poLight ASA (PLT) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to an update on poLight related to the right issue process. So, yes. So my name is Øyvind Isaksen. I'm the CEO. Together with me in this webcast is also the CFO, Alf Henning Bekkevik; and also Joachim Hanche-Olsen from Pareto, who is kind of heading the process we have done together with Pareto. So for today, it's -- the main purpose is basically to give you opportunities to ask us questions related to the process. As an introduction, I will go through highlights on poLight. In case for our new ones, I will quickly introduce poLight. I will go through the -- focusing on the market status and some outlook statements. Then Joachim Hanche-Olsen from Pareto will go through 1 slide about that, the right Issue process in itself. And then in the end, we're going to facilitate a Q&A session. [Operator Instructions] And then Joachim will read the questions, and then we will distribute, who is answering between us, 3. Good. Yes. poLight, you may have seen this many, many times before, but in case, as I said, there are new people participating, poLight, in 1 page, a global player in tunable optics. We are working in many different application areas, has been around since 2005, develop state-of-the-art tunable optics. We have a strong IP. We are around 40 employees, extremely distributed focusing on being with our competence and being where we have customer and partners. Headquartered in Horten, outside Oslo and employees in Finland, France, U.K., U.S., China, Taiwan and Philippines. Been listed since 2018, 1st of October. If you're going to describe poLight's technology in -- with 4 attributes, you would say, extremely fast, high speed, realize very compact solutions, and no pumping effects, meaning constant field of view in a technical terms and very, very low power consumption being super important for many applications. So in -- I'd like to compare the TLens and the poLight technology to function in the human eye. The existing product we have launched to market for some time ago is called TLens, tunable lens. It's basically replicating the function of the human eye. A human eye consists of a lens and eye muscles. Eye muscles is squeezing, shaping the lens, changing the focus from you reading a book to focusing on affinity. We're doing exactly the same. Our lens material is a polymer, which we produced in Horten and have developed over 15 years. And our eye muscles, we produce as STMicro, which is basically a membrane, which when we put voltage on that membrane, bends. And if you see on the top left corner, that bending is then shaping the polymer, which is underneath that membrane, meaning exactly as our eye is functioning. So then changing a high voltage on the membrane, meaning a focus in close; no voltage on the membrane, focusing infinity. So -- and this is typically a technology which is used to realize an autofocus function in the fixed focus camera. Normally, when you do focusing on a camera, you are moving the whole lens stack up and down. A camera typically comprises many, many different lenses, like 5, 6, 7 lenses which is then being moved up and down in the conventional way of changing focus. TLens is a way of not doing that. It's basically adding a small lens, which we call tunable lens, which is taking care of all the focusing needed for the camera, meaning less complexity, much more compact, and significantly higher speed and other attributes, not to talk about power consumption. So you can see, if you look at the top right corner, there's a picture of the pen, and you can see then the TLens. There are many TLenses around that pen. So you can see that the size of these components, really, really compact. So our technology likes to go small and it's a perfect match for small compact cameras. When it comes to the supply chain, we are basically fabless, but we do have some manufacturing activity in headquarter and that is producing the polymer, the lens material. That's basically what we do. And also in headquarter, we have the ability to basically do what we do around the world, except wafers from an assembly perspective, but at much, much lower volumes, more like sampling volumes. So the polymer is produced, 1-liter polymer is, say, 1 million lenses, so it's very scalable. So we tend to prefer to do that ourself. It's a relatively easy setup and very scalable. And then we don't have to kind of distribute the recipe of that polymer, which is a key, key component in our product. So that's the lens. The eye muscles, our eye muscles is produced by STMicro. After many, many years of development and qualification, we have now qualified those wafers. So it comes out from the factory in Italy, an 8-inch niche wafer. And that -- that the 8-inch wafer comprises, more or less, say, 2,000-plus, depending on which product we're talking about, eye muscles. These are being sent to our assembly partner in Asia, which is then assembling the TLens, which is comprising a back window; the membrane, which can be bending; and the polymer. Then we sell the TLens, like, the bare TLens with no packaging around, and we sell it also as a packaged device, easier to handle. And for each TLens we sell, we also sell a custom-made ASIC to -- which is basically supplying the voltage to the membrane, okay? And then we do sell to camera module supplier. Camera module supplier will then use our TLens in different ways. There are 2 examples being illustrated in the center part of the drawing. It's either making TLens on top of the fixed focusing camera -- fixed focusing -- fixed focused camera, or is taking TLens inside the lens stack. That will enable more flexibility when it comes to sensor format. It will also enable more flexibility, when it comes to size. So that is, I would say, the most advanced way of doing it. Even though we -- our customer typically is the camera module supplier, we engage heavily in dialogue with OEMs, meaning the company owning the end product, which the customer is using. And our job in that respect is to kind of convince the OEMs that this is a great technology and then they will kind of motivate the camera module supplier to use TLens in their solutions. So as I said in the beginning, poLight's products and technology is well suited for many applications. Consumer side on the left side, illustrated by a smartphone, smartwatches, webcams, definitely a very interesting market; augmented reality, meaning smart glasses is definitely a sweet spot for our technology. I will come back to talk a little bit more on cases. Then industrial, as an example, barcode reading, also a super good area for our technology. So those 3 are, today, the main focus for the company. We do believe, and not only we believe, but the market believes that augmented reality, which today is very much focused on products on the market today, are very enterprise-focused. We -- I'm of the belief that this is an area which also will add to the -- I would say, the consumer side, so adding, like to the left picture, also, glasses, sooner or later. As many of you know, we are already involved in several proof of concepts in the consumer side of AR. So those are the 3, I would say, key areas. We have customer wins in all these segments. What we also do see, step by step in maturing more, is the markets related to medical and also markets related to automotive. Those 2 markets is -- I would say, most mature is the medical. It's, step-by-step, showing us new opportunities, but also relatively recently, we are actually engaging with, I would say, big Tier 1 companies in preparing ourselves for the automotive market. A car is being -- have so many camera, both inside, outside, and this is a huge mega trend also. So not many years ago, this slide was empty. So if you start on the left side, we have now a design win in smartphone. Finally, we have design win smartwatches with smartwatch phone actually and webcam. So that is the consumer side of our design wins. We then have 2 declared assignments on enterprise AR market, Magic Leap, Magic Leap 2 and then LLVISION, LEION Pro, which was recently announced. And then we have quite a few on the industrial side, like the Honeywell, the SuperLead, the Hikrobot, [ Vuzix ] and Teledyne, which are all, I would say, important designers in the industrial segment, in this case, represented by barcode QR reading for supply chain logistics and also for assembly line, machine vision application. So recently back from China, and we were invited to participate in a fantastic event in -- for MEIZU. So MEIZU have a huge event in Shanghai. And they presented the 3 smartphones, all related to MEIZU 20. So they have MEIZU 20, MEIZU 20 PRO, MEIZU 20 INFINITY. INFINITY took a lot of the, should I say, time during this event. It's the flagship phone. You can see that person on the -- presenting that phone on the right -- top right in my -- in the picture there. He's talking about the specs of the phone. And this was -- we just captured that picture during his presentation. And it was, I have to say a very special day for us. When you saw that this presentation, it was a huge several hundred people in this huge, [ let's say this ] site in Singapore -- no, in Shanghai, and they say that this is powered by poLight, which was a fantastic experience, to be honest. He is talking about no pumping. He's talking about millisecond focus speeds. So this is what we also -- when we present our technology, we emphasize on that -- there is no moving parts. There's no pumping, there's constant field of view and also the speed. So they kind of emphasized that. So this is a selfie camera. It is, they claim, the most compact selfie camera, giving instant and smooth autofocus user experience. It's actually a fairly good spec of the camera. And if you would visit us 1 day, you can see the camera. It's extremely impressive small. It's 32 megapixel. So it's -- and it's really, really compact. And in this case, as you can see from the bottom right drawing, it's -- you can see that the top of the camera is the smallest part. You can see the nose of the camera is very small, which means that the impact on the screen is very, very limited, which is a good important point. And then the TLens is kind of hidden in between those other -- those 2 lens stacks, the top lens and the bottom lens stack. So the TLens is kind of in between them. So we have already completed the delivery of our first PO. There are, definitely, uncertainty related to the volume. But normally, this kind of flagship smartphone, which is kind of -- they are using as kind of, "Look what we can do." "Look how clever we are." That -- those types of smartphone typically are the low volume ones. So we -- it's -- we don't know and they don't know how it will sell. Highly -- this phone is highly integrated with the car, which they also launched the same day, and operating system. So this is -- it's going to be interesting to see the response. For us, it's a fantastic opportunity, of course. And it has been launched in 30 of March. Whether it would be available in the market, they haven't told, so we just need to monitor. The only thing they have told us is relatively soon, whatever that means. AR. We have established an impressive position in -- I would say, in the mega trend. It's a big word, but if you look at where the innovation is happening these days for consumer side, it's very much related to this space. And in a way, if you look at the smartphone side, it's more like all about -- mostly about cost reduction. And also, the OEMs, in the smartphones, they do, today, see challenges in sales volumes. So costs -- smartphone is, of course, important, but it is also an area where the innovation is less and the innovation I feel is more and more other devices such as AR, when it comes to consumer. So having a position in AR at the early stage is extremely important as we see it. Why TLens is so important is kind of the normal I will say, attributes, we have been talking a lot about compactness, low power consumption, extremely good speed, constant field of view. And very much important here, when you have glasses on your head and you started moving your head, there needs to be no gravity impact, where we do not have any gravity impact. And also, by design, heating in those glasses is an issue, so the temperature will change a lot during use. And then the -- actually, by design, you can say, the TLens technology actually do, which compensate for that temperature effect on other components in the system. So in a way, by design, we are offering athermalization. So anyway, super, super good fit, different used cases, as listed here. Today, AR, as I said, is enterprise-driven, but we are also involved in several cases, which is our consumer focus. Typically, at least, in more like '26, '25, I don't know, '27, around there is what we are hearing from our customer is that they are targeting to go bigger in the consumer side. Yes. So this is from a picture from Las Vegas this year, which was a -- I would say, a fantastic event for poLight. We were having a lot of meetings and demonstrations, and we could walk around in see us and see our product being used in different products, which is -- after so many years of fighting in this ecosystem, is a tremendous feeling and achievement. Magic Leap was torn down by a company called Yole. And this is why it was done public, not so many months ago, that Magic Leap 2 camera, which is on -- if you look at the red arrow is the upper camera -- upper right camera is using TLens. You can see they have torn it down. They have this dismantled the camera module. They found the poLight logo. So yes, it is a poLight product in Magic Leap. Magic Leap is a highly profiled company in the U.S. It's been massive investment in Magic Leap and is currently shipping with TLens inside. And we have bought a few demos and it's quite an impressive glasses, I have to say. I also, like, the statement from Yole on the left -- bottom left side, "The use of this TLens device is key for functionalities in the AR/VR headsets," comments the CEO in Yole SystemPlus. It provides a strong added value for a new wave of AR/VR headset system. And this is what we feel. We are in a unique position in what everybody believes is the next big thing. And we shouldn't underestimate what this can mean for the company. It's not going to happen tomorrow from a financial impact perspective, but it's really, really about future proofing the company. Magic Leap, yes; Vuzix, yes, also have confirmed that they are planning to use TLens. Actually, in this case, if you look at the picture on the bottom right, you can see 2 TLenses being used in the Vuzix Shield. Expected to be launched in mid this year, they say. They are already shipping to development partners. We have been able to get Vuzix Shield glasses. So if you happen to be around, you could pop in and see them. We also have confirmation from XVisio about using TLens. Our understanding is that XVisio had 2 versions, 1 pro version and 1 non-pro version. And due to customer feedback, it seems like they are converting the non-pro version to also using TLens, due to customer feedback over the last few months. LLVISION, this is also, they claim, will going to be launched in sometime this year. The indications we have is mid this year. So whereas LLVISION -- I just met LLVISION in China, super interesting company, very focused on glasses. You can see they are using TLens on the camera on the center of the glasses. And you can see what they say, fourth of April '23, "LLVISION confirm releasing enterprise augmented reality glasses using TLens." We were so lucky we got a statement from the cofounder, Allan Liang saying TLens has a millisecond-level response time. Again, what we typically promote with our technology, it enables fast auto-focusing and remote video streaming experience for AR devices that need to move quickly. So wherever the glasses -- you're in the factory or you're in other -- you move and that you need to quickly be able to change focus when people are moving and shooting at different things. This is also declared very important for them to have a profitable result from the AI, artificial intelligence algorithms. And also emphasizing the low power consumption, which is key for these kind of devices. And they say so far, which was a little bit surprising for us when we were there, they have already delivered the glasses to a customer, like, TBA, which is an advanced energy device manufacturing; SANY Group, a construction machine manufacturer; an airline company; and agili8, which is an AI solution company for healthcare in Australia. So already have a quite a nice footprint. And of course, most nicely also, they see us as a strategic partner and want to strengthen the cooperation with poLight going forward for different type of applications. Quite impressive glasses, I would say and really, really encouraging to see how far they moved so quickly. I would say, so LLVISION already announced, Magic Leap already announced as design wins. Vuzix, on the right side; XVisio, on the left side here, is to be announced as design wins. They're already announced as designed-ins. Healthcare. Yes, as I said, even though I would say that it's not, today, as a part of the -- we have consumer, we have AR, we have industrial. Those are the 3 key areas. Healthcare is definitely a candidate for us as a fourth segment. It will take time to develop this market, but we do expect this year that we will have our first commercial design win. It's related to, as many of you know, a disposable laparoscope. You can see the laparoscope on the right side, the black tip there, which can be bent. And this seems to be and claim to be the first disposable laparoscope with AR function, and they use TLens. It's a huge strategic design win for us. We have seen many, many other companies wanting to start activity related to using TLens in similar application. This company, I mentioned, is a relatively small company in the U.S., but they seem to be having a good traction lately. They also have financed themselves in a very good way, so they are ready to ramp. So it's going to be exciting to see when they release how the uptake will be. I don't expect it to be a big uptake in -- or a big volume for us in the short future, medium future even, but I do expect it to be a market segment, which we can play a huge role. We are also enrolled, as you know, with other customers who's planning also to use it in high-end devices for endoscope. So this healthcare activity in poLight that started basically with the very, very [ well-renovated ] research group in Norway at the Kavli Institute in Trondheim, the Moser's team, who developed a system for imaging the brain activity of mouses. So when the mouse is being kind of exposed to different external happenings, they could kind of see the response on the brain of the mouse. They are actually using several TLenses stacked to image what's happening in the brain. That has created a lot of press. It's created a lot of articles, where we are mentioned. It has created a lot of activity with similar institute as Kavli to doing the same. As I said many times, it's -- even though it's a high-value kind of revenue for us, it will never scale the company, but it is a part of building our brand and building our position in the greater healthcare area. So I think even though today, as small, even though no design wins, but I expect the first assignments to happen this year. Last slide from me, outlook statement. Definitely growing pipeline in several markets. We are super busy as team. Luckily, we have a dedication in the organization, which is impressive. After so many years of hard work, there are still a lot of enthusiasm and energy to make things happen. Smartphone design win, of course, is a fantastic happening for us. We -- it's a key -- it's a milestone and a key reference, not only for smartphone, but for generally speaking. Everybody understand, if you are selected with a new hardware technology component in a smartphone high-end case, that is, in itself, a reference, which should not be underestimated for all market segments. Then time will show. We will do roadshow and demos with -- hopefully, with purpose-made kind of applications, which we can benefit from the use of TLens when the phone is available. And hopefully, that will mean that other phone makers will also like to take the jump and move with this unique technology. As I said, AR, fantastic position. It's not going to be a walk in the park. We are already there with many, many players, and there are new design wins expected this year, not only AR, also potentially on the VR side. Medical opportunity, just talked about it. Do you expect this year to be the kickoff. Barcode reading design wins expected this year also. Even though small cases, they're important. Building our position there and do expect more design wins in barcode this year also. Automotive. People are telling us that today, the cameras in the car industry are basically with no focusing capability. They are telling us that sooner or later, there will be a need for autofocus technology in the car, both outside camera and in-cabin camera, inside the car camera. What they're also telling us is that there are different reasons why they need autofocus. One reason is that they are -- the resolution is increasing in the camera and that will, invent self-force AF to be needed. Also, they would like to move from glass lenses to plastic lenses. So there are drivers pointing in a direction which is describing the need. Then why should we have a position in that industry? Well, the fact that the incumbent technology in making into focus is moving a lens stack back-and-forth. Many claim that, that is really a no-go in this kind of environment, driving car, vibrations. So they really would like to look at something else. And one of the something else could be a TLens. It's going to be an extremely tough market to penetrate, but we are, I would say, receiving incoming calls, wanting to engage with us, and we have actually now ongoing POCs with Tier 1 players in this area. Don't expect anything kind of great news flow in the next, say -- what should I say, a few years, because it will take many years to develop this. I'm mentioning it because, again, it's a part of future-proofing the company. Today, the consumer is very concentrated around smartphone and other things. But, like I said, in AR, the volumes in cameras or in the car industry is huge, so we are starting to build, I feel, and showing that, yes, smartphone is important. Consumer is important -- today's consumer is important, but we are involved in many, many other segments, which will facilitate a successful case. It's not walk in the park, but there are super good opportunities. Joachim?

Thank you, Øyvind. So I guess this now moves into a brief, call it, overview on where we are in the rights issue process. So as you have probably seen from the announcements on NewsWeb over the last weeks, poLight is now running a NOK 135 million rights issue. This rights issue has been fully underwritten, meaning that the company will raise its NOK 135 million. And the subscription period has already started. So shareholders that was registered in [ DPS ] as of 13 April was given preferential rights to subscribe for shares in the rights issue. And these subscription rights that the shareholders have been given are tradable, meaning that you could buy and sell them on the Oslo Stock Exchange, and they are listed under the ticker PLTT. So each subscription right gives the right to subscribe for and be allocated 1 share at the subscription price and the subscription price has been set to NOK 10.45 per share. So as long as the market price of poLight's shares is above the NOK 10.45, these subscription rights will hold financial value. And as referenced to closing price, as of yesterday, 19 April was NOK 13.68 per share. So as a shareholder, and in order to capture this value, you must, either, alternative one, make use of the subscription rights by subscribing for new shares. And the deadline for the subscription period is the 28th of April at 4:30. Alternatively, you could also sell the subscription rights that you do not want to use for subscription. And the trading of subscription rights will stop on Monday at the close of the stock exchange, 16:30. So that's the latest you can buy or sell subscription rights. It is possible to subscribe for a higher number of shares than the number of subscription rights that you have. It is also possible to subscribe for a lower number of shares than the number of subscription rights that you have. But if you do that, of course, we would encourage you to sell the subscription rights that you do not want to use for a subscription. Of course, also opportunity for new investors looking to participate in the rights issue. So the way for new investors to participate is to purchase subscription rights, again, with a ticker PLTT and subscribe or alternatively oversubscribe according to the purchased subscription rights. So in order to subscribe in the rights issue, and there are more information about this in the links that you see here on Pareto's webpage and poLight's webpage. But in order to subscribe, you can, either use the VPS online subscription system, and that is an easy way to do it, if you're a Norwegian resident, or alternatively, you can fill in a subscription form and submit this to Pareto. So, I think, again that's about it, about what we wanted to say about the rights issue and the process and where we are. Keep in mind these deadlines, the subscription period ending on the 28th of April and the latest you can sell subscription rights is on the 24th of April. So I think that's about it. And with that, I think we skip to the Q&A. And I think, Øyvind, that we -- I will just read out the questions, and you could sort of address them as we go along. And if there are questions that are better suited for me to answer, I will address those directly.

So I think the first question that we could take is what is the reason that the TLens only appears on the high-end phone and not in the other products that were announced in the series?

Yes. It's a good question. And we have addressed that a few times also during older quarter presentation. But the quick answer is that typically, when you -- when companies start with new technology, they will always start with a certain model, and typically, a model which is -- can take the cost, because new technology typically cost more. And they also would like to use it in a model which they expect to be a relatively low volume. This is a very classical way of introducing new technology, so that's the reason.

Very good. And the second question here, can we expect another smartphone release with TLens this year? What is the status on the American smartphone OEM?

I think we can give a more broader update on -- a general update on our Q1, 11th of May. So I think please wait. We'll give a -- yes, give an update on all market segments in -- at that point in time.

Very good. Then there's 1 more question. So in the prospectus, poLight was not aware of any significant changes in trends in production, sales and inventory and costs and selling prices that affects the business at the time of the release of the prospectus. And then the question is sort of are there any known changes in these trends now? Any sort of big stuff since the release of the prospectus?

No. Yes.

Another question here. It relates to the fact that in Investinor and the Industrifonden have agreed not to sell subscription rights at a price that is lower than NOK 4.48. And then the question is, do you have any information about if they will sell at a price above that price, or are there any agreements with the underwriting consortium that these subscription rights will go to the underwriting consortium? I think I can address this. I think, firstly, we can't speculate about what shareholders will do. So I think I won't comment on the first part of this question. But the second part, there are no specific mechanisms in the underwriting agreement that sort of transfers these subscription rights to the underwriters, that there are no such mechanisms. Yes, I think, basically, that's about it on the questions. I will see if there have popped up some more questions here. There is a question here. How is your financial outlook? It's a quite broad, broad question. Do you have any sort of broad, like…

Yes. I would like to refer to what we said before, meaning that 2025, we were hoping and targeting to be profitable. This is highly dependent on the ramp on the smartphone. So I would -- but over and above that, I would like to kind of more comment on these outlook statements on our quarterly presentation, 11th of May.

Very good. And then there is 1 question here. If you have 3 accounts that holds all live stocks and want to buy shares, do you need to then buy 3x through EPS? Or is it possible to do it in one go? Not quite sure, to be honest. But presumably, you need to do it 3x, but I would check that with your broker.

Good?

I think that's about it on the questions.

Thanks, Joachim, for helping us. This has been a long process and a complex process, so good to have a specialist advice from Pareto. Thanks, everybody, for joining the webcast. If there's any questions, don't hesitate to reach out to us. We will try to help you as good as possible. And hope to see you in our quarterly presentation in Continental, 11th of May in Oslo. Thanks a lot. Bye-bye.

Bye-bye.