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Good morning, everybody. Welcome to poLight's first quarter presentation 2023. Together with me today is the CFO, Alf Henning Bekkevik. Chair of the Board. Grethe Viksaas is also present. And for those who is present, you can have a chat with Grethe afterwards.
The agenda of today. Key events; introduction to poLight, I will extend that a little bit in case there are some new shareholders, investors; review on market, financial review by CFO; outlook statement; and Q&A.
If there are questions from the audience being present at conference call today, please wait asking the question until you have the microphone in your hand so that everybody can hear what you say. We have a huge attendance from the webcast.
So those following us from web, please, when you enter questions, leave your contact details so that we can secure that you get answers in case we are running out of time.
Okay. Key events in the quarter. No doubt that the fact that we now finally have our first design win in smartphone has kind of colored the quarter a lot. We were present in the release event in Shanghai. That was a fantastic experience. This is, of course, an enormous milestone for the company. I will come back to that.
Augmented reality cases, I would say, continued to develop overall very positive. And it is maturing, as you know. Magic Leap 2 and LLVision is already using TLens in commercial supply. And there are orders coming. I was asked to comment on the existing design wins more than I normally do. And what I can say that one of the design wins in the machine vision side gave us a follow-up order during the quarter. That's typically an example of things which we do not make a press release out of. Of course, we could do. But we reckon that order of 650,000 will not be share price sensitive.
But I'd give that kind of update through the quarterly report. So that's actually a new order from an existing customer using us for a machine vision case.
All-time high revenue, still small, we know, but we have to take all positive signs as a good progress, NOK 7.1 million is significantly higher than it used to be. And of course, at least half of it is driven by activity with Meizu. But also, there is another half, which is a lot of small things, which indicates the spread of the revenue.
Then the rights issue was fully underwritten and gave NOK 135 million in gross proceeds. And thanks for those who participated. poLight in 1 slide, global player in tunable optics.
Globally, you can see from the geographical footprint that we are relatively well distributed. Started in 2005, it's been a long journey, have today achieved, I would say, a high maturity when it comes to product technology and are in the process of establishing more and more important reference designs. 19 worldwide patents, which is a little bit increased from last time, 7 are pending. So IP is something we do really invest a lot in.
We're using several millions per year in maintaining patents. 37 employees. I guess, that's 1 down from last quarter. So that's a little bit up and down. There's no planned major changes at the moment. Some can come in and some can go out. So that's basically flat during the quarter. And listed in Oslo Stock Exchange since 2018.
I added one slide, which I normally don't show in case of new investors and shareholders is participating. So what we do is basically replicate the function of the human eye. Human eye has a lens. It has eye muscles. When you want to change the focus where you're looking, the is eye muscle is shaping the lens, changing the focus. That's what poLight TLens does.
How we do that is that we have developed a polymer. If you look at the top left drawing animation, and that polymer is the blue dot -- white dot material in the middle there. And you can see there is a membrane, which is bending, which is shaping the polymer, yes, exactly like the human eye works. So this is used in compact cameras and displays.
And competing against the conventional way of doing it, which is when a lens, when a camera is going to change focus, they change the position of the lens stack. What we do is not we ask the lens stack to stand still, and we add TLens, which bends slightly to do that function. So it's quite a unique technology or it is a very unique technology. When it comes to supply chain, we make -- on the bottom drawing, we make the polymer in headquarter in Horten. Some of you have been there and seen it.
One liter polymer is a million of lenses. So it's really, really scalable and is also a relatively simple setup, and that's why we keep it in-house then we also do not need to share the recipe of making the polymer. Polymer is one of the key values and components in TLens. Polymer has been with us all the time. That was basically the beginning of the company was that polymer.
So then we -- the eye muscles, which has been also a big investment for us to develop. We are together with the MEMS supplier ST. So ST is producing an 8-inch wafer, which you can see the disk on the bottom of the screen there with the logo ST.
And that disk is 8-inch and is comprising more than 2,000 dies, dies meaning the 2,000 eye muscles. Those polymer and MEMS wafer is shipped to Asia. In Asia, in Philippines, there is our manufacturing assembly partner. Assembly partner meaning that they put together the components to make the complete TLens. That's happening in the Philippines.
Historically, we have been in Philippines and Taiwan. We are now in the process of moving everything to the Philippines. So we can then produce 2 types of lenses. We have a TLens, which is without clothes, a bare TLens and we have a TLens with a package. You can see that in the drawing, the bare TLens, the package TLens.
The advantage with the packaged TLens is easier for customers to handle it, it's protected, it's easier to connect with. The disadvantage is that it's a little bit more bulky. So the bare TLens, as you know, the add-in design is using a bare TLens, and that is to optimize the compactness of the camera module.
Then they use the bare TLens and they take care of the handling of the sensitive little TLens themselves, whereas the packaged would have helped them to do that, but that will increase size. So those are the 2 kind of versions of TLens. We foresee that smartphone will move with bare TLens as standard. We foresee that the packaged TLens will typically be industrial initial AR, initial medical. But we also foresee that longer-term AR will move towards bare and potentially also other markets.
So of course, for us, it's easier to make it bare TLens costless. And it gives our customer the ability to also -- to differentiate themselves, integrating TLens in different ways. So I think we're heading towards bare TLens as standard. But today, we have to serve both.
Then we have TLens with different aperture size, meaning the hole in the middle is different. 1.55 silver, typically industrial, some medical cases. 1.9-millimeter hole, which is typically smartphone and others. And then there is on the engineering sample level, there are 2.2 aperture size, which we call platinum, which is today not in mass production.
And just to say that for -- as an example, for medical cases, it could potentially be that we, over time, will actually make a smaller TLens. You can think about endoscopes going into the body want to be as small as possible. And this is where our technology play best. Our technology likes to go small. And that's -- so for us, an evolution towards smaller TLens is much easier than evolution to a bigger TLens.
Okay. So we -- and then of course, we have our own driver, ASIC driver that is putting voltage on the eye muscles so that they bend. You can see from the drawing on the top that you have voltage changing from 0 to 50. That voltage makes the Piezo change and bending the membrane. That voltage supply is coming from the ASIC driver. That is over ASIC driver.
So these are the products we sell and we sell to camera module partners. They are somehow doing the add-in design like the bottom camera module, you can see there. The TLens is buried in between the lens stack. And we have the top one, which is using the packaged TLens as add-on -- in an add-on construction. And then we sell to a lot of OEMs, as you know. And not only do we work directly with the camera modules, but we also work directly with the OEMs. The OEMs are key for us because OEM are the bosses. They dictate what the camera module is supposed to do. This is a good technology because it's extremely fast.
You can think about competing technology, moving the land stack, very slow, high power consumption, whereas we are ultra-fast. We don't move anything, very low power consumption, no magnetic interference at all. We think about products getting more and more compact and slim. You have antennas for different things. And then, of course, if you don't have anything magnetic interfering with the other components of the system, it gives the designer more freedom to design.
So -- and of course, no gravity impact. So these are key attributes in our solution and they seem to be a very, very compact solution. Okay? And you can see it's a very small component.
If you look on the top right, there's a tip of a pen, a normal pen. And you should see the TLens, a bare TLens underneath.
Okay? So that was a little bit of the basics since I understand that there's a lot of new people following us now. And where do we work? Well, we are working in, I would say, today, three main markets: consumer on the left, represented by a smartphone, wearable accessories. That's a very important market for us. We are working on the augmented reality space, which is maybe potentially even more important for us over a longer time period. And we are focusing also on more the high-end kind of industrial segment like high-end barcode readers.
Those are the 3 important legs. Of course, the consumer side, the left side is driving the volumes quicker. The future, many believes lies in the AR space. All innovation happens there these days and has done for a long time. People believe that AR will actually be a part of the consumer. So AR will be both enterprise, high-end and consumer.
So that's why it's important, as we have said many times before, to build a position now. Now take -- claim the space. And that's what we do. If you look at the fight we have had for many years in smartphone, that fight we had to take then was, of course, related to that. When we started to fight, there was already a well-established technology in place. So from an engineering perspective, why should they change? It worked. And they have deployed millions, hundreds of millions of phones. So then you need to show something extra you need to do -- to demonstrate why should I change? Why should I take that effort and risk? And that's what we have managed to do after so many years, but it took some years and money.
Whereas in the augmented reality, we claimed the space. We are there now when it's small, and we are building extremely key references. Barcode/industrial is kind of an example of type of business, which will be there as a fundament over time. There are products being there for 5 to 10 years, same customer, same product, shipping, repeating, repeating.
As long as we are managing to build more cases and maybe getting into more the point-of-sales area, that market will be a, call it, more a little bit of recurring revenue of the company, whereas these sexy smartphone, wearables and augmented reality will be there cream on the cake giving us the volumes over time. But good to have something solid in the fundament.
Yes. So -- and then other market segments, which I will tell a little bit more -- talk a little bit more today is the medical and automobile.
In a way, we are extremely eager to move full-fledged also in these areas. But of course, there is a limit what this organization can handle. So we need to take it step by step.
At the same time, there are some trains leaving the platform now in these market segments, and we don't intent to lose them. We want to be on that train. And I'm going to talk a little bit more about that later.
So hopefully, next quarter, I have to split this into 2 slides. So as you can see, and you have been following us for many years now, many of you, it's not so long time.
This was an empty slide. 11 design wins, 11 design wins, Meizu Infinity, smartwatch, smartwatch, webcam. Consumer side: AR, Magic Leap, LLVision; barcode, Honeywell, Hikrobot, Teledyne and unnamed customer. 11 design wins.
Actually, Superlead is using the same imaging system in 3 different products. So if you're creative, you can count 14 or what is it [ 13. ] So we're starting to build an impressive reference in all the, I would say, existing market areas I talked about here. Okay? Smartphone, consumer, barcode, augmented reality. Then what I do expect is going to happen this year is that we're going to add also references, hopefully more in the same segments, but also hopefully having the first reference in the medical space.
Okay. Use case: Consumer. There's no doubt that the add-in TLens design is fundamental for consumer. It's difficult. It's super difficult. It's more -- as I mentioned initially, it's more difficult for our customer to handle the bare TLens than a packaged TLens and add-in needs a TLens.
We are trying as good as we can to help our customer to ease that pain to use a bare TLens and to use add-in. I have many questions whether there's only one partner in add-in TLens. What I can say is that there are more on its way. We are also focusing more and more on making so-called reference design, where -- so the customer we have is -- don't start from scratch and understand how to implement TLens in the lens stack. So we are our self-making reference design.
We have employed people in -- who has worked with lens design in other companies to be able to kind of make those reference designs, which we actually publish on our web page.
In the consumer side, smartphone, clearly, and augmented reality, also -- which also we have consumer activity has mainly been the main activity. But there are -- we have a few more webcams cases also for consumer. We're starting to see some interesting development on laptop side. Early days, but enhancing screen will potentially dictate a better camera in the laptop.
Of course, it's a challenging application due to the screen is thin and its limited thickness and all that. But we started to see some traction there and have some cases coming. Drones, yes. I have to say, not big, but we have some drone cases, which we are working on. So then some smart home type application, iris type recognition. So it's not only smartphone and augment reality. There are also other things, which I think potentially can be important for us.
This was a fantastic day. This is in Shanghai. And it was the release of the Meizu 20 Infinity. You can see on the slide on the picture on the right, there were several hundred people in this event, in Mercedes Center in Shanghai or what it is called. And we were enlightened. And they -- actually, a lot of the -- in the beginning of the show was related to the Meizu 20 Infinity, which is the high-end phone. And not often you see this from a small company from Norway that the company releasing a new product is mentioning actually powered by poLight. It's like Intel inside, isn't it? It's poLight inside, which is fantastic for us as market activity.
In Chinese, of course, I know that you can read Chinese, but if not, those Chinese on the slide, there is no pumping and very fast, millisecond focus speed that's what we're saying. So this is a flagship phone. So I said many times before, I expect it to be a low-volume case. It's a showcase for Meizu, a see what we can do type phone and also see how good we are, that kind of phone.
They said that achieved the most complex selfie camera, instant and smooth autofocus in the world. The spec is actually 32-megapixel camera. So it's a good spec, F2.5, very compact. As you can see from the specs there, they are using bare TLens silver premium aperture size 1.9 and have it inside the land stack, as you can see from the right bottom figure.
So they claim that this is the smallest camera module and pupil size with AF on the market. Those who have -- probably some of you have seen a camera module, those of you who will come to us and see it, they can see it in Horton.
Status. We have fulfilled the first PO that was done during the quarter. It was launched to market in March -- end of March. And now we are kind of waiting for when will that phone be available. I know many of you also do that. I will, for sure, buy one, if not more. And I'm sure some of you will do. We don't know the details when. We don't know the details where it will be available. So we need to come back to that. But you can rest assured we ask them.
There's no doubt that this happening will increase exposure in this market. The fact that soon, there is a phone in the market, which people can buy is a significant event. And for sure, all the other OEMs will buy it and test it and dismantle it. And then, of course, as you may know, we have many who have done PoCs with poLight, smartphone PoCs. And I met a few of them already when I was in China during this event. And they said to me, we are really looking forward to see and test the phone and maybe this is a good thing for you, something like that. So of course, this creates a lot of interest. I think the interest is already there due to the release and the event, but I think the main impact we will see when people have started to test and use it.
And of course, based on what will be the user feedback in the market. So it's a great opportunity for us. It's -- and not only for the smartphone market, obviously, generally for the company. If you have a company, which has been able to go into -- get a design win in this area and the other areas, it automatically gives you a credit that, okay, they can do. Many also can see that potentially it's a little bit risky. Can they supply? Are they able -- we supply it faster than we were obliged to.
Of course, it was a relatively small case. But also, I think it will be important for removing/reducing the perceived risk of dealing with poLight from a supply chain perspective. So super positive, and we're going to use it for whatever it's worth, and it is a major event for us. Having said that, I mentioned before many times, and you can hear to all CEOs talking about the consumer market, it is a depressed market. There's no doubt about it. And they are having lower sales, even Apple. So this -- it is a situation impacted with whatever that today. The -- you can see also the innovation in that area is, I would say, is quite little focused.
It's more about deploying inventory, old components, old components releasing new phones, same sheet, new wrapping. So it's a lot of that. And also when the drop -- sales is dropping for the OEMs, that, of course, means that they have to reduce releases. And we have seen that for a while. So -- but what -- the only thing we know is that, that situation, that sentiment will change one day. That will change one day. Spending will increase. They need to renew. And then that's where we have established references. That's where poLight will be and make and get new opportunities when people at OEMs are ready.
So it's super positive. At the same time, it's important to communicate, it is a difficult market at the moment, but we think it will change. And when it changes, we will be there with excellent references.
So I'll try to make -- to confuse you a little bit. I will try to make a little bit different layout on the status. Let's see how that works. It basically shows. I have a summary table also, but it shows 4 design wins in consumer. One design-in. That design-in related to AR.
8 PoCs, and you can see how that is distributed on the different market segments. Smartphone, AR, iris, laptop and then a lot of planning PoC. And you can see a lot of the planning PoC is also, what should I say, camera, web or similar kind of related. So very good activity.
Let's move on to AR. Impressive position in a megatrend. I think -- and we have talked about it before, compactness, ultra-low power consumption, fast focusing speed, constant field of view, no gravity impact when you move your head, athermalization, super important, meaning that when the temperature in the glasses change, which they will do in use, we -- by design, in a way, TLens is compensating for that. So if you have a fixed focus camera without any TLens and the temperature change, that fixed focus camera would quickly go out of focus.
So that athermalization effect in TLens is super important. And in use cases, of course, fast and sharp focusing of object/text regardless of distance, fast QR/barcode scanning regardless of distance, hand gesture recognition, All-in-Focus still images and continuous video focus when recording moving object.
I just myself tested the LLVision glasses the other day, which we have -- our Chinese GM was visiting us and had the LLVision glasses with him. And it was impressive to see when you moved around to see what -- because then there was people looking back office and trying to help me with kind of giving me instructions on what to do. So I was in the field of doing something and to see how that -- how well that worked with the TLens and autofocus. That was quite impressive.
And this is LLVision. So Allan Liang, who is the co-founder of LLVision. I was visiting them. It was an impressive visit. I had a lot of use cases. And here is what we say.
TLens has millisecond response time, faster focus and remote video streaming experience for AR devices that need to move quickly. And it also allows the AR recognition results to be more accurate. Also, the low power consumption, while used in continuous focus mode is key for us.
So far, we have delivered to customers like TBEA, an advanced energy manufacturer, SANY Group, a construction machine manufacturer, Southern Airlines, an airline company, Agile8, and AR solution company for health care in Australia. Already shipping this -- exactly this device to this customer. And he is kind enough to say that he would like to strengthen the cooperation with us.
So this is -- again, it's a small volume case but a fantastic reference. And generally speaking, I would say the AR segment has been developing positively during the quarter. TLens is used/planned for both world-facing cameras and display. We are, as I said, already in Magic Leap and LLVision. Three more products is planned to be launched in the second half 2023.
Then I have to say, if according to plan, because this is how it is. Every day, there is a change. This and that later or earlier. So we kind of say that it will happen. It's out of our control. But that is at least the current plan of these 3 companies is that they will launch this year.
In addition to TLens, we have TWedge and -- which is enhancing micro LED displays, which is receiving, I would say, super good interest. I can just say a few words about that. TWedge, we're expecting -- this is still a project which is in an early prototyping stage.
But we decide to be quite open about it because we already do -- we are quite vocal about it in the market. And we are spending money on it. And then your shareholders deserve to know what we -- where we spend our money. When it comes to new development, this is where we do most activity at the moment. The company -- the feedback we have from the market is positive, I would say, maybe very positive. We will have technical samples in mid this year, and then we're going to do a road show showing this function of the TWedge. So a very interesting product, which will kind of add another leg to the company's product portfolio.
But as I said, so far, there's no firm decision that we will go all the way with TWedge, but we are doing the screening in the market to understand what TWedge should be, what spec, and then we will decide, during this year, to move ahead or not and then we will talk about that more later. Everything seems very promising at the moment.
On the AR side, we have 2 design wins, enterprise, we have 4 design-ins, enterprise and one consumer. We have 6 PoC, 3 enterprises and 3 consumer-related, and we have 15 planning PoC and then I run out of icons. And there is a mix of different type of application in that space.
Okay. Use case industrial. Barcode. Opportunity pipeline is developing, but it's also a slow-moving market. We are 5 customers now, which are shipping and they are also most likely to be in the market for several years. So all these 5 is -- still have several years of lifetime. As I mentioned in the beginning, we recently received a follow-on order on -- from one of them, machine vision case. And we are discussing new releases with existing -- already existing customer.
And we're also having a lot of companies planning to qualify -- or is qualifying our technology. So if you look on the numbers side, there are 5 design wins, there are 16 PoCs, 16 PoCs. You can see they are very often related to barcode, but there are some machine vision cases, and there are some other I would say, more camera general related things and 11 is planning PoCs.
There was a question asked where is the customer coming from? And I would say they're spread all over the world, including Europe.
So now I'm going to talk a little bit more about health care and automotive. There's actually a new design-in during the quarter. It's a company which is developing a miniature two-photon microscopy for commercial sale.
Remember the Kavli case. This company is actually doing something similar, and they plan to sell this instrument to different labs around the world. They will start in China and then go from there. So they have purchased and confirmed that they have designed TLens into their instrument. Again, I tell you before saying even that this is a commercial company doing it, we don't expect it to be anything high volume, but it's going to be a very high value for us, of course. And again, a step by step, building poLight and TLens brand in this health care area, which I think is super, super exciting.
Xenocor. Xenocor is the laparoscope. You can see the picture of the tip of the laparoscope on the right. Our understanding that human trials are soon happening. That's our understanding. And they claim to be happening around mid this year.
And they expect to do a release shortly after that. So I feel that, that is -- in the medical space, Xenocor is definitely kind of the first commercial design win we will claim. And when that happens, I will -- we will, of course, announce.
As I said, the Kavli case has generated a lot of activity for similar research cases. And we -- I don't know how many 10, 15 customers is now kind of using the lens in their labs. And as I said, I think it's a great, great brand building. But then also we see more and more that more and more commercial companies using TLens in more standard products is showing visibility. And I mentioned before, we have, especially, I would say, one case maturing very well, which is a Tier 1 player. It is -- so far, it's progressing well, very advanced design. They're using 2 TLenses. And we don't know how far it will go. But today, there is no sign of it not happening all the way, but it will take a couple of years.
We feel before they can qualify the whole process. It's a really high-end device, and it's -- I think, again, volume-wise, is not in close to anything like bigger barcodes or AR or short consumer. But again, the value of it per piece is really high. So endoscope area, we feel, will probably be the most key area for us in the medical. And then, of course, AR glasses used in the medical environment is, of course, also a big area.
So health care, I still -- I think it's fair to say that I feel still in this area, it's not on the 3 main boxes. It still is an area we are a little bit scratching on the surface.
I think there are more to learn and more to see in this area. And I think engaging with these Tier 1s, engaging with the first ever AF-based laparoscope, engaging with the Kavlis, the institutes who make publication and talk about TLens, fantastic. That's how we, step-by-step, plan to build the position. Which is nice about this area is that the smaller, the better.
And what TLens won't like to do is to go small. And I have questioned many times about the pill cam, but that is -- there's no activity today on the pill cam, you can see the pill, which you swallow and hopefully find its way through your body and make nice pictures. But this is still only my wet dream.
Automotive. We haven't really talked much about that. But this is, what should I say, a nontrivial volume opportunity. The in-camera requirements, it demands new solution, whether it's monitoring the driver, monitoring the back seat, it will trigger a need for different new technology. Autonomous driving will change also the need for the spec in a camera.
Without going into the details, but what we see is that more and more is -- people is coming to us and want to find a new solution for the focusing functionality because they don't believe that the mechanical focusing mechanism will work. You can think about the car, you think about the super, super tough environment. And they don't think that a mechanical system will work like a VCM. And we are one of the guys they are considering.
Actually, in the quarter now, we have engaged in 2 PoCs, which is new and a few others are planning PoCs. And those are big names. Those are big names, very big names. There's no doubt that this is not going to be an easy market to penetrate. But there is a need for new technology and TLens is one of the solutions being mentioned and explored.
So market is huge. Market is huge, and it will take years to develop. But I think the slogan or the statement and the heading here is it's a very describing statement, a nontrivial volume opportunity. I think over the years -- next years to come, I think we're going to talk more and more about this.
I think this is also an example of claimed space. There is a need, poLight is a solution. So on the summary then on the consumer side, just so that you know, the -- in this table, consumer line doesn't include AR. All the AR cases is under AR, okay? Whereas the slides I showed earlier today, the consumer also included AR. You can see from the icons. So that -- there's a difference there.
Design win 4, project 0. What I have to say there, there was -- in the Q4 report, there was one design-in, remember, in consumer. I didn't talk about it, but it was there. That design-in, I consider today to be more a mature PoC. So I moved it to ongoing PoC. It's not gone. It's just my consideration today is that it's less mature in timing. That's why I moved it to ongoing PoC. Hopefully, it will be back next quarter.
Augmented reality. Same there. One of this design-in is moved to PoC for the same reason for the same customer. Okay? But still, as you can see, 12 design wins, 6 design-ins and that's down from due to those 2 cases, which is moved to mature PoC. This is an assessment we do.
When we classify design-in and mature PoC, it's very, very difficult to judge. So my judgment today is that it's more mature PoC than the design-in. That's my judgment today.
Completed PoC, 70; ongoing PoC 43, up from 38; and planning PoC 48, up from 47. So in a way, the pipeline remains and continues every quarter to mature and improve. The problem we have now in poLight is that we need to be careful to not be overeager to add new cases and not be able to support our customer in a good way. That balancing act is super difficult.
Not at least when we now start to engage with PoC in automotive industry, of course, that is going to be a super demanding, the big companies. We are engaging with Tier 1s in the medical space just starting in a way. So in a way, we have a situation where we are potentially having a challenge with capacity. So we need to be selective also.
Okay. Alf Henning, would you join me for the financial review?
Sure. Thank you, Øyvind, and good morning to you. So deliveries of TLenses and ASICs gave NOK 7.1 million in revenue in the quarter compared with NOK 1.5 million the same quarter last year. And as already mentioned by Øyvind, about half of that revenue is from the smartphone market.
The EBITDA loss was NOK 14 million compared with NOK 18.5 million last -- the same quarter last year. And what you could say it's still a small volume when it comes to revenue, but it contributed to this development in the EBITDA. But also, there have been less third-party involvement in the R&D projects, explaining the improved EBITDA.
On the balance sheet. The cash position was NOK 53 million compared with NOK 84 million at the end of last year. Inventory went from NOK 45 million at the start of the year to NOK 56.8 million. That is NOK 11.2 million increase during the quarter. That is wafers from ST, which is a long lead time component.
On the cash flow. We started the quarter with NOK 84 million. We used NOK 30.6 million in operating activities, compared with NOK 6 million in the first quarter last year. There's mainly 2 factors explaining that significant increase. The first one is that in inventory has increased by NOK 11.2 million and also the fact that last year, we received a VAT claim of NOK 11 million.
The other activities were insignificant during the quarter, so the cash ended up with NOK 53.6 million at the end of the quarter. I can also mention as always, even also in the end is that the rights issue was oversubscribed by 25%. So we received NOK 135 million in gross proceeds in May this month. Okay. Thank you.
Thank you, Alf Henning. Okay. So it's a little bit longer today due to me talking too much. Outlook. High activity, as I hope you see and appreciate. Smartphone case key not only for smartphone but for the whole company and all segments. It's a great opportunity for us to showcase our technology and also potentially receive or reduce the perceived supply chain risk working with our technology. As I said, the consumer market is depressed. We are not.
We will be there when the market is there. So augmented reality, it continued to develop, I would say, very positive. We know we are on Magic Leap, we are on LLVision and more to come for the next quarters to come and onwards. Don't forget that we're also involved in consumer-driven AR cases and that other market segments such as industrial, medical, in the longer-term automotive represents significant business opportunity for future-proofing poLight.
So there is all reasons to maintain dedicated to poLight. We are a team, which is very motivated to develop this company step-by-step. I -- we all want things to move faster. But I think that step-by-step, we have proven that we take positions and we claim the space. Thank you. So should we then go to the Q&A? Alf Henning, do you want to join me?
Sure.
Okay. The first one is about smartphone market. The Meizu Infinity design win came as a surprise for many of us. Did it come as a surprise for other players in the market?
Yes. I think so, I think so. And when I was in China now last time for the event, when we visited other customers, they were positively surprised and impressed that we managed to do so. And I think that will trigger an interest from other smartphone OEMs, for sure. So I think, yes, it was a surprise for many.
Does Meizu Infinity need to be in the market to be seen as a valuable reference? And can you tell us more about what the design win in smartphone means for poLight?
I think we addressed that during my talk.
Yes, I think so, too. Did you receive more interest about smartphones from other players in the market after the Meizu announcement?
I think yes.
How do you consider the robustness status of the add-in design?
Yes. If robustness means reliability, I would say that the add-in camera module design is -- doesn't have a major difference when it comes to reliability and performance as compared to an add-on. So I would say, very similar. Having said that, robustness and reliability will always be chasing us. The market all would like to have it more robust. The phones and the products are getting more and more stiff and thin, meaning that the extreme impact when you drop it.
So this is -- this will kind of hunt us forever. So -- but we hopefully will be on top of it.
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Than design-in due to the time schedule and maturity. And yes, it is a low-volume flagship.
Which geographical zone are the other potential smartphone customers located in?
I would say that the smartphone cases we are working on are mainly, I need to think, mainly in Asia, but there could potentially be some others, but mainly in Asia. Yes.
Does Meizu also work on products needing TWedge? Is that in automotive?
Yes, Meizu has shown quite great interest in TWedge. They -- we don't know in particular what is the case. As pointed here, Meizu is owned by a company called Geely, which is automotive vehicle company. So -- but I don't think TWedge is related to that. I think TWedge is more related to AR glasses, we potentially are considering to develop AR.
Are there more than one player with add-in design for smartphones that is ready to enter into real projects with OEMs?
I think as of today, I think SANY is clearly the one. But there are other in the process.
Are there more camera modules makers like SANY that will be ready for mass production soon?
Yes. I think that's covered. We can't repeat.
Does smartphone companies request dual source? If yes, is this the reason TLens are not used in more smartphones?
I think it's a good question, and it is an element, I think, but I don't think it's -- that's the reason why we are not in more smartphones.
But I think that when TLens is being kind of considered more and more by more and more people I think that will quickly become a question. And then you can say at what level do they need dual source. I think first and foremost and most important for them is to have dual source on a camera module level. You see. So they need somebody else. And then that, I think, is the most important thing for them.
Then, of course, also they would like to have that TLens could be supplied by different companies, not only using TLens from polite, but other technologies. So like the VCM industry, as an example, which is a huge industry having many, many players. The TLens is poLight. So I think that, yes, that can come. I feel that the ways of doing that is that we could, of course, license our technology to others, if we want. There could be like liquid lens-type technology, which may also find our space there.
So let's see how things are. But I think first and foremost, I think the -- from a supply risk perspective, I think the most important is that there are more camera module suppliers using TLens. I think that's the first step of derisk.
Can you say something about how long you have worked with Meizu and how they got into the project with TLens?
Yes. It's -- we started working with a company called Xingji Times probably 1.5 years ago or something. And they were -- that company was started by Geely, the company who owns different brands in the automotive the Volvo, Polestar, like we all know here in Norway.
And they -- so they wanted to kind of build the ecosystem around the car, and they wanted to have a tighter integration between the communication equipment, glasses, phones and the car and the satellite and everything. So that's where we started and the Xingji Times, which they called then was very innovative, and they wanted to be different.
And you need a guy like that to come in with new technology, you need a guy who would like to be different, who would like to be better, who would like to be top in class. And that was our possibility. So we managed to convince them that we are one element of being different.
And since then, we have been working very closely with them. Then what happened is that Eric, the Chairman of Geely, he acquired also Meizu, which was quite a big supplier of smartphones back in the days after Xiaomi took the role they had in a way, and they dropped from say [ 10, 20 ] to a few hundred thousand per model.
So then they decided to acquire Meizu. So that the smartphone initiative in Xingji Times was merged with Meizu. That's why they call it new Meizu. And that's where we then -- that phone was kind of packaged into the Meizu kind of family.
So I think if it was Meizu from the beginning, I think, which is more of the same like the other do, I think it would not be TLens inside.
But the case now was it was starting as with a company who would like to be different and innovative, and that gave us the opportunity.
Meizu launched a standard version and a pro version of phones at the same time as Infinity with TLens. Both the models already set sales record -- has already set sales records for Meizu, even though they have just been launched. When the TLens model goes on sale, how likely do you think it is for us in Norway to be able to get one?
We really don't know. We try to chase that many times later this morning. So what we know is that they say soon it will be ready for preorder. But we don't know where you can preorder and for which countries and frequencies. That we don't know yet. So we just need to come back to that.
Meizu is probably not the smartphone customer poLight has worked with together with a camera module player for a long time on the development of add-ins. What does the original customers say about Meizu becoming the player that launches the world's first phone with a tunable lens in a selfie camera?
Yes. Yes, good question. Let's see. I think that, that customer who initially worked with camera module supplier and developed the add-in concept, they, for sure, will test the Meizu Infinity phone. And then let's see. I don't know. It's going to be interesting.
Does poLight still work with the original smartphone OEM?
We work with what's the definition of that? We are engaging with them. We are talking to them. We are promoting to them every day, every week. So in that context, yes. But are they one of the active PoCs? No. Are they one of the completed PoCs? For sure.
How would poLight continue to work with Meizu in the future with regard to more models?
We will, of course. Hopefully, they will be happy. Hopefully, what they tell us the continuation with us and all other suppliers they use is, of course, dependent on how we perform and what is the user feedback, end user feedback from that function. So we hope that Meizu will develop more kind of application around utilizing TLens technical advantages like All-in-Focus, Bokeh, so that the end user really appreciate it, which would be difficult to realize with other alternative technologies. So I think it all depends on the feedback they get from the market. And that we will learn in the next 6 months or whenever it was -- will happen.
Selfie camera with add-in is now design win on. Has this speed up work also with rear camera from some camera module makers or OEMs? And are there any back camera PoCs in the pipeline?
No, I would say that the main activity still for the company is the selfie camera. And I think it's too early to -- for the OEMs to think about going to the back camera. I think we need to concentrate now in claiming the space in the selfie camera and then stay there for a year or 2 and then go back to the back camera. So I think it's a little bit premature.
Is poLight involved with under-the-screen selfie camera with one or several companies?
Under-the-screen camera, I only talked to one customer recently who is talking about that. It doesn't seem to be any big push in that direction. So the answer is no.
And now is question...
And the reason is image quality. You lose a lot of image quality through the screen.
And now is question about ARVO. Did you gain increased interest from VR players of the Sharp showcase their solution with TLens?
Yes. All noise around using TLens in different application helps and Sharp is quite vocal about it. So I can't say specifically, but I think all these kind of presses and demonstration. I meet Sharp on a regular basis. And I met the customer in China, the AR customer, who just had met Sharp talking about their -- they call it the polymer lens.
And so that -- certainly, we have Sharp as a sales entity of poLight selling the polymer lens, which is, of course, helping a lot. So Sharp being big, being global, being in many different market segments. So of course, that's super, super good.
Last quarter, Vuzix was mentioned as a customer, and the project is Shield. These glasses were very similar to how you imagine consumer glasses. Is it conceivable that this project will be able to come out as a consumer product in the long term?
I totally agree. They look nice. They look very nice. I have one sample in our offices and they really look like a more decent little bit bulky Ray-Ban-type glasses. So they are nice. As far as we understand, Vuzix commitment is AR enterprise. So we don't know at least any plan in that direction. But of course, there are many other companies, which we also engage with, which are thinking their consumer space direction, and they will look like the Vuzix glasses, I agree, maybe even more compact.
Can you say something about how many major players are in projects with poLight on AR and VR?
The only thing I can say is that -- when I say that we are well positioned in the megatrend, it is because we are engaged, we are doing a project with big names. That's the only thing I can say.
Which function should TLens cover in possible VR projects? Are they the same functions as for AR?
Well, it is a camera. So in that sense, yes. But for the VR, VR is virtual reality. So then you're wearing a glass, a display, which is covering your eyes and you can't see through it. That's virtual reality. So you're in the virtual world. AR is augmented reality. So then you have glasses, you can see the world. In addition to see the world, you can see something in addition projected into -- onto the glasses. So that's the difference between AR and VR. VR then, since you don't see through the glasses, they sometimes use a see-through camera. And that -- sometimes that is an RGB high-end camera using AF. And that's where we play the role is in the see-through camera.
How do you feel selling the TLens product to major players in AR now? Is it difficult? Or do they come to poLight themselves with inquiries?
No, we -- in poLight, we have the genetic of being proactive. So we do reach out for sure. But yes, we also have incoming calls. What is interesting now to see is that you have different camera module suppliers, which is -- also say, we are also capable, we are also capable of integrating TLens in an add-in design for AR.
And they do that because the big players in the AR space say, we would like to use TLens. So again, it's an example of how important the OEM drive is. If the OEM said, yes, Mr. X Camera Module Guy, we can work with you, but you need to show capability with TLens. This is a fantastic space to be in.
Then they have to go, we have to build it to prototype and go and show to big guys that we can do. So in a way, in addition to reselling direct and we, step-by-step, will build up other players who's also coming to them with a solution, we come with a component, they will come with a solution having TLens inside. So interesting dynamic.
Are there any/many players who have started with add-in cameras in VR/AR? -- the -- what is shipping today is add-on?
The -- what is shipping today is add-on? I think next releases for them is also potentially add-on. But a little bit longer term, I think add-on will be the solution.
Can you give an update on how the work with TWedge is going and something about the interest in this concept?
Yes. I think we covered that.
Is poLight working with more than one company regarding TWedge?
Again, definition of working with, yes, we are engaging with several relative to TWedge.
Does poLight have a patent covering TWedge?
Yes. Good question. And the technology platform for poLight is covered by a patent, and that patent is basically, to put a little bit simple, two thin glass membranes, polymer in between, okay? That is what is patent of poLight. Polymer and 2 glass membranes.
TLens do that, okay? So one of the glass membranes is bending, okay? TWedge does that tilting. So it's basically, in that respect, should be covered by the same patent. Other rounds, other tweaks maybe. But the way we see it, yes.
Okay. Some questions about the barcode and industrial. Can you say something about how you work with existing customers in the vertical to be able to win more projects from them?
First of all, the most important thing is supply quality, be trustworthy. And that's, of course, not always easy, but we try hard to do that. And then it's obviously try to engage in the road map discussion with the customer, which is sometimes -- also sometimes difficult because they want to keep that very, very secret. So we try as good as we can to stay close to the customer, like every company will try to do with customers.
And we are already engaged with some of them for next generation. And even the next generation we talk to the customer about is even to potentially to do coexist. It's not going to replace the existing one because they typically last for a long time. It's going to be an additional new product.
How are the customers who have joined PoC and design-in distributed geographically?
I think we answered to that is basically worldwide.
What are the possibilities for projects in drones? Are there any in progress?
I would say a few, yes, but not massive. And a little bit surprised over that, to be honest. We have some tests about vibration, which should be a big advantage using TLens. But today, we haven't seen any big traction in that area, but we have a few cases, yes.
On the medical side, project has major PoC projects underway with a Tier 1 player who -- to whom you have already delivered several lenses. Can you say something about how this project is going and what possibilities there are for some volumes in such a project if design win is concluded?
This was actually one of the cases, if I understand the question correctly, I mentioned during my presentation. That project goes well. It's still a PoC. We -- I would say, it's maturing. I think I don't -- we don't know how far away it is from the design-in, but they are doing an extremely thorough job. It's a big company. And the bigger, the more thorough in a way. So we support them well and we do supply. And the feedback we have so far is that so far, so good. And I will give you a regular update on that case, but it looks very promising. Big volumes? No. Decent volumes, yes. High value? Very high value. Very interesting, financially also an interesting case. And of course, if that kind of company release a product with this technology. I think that will be fantastic.
It was mentioned somewhere earlier that the
Kavli cooperation has led to a commercial player taking up the work of designing a similar scope for sale. Can you tell someone how far this work has come?
Yes. I think we mentioned that during the talk.
Can you say something about pill cameras? And whether poLight is...
I think we covered it also.
Yes. And then there's other questions like, how is the weak Norwegian krone affecting poLight?
CFO, will you answer?
Okay. Thank you. Well, we are selling our TLenses in U.S. dollars. So when it comes to revenue, it's positive that the weak -- over the weak krone. But we also have expenses in foreign currencies. So it depends on the sales. If you look at the first quarter, I would say that the expenses are higher than revenues. So a little bit negative affected by the weak krone.
As the sales increase?
Well, that's another story.
Thank you, Alf.
Has there been any geographical change in companies working with or asking to work with poLight?
I think that more and more, we are more and more global, I feel. No, we have presence in Asia. We have presence in Europe. Don't forget, we have a good setup in U.K. also. We are -- so we -- I feel that we are -- in a way, Latin America, nothing. But North America, Europe, Asia, I would say, is the 3 very important regions. So I think more and more global.
Will there be more employees in the near future and in which categories?
I think we actually were one down this quarter. But there is -- we don't -- in the next kind of quarter, we don't see any massive buildup. There is couple of people potentially. But -- and then we are -- as we know, ramp up manufacturing, of course, we need to be more and more equipped to ramp, and that means that we need to develop and professionalize data management in the manufacturing process. So that's one area which we are focusing a lot now.
I think that we're going to be -- I mentioned that we are squeezed on resources when it comes to supporting customer cases. And people are working extremely hard, and this is not a work. This is -- being at poLight is a hobby, I have to admit. And there are so many people working day and night and weekends in all time zones.
So I think the customer support, which is very, very techy, extremely techy is taking a lot of resources, and we also need to step-by-step strengthen them. And then my sales team is saying that now there are so many customers that really need some help to do the account management. I think also potentially in the account management side we need to add maybe a couple of in the regions like in the U.S., in Asia and potentially in Europe. But nothing massive, but say a handful throughout the year potentially.
When do you think it's realistic to see the first product using TWedge?
Yes. I don't know, to be honest. But say if technical samples are going well, and we don't need to do major changes to the design, which really happens, then I think it could happen within the next 2 years. So -- but I think it's on that time scale. I don't think it's realistic to say this year and potentially also not next year.
There could be a scenario where one of the TWedge customers will say that can you do something special for me, and that will be the potential start that we do special design for a special customer. That could potentially be faster. But of course, we would like to make a generic TWedge product, which we can sell like TLens. And then I think it's -- if everything goes well from now, when we take a decision and the Board approves, then maybe a couple of years, I would say.
The design-in VR case, is this from a company most people have heard of?
I'm a little bit uncertain. The design-in -- oh, yes. Okay. Yes, there is a design-in on a VR case. Yes, I need to think, yes. This is -- what should I say, this is a very high-end professional company -- sorry, product. They are known to be the best high-end VR headset in the world. So in that sense, yes, will Peter and Ole in the street know them? No. It's for the professional market, but very high end.
You have earlier mentioned a second mobile phone in 2023. Is this still an option?
A little bit uncertain was that the first or second mobile in 2023. Yes, okay. Yes, it depends maybe what you're referring to is the next kind of made 2 potentially. That is too early to say, too early to say.
The recent fund raise have been connected to customers needing assurance that poLight is in a financially secure position. Is this customer Meizu or are there other players needing this raise?
I would say that this is more related to generally speaking that -- not a particular customer that, of course, but poLight being seen as financially well funded is a fundament to play. It's a ticket to play. If you don't have that, you will not get customers. Not a particular one. Have we been exposed to a lot of critical question regarding that? Not really. But that's also why we act before we need in a way.
Hello. Thank you for the presentation. I'm curious if poLight has considered the potential applications of TLens technology in flame detectors for industrial segments such as oil platforms and refineries, where each platform might have around 20 detectors and refineries up to 100. Could TLens' fast focus and high optical performance benefits this market?
I'm coming from that market. And yes, potentially. Have we explored it? No. I think we -- I'm not saying that this cannot happen, but I think that we have the plate full, so we can't explore that market at the moment.
Do you think that poLight deserved the drop in share price the last year? If you see the progress you have achieved the last year, don't you think poLight is better positioned today compared with a year ago.
To answer to the latter part of that question is that polite has moved very positively forward. The last, say, 12 months, that's beyond any doubt, beyond any doubt. And the design win slide shows that. So then when it comes to share price, I will answer it this way. I -- that's nothing I can control. My role is to manage this company, build the company, build new design wins, build a good organization.
And then over time, the company will be valued what is deserved. Sentiment in market, what triggering, what share price, we can't focus on it. Is it more motivating as a CEO to see the share price increase than decrease, definitely. Is there more happy shareholders when the increase -- share price increase than decrease, definitely. But I need to try to kind of keep that out. It's noise. I need to concentrate on the operation.
How about SMA solutions from, for example, Cambridge Mechatronics, competition corporations? Or what do you think?
Thanks, Alf. Yes, good question. I think potentially both, I think potentially both. We do talk to them, of course, and they are a good company. They have good technology. And -- so I think both is possible to see. We also know that they are exploring AR world, of course. They also talk about many of the same things. So I think we can both potentially be competitors, and we are competitors in many ways, but we also could potentially be partners.
You are still using a picture of a pill cam in the presentation and now also made an icon of digestive system with a pill cam. Do you expect TLens to be in a pill cam in the future?
This is my wet dream. I really feel that this is something where we can have a role. But do we have a PoC? Do we have a planning PoC in this area? No. But I think it's an extremely interesting area. We actually have one employee, which has been working in this space now.
So -- and he says the same. It happened things there. So -- but think about the power consumption, the compactness and all that, which is kind of our kind of sweet spots. So let's see, it's my wet dream.
You are having quite a lot of ongoing projects and PoCs. Are you close to your capacity? Can you cherry pick the best projects? And do you have to reject any requests?
Good question. We have mentioned it already a little bit. Yes, we are, I would say, at peak load. We are at peak load. We -- some things we do say no to, typically like people -- things which are a little bit too much on the edge and too much far away, which will need a different TLens in a way we typically say thanks, but no thanks.
We have been contacted by companies wanting to do contact lenses and implants in the human eye, which will be fantastic to be involved in, to be honest, and it's -- but those are typically things we cannot today concentrate on.
So we do -- cherry pick, I think, is a strong word because we are running like crazy to find new PoC, a new customer, but at least there are things we need to say no to.
Are there any real competitors in tunable optics for small devices without gravity and thermal challenges like TLens?
That, I think, is a small world. That, I think, is a small world.
The DI already given in smartphones in the fourth quarter. Will it also be flagship model and low volume?
I think we answered that.
Okay. What geographical zones are the other very mature smartphone companies located in?
Yes. So I think these questions have been sent in also through mail, I think.
That was the last one. Yes, that was the last one.
Yes. Let me see. I think we answered those.
Yes.
Okay. Is there any question from the guys and ladies in the Continental? I already even you have answered questions through the interface, which actually is a nice way of doing it. Any other questions? You want to have them offline. That's fine. We will have time for that.
Okay. Thanks, Alf Henning. So thanks, everybody, for an extensive Q&A session. I think this is a record-long quarterly presentation, 1.5 hour. Next event, Annual General Meeting on 24th May in Horten. So of course, welcome to participate. Give us a message, if you will be there and we will prepare for that. So that will be in summer day, 24th of May. Then we have Q2 report, 17th of August, at the same time hopefully, and after being recharged at a good summer holiday.
And hope to see you back in Continental then. More and more people is coming and participating in this quarter presentation face-to-face, which we find extremely encouraging. And thanks to those participating through the webcast. Have a great day, and see you next time. Thank you.