poLight ASA (PLT.OL) Q2 FY2025 Earnings Call Transcript & Summary

Welcome, everybody, to poLight's Second Quarter Earnings Presentation. Together with me today is CFO, Joakim Hines Bredahl. Grethe, Board Chair could not attend physically today, but I'm sure Grethe is following us closely through the web. So the normal agenda, key events, introduction to poLight, operation and market review, focusing on the market side, financial review by the CFO, outlook statement and Q&A. So since this webcast -- this presentation is webcast, please wait for the microphone if you have questions from the audience so that they can pick it up. And for those using the portal to ask questions, please also leave your credentials so that if there is no time to reply to your question, we can contact you for further follow-up. Super. Yes, key events. I think the -- absolutely, the most important thing, which we also mentioned as a post-quarter event last quarter is that we entered into a strategic agreement with Q Tech Technology Group. And yes, this is, as I said, it was backed by a top-tier consumer OEM. I'm coming a little bit back to it. We -- during that process, we collected NOK 223 million gross. No doubt that this event has created a lot of positive momentum and increased market activity. We see a, I would say, continuous positive development in the barcode machine vision market. Repeat orders, existing customer adding us into new products, old customer, the first customer buying new components after having had the product on market for 5 years. So step-by-step, also very exciting to see how we now potentially can step up in the value chain and offer more solution through this TLens lens module based on the M12 standard, which will ease the implementation for many customers. So here, we're taking a step up in the value chain together with [ Sonnex ]. The TWedge is amazing. It creates so much interest and also in this quarter, more than NOK 1 million in sampling revenue which is very, very significant. The patent infringement is closed, agreed commercially and very active quarter when it comes to exhibition. We're attending many, many of the key events, either together with partners alone or only visiting and have meetings. Post-quarter events, which also nearly is filling a page. We have another design in, which we got confirmation on during -- after the quarter was closed. And we expect that this is an enterprise interesting case. I can't say too much about it, relatively low volume, good prices. And I'm sure that there will be some more visibility on that later and we expect them to release that product to market in end of this year. And then it will be classified as a design win, of course. We had a repeat purchase order, I mentioned it already, worth around NOK 1 million connected to the first -- related to the first design win we ever announced, which is the EX30 case, as you probably know. And then a very, very interesting step in the right direction. Yesterday, we got a significant PO for TLenses and driver, which is related to the Tier 1 OEM in U.S., which was kind of a trigger point for a strategic investment with Q Tech. So this is to support a qualification program for a AR glasses, which is planned to be released. Extremely important event and clearly stating the intention very clearly from this OEM when it comes to using our technology. And just to recap, the background was that this particular OEM, he was very keen and had, in a way, qualified our technology, but it did have some kind of concerns related to size of poLight, ability to ramp to high volumes. And that's why it triggered this deal with Q Tech. And now they have seen that we did that. And for them kind of to show that they meant seriously, they're now triggering programs with us and Q Tech. Super important. And this is basically what we have been facing many times is that, as I said, poLight being what we are, a small Norwegian company, even though we are growing, we are still small in the ecosystem we are working. They are very demanding customer, big customer, big volumes. So they are a little bit allergic to taking risk on small companies. That's why this investment from Q Tech is an extremely important remover of pain points. So they invested 33% after the substantial offering, they are down to 30%. Q Tech have now 2 Board members. Chris and Louis in the Board pack -- sorry, in the quarterly presentation, you can see the presentation of both Louis and Chris, very experienced people from the ecosystem, contributing a lot to the Board discussion. On the Board topic, we also have added Cathrine, who is very experienced legal lawyer. And so now we have a Board member of 7, 2 of them from Q Tech. So we also have started a program with Q Tech where they will build an assembly line and test line at Q Tech factory outside Shanghai and that is progressing well. And this is intended to -- for the Tier 1 OEM particular, which is -- was trigger for the investment. Okay. Statement from Eloy, same statement as we did use last quarter. We strongly believe poLight's unique technology will be important for several applications with backing from the top-tier U.S. consumer electronic customer. We are confident this alliance will bring a cutting-edge solution to the market, addressing key industry challenges. It's a strong statement. It's a strong commitment from Q Tech. And I think that combining our strength on the technology, their, I would say, customer base, their experience in ramping, it's really, really -- and I would say, we are entering into a new era of the company. Okay. Just quickly on poLight. Many of you have heard that so many times that you can present it better than me. Focusing on the AR/MR consumer and we also are step-by-step building up the industrial enterprise market. Those 2 markets are very different. The consumer have the high volume potential. Each project has a relatively short lifetime. Hopefully, we are able to build a fundament through the industrial engagement we have, which is kind of a slow-moving lower volume business, higher price point. So that would be the kind of the basis and then the higher volume will be on top. The high volume will, of course, enable a lot of, I would say, cost reduction in our supply chain so that we have very, very good margin on the enterprise market. So that is the strategy. Our technology, I just had a customer meeting yesterday in headquarter. And the statement there was quite encouraging. Of course, there's a lot of variables kind of being discussed. And he's saying we're going to see the need for small cameras. We need low power consumption. We need speed. And he said, there is not much to choose other than poLight technology. It's a very, very strong statement from a big customer. So our kind of attributes is like design for what's coming. It was designed 20 years ago or at least invented 20 years ago and now we can more and more see how we fit into this new market, which is developing. Yes, it has been a long ride, but now we really see how good fit we are for what's coming. Global player. We are now 50-something people, very dedicated team. I'm very happy with the team, very international. I don't know how many nationality we are now at 15 plus. And we are spread around the world. We focus on have resources where our customers and partners, meaning the growth will not be in Norway. The growth will primarily be in the international markets. So today, we are present in Norway, of course, Finland, France, U.K., U.S., China, Taiwan, Japan and the Philippines. So -- and the IP situation is very strong and we are continue investing in IP. Yes, you know this very well, 2 glass membranes, polymer in between, bending the top glass membrane through a PSO wafer. They are changing the focus, very fast, low power consumption. The same technology platform, not bending, but tilting is the TWedge. We produce the polymer in headquarter in Tonsberg, very scalable. We source wafer from STMicro. We ship this to our assembly partner, which now will be 2. It will be the [ Tongxing ] and it will be Q Tech. They are assembling, do the packaging. And we then deliver this to camera module players, whereas we're also focusing a lot on convincing the various OEMs, the product owners to design the product based on the TLens technology/TWedge technology. It is basically the OEM who dictates what is the spec of the camera. So it's very important that we, as poLight, is very convincing and have relationship direct to the product owners. So many -- I would say many of the meetings we have from a sales perspective is with the product owners. Yesterday is the case, same today. This is very, very important. But of course, we need to support the camera module players. They are instrumental for us. So we also spend a lot of time to support and convince them. As I said, targeting momentum markets, AR/MR, I feel is the most strategic thing we do now. A lot of innovation is happening there. Having said that, the consumer market, generally speaking, being the smartphone, being the laptop, being the webcam is important, being watches. But I think the fit and the need in the AR/MR market is clearly the most important. But we also are addressing the consumer in general. Machine vision, industrial, yes, I've said it many, many times, we are there. We get more and more visible. We have many design wins now and we are starting to build quite an impressive platform. This M12 case I've been mentioning is another level where we can step up and make solution an easy adoption for the customer. We also support emerging markets, but the momentum market is clearly where we put the focus. And we are a small team, so we need to be dedicated and loyal to those markets. So I would say the emerging use cases like in this quarter, we haven't spent time. We are following, we are monitoring, but we are not spending resources on this now because we need to focus on all the opportunities we have in the momentum markets. But when we do development, when we do planning for the future, we do keep the needs we think will emerge in the emerging use cases in mind so that when we say 5 or 10 years from now, we will see that we have a portfolio which also will kind of serve that market. But today, we don't spend a lot of time on it. I think the key for a company like poLight in the phase we are is to don't take too much -- or should I say, don't address too much focus is key. Starting to be a busy slide. And the latest one is the IData. So in all the key market segments, which I've been calling the momentum markets, we have references and more will come. Let's go into the consumer market segment. Yes, as I said, clearly, AR/MR has been the main activity clearly. I would say that when it comes to the advanced AR glasses, it's still a market in -- which needs to mature. But we do see that what they call smart glasses or AI glasses is really building quite some momentum. You know the players as good as me and you can see they are ramping up and they actually have no problem. None of the key players have problem to supply because they were surprised by the demand. Also, the MR mixed reality market is significant. So they -- today, however, they are using fixed focus, except those we have in the enterprise AR/MR market. But as I said last quarter, we are close to our customer and we do see the need for AF. I had a meeting with one of the big player a couple of months ago and I tried to convince him that he needs to plan with AF. And he was telling me, Oyvind, we know, and we probably know better than you. And the answer is yes. So this is coming. This is coming. I think it will come with some of the major guys and then the other will be also moving after. Just the fact that the design of the cameras, the compactness, the specification drives for AF to have a proper camera. And then you have the use cases, AI reading menu, reading a business call, reading whatever, a QR code, then you have all the AI use cases, which also will trigger that need. So we are quite convinced that it will happen. But there will be a mixed bag. There will be some with or some without because there is a cost issue or there is a cost penalty for having a more advanced camera. But at least the signals we get and also mind you, when Q Tech is doing such an investment, one of the key strategic market for Q Tech is AR/MR. So in a way, it's -- for you as an investor, it's a validation. It's a huge validation. They are sitting with big customers every day. They understand what they want to do and they invest in poLight. It's a big validation. Also, what is encouraging to see is that as you have seen, there are many PoCs. Some are moving very slow, some are moving faster. Some of those, which has been there for a while, is now, would say, progressing towards something more than PoC, okay? I mentioned this Tier 1 OEM, which you referred to on the press release of 15th of April. It's -- when they see that Q Tech and poLight established this partnership, their commitment was this, that now they are starting programs, not for studying technology, but for making camera platform for their product portfolio. So that's one example. There are other examples where we are on the way transferring from PoC, advanced PoC into real products. I think that -- I think we need to be aware that this is not something which would come super quick, but it will come. We don't control that tempo, of course. It's -- they are extremely thorough, extremely thorough when they first go in with this kind of new technology, they want to make sure that everything is good, that you as a user would like to buy not only 1, but 2 for you and your son and your daughter, maybe 3. So they are extremely thorough and they are driving us crazy in all the things they would like to explore and test and finding new problems we need to solve together. So it's not something like easy thing. But we have made the fundament, extremely good fundament when big customer is telling us, you are the guys, you have the technology. But step- by-step, they go and those steps we don't control. So nothing we're waking up tomorrow with a lot of design wins in the AR/MR market, no. But -- and I said many, many times, it will take time, but I'm getting more and more sure that it come and we will be there. In addition to the AR/MR market, we do see some extremely interesting -- I said it before, but I repeat it and now we are actually moving to real, how should I say, execution on technology and development and PoCs with major players in the laptop area. That is, in a way, you can call it AR market. There are different way to describe the AR market, but certainly, the more advanced AR market is still to come. Technology need to mature. Laptop is a market which is there, a huge market. We buy laptops every day in a way, at least I do every year. And so this is something -- a market which is there. So if we can qualify us and if there is really a use case in the laptop market, that is something extremely important, adding to the bigger context in the consumer market for us. Webcam, the same, more activity we see now on the laptop compared to webcam, but we also see traces of interest in the webcam side. And then, of course, smartphone and smartwatch. I said, again, smartphone is difficult at the moment. We have a fantastic reference through the MEIZU. It's difficult to scale because of the cost of that new solution. I think the cooperation with Q Tech can be important here. One of the reasons why the selfie camera with TLens is expensive is due to the manufacturing process. Q Tech is, in my view, an extremely innovative players in manufacturing. They even develop their own devices and machines. They have very smart guys on the algorithm side. So I think that the way they potentially can integrate TLens and the processes they are using to integrate TLens as an add-in solution, which is needed, can change this game. But at the moment, it's difficult because of the cost sensitivity and that VCM is so installed. But not to be forgotten. And the same with the smartwatch. We had a very interesting case, smartwatch with a big player. And -- but that is kind of concluded for now as a PoC. But I think that -- to be honest, I don't understand why these kind of advanced watches like, say, using Apple iWatch. I can't understand why that doesn't have a camera. This is -- I have a big phone. I will leave that. I will go from my jogging, leave the phone home. I have my camera here, my phone, everything and I should also have a camera. I can't understand. But I am quite confident that sooner or later, these kind of wearables will also need a small compact camera. And then it's an evolution that they also sooner or later will need AR. So this is my -- I said that from day 1 when we got Xiaomi and [ Sun ] design win and I'm still convinced that that has to happen. Okay. Yes, you can see the status there. One, I would say, disappointing thing in this market is that this LBS program, laser beam steering program, which has been a design-in for some time, I've decided to take away. I've been communicating that program that the customer is waiting for a lead customer. They are still waiting for a lead customer. They are still promoting the solution. But when I don't see any clear evidence of empty plans, I feel it's most the most, what should I say, correct thing for me to do is to remove it from design-in. It doesn't mean that we are not in the concept. We are in the concept. We are instrumental for the concept actually. It doesn't mean that the customer has stopped kind of demoing the system, basically mean my judgment of what I believe today. Of course, it will be more bullish to keep it there, but I like to be balanced. That's why I took it away. Yes. As you can see here, PoCs, 21 PoCs, 19 related to AR/MR. And in the report, you will find the split between TLens and TWedge. 23 planning PoC, 16 related to AR/MR. Yes, I think we have mentioned most of this. Yes, TWedge. It's a little bit confusing, to be honest, because we have a technology platform which we -- I think we can say we're engaging with nearly all major guys. And we're getting significant POs and we'll continue to get to -- for them to qualify and test and understand. The confusing thing I feel is that every meeting, every dialogue we have with these customers, we learn new things, meaning that it's today difficult to say what is the spec of a TWedge product. How does it fit into the system solution at the customer? It's difficult. There are so many things we learn every day. So I'm still there that I think we should continue developing the technology platform. Don't rush, don't rush it. The worst thing we can do now is to throw millions into a product development and mass production scheme and come out with something, well, by the way, I would like to have that change and this change. So I think we need to move on. I think we need to develop more, move to the next level of technical samples, which has started to be quite advance. We are now progressing towards TS5, TS5, technical sample, fifth version. We have customers lining up to buy that. But kicking off a real product and understanding today when we go into mass production with TWedge, I don't know. The only thing I know, I feel very, very strong about it, it will happen. But we need to be careful how we -- that we end up with a product which is a market -- fit with the market. But it's interesting because this kind of technical samples, it's learning us, it's getting us income, which partly finance the investment we do. But we are -- in the balance sheet as an example, which my CFO is hammering me all the time, there's nothing about TWedge. Everything is expensed. Everything is expensed, very clean balance sheet. So -- and also, it's interesting to see all this started by resolution enhancement. Like microLED, very difficult trade-off between brightness in the display and resolution. We say -- we said at that point of time, guys, you take care of the brightness, we will fix the resolution. But what we see now, not only for microLED, but for LCOS and others, there are different needs. There are different pain points and maybe the resolution is not the biggest pain point. And we have seen demos at the big names, which has integrated TRED into their system, which is impressive what they can solve. And what's also impressive that each of the big names we are talking to and we're talking to all the big names, all the big names is using this now. And they're saying to us different things. We would like this to be used for that. We would like it to be used for that. So it's an amazing -- resolution is only a small part of it. Yes. Here you see the status there. And here, this graph -- this slide shows you only AR/MR, but includes also the consumer part. And you can see those icons which is labeled with C is consumer, a significant part of it. Yes, we already mentioned this. To start with the newest, IData, very innovative company, releasing in one go 5 products using TLens. They placed a preparation PO, a small PO, 200,000 was it. Yesterday, we arrived -- we got another 400,000 PO. So step-by-step, building the platform. There will be more news flow this year, I'm sure, in the barcode market. I'm very interesting to see how this M12 can fly. The feedback we have from the customer, we are working together with [ Cellnex ] and the feedback we have from customers is that there's a good interest in this. So I think this can quickly be a trigger for a different revenue level in this segment. Yes. Busy activity. As I said, we expect more to come this year from design-in to moving up to design win. Health care, not really any, I would say, nothing to report this quarter. There are 2 things I would like to mention though, which maybe is not on the slide even, is that there is -- in Asia, there seems to be more commercial interest in endoscope using AF than rest of the world. We don't quite understand why. Another interesting observation is that when we look into the image sensor road map, which is an important kind of thing for us to understand, we do see now some signs of going from a 2-mega sensor to a 5-mega sensor. Remember, we have been involved in several cases and it has stopped up because of they are seeing that 2-mega sensor doesn't really need an AF. It doesn't make sense. Some of the programs we had -- you remember that you had this big program with this huge sterile endoscope device, which doctors are using when they're operating. This is a big company. They plan to use a 5-mega. But during the process, they stayed with the 2-mega, so they need this a bit. Now looking into the road map, which we have seen on the image sensor side, there are actually traces of 5-mega sensor coming out. That could potentially change everything. So even though there's nothing there today, as I said in the beginning, but we need to keep an eye on it because we have a fantastic solution for that market when the market is there. Another interesting thing is that this MINI 2P market is there, not big, but very profitable, extremely profitable. And we also see now that one of the customer is planning to place a repeat order on this new revision of the MINI 2P, having a broader spectrum. So there will be coming something there. Again, nothing to report in automotive. Doesn't mean that it will not come. At the moment, not the focus. Yes. So sum up, design win, 33 as before, design-in 4, up from 2. Completed PoC, 127, up from 124; ongoing PoC, 54, up from 47 and planning is still at 55. Good activity. Yes, here you can see Oyvind [indiscernible] plot, step-by-step, more activity. So Joakim, financial review.

Thank you. So we are looking -- if we start with the P&L, we have a revenue in the quarter of NOK 3 million, which is slightly lower than last year Q2. But if we look at the year-to-date numbers, we are a bit ahead of last year, which was a few hundred thousand ahead of last year. So it's sort of going at the same pace. There's -- the gross margin in the quarter is slightly negative, which is mainly due to the change in the obsolescence provision, which is quite high in the quarter. And the reason why it's high in Q2 is that historically, we have bought inventory. We bought wafers. So that's a trigger point where we do the time-based obsolescence provision that we've talked about before. So that's the reason why it's higher this quarter and will be every second quarter. That's to be expected. The EBITDA was negative of NOK 29.5 million, which is NOK 8 million -- about NOK 8 million more than last year same period. And this is mainly due to a higher OpEx, particularly in the R&D department. We've seen traction in the R&D. So it's more external expenses, also more time spent internally in R&D. Also, the inventory obsolescence provision is higher than it was. Then if we turn our eyes to the balance sheet. The one thing that sticks out the most is, of course, the cash position, which was improved in the quarter with the private placement from Q Tech. And I also want to point out that the subsequent offering, the repair offering is not included in these numbers since that was closed early July. So that will come -- be recognized in Q3. And then we have an inventory of NOK 56 million or NOK 57 million, which has been written down about NOK 6 million during the year and NOK 3 million during the quarter, mostly due to the provision for obsolescence, but also because of goods sold. So we took that out of the inventory. If we look at the cash flow development, again, the most important event in the quarter is the cash inflow from the private placement, leaving us with a cash position of more than NOK 270 million at the end of Q2. If we look at the cash used in operating activities, we have about NOK 24 million in cash used. Again, this is mainly due to the increased OpEx that was referred to in the P&L and a slight change in the working capital, increase in working capital of about NOK 1 million. So yes, that's it for the financials. And I will refer back to Oyvind to close the presentation.

Thank you, Joakim. Yes. So a concluding outlook summary. And then after that, we will take the Q&A. As mentioned, the Q Tech investment agreement has been positively received. And as I said, this top-tier consumer OEM in U.S., which was a direct trigger for this to happen has now kind of delivered and starting program, which is super important, extremely important. Several customers which we meet have said this removed many of our pain points. Yesterday, it said. Today, it will be said. And every meeting we have, this is clearly something they see extremely positive. There is some kind of, what should I say, not fear, but question marks from other camera module companies, you can imagine, saying, as an example, this top tier consumer which is backing the investment told me a few days ago that one of the big camera module guys was concerned that we will not support them if this company would like to use because that consumer OEM will not only use one camera module guy, he will use more. And one of them talked to the OEM and was expressing, yes, but will poLight support us? Of course we will support them. We will support all camera module guys. After all, it's not the camera module guy who decide what spec the camera should have, it's the OEM. So if the OEMs would like to use whatever camera module guy, we need to be professional and support them, of course. No doubt that us being -- having Q Tech as the biggest shareholder, no doubt that that is -- means that we are doing many things together and we are working very close together. But it doesn't mean that we don't work with others and support others, that we are extremely clear and important to communicate that to the market. We support everybody and we do what the OEM would like to do. But you can say the fact that as I mentioned last quarter, the ecosystem is like this. On the camera module side in the beginning they were, I would say, contract manufacturers assembling a camera module specified by the OEM. That is a tough business to be in, very low margin. So what you're seeing over time is that more and more the camera module guy is trying to be vertically integrated. So they're expanding. They want to go into lens stack, they want to have their own lens stack, they want to have their own actuation, AF technology et cetera, et cetera, so that they have more value to the business instead of kind of buying actuation, buying lens stack and just assemble, they actually have technology themselves. This means that many of the camera model guys have AF technology in-house and of course they would prefer to use that instead of buying TLens. Luckily it's not them deciding, it's the OEM. But still there will always be some kind of, call it resistance there. Having Q Tech as an investor in poLight and they are of course highly intensified to make poLight a success, it means that suddenly overnight we have a friend in the ecosystem. So which have really a lot of enthusiasm to exactly promote TLens camera modules. And not only their own whatever VCM solution which they have, Q Tech acquired recently, [ TDK's ] VCM activity, but they also have TLens. So in a way we suddenly have a completely different dynamic, as before that investment. This is key and this is why we have been trying for years to find that strategic partner. Know we have a good friend in the ecosystem. But I think it's correct also to say, given how I explained how the ecosystem works, that of course this investment will not change our market position completely overnight, because it is the OEM who dictates. Even Q Tech cannot tell the OEMs what to do. Q Tech has to do what the OEMs want to do. So it doesn't change things overnight. But it does help a lot, definitely. So given what I've said, given the market position we are in, given that we have very important references in all key markets, given that we have still big markets to explore, what I call the emerging markets, the initiatives we have ongoing to improve ourselves and our offering is, I think it's becoming more and more evident that this company will sooner or later become a success. Thank you. Okay. Should we do Q&A? Let me just pick up some water. Is there a few questions, Joakim?

We have some questions, as we usually do. We could start with the questions that have come in during the presentation. So there's one question here about the patent infringement that we mentioned. We state that it was sold commercially, which indicates that there was an infringement. But in the previous quarterly presentation you firmly stated there is no infringement. Please elaborate to close this uncertainty once and for all. What was the problem? Is it TLens? Did poLight or the accused pay the compensation?

No. So there was no infringement. We, our advisors, is extremely clear about that. There happens to be that this particular country called U.S. and Texas in specific, has a system where you can be relatively unfairly attacked in a way. And the cost of going a legal process is extremely expensive. You can believe as much as you believe in that you are not guilty and we are not. But the cost of proving that in dollars is extreme. That's why we took a commercial approach guided by our advisors to settle commercially. That's it.

Good. Can you say anything about what kind of product the mentioned enterprise design-in is that is supposed to be released in the second half of this year?

Not yet, sorry.

That's quick. If possible, could you give some new examples on TWedge solutions that you haven't mentioned before? You did mention quite a few.

Yes. No, it's -- I'd say one thing which we are hearing is this motion blur that when you do have motions, there is a blur which we are fixing, fill factor in the pixels, that pixel. Yes, it's several things, but I think those are definitely important.

In April you said we have been working with this OEM for many years, qualifying our technology. So this is referring to the press release on the 15th April. What is the difference between the technology qualification referred to in April compared to the qualification program referred to yesterday with the same OEM?

Okay. Good question. So typically when a customer, typically the bigger customer are more structured and more thorough than the smaller ones. But -- so they start what they call -- of course they do a desktop screening of technology and then they select what they would like to test and try. Then they initiate what they call typically -- somebody call it PUC, somebody call it NTI, new technology introduction. And then after having done that, they go more into the face of the -- they call it more the product, product focus, say, call it, say new product introduction. You start with a technology introduction and then when you understand the technology, you move into a product introduction. So there are different stages. What we have been going through with this particular OEM is years of technology study, the technology introduction. They want to introduce new technology. Then this is the R&D guys, of course, based on needs which has been expressed from the product team, they are starting to investigate technologies. If you pass that and they see, yes, this technology we believe, this technology we feel is the best, then they are turning around to the product managers who's specing the product and say, yes, guys, now we have this technology. Here is the demo. We took the last release of whatever, put it into this prototype, try it, do you like it? And then the product, I say, no, no, yes, but yes, but it's too expensive, so leave it. So what it means now that this particular customer has moved from technology study, has kind of convinced the product manager who's designing the product spec in the product that, yes, this technology good, let's move into new product introduction. So what this program is about is about a new product introduction. A big step in the right direction. Okay. Yes.

Another question about the new enterprise design-in mentioned today from a sort of different angle which might become a design win in 2025. Is this a new OEM customer for poLight and can you say which market?

Sorry, is this related to the same press release?

No, it's related to the design-in that we mentioned today. The enterprise design-in.

That's a new customer.

That's a new customer. Can we also say which market segment?

I would say the professional market.

Under AR/MR, you said that all the big names are using TLens now in testing. Is this the big names in consumer market that everyone has heard of, not only people who is into tech?

Did I say that on TLens or TWedge? But anyway...

Care about the TWedge at least?

Yes. So when I say that -- when I say all -- most and all of the big names is typically the names you would have heard, yes.

And some you haven't.

Some we haven't, of course. Yes, but...

Given that TLens reaches mass production, what are reasonable assumptions regarding future unit sales price and contribution margin for TLens?

Good question. And we don't know is the clear answer or honest answer. But of course we have some assumptions. If you look at a price point and we said this before, the price point today of TLens, how we see the world, is that enterprise professional market low volume $10 plus/minus, quite high. If you go into the more the consumer world, take the MEIZU-type devices, you are typically in say factor 4 or 5 less compared to that enterprise market. I think that when we are ramping up in high volume, we need to prepare to be into dollar below. VCM is selling for $0.2. I don't think we're going to go there, but we need to be -- definitely when volume increase, we need to be ready to be a $1 minus. Yes. I didn't talk about TWedge.

And then another related to the patent infringement. When do you expect a design-in or design win from the player involved in the patent infringement after it's now reported as resolved?

No, but that's an existing customer, already in and we just got a new PO from that customer.

Meta Ray-Ban smart glasses translate restaurant menus, scan QR codes and detect objects using fixed focus. Based on your mentioned discussions with OEM customers, do you have use cases of when AI needs AF?

I think we answered that in the presentation, I feel, yes.

You say TWedge does not only improve resolution but could also be a solution to other pain points. Do you have some examples of these pain points?

I addressed that, yes.

And one -- this is a question for me. Is the obsolescence only a write-off or are you also scrapping the goods, meaning it cannot be used or sold? So technically what we can do is both. But in all essence what we do is a write-off based on age. And our inventory is in all the majority are in -- or the massive majority of our inventory is wafers. So it's the age of the wafer, which means that we have to, according to IFRS, we have to write off the value over years. But of course, in the inventory ops lessons, there can also be write-offs related -- we've described this in the quarterly report, there can also be write-offs due to -- if there are any technical issues. So that doesn't necessarily mean we're scrapping the goods, but it means that there is doubt as to which customers that can be sold to and at what value. And then we can't keep it at the value that it is in the books. It doesn't mean we're scrapping it. So there's a bit of both. But in all -- the majority of the obsolescence provision is based on age. The vast majority. Okay. So...

Are there more questions?

Those are -- then we can look at the questions related -- that came in before the quarter.

Oh, yes. Okay.

In the last weeks, several leaders of big tech companies have commented on their excitement and ambitions in the personal glasses category. Mr. Zuckerberg of Meta said on the 30th July that Meta's future vision is super intelligence and personal glasses. How do you feel about poLight's position in this huge industry when it comes to developing the personal glasses of the future?

I think we are right up, as I said in my presentation. I think as I also referred to this customer yesterday, I think we are really, really well positioned. I think we are the company in the AF space which is best positioned. Will we be alone? No, but we are very well positioned.

And this is a question...

I think it goes a little bit without saying when customer like Q Tech, which has been triggered by a big tier U.S. OEM is doing all this, starting programs, it says everything. Then of course we have to execute. We have to execute, which is not given, but we have to focus on execution now, more and more.

We have a question. We've talked about this quite a lot, but there's an opportunity here for you to see if there's more to say. For Q Tech as a major investor, poLight's success will be Q Tech success. With Q Tech's huge connections in the industry, can they help promote poLight to new potential customers?

It's so right, it's 110% correct what you're saying and we just see now that we are being -- Q Tech being Q Tech are obviously having a big -- they're big company and they have relationship on top level on all the big names. And what's happening now and typically when we are coming, we are very often being pushed into the R&D guys and if you're lucky we meet later when we are qualified, we meet the product guys. But it's more difficult for us to kind of access the top level because of the size and who we are. What we see now is that when Roy is having top management meeting, Roy is the Chairman and the biggest investor in Q Tech, he invites us and he talks about and he lets us present, he talks about us and his capability to use our technology of course is a big difference. It's a game changer.

Now this is a bit of a personal question for you, Oyvind. Being CEO at this time in poLight's history, what excites you the most going forward?

It's what I see coming. I've been now for 11 years. I've never seen things so clear.

Good. Has a formal contract been signed with the U.S. top -- U.S. Tier one consumer OEM who encouraged Q Tech to invest?

The contract, the PO/contract is coming through the camera model guy through our distributor in China.

Has the collaboration with Q Tech already resulted in initiated projects with new customers?

Yes.

Is Q Tech planning to incorporate TLens into any of their standard products?

Very good question. I'm talking about that we would like to -- like the M12, we would like to move up in the value chain. We would like to be a standard solution which is easy for customer to use. I hope that we also in the partnership with Q Tech can make standard camera module which can be offered to the market. Very often what you see, the big ones, they don't use off-the-shelf camera module because they have so many technology guys who would like to have this spec and that spec. So it always ends up with a particular camera with a particular spec. But a massive market with company which is smaller which cannot have that luxury of specing their own things because they're too costly, that market could be addressed very effectively with an OTS camera, off-the-shelf and hopefully with the -- our friends in Q Tech now, that process can move.

Then a few segment-specific questions for the AR segment. Are there any design-ins or PoCs that you can tell us a little more about that might be of particular interest to us shareholders?

Not more than I've said, but what I'm saying is that there are a few one which now is moving from advanced PoC to very advanced PoC and even getting close to design-ins. And we are working very hard to materialize that. There are a few which is in that stage which I've already kind of indirectly talked about.

The PO that recently came in for the very exciting project with the consumer top tier OEM. It must be referring to the one sent 2 days ago. Can you say anything about whether this is AR or MR or something else?

AR.

Can you say anything about the potential for volume if this project is a success and whether it's camera-related or for other applications?

Sorry, can you repeat that, Joakim?

Can you say something about the potential for volume if this project is a success?

Oh, yes. I think it's difficult to say. It's still some time ahead of us. The market needs to -- it's impossible to see how market will react. So I can't commit. I think typically these advanced AR glasses will start with relatively low volume before it takes off. But I don't know.

I'm not sure if you can make -- well, can you say something about whether it's camera-related or for other applications...

Camera. Camera. Camera.

Then moving on. The Vuzix Shield is still on sale and it is getting a lot of praise from [ Sanda Glasses ], among others. How are you working with Vuzix in terms of future products or projects?

Yes, we are -- I recently had a meeting with the CEO and he is extremely positive. He's repeating what he's telling me many, many times. You guys will be very important for this market. I think this is -- Vuzix, of course, is a smaller player. I think they will be a very good example that they cannot spec their camera. They need the -- this is a very interesting case for off-the-shelf camera. So I think that we need to be -- if we get into this off-the-shelf camera or this standard cameras from some platform guys, then we are there. But they will not be capable of doing their own camera. So we need to be in the standard camera suite.

Then part of this question has been answered, but there's a separate part. How are the TWedge projects you are involved in going? But also is there a possibility of seeing the TWedge TS4 prototype in a demo video?

You know, we talked about that the other day and it's super difficult to make a video of the video. In a way that is very difficult to -- so I think that what we can do when we have the TS5 up and running and have a good demo and we are talking about having a Capital Market Day that we could invite everybody to see the demo there, I think that would be the best.

How do you feel about the development and interest in TLens and AR/MR glasses is coming from China?

Sorry?

How do you feel about the development and interest in TLens and AR/MR glasses coming from China?

No, no, it's a very good interest. I think there's no doubt that the innovation in this segment has been happening in the U.S. very bay-oriented. But you can see now and you could see from the CES 2025 and I'm sure you will see even more in 2026 is that the Chinese player is starting to be very active, very active, very active. So that's coming definitely. I met one of the key OEMs in China at CES and he told me, you know, even all the major OEMs in China will move into this market and if you don't believe, if they don't follow the trend of -- on the camera spec and the need for AF, that would be a huge market.

Then moving on from AR/MR. Well, you've covered this. How are things going with smartwatches and webcams?

Yes. Yes. Yes.

We've discussed that. Smartphones were reported to be moving a bit in Q1. How is the contact with this area now?

It is there. As I said in the presentation, I think the opportunity may be different now with relationship to Q Tech and their ability to manufacture cost efficiently add in designs. So -- but I would also like to kind of say that it's a super difficult market and the VCM is extremely established. But the market do say that, yes, you have a very good solution, but it's too expensive. So if we can cost optimize it so that it's less more expensive, I think there is an opportunity. So we shouldn't give it up. But I would also like to say that it's not something we have a lot of activity on today, but it's something we are discussing with Q Tech.

Okay. So how about competition regarding the TLens, is it increasing? Are there any new players? Are there any incumbents improving their alternatives or alternatively cutting their prices to...

Yes, I mean -- yes, good question. I think you can say VCM, when you're selling a VCM for $20, it's really, really aggressive. When I started in this industry, they were selling for a $1 plus at least, $2 for high VCM. So it's a -- the VCM is an industry, it's huge industry and of course not all the VCMs are selling for that cheap because there are more expensive VCMs. But I think we need to see, we need to find the sweet spots where we are a better fit sort of because we can't today compete on that price level and that's the better fit we have found in the AI market. Other competitors, I highly respect for competition and I never talk bad about competition and we have other tunable optics company. I would say that in the AR/MR space, I do feel that because small speed, low power consumption and of course I talk to my competition, I have meetings with my competition and we compare notes and we kind of silently agree that, yes, maybe TLens is the best for that kind of application. But then they are better for other applications, for bigger aperture sizes, for more optical power. So it depends what you want. But I highly, highly respect competition and I think competition is important. When I talk to the OEMs, one of the pain points which is not removed after the Q Tech investment is that you are single-sourced. Yes, but I'm nice. Yes, but that's not enough.

And speaking of single-sourced, the next question is related to the Q Tech TLens production line. When do you expect it to start ramping up volume and production and what's the status of it right now?

Quite good progress there. We have consigned a final test machine which is on its way to be operational. I think they have done all assembly steps already. There are different assembly steps, as you know from the video we've showed you. So I hope that we will be together with the Tier 1 OEM in a Q Tech line maybe September, October this year already going quite well. Then of course we need to do a qualification which in a way we will be highly involved in. We're going to produce something at Tongxing, we're going to produce something at Q Tech. We're going to compare, understand the differences, do the testing. So -- and this is a little bit back to this qualification program. This is an element of it, of course.

Does the top tier OEM you just received the PO from also consider using TWedge? And if so is that in the same product?

You're asking so many interesting questions. Yes, that's absolutely possible. And yes, they are also engaged in TWedge.

Could you comment on the progress and status of the large aperture TLens typical specs? When can samples be ready for customer development and evaluation? Is there customer interest? Is it ready for rolling [indiscernible]?

This is a very difficult program and we have done a lot and we are prototyping and we are testing and simulating. I think it's -- I think we are far from a product there, far from a product. Still a technology program. Again, nothing is in the balance sheet, everything is expensed. So R&D. Will it be a product out of that? It depends. As I think I say in my quarterly report, if that product, we need first to understand what spec can we achieve, what optical power can we achieve, what mechanical dimension can we achieve, what wavefront level can we achieve, et cetera, et cetera, et cetera. So this is not fully understood. We are simulating and building different concepts. What I can say I think is more promising in the direction of the enterprise than the consumer. So too early to say, but it's a difficult program, but we learn a lot.

There's a follow-up to that question. Are you focusing on the large aperture only for and together with specific customers or would you also develop a more general generic version?

No, no. I would say today it's not the product development, it's a generic technology platform.

Okay. We have a few more questions. How does TWedge compare to TLens regarding need for robustness, lifetime cycles, yes, thermal drift, how have you managed to cope with these possible challenges?

Yes, it's a good question and it's a little bit premature to answer in a good way. TWedge is a completely different non-wafer-based product as of today. So many of the wafer-related challenges will not be there. On the other hand, there are more assembly, more parts which needs to be assembled and be assembled robustly. So I think drop test will be challenging, but hopefully solvable. And we've already done some drop testing and reliability testing preliminary. We see it as clearly possible, but it's also clearly challenging, yes. But as I said technology program, we can't focus on everything in this phase. We need to focus on the fundamental now and then we need to see how we can solve those challenges. Remember, in the early days of TLens when we started to -- we thought we had a solution and then we started to test and dropping and humidity and we had 1.5, 2-years extra more to do, remember. So hopefully that will not happen again because we have learned more. But it's a tough program and it's premature to answer these questions.

A couple of more elements concerning the TWedge -- competition regarding TWedge, have you noticed anyone else using the same idea to enhance resolution?

They are flying around some patent application which I'm being informed about, but not really. What we said before to that, I think the -- maybe this is a little bit arrogant to say, but I think the biggest competition is not using evaporation, meaning avoid it. So I think we haven't really seen any kind of TWedge competitor as such, which we believe strongly in. But not using it is of course a competition in a way.

There's another question, might be a bit premature, but are Q Tech considering the same approach with TWedge as with TLens?

I'm not sure what we mean with that question, same approach.

I'd guess assembly, but we're not in the assembly.

Oh, yes, that's premature. That's premature.

But they have interest in TWedge.

Definitely interest in TWedge. Yes. Correct.

Would you approach other market segments, for example, automotive and robotics more actively in the near future? Or will you do first things first and are you approached from these markets?

First thing first as I said in my presentation.

So in the qualification program, there's a lot of interest to our latest press release. Congratulations on that. You do mention further milestones need to be passed. Can you elaborate on time span we can expect when it comes to potential design win and also what kind of product it is put there? Yes.

I think we answered partly already, but in a way. So we are now moving from a new technology investigation to -- and they say, okay, yes, we like the technology. Q Tech has invested in you, so we move on to product focus. So no, but still they haven't seen a camera from Q Tech with TLens yet. So of course they need to see what performance that it will give them. So that's what they need to know, understand and will that fit into the products in a good way mechanically spec-wise. So this is what they know is that those are the milestone I'm referring to. When? Impossible for me to say, but it's typically they're using, they're using quite some time to do these processes. So it's nothing going to happen this year, it's nothing maybe even happen next year, so -- but maybe it's a '27 program. We don't know. But as I said before, this market is still a few years ahead of us.

With the LBS case removed from the design-in success in bigger projects seem to be more or less riding on this referring to the previous...

I have to say I disagree strongly on. This one he is referring to is definitely important. It's a major player and it will give us a lot of credibility and lot of volumes. But are many, many others we are working with and hopefully you will see traces of that. Yes.

In both Q1 and Q2 report, you state that when it comes to smart glasses, market engagement indicates that trends in camera specifications and use cases will likely trigger the need for autofocus. A) How is this trend progressing? And b), when do you see this shift happen?

Yes, I think we partly have answered it. I think that the customers, some customers are convinced it will need an AF and some customer are less convinced. So that's the world. Referring to the -- as I said, referring to that big consumer OEM who was triggering point for the investment agreement which now has moved on with programs, I guess is what you say, the proof of the pudding is eating. So now they're eating the pudding and they like it. And when you're talking about more the most advanced guys in the world saying that this we need and when I try to convince this guy and he say, Oyvind, you can stop, I know, I know better than you, we need, then I don't see what more I can say. It's clearly coming, but there will be players who will not do it because they are selling on cost and you're supposed to be cheap. But I'm sure there will be -- and there will be both. There will be with or without.

Quite a detailed question. Consumer-related PoCs. How many would be defined as smart glasses and how many would as more advanced AR/MR glasses?

That's a hard one. That's really a hard one. And the definition in the market is changing every quarter. Refer to smart glasses now with AR glasses. Refer to smart glasses without display. Now suddenly they're talking also having display and smart glasses and that smart glasses becomes an AR glasses. I think in the end of the day, it will converge to an AR glass. But today it's like smart glass without display may be coming smart glass with display, may be coming a very advanced AR. But I think sooner or later it will kind of converge to something similar with different specs. That's a good question, but it's difficult to answer very correctly.

Couple of quarters back you showed an animation to illustrate the difference between fixed focus and autofocus and smart glasses. To what extent does OEMs relate to the same pain that you're describing?

No, no. As I said, some see the need, some don't see the need.

Just a few more questions now. The phrase next phase project discussions has also been used in 2 successive reports. Does this include several design-ins with different OEMs and is it possible to provide any time frame?

I have to give credit to the way you're trying to get information out of me coming from all angles. I appreciate it and I appreciate really, really, really the questions. But I would say that what I'm saying now there are a few PoCs which is now getting very mature and approaching if we deliver on this now in this time and we are sitting and discussing, not the technology, but we're sitting discussing now with a few product intersection. When can we take you into product? And this is maturing quarter-by-quarter and I have a few particular cases in mind, very interesting cases. So yes, so that's what I can say.

Yes, let's not say anymore. This is an interesting question. You are mentioning some OEMs prefer lead-free TLens. How major is the issue and how complex is it to resolve?

Yes, good question. Yes, a lead-free solution is something which some big names are wanting and they are the direct reason why we have -- one of the reasons why we have now started a lead-free program, expensive program with [ ST and IME ]. Another reason is that ST as a big player in this market, they are investing heavily in lead-free because they see that coming. So how difficult is it? We don't know. This year we will receive samples as we speak. The time plan for that is the first samples will be hopefully seen in Q4 this year actually. We are keeping a big OEM in the loop, informing them about status. I'm so close to saying too much.

Yes, let's move on.

Yes, and that is -- that looks very promising and I think that will -- if we are successful it will open huge opportunities for us. And I think that -- now I'm speculating, now I'm moving from fact to speculation. I think that there will be other who also will take this kind of philosophy of having a lead-free, lead-free kind of products completely like a green, green wave coming. So -- but the TLens today which using PCT which have some lead which is clearly within kind of the rules and regulations is going to have a long life still. Many doesn't care about it at all. We will keep shipping that, but to grow and expand our opportunity, I think lead-free is important and hopefully then everything can converge to lead-free. But that's a little bit early to talk about, but that's the aim.

And here's a question for someone who's been counting your tables on PoCs.

Oh, yes. Okay.

So in Q4 2024, you listed a smartwatch among PoCs. In Q1, the term accessory has gone from 1 to 2 and smartwatch is gone from the list. I assume that you have now sorted smartwatch under accessories.

No, I don't think so. And no, these are impressive details, but I think that smartwatch case he is mentioning is probably under completed PoC.

Then we have...

Are you going to kill me or...

No, we have one more question. I think I can answer this, so you can have a drink of water. When can -- and we've had this question before, but it's good that it comes up and we can answer it. When can investors expect that poLight finally becomes profitable? In 2021, 2025 was stated as the year that poLight was a completely different company and this is proved correct. However, the financial situation is still not secured. Considering that high volume orders still are some time away, how will this change in the next years? And what we've said before and what still goes is that profitability will not come until we have high volumes. That would demand a radical change in the company. And that is not the direction we're going. That is not the strategy. The strategy is to achieve high volumes and we are clearly taking steps to get there. But as we've stated quite a few times, it takes time to get there, which is why we are very happy to have secured a good strategic shareholder in Q Tech. And the private placement and subsequent offering that we had this year places us in a position where we can keep developing the company and keep being present for the market opportunities for quite some time still. And that concludes it. I'd just like to say that we get lots of questions in, some by e-mail and some through the portal and some might seem like they're asking that we're not giving enough information. But I'll just close with this statement. Having followed poLight for over 10 years, please let me express my gratitude to you and the whole hard working and persistent team for impressive achievements. I think that's a nice sentiment.

Yes, absolutely. Best question today.

Yes. Do you agree?

Yes.

Yes, great.

Okay. That's it. Any question more from the audience? No? I will be amazed if they were possible to have more questions, to be honest. But now Joakim, Joe, set aside, I mean this kind of Q&A session I think is adding a lot to the value of understanding the company. And we are here to answer that, we paid for that, and so that we are really, really appreciating. So thanks for you following us through the webcast. Thanks for you coming all the way to Oslo, joining us here. And see you next time. It will be on the October 13 for the Q3. Thank you.