poLight ASA (PLT) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to poLight's fourth quarter presentation. My name is Øyvind Isaksen, I'm the CEO. Together with me today is CFO, Alf Henning Bekkevik; and Chairman of the Board, Grethe Viksaas. So the normal agenda, key events, introduction to poLight for those who are new, a review on specifically focusing on the market side, financial review by the CFO and outlook and Q&A. So quite a busy slide, which I guess is a good sign. It has been extremely busy these days, ending the year in full speed and continuing this year in at least the same speed. So which is good, which is absolutely good. Teledyne launched the 2 megapixel Multi-Focus MIPI Module, that's kind of old news, but that was in the quarter. They are now shipping. We have an extremely high activity on the smartphone side, which led to finally a design-win and first mass production PO. Many have been waiting for that for a long time, including myself. AR, fantastic progress. Magic Leap, finally. Vuzix, finally. I will talk more about this. But also LLVision and XVisio is confirming using TLens for the next generation AR glasses. Magic Leap was launched end of September. And I don't know how many questions I have been asked, which design-win it is and is it a big one, is it a small one, is an American one, and this is the one. We're extremely proud of this, of course. It's a quality stamp for TLens and poLight. We have actually received approximately NOK 2 million plus in POs and the shipping as we speak. This Vuzix is using actually 2 TLenses, one on each side. And it's -- I'll come back to Vuzix, but this is today the least for developers and will be released for market in mid of the year. Same for XVisio and LLVision. We come back to both all these designs. Also at -- we met all these at CES in Las Vegas beginning of the year. Sharp also demonstrated a design of a new camera module using TLens. It's also an add-in camera module and they showed the camera module and they also showed the use case in the VR headset. So quite a busy start to the year, end of the year. For those who are new, global player in tunable optics. Tunable optics is more and more talked about in the market. And I think it will play an important role in many market segments. Been around since 2005, so things takes time. But now we are going into a new era of the development of poLight. It's going to be extremely exciting to see how things develop in the future. We have a strong IP. We're focusing a lot on that. We have 17 worldwide patent families, 9 pending and 3 registered trademarks. We are small 40 people, increasing a little bit quarter-by-quarter. Headquarter in Horten as you know, but employees in Finland, France, U.K., U.S., China, Taiwan and now also Philippines. We recently hired 2 people for the Philippine following our manufacturing assembly partner. Publicly listed, as you know very well as PLT since 2018. Also quickly, just to recap, focus market segments, smartphone, wearable accessories, basically consumer, important for poLight. They are the main opportunities for high volumes. Augmented reality, very important for poLight and extremely good fit for our technology. In the beginning, in the first years, AR will be enterprise professional use case market, meaning relatively low volume, but everybody believes that AR will also be a consumer product, meaning increased volume, high volume. So those 2 segments are extremely important to us. We continue to explore the barcode area. Teledyne is the kind of latest design-win in that area. And there we see more and more customers wanting to use TLens for this kind of application, both barcode reading, machine vision. But it will take time to develop the volumes because then you need to go more into the point of sales where the cost sensitivity is higher. But that's where we are targeting. When it comes to other markets, I would say there are 2 which I've been mentioning before and I will mention it today also, medical and automotive. I will come back to those a little bit later. The good thing about this slide, I'll need to split it into 2 next time. So as you can see, and you have been following us for many years, many of you, and it's not many years ago, a couple of years ago, there was basically nothing. And now we are getting design-wins in all key market areas. We are still lacking the medical, but that is coming. I will come back to that a little bit later. As you can see now in -- on the consumer side, it's, as you know, they recently announced selfie camera smartphone, watches, smartwatches and MAXHUB, the web camera, which is still actually shipping. The smartwatches, they are end of life, so they are not shipping anymore, but MAXHUB is shipping. When it comes to the industrial area, as you can see here now, we disclosed one more of the customer, which is Hikrobot, which is quite a sizable company, which is on the top right icon there. Then we have SuperLead. They're use -- Superlead, they're using us in 3 products now, and Honeywell, as you all know. And the latest one, Teledyne. And then, of course, Magic Leap and more to come. So quite a strong reference list building up. Yes. This is smartphone. There's no doubt that add-in TLens design is showing us so many opportunities. Also, the reference design we have developed by our own is helping OEMs and camera module players to start more quickly to design their own designs. So this is kind of a consumer-related slide, but I will say that the main focus definitely is smartphone, but augmented reality application and webcam, drones are also cases which we are exploring, and there are concrete cases on these area. As I said, smartphone a key and significant part of the company's resources has been dedicated to smartphone. Having said that, the synergy between the different market areas are high, meaning it's more or less the same demand. It's more or less basically the same -- it is the same product, which is used for different market segments. That's why we can, we as small organization, address quite a broad application area. So in the consumer side, the statuses for design-wins, 6 ongoing PoCs and 12 planning PoCs. Of the 6 PoCs, 2 are AR, consumer AR, 3 smartphone and 1 iris. Regarding the first design-win, it's limited what I can say. But what I can say on the right, you can see kind of conceptually the camera module drawing. I can't show any more details. But what I can say, it's a flagship release. It's a high-end phone, very high-end phone, implying it will be low volume. I've always been saying that the first cases for smartphone for poLight will be low volume. You will never be thrown into a huge 1 million, 2 million, 3 million case before they have 2 things; proven technology and also see that we are capable of ramping fast enough. So this is something we have to prove ourselves through the first design-wins. They claim that they're going to achieve the most compact selfie camera in the market, instant and smooth autofocus user experience they say. I myself visited the company, of course, seen the phone, and it looks impressive. The camera module specification is 32 megapixels, a quite high resolution selfie camera. They're using a bare TLens silver premium, aperture size 1.9, inside a fixed focus lens stack. This will be the, they claim, the smallest camera module and pupil size with AF for selfie camera in the market. Status, first mass production PO received and announced. We are already shipping. We have weekly shipments from our factory to customer, and that will be continuing in the coming weeks and months. They are planning a market launch in Q2 '23, so not far away. And we are also in discussion on future new projects with the same customer. And then the proof of the pudding is repeat orders. Extremely exciting development. I will say well deserved. Let's keep on delivering. AR side, yes. Also, I would say, a very good development. As you have noticed, I've -- step-by-step, I've been more and more global about the AR market area. And I think it's fair to say that we do feel still that this technology is extremely good fit for AR. And the key selling points we are addressing, just to repeat that, we enable an ultra-compact size camera module, which is important for small glasses. We have extremely low power consumption. There's nobody even close to that low power consumption spec we have. And if you can imagine, even when the glasses become smaller than this, the battery capacity is very limited. So power consumption is one of the key factors. Fast focusing speed. You are moving, you don't want to have a very slow autofocus capability because we want to see instant things in focus. We have a constant field of view, meaning no [indiscernible] when you change focus in distance. There is no impact on gravity. Moving your head, there's no impact on gravity. And extremely important, they call it athermalization, meaning that camera module, a camera module will autofocus in this application and quickly experience to be out of focus because of temperature variations. So there with TLens in a way, by design, compensate for that, extremely important attribute for these glass suppliers. Use case for TLens camera in AR. Of course, fast sharp focusing on object, text, regardless of distance, where you are. QR/barcode scanning regardless of distance. You're going to -- say you're on a factory floor, you want to scan a QR code, you need to have that super-fast. Hand gesture recognition, all in focus, as we would know well from the smartphone application, and of course, continuous video focus when recording moving objects. 1 design-win, Magic Leap, not a small one. 6 design-ins, 2 of them consumer, has 1 of them Vuzix. And 4 ongoing PoC, 2 of them related to consumer. And 11 planning PoC. Going to keep us busy. Yes, this is CEO at Las Vegas. As we can see, I'm being demonstrated by Magic Leap. They have a huge booth, Magic Leap. We have to sign up for demonstration. We waited for nearly an hour to get access to the demonstration. So very, very popular booth, and many wanted to have them and they had many different kind of places and different use cases they demonstrated. So I was lucky to have a go, and it was -- it's really, really an impressive glass, really, really impressive. Not cheap, but super impressive. And I met with key team members of Magic Leap and they really emphasized a lot how important the TLens is for their functionality. As you can see here, Yole has done a tear down. Yole is a famous company doing market analysis, strategic advice, they're doing tear-down analysis. So -- and they have done a tear down. You can see here on the right side here, that camera to the right and here they have tear it down and they found a poLight logo. So that was relatively obvious, it was poLight. And here, you can see the TLens in the package. This is a package TLens on top of a fixed focus camera. So this is not an add-in, this is an add-on with a package. And then there's an interesting statement here saying that the use of this poLight device is key for the functionality for AR/VR headset, comments Romain Fraux, CEO of Yole SystemPlus. It provides a strong added value for the new wave of AR/VR headset systems, and we didn't pay him. So super encouraging and more to come. So Magic Leap, I'm not going through all the details but for your references and for your information, you can look through it later. But Magic Leap is private founded in 2010. It's the largest funded. It's kind of USD 3.9 billion investment, 1,000-plus employees. And ML2, Magic Leap 2 is seen as the industry's most advanced AR head-mounted display, focus on enterprise and we are in the world-facing camera. Vuzix, this one, actually, they are public. So they are traded in the U.S., founded in 1997. So it's a real -- I met the CEO at Las Vegas. He was super happy with the TLens and other TLens related technology we can offer. They did an IPO in 2009. They are not small, around 115 people. They are actually the industry oldest, first mover of AR OEM focused also on enterprise. So they are, in a way, a serious player, very competent, also impressive demos at Las Vegas. And we were so lucky that we were able to get hold of this, I would say, PVT release, which is for the release to developers for them to prepare themselves to -- with application and so forth. Again, 2 cameras with TLens on both sides. Okay. To the benefit of time, I will not go through the details here, but we also have a set of XVisio headset in headquarter. Those are same AR enterprise, a relatively small player, but still planning to release this AR headset for enterprise customer mid this year. LLVision, a Chinese company, also having a PVT glasses ready, trial shipping to customers, planning to do a mass production release mid this year. Okay. Barcode/Industrial. Teledyne launched 2 megapixel multi-focused MIPI module. This is actually the second generation product using TLens. I would say machine vision manufacturing line application, so small volumes. And this is a little bit, I would say, the story of poLight design-wins in barcode reading is that it is related to machine vision, manufacturing line, logistics, meaning relatively low volumes. All these products are shipping. Why we are not announcing, kind of, progress is because every -- when we get the first PO, that PO is quite high compared to what they need. So say we dictate that they need to order maybe say, 12,000 units as a minimum order quantity for us to have an efficient manufacturing process, whereas they may be only need 2,000, 3,000, 4,000 per year. So that's why you don't, kind of, hear, kind of, a constant news flow because we are, in a way, forcing them to buy quite a lot for a few years' consumption. But all these products are shipping. The opportunity pipeline is increasing. But however, we do work actively now to try to find those opportunities, which is more towards the point of sales, meaning much higher volumes. You can easily get a barcode point-of-sale application, which will sell in quarters like 0.5 million, 1 million. So then it becomes a significant market at a different price, of course. What we're selling now is a few thousand type cases and the prices are very high. I think this will step-by-step build trust in our application -- in our technology for this kind of application. And step-by-step, they -- we are also able to cost reduce when we are ramping more for mass production for smartphone and other cases, we were also be able to reduce the cost of our products, meaning we can be more cost competitive for PDA type barcode reading application. So that is the plan. 5 design-wins, 15 PoCs, 13 barcode/machine vision related. It's a huge pipeline. And 11 planning PoC, 6 of which is barcode. Healthcare. Xenocore, which I know you have as much dialogue with as me, is my understanding from the forum. Met them at Las Vegas, the CEO. Very positive to poLight and our technology. Claim they will now start soon human trials. So TLens into a human body. Isn't that a good slogan? And they do plan a market release in the mid this year. So that would be then the first design-win in medical. Super interesting case. And we can see other coming to us also wanted to start PoCs on -- in the endoscope market. Kavli, the Moser's team in Trondheim has done a lot of good things for poLight when it comes to brand-building. There's been a lot of press around them. I saw [indiscernible] just gave them some funding actually. So they are getting a lot of cred for the work they have been doing and TLens is an element of that. I'm not going to take the credit, of course, because they are doing a fantastic research work, but TLens has been an important tool to achieve what they achieve. And it's impressive to see how many research lab and actually, I would say, commercial instrument supplier who is now working on similar solutions. We just -- this week, we got PO from a company in China, who's actually going to sell this kind of microscope and need them TLenses for that. That will probably be released within this year. So more and more activity related to that. As I said before, and I will repeat, I don't think this is going to be a big volume thing for us. We are selling at very high value. We even do some system integration, stacking and stuff like that for them. But I think it will be a super important brand-building in that area. Meaning like cases like Xenocore, when they see that we are involved in this type of advanced research instrumentation, it gives them a kind of a comfort that this is a good technology and have a good reference in highly advanced applications. So I see it more as a brand-building than anything else. Of course, it's money, but it's not going to scale the company. It's going to be a brand value. Yes. So over time, we feel that this can be an important market segment, but it will take time to develop it. We have 1 design-win, Kavli. We have 1 design-in, which is Xenocore. And then we have 15 ongoing PoCs. One of the PoCs is actually related to a world market leader in endoscope. They use time. They're extremely thorough, highly competent. We already received quite some NRE financing from them. And hopefully, next year, we can talk about a real project with this customer, market leader. So 15 ongoing PoCs. Many of those are type Kavli related, but also others and 8 planning PoCs. So my table, design-wins, 11 up from 9. If you look at the bottom line, active project, meaning design-ins, 8 up from 7; completed PoCs 65, up from 61; ongoing PoC, 38 up from 33; and planning PoC, 47 up from 36. Super hectic days. Alf Henning, would you like to go through the financial?

Thank you, Øyvind. And good morning to you. The company had NOK 4.1 million in revenue in fourth quarter last year compared with NOK 3.9 million fourth quarter in 2021. The EBITDA loss was NOK 50 million in the fourth quarter compared with NOK 5.7 million. There's mainly 2 reasons for the decline in EBITDA. The most significant one is that in the fourth quarter in 2021, the company won the VAT claim that have been going on for several years and recognized NOK 12 million. The other reason is that there was an expense related to share options of NOK 4.7 million in the quarter, the same quarter in 2021 related to social securities due to the fact that PLT, the poLight share rise in the quarter. On the balance sheet, the cash position was NOK 84.2 million at the end of the year compared with NOK 157.8 million in the end of 2021. Inventory of NOK 45.6 million compared with NOK 16.8 million. That is an increase of NOK 28.8 million during the year. The increase is mainly wafers from ST Microelectronics. That is our long lead component. But also assemble TLenses, and increase in assemble TLenses contributed to the increase. So the increased inventory improves the company's readiness for potential volume cases. On a cash flow. The company had NOK 104 million in cash at the beginning of the quarter, used NOK 15.2 million in operating activities, whereof NOK 9.6 million was related to increased inventory. NOK 4.4 million was used for buying new final test equipment at the Philippines, and the company had NOK 84 million at the end of the quarter. That will bring the company cash-wise throughout the second quarter this year and into the third. Meaning that there will be an equal capital rise during the next quarters. Thank you.

Thank you, Alf Henning. So 1 slide to go and then Q&A. Outlook, growing pipeline in several market areas. I think it's a fair statement. Recently announced design-win and first mass production PO for smartphone. This is an extremely important milestone for the company, and it is a key reference for all market segments. Of course, as we have seen before, companies can change the mind and delay or cancel programs. So as a written report, that can, of course, also happen this time. Having said that, a firm PO, casing for deliveries, relatively recent soon-coming announcement is at minimum a very strong signal, but this is the real case. AR opportunity are developing very positively as we've gone through several references, several confirmed design-ins and a part of Magic Leap 2, which is a fantastic achievement for poLight. At CES, I mentioned Sharp. Sharp has actually demonstrated quite quickly a fantastic capability of developing an add-in camera module. And I don't know if you saw it, but they have a demonstration of this camera module. They made some videos. I actually have a copy of that presentation also the camera module, and it is quite impressive work. and they are super enthusiastic about TLens. Sharp has been in dial with us for many, many, many years. Japanese, they're thorough. It takes time to develop the relationship, but they are expressing an extremely high interest in Sharp. Sharp is many things. Sharp is a camera module supplier, but Sharp is also an OEM. So I think there are several opportunities, both they were Sharp camera module. We try to sell their camera modules to other OEMs, but they also have internal customers. So I think Sharp case can lead to many interesting cases over the next years to come. And this other kind of AR cases, which we're now involved in, it's building an impressive reference list and an impressive platform for future strengthening our position further in the AR space. Of course, we will not be alone in the AR space. There will be other technologies which will come in. We will coexist with other technologies. But I think it's fair to say that the position we have taken now is a very, very strong position. And we intend to keep that. Yes. So as Alf Henning said, there will be capital needed to continue development of this fantastic company as we have communicated in several quarters. So that -- and hence, of course, the company is planning accordingly. Okay. Thank you, everybody. And could I then invite you for Q&A session, Alf Henning?

So first some questions related to smartphones. Can you say something about whether this customer is the same customer who has been involved all the way as OEM together with camera module maker in the development of the add-in concept? And now we're talking about smartphones.

No, it's not the same OEM but it's the same camera module supplier.

Can you say something about whether this customer has a plan or sketch for future use of TLens in future modules as well?

As I mentioned in the smartphone slide, that is the case. We are in discussion with the same customer of next generation releases.

If this phone is released…

Of course, just want to say that it's not a walk in the park to get the next one. They will, for sure, being hammering also pricing and performance and all that stuff but yes, there are real cases that are also lining up.

If this phone is released as expected, do you think there is a possibility that the phone would go on sale in Norway?

Yes, we asked that question, and we have no clear answer to that. But it seems like it will be possible from a tech perspective, then it depends how they will use to what kind of methods they will use to distribute the product. But our interpretation is that sooner or later, that should be possible. So then [indiscernible] can buy a new phone finally.

Have you received inquiries from other smartphone customers who want to use TLens as a result of the first customer's further steps?

We are extremely proactive in this market. So we don't need inquiries. We are hammering all the doors all the time showing all our design solutions and stuff like that. So we are all over the place. And of course, when this new phone will be released, we will showcase that phone to all who will let us in.

Can you say something about time line from projects to market entry in this segment? Is it differences between OEMs, fast followers?

That is extremely difficult to answer short and precise on. But I think I would like to answer it in this way. Many camera module suppliers, many OEMs have already -- is a part of completed PoC list. So when they start a new project, however, it's like typically like this. They start with -- okay, this is a phone, we need to have a different mechanical design. We need to have a different optical spec. So even if they have done the PoC to prove the TLens technology, they need to -- they have to start from scratch because the new mechanical design means that they have new kind of camera design, new image sensor in the market needs that we have. So everything -- and that takes quickly 6 to 12 months depending on who you are to make that happen.

It was previously mentioned that there are 4 smartphone customers who have come a long way in terms of maturity in PoCs. 3 customers lead the way while fourth is not maturing quickly. Can you say something about the smartphone market or the many players who are actively working with TLens as technology in selfie cameras, rear cameras or other functions now?

Yes. I think we went through it at least briefly in the presentation. But what I can say that we have several smartphone opportunity also in addition to the design-win announced. Then also, I mentioned before that there's no doubt that smartphone market OEMs are struggling and they're still struggling, as we have been exposed to that cancellations, delays due to basically triggered by the shutdown of -- due to COVID. And people are extremely careful in spending money, meaning OEMs dropping sales significantly. And that is coloring the whole sentiment in that market. But I can confirm that we have other opportunities we are exploring.

If one of the OEM/camera maker working with TLens requesting whether poLight can supply to a model with a high volume in, in for example, Q4 2023, how must poLight practically prepare and ramp up the organization to meet such an inquiry with a positive response?

Yes. It is -- we have quite -- we are step-by-step building up a quite good capacity when it comes to infrastructure, meaning assembly line and stuff like that in the Philippines and testing facilities. So in a way, the main -- that another challenge will be material coming into the fab like wafers from ST Micro. So but I would say that we have, as you know, as you can see from the inventory, we have already taken quite some risk to be ready for smartphone cases. So we have, I would say, significant of inventory related to wafers. So I would say that we can supply much more in end of the year then we think is needed even for relatively a good volume project because we are prepared for it. But generally speaking, a lead time of material is as much as 12 to 18 months. So it's a very, very long lead time still. Maybe things will be changing in the fab side, but at the moment, that's the case. Luckily, we have a lot of inventory, so we can move relatively quickly. Another bottleneck for us, which we are working on and which will be sorted out, hopefully, within that time perspective like Q4 is our test capability. We are testing every single TLenses being shipped to a customer for all kind of permits, mechanical, opticals. And that test capability, which Alf Henning mentioned, we have done more investments in that is something we need to -- we also need to increase to be able to supply a high volume case, which we are currently doing.

Our smartphone is planned to be released using TLens in the second quarter of 2022. Can you say something about what this will mean for the company if it turns out to be a success?

Yes. I think if there is a phone, should I say, when there is a phone shipping with TLens, that is -- then we are moving to a new era. We can then show that phone can -- people can buy that phone, people can -- other OEMs can buy that phone, they can test that phone. And hopefully, the user experience is very positive. So of course, then we have a live reference in maybe the most important high-volume market at the moment. So I think it's basically a reference which is super important to get the next design-wins. So I think it opened up a new era for the company.

For many, the smartphone lens order was a surprise. Did you expect the order for the smartphone project at the time it came?

I wasn't surprised that day because, of course, we are following things closely. So -- but they did actually accelerate the development a little bit. So when I met the customer in -- when I was traveling, I think that I was a little bit surprised by how much they accelerated the plans. But we have obviously been working with this customer for a long time. So we are relatively well informed, but they did accelerate it, yes.

Okay. Some AR/VR questions. About a week ago, the company Yole Group had a teardown of Magic Leap 2 and reveal that TLens was inside the product, making it public information. What is the reason poLight didn't issue a statement commenting on this? Is it not a fantastic opportunity to finally demonstrate to the market what poLight have achieved?

Yes. And so what we decided to do to not kind of create an unnecessary, what should I say, information and noise in the market, we decided to take that today, showing it physically also telling the bigger picture. So I hope that was sufficient. And also then you can see the Magic Leap in the context of everything else. So that was the decision we took that we thought it was better to present it today, which is not many days later than the tear down was available.

It was fantastic to have Magic Leap confirmed as a customer with design-win in AR, one of the major player in the U.S. What does the reference mean for poLight's future work with other AR/VR customers? Did you notice more interest for your product?

Yes. Again, it's a reference in a key market and all references is the best sales tool you can have. So extremely important.

What feedback have you received from Magic Leap on TLens in Magic Leap 2?

One of the key management members thank me for a highly important component for the AR glasses. So I think that's a good reference to have.

In a previously quarterly report, it was mentioned that poLight works with almost all AR/VR players of importance. But one more of the major players in the U.S. was mentioned as a PoC with the possibility of design-win in '23 with a 2 TLens camera. Can you say something about how this project is on the time line?

Vuzix itself, and release market mid this year now for developers.

New AR/VR patents are now coming up weekly from a very high number of both small and large players. And we see that TLens is one of the preferred technologies in many of these patents. Is poLight involved in the PoC work of all these actors or is someone working on their own with camera module makers without poLight's assistance in the projects?

I think, first of all, I would like to pinpoint this patents because we get a lot of mails from our investors about patents or patents application. And I think it's important to say the following. Some of the patent application or our utility model, which is basically will never become a patent. They may do it for protecting the freedom to operate. Some of the applications are also clearly, they can never be approved because of prior art, by us or others. So when you say patent, it's not necessary patents, could be utility model, could be application, which will never be accepted. But yes. We see the same patterns, and you're helping us to follow that. I would say, when it comes to new AR/VR applications, sometimes we know about it, sometimes we don't know about it. Sometimes the patent can be very generic, any tunable lens, not only TLens but any tunable lens. So it varies. It's a mixed bag. But I think it's very useful that you help us to follow this development because there's -- it's a big activity now in this era.

Which applications other than world-facing cameras are TLens relevant for in AR/VR in the short term and in the long term?

Now it is -- we didn't talk about today, but it's, I would say, display. Laser beam scanning is one of the display solution which we think will come. We are involved in quite a big project with a big player where the TLens is being used for tuning the laser system so that when the user focus or look at the glasses, independent on where the user is focusing, it will always see that laser being scanning display in focus. And that tuning of the laser is done with a TLens. Quite important case for poLight. We haven't talked much about it. It's a strictly confidential case and actually targeting consumer market. So that is for display. Then we have a new concept, which is being developed as we speak or should I say, prototype. That is for, we called TWedge. So it's another trademark for poLight. It's for, like micro LED displays, which is also quite popular to use for AR displays. They struggle with resolution. And one way of doing -- solving that problem is to use TWedge. TWedge is a wobulator, which is doing pixel shifting, half pixel shifting to 2x, 3x, 4x, increase resolution of a display solution, micro LED. This is a new product, but it's basically the same technology platform. It's the polymer, which is the lens motor and 2 glass membranes. What a TWedge does is that it basically tilt one of the membranes, okay? Meaning that the beam which is coming in is being beam steered to different positions on the screen. So basically being steering, tilting with the piezo. So that is an -- we had extremely many positive feedback on that concept. Mid this year, we will demonstrate technical samples to many players. We will be at the booth in the U.S. for a display week. And we are trying to engage with the customer or customers to bring that product to first application. So it's not TLens, but it's based on the same technology platform. It will be a new product for poLight if we decide to move on, with a significant potential. So then finally, not only a single product company.

Sharp just showcased a new VR solution with TLens. You stated that there was low expectations in volume until 2024, 2025 in the AR/VR segment. If Sharp were to enter with a top OEM, is it not then possible to have significant volume in this case alone and before '24, '25?

Now I don't think -- as I said, we talked about Sharp, super important partner in many aspects, but I really don't believe any AR volume before '25, '26. And then just -- I think we're just to be very clear and honest on that, the market is not there yet. The technology is not there yet. So we need to be patient. We need to use this year to build our position in enterprise and engaged in PoCs with companies who planned to be ready when the consumer market is there. That's what need to be focused. So I don't want to give any expectation of having anything high-volume in AR side in '24 or something like that. That's too early.

Okay. And now, some questions regarding medical. We are seeing an exciting development of project within the medical vertical now. How is the customer base distributed here? Is it mostly Asian, European or American players?

Global. Impressively global, actually.

Xenocore was mentioned earlier as design-in with poLight. Can you say something about whether they use add-in or add-on concept? And is the model they use in the camera developed in-house or is it a camera module maker that can sell this to several other medical customers?

Xenocore uses an add-on concept, especially kind of -- we are helping them to integrate it on somehow. So we're taking a bigger response to that and only supplying the TLens in this case. But it is a purpose-made design for Xenocore.

Can you explain a little bit more about the major player who works with TLens and who has come a long way in the PoC phase? Is this a project that could have greater financial potential for you?

Yes. I just mentioned it in -- during talking about medical, but it's a very interesting case. I cannot say more than it's one of the key market player, maybe market leader in this kind of equipment. They are doing PoC as we speak. They've been doing it for, I don't know how long, 6, 8, 9 months, at least. And we are getting financial support for them. We are selling sampling to them. So maybe next year, they are ready to start a real product project. And then, of course, we will update investors on that. Extremely interesting case. And yes, I think that this could have a relatively significant standalone impact on for us, but also, of course, entering a new market area again, giving new opportunities. So in soon super important.

The Kavli institute and Moser have received support from Facebook founder Mark Zuckerberg's Foundation to spread the Mini 2P technology to several research environments because they believe it is so groundbreaking and important in future research. Have you noticed any growing interest in such solutions against this [indiscernible]?

Yes. We see more and more cases coming to us. They are all over the world. So this is -- as I said, it's not a big contributor with volume. But from a brand-building perspective, it's really, really useful. And also, I have to say, it feels good to contribute to things which is meaningful for the greater good.

Yes. Agreed. Some technical questions or [indiscernible]. Do you increase head count?

A little bit, yes. We just added a couple of very senior, highly qualified team members in Philippines, I was just there and visiting them. So we need to be -- have high competence close to our manufacturing partner and Philippines is key in that respect. So a little bit, yes.

Has there been interest from other players about purchasing poLight? Will poLight be willing to sell if anybody shows interest in the near future?

That is -- we don't focus on that. We focus on developing organically, this company, to have a -- to share, to create shareholder values. And what will happen in that context is a Board room decision and shareholder meeting decision. So focus for us is organic development.

It has been a lot of talk in Norwegian area lately about the state of the share issue practice, subscription rights versus direct issue of private placement, I guess. If a future capital raise is required for poLight, does the management and the Board see it as important to give existing shareholder subscription rights except if there is a good reason not to?

Yes. Good question. I think the Board is very, kind of, take this very seriously. When we do raise capital, consideration with respect to the company, consideration with respect to shareholders is key judgment they do. And we will try to do what's good in some. So I don't want to comment more details on that. But it's, of course, something which is seriously consider different ways of doing share issue.

It is mentioned that the company runs test productions for yield improving work at regular intervals and that the number of lenses are produced for stock. Where do we find ready-made lenses in the accounts?

First of all, we -- today, we produce more than trials, we produce as much as we can to deliver to the smartphone customer. So that is reel production. And also we produce for other customers. So -- but yes, the yield is going up and down. This is very typical for the stage we are in. But when it comes to the lenses, which is -- are in stock you would find in the inventory on -- in the report. And also when you get the annual report, there will be more details about this.

Yes, that's right. How high a yield do we think you can manage on TLens in high-volume production?

I think it's a quite good outlook actually. We have seen huge improvements in the last weeks when we know we finally can do some continuous relatively high-volume production. But definitely, 90-plus-plus.

You have mentioned that you work with almost all important camera module suppliers. Home many have ready add-in module now and how many are expected to be ready during '23?

These add-in modules have different application areas. We have add-in camera module suppliers -- sorry, we have camera module suppliers making add-in designs for AR, as an example, VR. We have camera module suppliers focusing on smartphone for add-in. We have camera module suppliers doing add-in for industrial application. So there are many different applications also for add-in. But I would say that a small handful in some, I guess, will be something end of the year, give and take.

At Capital Markets Day, we were presented with both pre-shaped TLens and an OIS solution with poLight technology platform. We find this again in patents from camera module makers now and in some patents we find combined solutions that contain poLight technology that performs both OIS, autofocus and zoom. This is considered by optical engineer as the Holy Grail for cameras, a camera model that can perform all these solutions without moving parts. Can you say something about if you have seen prototypes with such a setup and/or if this is possible?

Again patents, be careful, patents is not necessary patents. But referring to my comments about OIS, AF, zoom yes, you're right. Especially, Zoom has been -- is a [indiscernible], I would call it. I think it's super challenging, to be honest, to have a zoom in a smartphone configuration. Maybe possible long term, but I think OIS, AF, yes, that exist, and we can also do that with tunable optics. I think the most challenging part in that 3 OIS, AF, zoom is the zoom part. And I think it's been a [indiscernible], for many, many years, and I think it has the color of a bit like a [indiscernible]. I have not seen anything useful so far but maybe one day.

The add-in design opened many doors and this reflected in growing numbers of patents, including TLens and add-in designs. Newly, there was a publication with an add-in design that includes 2 TLens face towards each other. Can you explain why they do it like this and if it's possible at all?

Yes. That's in a way one way of stacking TLenses, which maybe for this application typically could be for telephoto. So yes, possible. And yes, this is something we have been looking at.

Knowing there was -- there has been servicing patents for stacking TLens in smartphones in both horizontal and vertical modules, can you say something about [indiscernible] for 2 and vertical modules similar to the one that you -- the one that is in your reference design?

I think if I understand that question right, in the vertical direction, that is along the thickness of the smartphone, I guess, is the question and the horizontal is more like the folded optics. So in the horizontal, you have more space. Of course, if you go along the width of the phone, there are more space. Having a stacked TLenses in the set direction or the thickness of the phone will be more challenging from a real lens perspective but for folded optics or telephoto, possible. Of course, if you accept that camera is sticking out, that's another thing. I think people would like to get rid of that. And so I think that stacking TLenses is more relevant maybe for telephoto and folded optics.

Regarding automotive cameras as they use glass lenses today, is it seen as a cheaper solution to implement plastic lenses with TLens tech to reduce cost in the future?

Yes, that's actually a very good observation. In automotive, there is a trend or they are exploring to use plastic lenses. And that is causing a problem. The problem is that plastic lenses is less temperature stable. So in the car environment, when you use a camera, which is a fixed focus, consisting of plastic lenses, a change in temperature will bring a fixed focus camera out of focus. And that's where you need AF, so-called athermalization, same as for AR glasses. So yes, you save cost on one side. Of course, adding AF is also adding costs. So then it's a calculation of what they feel is smartest to do. But having then AF there, then, of course, you could use AF more actively, not only for Athermalisation but for changing focus. So -- and then you could say, actually, there was another question, I think, coming is that TLens, as we say, is compensating for this temp digits by design. Meaning that the way that the plastic lenses is drifting causing a camera module to be out of focus is actually passively corrected by the TLens because it has the opposite effect. So you can think about a very cost-optimized TLens but no activation, just being a passive component, which obviously will be a super cost-efficient design. So it could also be potentially a new product.

Can you tell us more about TWedge?

How many questions left?

There's a lot more.

Okay. I think we need to do some selection here. We talked about TWedge. I think that's done.

Which companies do you see as poLight's main competitors and why?

BCM industry.

And you are showing a capital endoscopy on the health care slide. Do you have any ongoing capital endoscopy project?

No. This P camera is my wet dream. One day I will make it.

Can you please explain this first from the report, important changes to the wafers improving the optical performance of the TLens is now faced in?

Yes. It is a wafer with a better R coating, meaning less -- better transmission through TLens, more light into the image sensor. So we have 2 versions going forward, one with the better transmission and one would still good, but there is any better. And those will be potentially priced differently. The first smartphone case is with the old R coating. So this is -- but it's no -- no, we will produce mainly the new R coating.

If the Chairman is here, would it be appropriate for her to present herself and maybe on the Board's view of the company going forward?

Yes. Grethe, would you like to say something?

Right now?

Yes, if you would.

Okay. This is extremely unprepared. I'm Chair of the Board in poLight. I have my background from IT technology and been with poLight now for 4 years or something.

At least, yes.

And I mean, the Board is as excited as you guys are about poLight. It's extremely difficult, but it's also an organization that is extremely dedicated, and I think they will manage. Anything else you wonder about?

That was sporty.

Teledyne just released an optimum 1.5 millimeter or something. It came with an adaptive price point and has an optimum 2mm in additional autofocus lens option. Is this TLens as well?

That, I don't know. I need to check.

How many VR cases are poLight in and how is the case for 2023 going and when can we see it in the market?

I think there is some potential -- we have some few VR cases. I think there is some potential for end of the year for VR cases for poLight. That will be related to -- VR, then you don't see-through. Like in the AR glass, you see the world. And then in addition to the world, something is projected to the display. So you see both a real world and you see something overlaying the real world. Like in a VR headset, you're in a cage. So you don't see the world. So in that application poLight in the VR headset is actually in a see-through camera. Meaning there is a camera which has been shown to the user wearing the glasses, which is taking picture or video of the world. So see-through. That's the application of poLight. And I think there is a potential for end of this year, design-win in that area for poLight.

You mentioned for the first time in the quarterly report that TLens has been mentioned as a potential candidate with automotive market. Where in the automotive area is TLens relevant?

Both in cabin and outside, both.

When will the company gain cash positive and start making money?

Yes, we don't have any new guiding as we had before. We said the 2025 will be a profitable year. So we haven't updated the guiding. This, of course, is fully dependent on how quick mass or volume production starts in poLight. So it's highly uncertain, of course, but there's no new guiding on that.

You write in the report that you do important changes to the wafers including…

That's already on performance.

Okay. Yes.

Let me just -- give me a second to see that we've covered most.

I'm thinking we covered all of them.

Fantastic. Thanks Alf Henning for your support. So yes, -- so that's it. Maybe a record, 1 hour and 10 minutes. Thanks a lot for all of you coming. I think also this is probably a record audience sitting here face-to-face with me. Very motivating. I encourage other people to join. There's so much more fun to talk to the audience than to a screen. So really, really appreciate it. And next event for poLight is that we're going to produce an annual report. 26th of April, that will be published. And then we have the Q1 '23 report, which will be 11th of May 2023. So see you 11th of May.