Elliptic Laboratories ASA (ELABS) Earnings Call Transcript & Summary

Good morning, and thank you for joining us today. I'm Laila Danielsen, the CEO of Elliptic Labs. Joining me is our CFO, Lars Holmoy. Let's jump into the presentation. We are proud to share our outstanding results for Q4 and the full year 2024, a year of remarkable growth and profitability. We nearly doubled our revenue, delivered our strongest quarter yet and set the stage for even a greater innovation ahead. We ended the full year 2024 with revenue reaching almost NOK 132 million and EBITDA just over NOK 25 million. This gives an EBITDA margin of just under 19%. Our revenues were driven by high launch activity in the market with 66 smartphones and 15 laptops being launched during the year. Q4 was our best quarter yet with revenue growing over 5x to nearly NOK 48 million and a strong 34.5% EBITDA margin. And note, cash flow improved by over NOK 9 million, reaching more than NOK 76 million. As says to the left of the screen, our numbers tell a clear story. We are building the future of AI sensing, making devices smarter, seamlessly connected and intuitive. With advanced AI sensor fusion and as we are moving up the software stack, we're not just improving technology, we are redefining how it interacts with the world. Today, over 0.5 billion devices are using our AI platform to make them greener, smarter and more user-friendly. Starting off, looking at our progress in the smartphone vertical, we have seen significant progress during the last year. We have launched 166 smartphone models to date, 66 of which were launched in 2024 and another 4 models during the beginning of 2025. As many of you know, our journey started by building a solid platform in the smartphone segment, where we, since our inception in 2016, have built an impressive portfolio with some of the largest OEMs across the world. We currently see a solid growth in our smartphone deployment based on our leading market and ecosystem position. Rapid pace of launches are translated into significant revenue growth for smartphones. We launched 3x as many smartphones in 2023 compared to 2024, and our smartphone revenues grew by an impressive 144% for the full year. We are seeing high demand for our AI Virtual Proximity Sensor, driven by the market requirement for AI-driven efficiency. As many of you are aware, our revenues are based on how many smartphones our clients shipped to the market. The global number of smartphone shipments grew by 7% during 2024. A promising development, however, our clients capture meaningful market share. Elliptic Labs customers had an average smartphone volume growth of 13%, almost twice the overall market growth. We are proud that our customers continue to select our AI-driven technology to drive new functionalities for more models and our ability to grow our presence in the market. We are continuing to expand our presence in the laptop market as a key growth vertical. Elliptic Labs increased laptop revenues by nearly 50% in 2024, reaching approximately NOK 54 million for the full year. Our expanding laptop portfolio has established a strong foundation for future growth. Laptop revenues typically follow a 3-year cycle, starting slowly, peaking during mass adoption and then declining as newer model emerge. However, we are only in the beginning to unlock the full potential of this opportunity. We continue to deploy Human Presence Detection Sensors and our AI Virtual Tap Sensor across an increasing number of models. Our clients recognize the groundbreaking functionalities we provide. Lenovo Smart Share basically, the Apple AirDrop Killer is a prime example of how we are shaping the future. An important point is that we're recently starting shipping multiple AI products per device. And this is a key driver for future growth as we move forward. This strategic shift is a key driver for sustained growth moving forward. As I said, by adding more products per device or more models, we're enabling strong growth. We started out by announcing 2 AI Virtual Smart Sensor on 1 model in the third quarter and continued rollout of multiple sensors per laptop in the start of 2025. Elliptic Labs is ideally positioned to drive the future growth of AI-capable PCs, leveraging our AI-driven strategic vision and proven ability to deliver innovative solutions at scale. The PC market is undergoing a significant transformation with manufacturers increasingly integrating AI-driven features to enhance user experience, enable seamless device interoperability and provide greater contextual intelligence. Elliptic Labs AI Virtual Smart Sensor Platform is uniquely suited to meet these demands, offering OEMs a cost-effective and scalable software solution that replaces traditional physical hardware sensors while delivering advanced functionality. As the demand for smarter AI-enabled PC accelerates, driven by the hybrid work, growing connectivity needs and consumer expectation for intuitive intelligent devices, Elliptic Labs stands as a key enabler of this transformation. With a strong foundation in [ the tiered ] AI, a proven track record with global OEMs and a focus on delivering high-value software solution, our company is well positioned to capitalize on the rapid expansion of the AI-capable PC market. We continue to scale rapidly, making model launches a key driver of our revenue growth. In 2024, we launched 66 smartphones and 15 laptop models, bringing the total to 166 smartphones and 41 laptops. 40% of all shipped products to date were launched in 2024, highlighting strong growth. As we move into 2025, the year has started with strong momentum. By the end of February, we shipped on 8 laptop models, already surpassing half of the total laptop launches from 2024. Two of these models feature 2 AI Virtual Smart Sensor, reinforcing our innovation leadership. Additionally, we have introduced 4 smartphone models in 2025 so far, welcomed even a new smartphone customer and secured 2 smartphone expansion license contracts covering 20 and 10 smartphone models, respectively. Overall, we have built a robust foundation to sustain our growth trajectory throughout the year. And with that, I will hand over to Lars for financial insight.

Thank you, Laila. In FY '24, our revenue from customer reached NOK 131.9 million, up 93% from NOK 68.3 million in FY '23. In Q4 '24 alone, we achieved record quarterly revenue of NOK 47.6 million, reflecting a 416% year-over-year increase and underscoring the accelerated pace of our business. This increase is a direct result of our strengthened OEM relationships and rapid market expansion in both smartphone and laptops. We have also turned our EBITDA positive at NOK 25.1 million, which translates into an EBITDA margin of about 18% for the year. This reflects our ability to grow revenue at scale while maintaining a lean cost structure. Our journey toward profitability demonstrates the power of our scalable AI Virtual Smart Sensor Platform. Even as our revenue nearly doubled over the past year, our operating expenses increased by only 4.8%, a clear indicator of our operational leverage. As we scale, we do not need to add manpower or other operating expenses at the same pace as our revenue grow. The '24 results validate this efficiency. Our business model not only supports rapid growth, but also ensures that each incremental revenue dollar contributes significantly to our bottom line. In Q4 '24, we set new records on multiple fronts. Revenue from contracts with customers climbed to NOK 47.6 million, our highest quarterly figure to date, marking a 416% increase over Q4 '23 numbers. This surge reflects both milestone-based revenue from key smartphone contracts and growing shipments in the smartphone and PC segments. On the cost side, our total operating expenses ended at NOK 31.4 million versus NOK 28.0 million in Q4 '23, driven primarily by employee benefit expenses that increased from NOK 21.8 million to NOK 25.6 million. This uptick stems from 3 new hires year-over-year, salary adjustments and the full year effect of the '23 hires, the 2023 hires in total. Meanwhile, other operating expenses were stable at NOK 5.9 million, down slightly from NOK 6.2 million same period last year, reflecting disciplined spending. Putting it all together, our EBITDA reached NOK 16.5 million, yielding a margin of 34.5% for the quarter. We're capturing revenue while maintaining cost efficiency, underscoring the robust strength of our revenue engine and our disciplined approach to managing expenses. Our focus on cash conversion has paid off. In Q4 '24, our operating cash flow turned positive at NOK 13.6 million, an improvement over previous quarters. This jump is a direct result of both increased and collected revenues from previous quarters and disciplined cost control. In parallel, our cash balance grew by NOK 9.3 million from Q3 to Q4, reaching NOK 76.4 million at quarter end. Moreover, already entered contracts give us confidence in our funding our current business plan. We are also improving payment terms in new agreements, already resulting in reduced days outstanding compared to past levels. While milestone revenue can cause fluctuations, improved terms will increasingly lighten our working capital burden over time. It should also be noted that we have repaid NOK 4 million in interest-bearing debt during '24, leaving us only with NOK 2 million in short-term debt at the end of the year. Our working capital ratio, current assets over current liabilities is at [ 7.8 ], and we are highly solid and able to pay our obligations. Our balance sheet is robust. Current assets has grown significantly while current liabilities remain low. Cash position, as mentioned, improved to NOK 76.4 million, NOK 9.3 million increase from Q3 '24. Current assets reflect NOK 14 million increase in trade receivables and NOK 5.9 million reduction of other receivables. Increase in trade receivables is connected to our increase in revenue in Q4 '24. With an equity ratio of approximately 90% and a strong cash position, we are well funded to pursue our growth initiatives. This financial strength enables us to invest in further in R&D, expand our market reach and continue to build on our momentum. And with that, I thank you, and I will leave the stage for Laila Danielsen. Thank you.

Thank you, Lars. So to summarize, we are achieving substantial growth across both smartphones and laptops. The number of launches is accelerating, and we are successfully converting our commercial progress into meaningful revenue expansion. Our revenue trajectory is rising sharply. And as illustrated in the chart to the right, our growth journey is just only beginning to take off. Laptops will be our primary growth vertical moving forward. We are now reaping the rewards of our efforts since introducing our AI Virtual Human Presence Sensor with our first laptop in 2022, expanding into device-device connectivity by the end of 2023 and now scaling with multiple AI Virtual Smart Sensor per device. We are confident in our path ahead and look forward to sharing this exciting journey with you in the coming quarters and years. And finally, let's revisit our assumption to drive future success. We are focused on maximizing our contract base, strengthening customer relationship, expanding partnerships and increasing AI Virtual Smart Sensor adoption. Our AI Virtual Smart Sensor Platform is rapidly expanding across industry, improving device intelligence and user experience. We are working closely with OEMs to integrate AI Virtual Smart Sensor into more devices, including laptops and smartphones. Our focus is clear, optimize contracts, increase adoption and scale product deployments per device. By driving continuous innovation, we enhance device capabilities and create more value for our customers. With strong momentum and growing market presence, we are well positioned to drive future growth in AI-powered capabilities. Thank you. And now we will take a quick break to review the questions that been sent in. Thank you. [Break]

Welcome back. And first, I want to start by thanking the investor that submitted some questions before, and I appreciate that. Thank you. So we'll dive into the questions here.

Yes.

I'll just start.

You can start.

We have a good list here. First question about laptops. How many laptops have you launched on in 2025? We officially launched on 2 laptops, but we shipped, as you probably saw from the presentation, an additional 6. So 8 in total are new laptops in 2025. And this is sort of back to -- we -- when we are launching a laptop officially, we have to follow the guidance and the policy of the customer. So here is an example where we indeed shipped on 8 laptops, but we were only permitted to announce 2. And we can't really comment beyond that because that is part of Lenovo's strategy. Okay. Jump into next. Last Q4, you stated that you expect a launch of a second PC OEM in the second half of 2024. Why didn't it happen? And do you expect to launch on more laptop OEMs in 2025? And so this is yes, we did -- I mean, we did -- we were hoping for that. But once again, this is back to the customers' overall strategy. And so we are still continuing working with several OEMs. And I think that's the only comment we have about that. And then once again, we are up -- this is up to the customers' overall strategy when they're planning to launch or not. Obviously, the -- it's been -- we see that for sure, the PC market is stabilizing. But for -- when we look at some of the bigger PC OEMs, there's been a lot of reorg and so forth. So -- but now we see things are stabilizing.

Yes.

Okay. So another question here about more products. It's a contract announced in Q3, November 11, 2024. Thank you for being specific with Lenovo for the products, HPD Tap Sensor and Accessory Sensor. So just for clarification, the Accessory Sensor is a Virtual Tap Sensor. We don't have an Accessory Sensor. But good...

We understand it.

But we understand the question, good phrasing. So yes, the contract is with Lenovo. Once again, we were not allowed to precise say, use the name Lenovo, includes the AI Virtual Seamless Sensor for laptops and accessories. So that's correct. More questions about products. Would all existing accessory products be able to use ELABS Accessory Sensor? To clarify once again, this is the AI Virtual Tap Sensor that is also being used for accessory or would laptop OEMs bring special accessory products for the market for this function? So in general, our AI Virtual Smart Sensor Platform can be used for today's accessory. So our goal is when we're making this type of capability is that you don't have to add on special hardware or anything -- make any changes to the design or anything else to be able to use our technology. We're 100% software. We want to make sure that we can work everywhere. So no special requirements needed or custom accessory. So I'll jump, I mean, there's a bunch of -- we're coming to cash flow. How is -- we got finance question too. How is Accessory Sensor price level compared to Human Presence or AI Virtual Presence Sensor? Same level for each accessory product. So I'm not going to dive into all the different details. But on high level, the pricing structure for the Accessory Sensor is basically competitive with the Human Presence Sensor. And obviously, as we have in the Human Presence Sensor, it varies based on volume commitments and integration depth. Another question. In theory, can a laptop already launched to the market be updated with other AI Virtual Smart Sensor? And is this realistic? So yet again, basically, all laptops can receive an update to enable our functionality. Do I expect that this would happen? No, we do expect and what we're seeing, particularly when we are looking here, if I go back and I look at Lenovo story, we started out a few years ago with one sensor, one virtual sensor on one model. Year-to-date, we are at 41 models and with several models with multiple sensors. They're all launched in new products. This is what I expect -- we expect. Can there be a possibility?

Sure.

Yes. But I think it's fair to say that a customer would like to deliver new innovation on new products to sell more new products, okay? Okay...

We actually got a few of those questions on new products for the smartphone. So it's good.

Okay. All right. Well, yes, we will answer that one. No problem. Does ELABS or Elliptic Labs have a focus on new products for the smartphone vertical? And yes, we do. We continue to invest in new products for the smartphone market as well. And this is looking at a set of use cases and leveraging all the fundamentals of our AI Virtual Smart Sensor Platform to expand on application beyond traditional virtual proximity sensing. So the proximity detection that basically when you're on a phone call, the screen is on, take it up to the air, the screen turns off, take it away, it turns on again. So we're looking also at capabilities beyond that. And then we get another questions about Wi-Fi. Okay. The new Wi-Fi standard is said to be more precise, which showcasing claiming Wi-Fi can -- Wi-Fi sensing can do much of the same as Elliptic Labs, AI Virtual Presence Sensor? Is Wi-Fi sensing a relative competitor to Elliptic Labs? So to be firm on that one, no. And I'll elaborate a little bit. Well, Wi-Fi sensing has approved. Does it offer the same precision level as this -- the capability that we are delivering for the Virtual Human Presence Sensor? It doesn't. And let me also just underscore this and be crystal clear how -- when we are making our technology for Human Presence Sensor, there's about 30 different components and sensors on a laptop that we can leverage, including if we wanted to, Wi-Fi. However, we have looked at that ourselves because we could easily just put that -- pull that information into our Virtual Smart Sensor Platform and use as part of our Human Presence Sensor. The capability, the underlying capability for Wi-Fi is not good enough. And there was a comment here about Intel. And also with our customer, we get the feedback that Wi-Fi is not good enough. So they told us to not even spend time on it. And we see that also that Intel is not spending any type of resources on Wi-Fi. So no to that question. But good question though. To you -- more questions about the product. Sorry. So to your knowledge, are there any software competitors for human presence detection out there? So no, not to our knowledge. And in general, our customer would have brought that up, for sure. And we're doing more than just human presence sensing. I mean we're moving up the software stack, but let me see. Is there any price pressure on Human Presence -- all about Human Presence Sensor.

Yes.

We talk about Virtual Tap Sensor. It's way more sexy. Is there any price pressure on the detection sensor from legacy hardware sensor or new disruptive competitors? So of course, traditional hardware sensors still exists and with higher cost integration complexity. So obviously, our technology is extremely scalable and very cost efficient and so have a strong competitive advantage. And then on top of that, what we have a lot of focus on is moving up the software stack that we did here last year, launching with Lenovo on the AI Virtual Seamless Sensor or Tap to Connect. And we continue -- I just want to mention this, too, with a tremendous expertise we have internally around machine learning and AI, we are moving up the software stack and working on new capability. And talking about that, has all the focus on generative AI gotten in the way of launching PC beyond Lenovo? Are you still confident in further rollout? So I mean, we've gone from 1 to 41 models. And also, let me just reiterate that -- this. Last year, we launched with 15 with Lenovo alone. This year, thus far, we are with Lenovo, we're only in February here on 8 already. And I am confident that we will continue to roll out. And with Lenovo and also, as we said, we are working with other OEMs as well. Okay. Here we go.

Okay. Thank you.

Okay. Are you 100% comfortable with the cash runway to cash positive? Are there any requirements for OEM customers regarding minimum cash holdings? Lars for you.

Yes. Thank you. Okay. So the last one first. Our OEM partners does not impose specific minimum cash requirements, though we always prioritize financial stability, of course. Yes, we are confident in our cash runway to reach profitability. Our solid cash position basically and combined with already entered agreements gives us confidence in funding our current business plan. And we also, as we mentioned last quarter and we also reiterated, improved payment terms of new -- entered into new contracts is reducing days outstanding compared to past levels. While milestone revenue might cause fluctuation, but that's short term and temporary. And over time, it will increasingly lighten our working capital. I also have received some questions about net working capital levels. And we don't give specific guidance on this. But based on the current momentum, we expect a positive trend. So in both in the cash flow and the net working capital and for all the reasons I all mentioned. And again, it might be fluctuations based on milestone revenue. But we believe, I would say the combined factors that we improved our contracts, more license -- more models in the market that meaning increased license revenue will continue to drive a favorable cash conversion cycle for us and, of course, improve working capital as part of this.

Perfect. So we know our customers, they pay in time.

Yes.

We're reducing the payment terms and we have more shipments.

Yes, correct.

Yes. So overall, it looks good. You feel...

Yes, no -- yes, and there's no overdue outstanding receivables either. So...

Okay. Good. So we got another...

Yes. Smartphone.

Yes. As you are charging a license fee per smartphone units sold, and I think they're probably referring to this new chart that we share here, how do you see the growth for your smartphone customers in China? So last year, which was quite pleasing to see was that the overall smartphone market grew 7%. However, our customer base in the smartphone market, Huawei, Vivo, Honor, et cetera, grew by 13%. And this year, in the mid-January, the Chinese government announced that they would do subsidize smartphone products under, to be exact, $818 with 15% subsidization. So this, I think is...

[ For our ] customers.

Yes. So this is -- obviously, we go in and we get a 15% discount over Apple and Samsung products. And also, this would stimulate consumers to buy more. So obviously, we can't look into the complete in the future, but we expect this to stimulate growth for our smartphone customers in China.

I just got a question about lifetime -- life expectancy of smartphones versus laptops.

Yes.

So in general, laptop has a longer lifetime than a smartphone.

Yes.

Yes, longer lifetime than smartphones. But smartphone -- the trend is also...

I think -- sorry, I think I said Huawei, I meant Honor. Yes, Honor.

Okay. Good. Good. Good. Yes. But in general, smartphones have a shorter lifespan than a PC, and you probably know this from your personal life as well, keep your PCs longer. But the trend is, of course, it's, yes, somewhat fewer SKUs basically, but volume is increasing.

Yes, absolutely. And I think you have any more questions here?

No.

No. And...

I think we have covered them all.

Okay. Very good. Thank you so much, and have a good day. Take care.