633 24.8 %
The following table presents our revenue by geographic area and is based on the shipping address of the customers (in thousands, except percentages):
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change ($) Change (%) 2022 2021 Change ($) Change (%)
United States $ 14,825 $ 12,053 $ 2,772 23.0 % $ 31,109 $ 21,718 $ 9,391 43.2 %
Percentage of total revenue 90.9 % 71.2 % 93.3 % 81.4 %
Canada 1,443 4,403 (2,960) (67.2) % 2,161 4,507 (2,346) (52.1) %
Percentage of total revenue 8.8 % 26.0 % 6.5 % 16.9 %
Other 48 470 (422) (89.8) % 58 470 (412) (87.7) %
Percentage of total revenue 0.3 % 2.8 % 0.2 % 1.8 %
Total $ 16,316 $ 16,926 $ (610) (3.6) % $ 33,328 $ 26,695 $ 6,633 24.8 %
Our revenue totaled $16.3 million during the three months ended June 30, 2022 , a
3.6% decrease from $16.9 million during the three months ended June 30, 2021 .
The decrease during the three months ended June 30, 2022 compared to the same
period in the prior year was primarily due to a decrease in Smart Glass revenue
due to the shift to the new View Smart Building Platform offering introduced in
the second quarter of 2021 and timing of new projects, mostly offset by higher
Smart Building Platform revenues and higher Smart Building Technologies revenue
primarily driven by the ioTium products acquired in July 2021 and WorxWell
products acquired in November 2021 . In total, the Company's revenue growth in
the first half of 2022 was unfavorably impacted by project delays and challenges
to win new projects during the Company's restatement period.
Our revenue totaled $33.3 million during the six months ended June 30, 2022 , a
24.8% increase from $26.7 million in the six months ended June 30, 2021 . The
increase in the six months ended June 30, 2022 compared to the same period in
the prior year was primarily driven by a shift to the new View Smart Building
Platform offering introduced in the second quarter of 2021 and new Smart
Building Technologies products, including the products acquired in the second
half of 2021. The decline in Smart Glass revenues in 2022 is attributable to our
customer's decisions to select the Smart Building Platform offering rather than
Smart Glass offering, as well as the timing of new Smart Glass projects.
Costs and Expenses
Cost of Revenue
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change ($) Change (%) 2022 2021 Change ($) Change (%)
Cost of revenue $ 39,531 $ 49,610 $ (10,079) (20.3) % $ 80,093 $ 85,789 $ (5,696) (6.6) %
Cost of revenue totaled $39.5 million , or 242.3% of net sales during the three
months ended June 30, 2022 , compared to $49.6 million , or 293.1% of net sales
during the three months ended June 30, 2021 . Cost of revenue totaled $80.1
million , or 240.3% of net sales, in the six months ended June 30, 2022 , compared
to $85.8 million , or 321.4% of net sales, in the six months ended June 30, 2021 .
The cost of revenue decreases as a percentage of revenues during these periods
reflect the benefit of leveraging the minimum operating costs in the factory
over higher revenues, favorable product mix across the three product offerings
and lower levels of contract loss accruals.
The $10.1 million decrease in the cost of revenue in absolute dollars during the
three months ended June 30, 2022 compared to the same period in the prior year
was primarily driven by:
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•a
•approximately
•approximately
•a$1.3 million reduction to previously recorded contract loss accruals for actual costs incurred in excess of the revenue recognized, which offsets actual costs incurred in the production and delivery of the SmartBuilding Platform product for the amount incurred in excess of revenues recognized, and
•a
These decreases were partially offset by:
•$5.3 million of increased subcontractor costs used for the delivery of the
Smart
•$3.6 million of higher levels of inventory impairments for raw materials and produced finished goods that were not sold at period end, and
•$1.7 million of increased factory operating costs as the Company scaled its factory capacity in the second half of 2021 resulting in higher costs in the first half of 2022 as compared to the first half of 2021. The$5.7 million decrease in the cost of revenue in absolute dollars during the six months endedJune 30, 2022 compared to the same period in the prior year was primarily driven by:
•a
•a$5.3 million reduction to previously recorded contract loss accruals for actual costs incurred in excess of the revenue recognized, which offsets actual costs incurred in the production and delivery of the SmartBuilding Platform product for the amount incurred in excess of revenues recognized, •a$5.9 million reduction in post-installation customer support costs, primarily due to a$4.8 million charge recorded in the first half of 2021 in connection with specific performance obligations promised to customers in connection with IGU failures associated with the previously discussed quality issue,
•approximately
•approximately
•a
•a cumulative catch-up adjustment to the previously recorded contract loss
accrual of
These decreases were partially offset by:
•$7.5 million of increased factory operating costs as the Company scaled its factory capacity in the second half of 2021 resulting in higher costs in the first half of 2022 as compared to the first half of 2021,
•$10.8 million of increased subcontractor costs used for the delivery of the
Smart
•$9.3 million of higher levels of inventory impairments for raw materials and produced finished goods that were not sold at period end.
Cost of revenue for the three months endedJune 30, 2022 and 2021 included$0.3 million and$1.3 million of stock-based compensation expense, respectively. Cost of revenue for the six months endedJune 30, 2022 and 2021 included$0.7 million and$2.2 million of stock-based compensation expense, respectively. Research and Development Three Months Ended June 30, Six Months Ended June 30, 2022 2021 Change ($) Change (%) 2022 2021 Change ($) Change (%) Research and development$ 20,908 $ 21,040 $ (132) (0.6) %$ 40,603 $ 37,610 $ 2,993 8.0 % Research and development expenses decreased$0.1 million during the three months endedJune 30, 2022 compared to the same period in the prior year, as increased spending on the enhancement of existing products and development of new products was offset by a reduction in depreciation expense for certain assets abandoned and written off in the second half of 2021 and lower levels of stock-based compensation expense. Research and development expenses increased$3.0 million during the six months endedJune 30, 2022 compared to the same period in the prior year, primarily related to a$7.8 million increase due to higher headcount and spending on the enhancement of existing products and development of new products, partially offset by a$2.9 million decrease in depreciation expense and a$1.9 million decrease in stock-based compensation expense. 41
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Research and development expenses for the three months endedJune 30, 2022 and 2021 included$1.5 million and$2.6 million of stock-based compensation expense, respectively. Research and development expenses for the six months endedJune 30, 2022 and 2021 included$1.6 million and$3.5 million of stock-based compensation expense, respectively.
Selling, General, and Administrative
Three Months Ended June 30 , Six
Months Ended
2022 2021 Change ($) Change (%) 2022 2021 Change ($) Change (%)
Selling, general and
administrative $ 40,755 $ 34,633 $ 6,122 17.7 % $ 83,714 $ 56,333 $ 27,381 48.6 %
Selling, general, and administrative expenses increased $6.1 million during the
three months ended June 30, 2022 compared to the same period in the prior year,
primarily due to an increase of approximately $6.7 million of legal, consulting
and accounting expenses during the first quarter of 2022 associated with the
audit and restatement of the Company's financial statements included in its
recently filed Form 10-K and Form 10-Q/A, and other related work, partially
offset by a $2.0 million decrease in stock-based compensation for CEO Option
Awards, Officer RSUs and Officer Options granted as part of the Merger.
Selling, general, and administrative expenses increased $27.4 million during the
six months ended June 30, 2022 compared to the same period in the prior year,
primarily due to an increase of approximately $12.7 million of legal, consulting
and accounting expenses during 2022 to assist in the restatement of the
Company's financial statements included in its recently filed Form 10-K and Form
10-Q/A, and other related work, a $6.3 million increase in stock-based
compensation resulting from the CEO Option Awards, Officer RSUs and Officer
Options granted as part of the Merger, a $4.5 million increase in employee
compensation and benefits associated with an increase in headcount throughout
fiscal year 2021, particularly as it relates to sales support for our growing
business and additional finance resources necessary as a result of operating as
a public company.
Selling, general, and administrative expenses for the three months ended
June 30, 2022 and 2021 included $16.3 million and $18.3 million of stock-based
compensation expense, respectively. Selling, general, and administrative
expenses for the six months ended June 30, 2022 and 2021 included $33.3 million
and $27.0 million of stock-based compensation expense, respectively.
Interest and Other Expense, net
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change ($) Change (%) 2022 2021 Change ($) Change (%)
Interest expense, net
(78.2) % $ 266 $ 5,619 $ (5,353) (95.3) %
Other expense (income), net (187) 4,978 (5,165) (103.8) % 141 6,420 (6,279) (97.8) %
(Gain) loss on fair value
change, net (1,904) 2,065 (3,969) (192.2) % (6,285) (5,348) (937) 17.5 %
Loss on extinguishment of
debt $ - $ - $ - * $ - $ 10,018 $ (10,018) *
*not meaningful
Interest Expense, Net
Interest expense, net decreased $0.2 million and $5.4 million during the three
and six months ended June 30, 2022 , respectively, compared to the same periods
in the prior year primarily due to the full repayment of the revolving debt
facility at Closing, resulting in lower interest expense.
Other Expense (Income), Net
Other expense (income), net decreased by$5.2 million and$6.3 million during the three and six months endedJune 30, 2022 , respectively, compared to the same period in the prior year primarily due to$5.0 million of penalties incurred during the three months endedJune 30, 2021 in conjunction with the proposed settlement between View andthe United States government to resolve claims and charges against View relating to its discharges of water into publicly owned treatment works without first obtaining a pretreatment permit. See Note
7 of the "Notes to the Condensed Consolidated Financial Statements" included in Part I, Item 1. "Financial Statements (Unaudited)" for further discussion of this matter.
(Gain) loss on Fair Value Change, Net
The (gain) loss on fair value change, net during the three months endedJune 30, 2022 and 2021, as well as the six months endedJune 30, 2022 was primarily related to changes in the fair value of our Sponsor Earn-Out liability. The (gain) loss on fair value change, net during the six months endedJune 30, 2021 also included the changes in the fair value of our redeemable convertible preferred stock warrants prior to their conversion in the first quarter of 2021. 42
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Loss on extinguishment of debt
During the six months ended
Provision for Income Taxes
For the three and six months ended
Liquidity and Capital Resources
As ofJune 30, 2022 , we had$111.2 million in cash and cash equivalents and$100.0 million in working capital. The Company's accumulated deficit totaled$2,422.6 million as ofJune 30, 2022 . For the six months endedJune 30, 2022 , we had a net loss of approximately$165.3 million and negative cash flows from operations of approximately$153.2 million . In addition, for the six months endedJune 30, 2021 , we had a net loss of approximately$169.8 million and negative cash flows from operations of approximately$125.2 million . The Company has determined that there is substantial doubt about its ability to continue as a going concern, as the Company does not currently have adequate financial resources to fund its forecasted operating costs and meet its obligations beyondNovember 2022 . To address its cash needs, the Company continues to pursue additional sources of capital. If the Company is unable to obtain adequate capital resources to fund its obligations, the Company will formulate additional plans to extend cash availability beyond such date, including modifying our operations to reduce spending. While the Company is seeking to raise additional capital beyond the Committed Equity Facility, as described further in Note 14 of the "Notes to the Condensed Consolidated Financial Statements" included in Part I, Item 1, there can be no assurance the necessary financing will be available on terms acceptable to the Company, or at all. If the Company raises funds by issuing equity securities, dilution to stockholders will occur and may be substantial. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of holders of common stock. If we raise funds by issuing debt securities, these debt securities would have rights, preferences, and privileges senior to those of preferred and common stockholders. The terms of debt securities or borrowings could impose significant restrictions on our operations and will increase the cost of capital due to interest payment requirements. The capital markets have in the past, and may in the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing. In addition, recent and anticipated future increases in federal fund rates set by theFederal Reserve , which serve as a benchmark for rates on borrowing, will impact the cost of debt financing. If we are unable to obtain adequate capital resources to fund operations, we would not be able to continue to operate our business pursuant to our current business plan, which would require us to modify our operations to reduce spending to a sustainable level by, among other things, delaying, scaling back or eliminating some or all of our ongoing or planned investments in corporate infrastructure, business development, sales and marketing, research and development and other activities, which could have a material adverse impact on our operations and our ability to increase revenues, or we may be forced to discontinue our operations entirely. Our principal uses of cash in recent periods have been funding operations and investing in capital expenditures. Our future capital requirements will depend on many factors, including revenue growth rate, achieving profitability on our revenue contracts, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, capital expenditures associated with our capacity expansion, the introduction of new products and the continuing market adoption of our products. Our total current liabilities as ofJune 30, 2022 are$83.5 million , including$13.7 million accrued as estimated loss on our SmartBuilding Platform contracts. Our long-term liabilities as ofJune 30, 2022 that will come due during the next 12 months from the date of the filing of this Quarterly Report on Form 10-Q include$1.0 million in operating and finance lease payments and$1.1 million in estimated settlements of warranty liabilities. In addition, as disclosed in Note 8 of the "Notes to the Condensed Consolidated Financial Statements" included in Part I, Item 1, we have an agreement with one customer that could result in up to$8.4 million additional issuance of cash for a promissory note over the next 12 months. The Company has historically financed its operations through the issuance and sale of redeemable convertible preferred stock, the issuance of debt financing, the gross proceeds associated with the Merger and revenue generation from product sales. The Company's continued existence is dependent upon its ability to obtain additional financing, achieve production volumes such that our significant base operating costs are better absorbed, thus allowing for negotiation of profitable sales contracts, and generate sufficient cash flow to meet its obligations on a timely basis. The Company's business will require significant amounts of capital to sustain operations and the Company will need to make the investments it needs to execute its long-term business plans. 43
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Table of Contents Debt Term Loan As ofJune 30, 2022 , we had$14.7 million outstanding under our term loan debt arrangement. OnOctober 22, 2020 , we entered into an amended and restated debt arrangement with the lender, which temporarily suspended the payments untilJune 30, 2022 . StartingJune 30, 2022 , we are required to make semi-annual payments of$0.7 million throughJune 30, 2032 . As ofJune 30, 2022 ,$1.5 million of the outstanding amount under this arrangement has been classified as a current liability, and the remaining$13.2 million has been classified as a long-term liability. The debt arrangement required us to invest certain amounts in land, building and equipment and create a certain number of jobs. As ofJune 30, 2022 , we had met the requirements. The debt arrangement, as amended, has customary affirmative and negative covenants. As ofJune 30, 2022 , we were in compliance with all covenants.
Cash Flows
The following table provides a summary of cash flow data (in thousands):
Six Months Ended
2022 2021
Net cash used in operating activities $ (153,248) $ (125,168)
Net cash used in investing activities (13,736) (5,820)
Net cash provided by (used in) financing activities $ (999) $ 516,122 Cash Flows from Operating Activities
Net cash used in operating activities was$153.2 million for the six months endedJune 30, 2022 . The most significant component of our cash used during this period was a net loss of$165.3 million adjusted for non-cash charges of$35.6 million related to stock-based compensation and$11.9 million related to depreciation and amortization, partially offset by the$6.3 million non-cash gain related to change in fair value of our Sponsor Earn-Out liability and other derivative liabilities. This cash outflow was increased further by$29.7 million from changes in operating assets and liabilities, primarily due to a$11.7 million decrease in accrued expenses and other liabilities, including a$6.5 million reduction to loss accruals for work performed during fiscal year 2022 and a$2.8 million reduction in warranty accruals primarily related to settlements during fiscal year 2022, a$8.7 million decrease in accounts payable due to timing of payments to our suppliers, a$6.9 million increase in inventory as a result of increased demand and timing of shipments, and a$3.6 million decrease in deferred revenue due to timing of satisfaction of our performance obligations relating to our revenue generating contracts with customers. Net cash used in operating activities was$125.2 million for the six months endedJune 30, 2021 . The most significant component of our cash used during this period was a net loss of$169.8 million adjusted for non-cash charges of$32.7 million related to stock-based compensation,$14.0 million related to depreciation and amortization, and a loss on extinguishment of debt of$10.0 million , partially offset by$5.3 million non-cash loss related to change in fair value of our redeemable convertible preferred stock warrant liability. This cash outflow was increased further by$7.8 million from changes in operating assets and liabilities, primarily due to a$7.8 million increase in inventory, prepaid and other operating assets as a result of increases in contract assets with customers for the new View SmartBuilding Platform offering and a$3.4 million decrease in accounts payable due to timing of payments to our suppliers, partially offset by a$2.5 million increase in deferred revenue due to timing of satisfaction of our performance obligations relating to our revenue generating contracts with customers.
Cash Flows from Investing Activities
Net cash used in investing activities was$13.7 million and$5.8 million for the six months endedJune 30, 2022 and 2021, respectively, which was due to purchases of property, plant and equipment primarily related to the expansion of our manufacturing facilities.
Cash Flows from Financing Activities
Net cash provided by financing activities was
Net cash used in financing activities was$516.1 million for the six months endedJune 30, 2021 , which was primarily due to proceeds related to the reverse recapitalization and PIPE offering of$773.5 million , net of transaction costs, partially offset by repayment in full of our revolving debt facility of$257.5 million .
Off-Balance Sheet Arrangements
During the periods presented, we did not have any material off-balance sheet
financing arrangements or any relationships with unconsolidated entities or
financial partnerships, including entities sometimes referred to as structured
finance or special
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purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
During the course of business, the Company's bank issues standby letters of credit on behalf of the Company to certain vendors and other third parties of the Company. As ofJune 30, 2022 andDecember 31, 2021 , the total value of the letters of credit issued by the bank is$17.1 million and$16.5 million , respectively. No amounts have been drawn under the standby letters of credit.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles inthe United States of America ("U.S. GAAP") requires us to make judgments, assumptions, and estimates that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Note 1 of Notes to Consolidated Financial Statements in Company's 2021 Annual Report on Form 10-K filed onJune 15, 2022 describes the significant accounting policies and methods used in the preparation of these financial statements. The accounting policies described therein are significantly affected by critical accounting estimates and include the accounting for revenue recognition, product warranties, impairment of long-lived assets, stock compensation, and the Sponsor Earn-out liability. Such accounting policies require significant judgments, assumptions, and estimates used in the preparation of the condensed consolidated financial statements, and actual results could differ materially from the amounts reported based on these policies. The Company has not made any changes in these critical accounting policies during the first six months of 2022.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our condensed consolidated financial statements, see Part I, Item 1, Note 1 , "Organization and Summary of Significant Accounting Policies," in our notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
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