poLight ASA (PLT) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to poLight's second quarter presentation. So together with me today is also CFO, Alf Henning Bekkevik and Board Chair, Grethe Viksaas. Alf Henning will go through the financials. The agenda as normal, key events, introduction to poLight, operation and market review, focusing on market, financial review by Bekkevik, outlook statements and Q&A. Regarding Q&A, for those in the audience to have today, please, before asking a question, wait for the microphone. Those on following us on webcast, please leave your contact details. So in case we are not running -- if we're running out of time, but we can respond to your question through e-mail. Key events: Well, I guess, the event is that Meizu 20 Infinity is shipping. It was available, I think, in June. Many of you have already bought the phone and tested it, come back to that. I will say good feedback on performance. But as I mentioned many times before there's no doubt that the consumer market is in a difficult sentiment, and you can listen to whatever quarterly presentation, you will, and you will see that all companies are reporting that. It's a difficult sentiment. What we also know for sure that sentiment change. Also during the quarter, which we also announced during Q1 is that the Chinese company LLVision has released a product of enterprise AR product using TLens. We also have to, of course, obey to all formalities. And one of the important aspects is Norwegian Transparency Act, which the company published the first report in end of June. As you also know, the right issue was oversubscribed by approximately 25%. Many didn't get what they wanted, big oversubscription. And again, at a net NOK 125.8 million in net proceeds, thanks to existing shareholders for that. Yes. For those who are new, poLight, in short, a global player, as you can see from the map, we are basically all over the place. We are slightly less than 40 employees, and we are more people outside Norway than in Norway. The strategy we have is to have people, competent people, close to customer and partners. So that's why it's set up like this. We are a tunable optics player. Hopefully, step-by-step, we will have different products in that area. Focus is on different market segments, but I would say consumer, AR, industrial has been the main, but definitely, like medical and automotive is coming. We have 21 worldwide patent families, 8 pending applications and 4 registered trademarks, which is a few up since last quarter, and listed in Oslo Stock Exchange in 2018. If you're going to say 4 things about our technology, super fast. For those who have tested the phone is quite amazing. It's really very compact solution. As you can see, the whole of the screen in the Meizu phone. It's really, really small due to TLens. Also, when you take a picture, and you're changing focus very often, you can see pumping because of the movement. For TLens, there is no pumping, making type of auto focus applications, much easier to make. And for many, many cases, power consumption, super important. AR glasses in the future for consumer. Of course, if this is going to be the glass, there's not much space for battery. So power consumption is critical. So those are the 4, I would say, key and the others. Technology, replicating the human eye. On the left side, you see a membrane being banded and under that membrane, there is a polymer, which is the lens, which is the only thing we produce. And when you bend it by having an ASIC driver, changing voltage from 0 to 50, that bending shapes the polymer underneath the membrane and hence change the focus from close to Infinity. As you can see from the top right, it's a very small, small sensitive lady. You can see it in relation to a tip of a pen. On the bottom side, you see the supply chain. We produce the polymer. We have ST as a partner for the MEMS wafer, which basically is the membrane, which is bending. We have assembly partner, which is packaging the TLens into either Bare TLens without any [indiscernible] or a TLens with some plastic around, which is the packaged TLens. So we sell that to camera module suppliers who have integrated in different ways, add-on or add-in and those guys are selling them to different OEMs. As I mentioned, consumer, specifically smartphone, wearables, key, barcode industrial important but slow moving market. But it typically is a market where product is lasting for, say, 5 to 10 years. So it's an important part of over time, the recurring business. Augmented reality, huge opportunities for poLight and as I said, also VR. And then the -- those are the 3, I would say, main focus areas. But I think more and more, we see that we have a big role to play in the medical endoscopes, we're going to talk a little bit more about that. But also, we can see now automotive being more and more relevant for poLight. As I mentioned before, and I will mention later, that's a nontrivial volume opportunity for us. Yes. Yes, in the design wins. I'm not going to go through the details, but just saying that, of course, having these design wins and the latest one, the Meizu phone is a big help for us when we are communicating with other customers. Then we have proven that we can deliver and we can have different applications. So if we go into the consumer side, as I mentioned, it is clearly a difficult sentiment. People are spending less. People are very afraid of their jobs in many areas. So that is obviously impacting the OEMs. The OEMs see the need to cost reduce products, they want to reduce variance. So this is impacting the whole industry, definitely. But I have to say, having this in your hand when you meet customers, is definitely creating interest, not only in smartphone, but in all segments. The focus in the quarter was smartphone and augmented reality. But we're also working on other applications such as webcam, laptop, smart home, wearables is also being addressed. We have 4 design wins, 34 completed PoCs, 5 ongoing PoCs and 10 planning PoCs. So first, smartphone using TLens on the market. That's definitely the biggest news for the quarter. As you can see from the Meizu homepage, among all the highlights, it says that selfie cameras equipped with a hybrid lens TLens, latest innovation for the company, poLight, which aims to revolutionize to autofocus on our mobile devices. This is not said by us, but is said by our customer. And I guess that's the best feedback so far. Yes, we have been in China specifically, we have been having the phone in our hands for quite some time since mid-June. And we have done a lot of road show. I will myself go to China next week. And the feedback so far, which is still early days is, I would say, from a performance perspective, very positive. And you have been using it and testing it, many of you, and I know that you also have seen that. We have said that what typically a customer feedback is that, wow, this was a really compact solution. Wow, this was fast and my God how smooth. So in general, saying they feel that this is the engineers in the OEMs we met. And of course, they like the small nose, which is meaning that you have a very small hole in the screen. No pumping breathing, basically better user experience they say. These are statements from customers. But it's also important to say that the TLens in an add-in camera module which is produced in very low volume compared to competing technology is expensive. Not so much, what should I say, not only due to TLens, but mainly due to the process of manufacturing is still early days. And of course, that means that in this sentiment, you need to convince people on performance and to take the cost penalty. Over time, I'm sure that our camera module suppliers will be more, so there will be competition. And also, they will kind of learn how to manufacture it in a more efficient way. Also, we were so lucky that we managed to implement an all-in focus touch and refocus algorithm in actually a commercially available phone. I don't have it here, but we have it in China. This is a cooperation with Almalence lens for quite a few years ago when we demonstrated the Google Pixel phone with the same algorithm. And as you can see here, there are amazing pictures. Here, you can see all-in-focus and you can see this on the left side, you can see the signs and you can see the background and the business card very sharp and the focus. You can see the Jet Sun, FAE in China, standing there front of the building. You can see the bottle and you can see the background in focus. So quite amazing pictures if you look at it. And who wouldn't like to have something like this. Left side is Redfar. He is the GM of China. And I will say the single most important guy why we have achieved this. Jet Sun is the FAE. Great team in China. This is half of it. So status on consumer, you can see here quite a lot of activity. 4 design-win, 1 design-in, 12 PoCs and 19 planning PoC. And just look at those glasses, meaning that there's a lot of consumer-related AR companies now planning to test the TLens. I should also say that part of this is also TLens, not huge, but part of it. AR, You noted well, you know why. Ultra-compact size solution, very low power consumption, fast focusing speed, constant field of view, no gravity impact when you move your head super important and athermalisation meaning robust focusing over a spectrum of temperature, which has been actually one of the key enablers. One of the reasons why Magic Leap went in that direction was exactly that. Yes. We've talked about that before, so that's nothing new. LLVision is currently shipping, which is great. So definitely a positive development. Look at this table. There are 2 design-win that you, there is 1 more design-in so 5. There are 12 completed PoCs. There are 11 ongoing PoCs and 12 planning POCs. So this huge activity. And I think it's important to say whatever we do to position us for this market has a direct relevance for this market -- for the AR market. TLens is the main driver here, but TWedge, which is this wobbulator, which is this product enhancing micro LED displays, resolution wise is also receiving, I would say, really good feedback. We already engaged with key players in the area. We recently shipped samples and the immediate feedback after them installing it in the demo kit was quite amazing. They were surprised how much it really improved the resolution. So how you are on AR then, 2 design-win, 5 design-win, 11 PoCs and 12 planning PoCs. And the glasses, all the glasses and that our enterprise, whereas the orange or whatever it is, is consumer related. So you can see a high portion of consumer-related cases. And the consumer cases are typically a few years ahead of us, and there are small companies and big companies working with us on this. Industrial, not so many new things to say. So I will save time on this, but still, I would say, good activity. Quite a few has created the PoC during the quarter, 27 compared to 20. It's a market, which I said before, which kind of takes a lot of time, but the good thing about it is that the product is shipping for many, many years. I think the volumes -- for the volume on this market to increase, we need to be kind of qualified or used in and closer to the point of sales area because where we are used now is typically in manufacturing plants, logistics hubs, where, of course, the volume is low. But as we can cost optimize, hopefully, they can bring it into closer to point of sales, which is giving a significant higher volume. Yes, use case Health Care and Automotive. Health care, many of you are following closely, Xenocor. Very interesting case, laproscope. Human trials to be carried out. After human trials, they will release. So key case for us. It will be, hopefully, a design-win within this year. This would be the first assignment for a commercial endoscope -- laparoscope application. Xenocor to remind ourselves, it's a disposable product, meaning that a onetime use. And they claim Xenocor that this kind of device is unique, and I think that is going to be the future, and they are taking actually quite amazing high volumes step by step. We have been in contact with some medical doctors, which is also saying that they see a great opportunity for TLens in the health care space. So Kavli, we have to thank because they started using TLens. They have been tremendous help to profile poLight and TLens in important journals. We are in close contact with them still. They're still using it. They just released the Mini2P, which is also using the stacked for TLenses. We have also seen a tremendous number of research institutes, universities throughout the world who is doing the similar things. There is even a commercial -- a few commercial companies, which actually are now selling this. You can go to lab maker as an example, you will see they are selling these devices and you can see from the prices that the TLens is relatively highly priced. So super important from, I would say, a profile perspective. Of course, we earn money on that, but that will never ramp in big volumes, but it's a super good qualification of TLens. So 1 design-win, 2 design-in, 17 PoC ongoing, and 6 planning. There are few of those PoCs, which is purely commercial companies. I mentioned that there is one which is with a huge Tier 1 player in endoscopes, not disposable, who is today qualifying TLens, and that will be a sterile endoscope application, very interesting. It's a long process, but so far, so good. Automotive, yes, nontrivial volume opportunity. Everybody tells me stay away because it's so difficult. And I believe them. It is difficult. We have started internal qualification for this market. It's -- it is -- we cannot neglect this opportunity. This is a huge potential volume opportunity. Yes, difficult, but we -- as we see today, and we may be wrong. But as you see today, this market should be good for poLight and TLens. What we are -- when we're engaging already, we think we're ongoing, as I said, 3 PoCs already after just kind of starting exploring this market with big names. And the thing they are saying that we need a solution. There is a need for AF for different reasons. Today, they don't see a solution of the existing incumbent technology and they think about vibration in the car. Of course, moving parts in that kind of environment is super, super difficult to handle. So they're looking for something like TLens. I'm sure they're looking also at other things. The question then is, will TLens survive in such an environment. And that's what we are doing internal qualification test to show. The way we see it is that we think we should. There may be a need for tuning here on that, but we think this should be possible. At least it will be extremely arrogant not to try. It will take time, but from a market opportunity perspective, I think this is one of the biggest opportunities the company has. Summary. As you can see, different market segments, we already talked about them case by case, but as a company with slightly less than 40 people, this is one guy asked me how is our health and if you look at this table, it's a stressful life, but it's a good life. Financial review, Alf Henning?

Good day to you. So in the quarter, we had revenue of NOK 7.2 million of deliveries of TLenses and drivers ASICs compared with NOK 2.5 million the same quarter last year. In the quarter, we had NOK 3.8 million that we have received for units that were meant to be used in a smartphone that was canceled in 2021. The EBITDA loss was NOK 18 million compared with NOK 13.9 million the same quarter last year. In the quarter, we had NOK 1.8 million in reversed social security related to the share options that was recognized in the quarter compared with reversed social security accrual in -- of NOK 3.5 million in the second quarter last year. And as you might know, this is related to the decline in the share price, that reversal. On the balance sheet, we had a cash position of NOK 153 million compared with NOK 84 million at the beginning of the year. Inventory ended up with NOK 66 million compared with NOK 46 million at the beginning of the year. It increased by NOK 9.5 million in the quarter, and as said in previously, quarter is related to the wafers that we have increased. On the cash flow. We started the quarter with NOK 54 million in cash. We used almost NOK 26 million in operating activities. That is more or less the same level as the same quarter last year. We received NOK 125-ish million from financing activities due to the rights issue. So at the end of the quarter, we had NOK 153 million in cash deposits.

Okay. Outlook. Even though consumer market is difficult, we will continue to emphasize and position us for that market. We have a super tool, Meizu 20 Infinity is a super tool in that process. But it's also fair to say, as I said many times, the sentiment is difficult. And currently, there is no kind of visible signs of that going to change, but we know it will change. We will actively use the Meizu as a reference, not only for smartphone but for any consumer-related application. And that is, as I said, a super tool. We will mature and cost optimize TLens solution, both addressing the component TLens in itself by learning. And of course, when we ramped and deliver everything to Meizu in the month actually only, we learned a lot on the manufacturing process and the only way to improve yield is to produce. So that learning gave us a lot of -- that process gave us a lot of learning, and we will continue that. We have kind of weekly yield task group reporting to management to see how we are progressing in this important era. So that will be a huge focus. Also, simplifying the manufacturing process when we have yield improved is something we are working on. So that is on a component level. But also we need to work together with a camera module players to optimize system level performance and cost. So we are addressing that from 2 angles. And then there's no doubt that there are potential ways of enhanced performance of the TLens and solutions around TLens, and that is a huge focus area for us, then actively develop the capability and relationship to existing camera module players and new camera module players. This is a key for us. And then also, we see now opportunity. We are currently doing some nice designs for, I would say, a higher value application of TLens. TLens is today used in the selfie camera, as you know. But the budget for selfie camera is significantly less than the budget for back camera structure. So that's what we know are kind of focusing more and more on to see how we can maneuver in the back camera space with TLens solution. So that will be kind of the focus from the product side. AR market, as I said many times, it will be key for poLight. There's not many a couple of years ago maybe since we started to address this market. And in a way, it's big world, but I would say it has exploded in interest. And of course, shipping with Magic Leap is a huge reference and elevation for that matter, but we are really engaging with many, many players, small and big. There is, we feel, a perfect match between what we have and TLens, both for camera, but also for display. And I talked about TWedge, so far, TWedge seems to be also a fantastic match for this segment. So in a way, 2 TLenses and 2 TWedges could be a wet room in a pair of glasses. I'm not saying that is realistic, but there is -- we have a potential several products which can go into that market or several units go into that market. TWedge is still at the prototype stage, mind you. And we are still kind of making the business case and to take a final decision whether this is going to be a product or not. So that is still to be decided, and it will be decided this year most likely. But so far, it looks promising. The AR/VR cases is still enterprise focused. The consumer market will drive volumes, but the consumer market is still yes, ahead of us. And -- but it's important to establish a position in the early days, which we didn't do in smartphone, which we will do in the AR space and VR space for that matter. Automotive step by step. We are putting resources in that. We are engaging with customers now, 3 POCs, as I mentioned. And it's -- I would say it's a part of understanding the possibilities and the challenges in this market. And so far, it seems interesting, but yes, difficult. Health care, same there. So there's no doubt that all this activity, we are now adding kind of 2 sectors -- market segments into our kind of focus area, which means that we have a lot on our plate. And I think it's fair to say that we have to continue or maybe increasing strengthening our organization to handle these above-mentioned opportunities in a good and professional way. So I would say, a lot of opportunities and a lot of challenges, but the enthusiasm and the energy to address these opportunities and challenges is very high. Thank you. Then Alf, will you join me for Q&A? As I said, if any questions from the audience, then please wait for -- after giving you the microphone. Should we start with your screen?

First one, given the wafer inventory, how many TLens or TWedge products can poLight currently produce?

Yes. So when it comes to TWedge, that is far from being a mass production -- so that is -- if you look at the kind of like the wafer inventory as an example, Alf Henning, talked about, that's not relevant for TWedge. So -- but on TLens, you may remember that we were forced to put a quite big PO on SD for wafers to secure supply. And that's what you're seeing coming in now quarter-by-quarter. That PO is being delivered. It's taken some couple of years or something. And I would say that if we look at the inventory health today, we can produce probably a handful of TLenses based on that. So we are very -- which is super good. We just had a management meeting with a big player. And of course, this is, for them, very comfortable to see that we are kind of -- that risk is not there.

PoLight has been increasing the testing capacity for TLens over the last few quarters. What is the production capacity for TLens?

I think the bottleneck in TLens manufacturing is, I would say, on the final test. As you know, all TLenses are 100% tested for important parameters. The manufacturing, the assembly of TLens is given that you have control of the wafer, which we have. The assembly of the TLens is relatively simple and standard equipment and can easily increase in capacity. But their test equipment is highly specialized test equipment. And today, depending on the spec the customer demand, which means which kind of testing we need to do is everything [ we buy ] say 0.5 to 1 million capacity per month. If we're going to increase that, typically, that type of test equipment is 6 to 9 months delivery time.

What's the latest update on ongoing PoC with a top-tier medical customers?

Yes, I briefly mentioned it. It is really a top-tier company. I would say, so far, it looks very promising. And again, it's a quite thorough investigation. It's a worldwide team in this company working on this aspect, testing all kinds of things. And it's a very advanced configuration, as you can imagine. So -- but at the moment, it seems like they are moving in the direction of wanting to use it. But still, things can happen, of course, but that's what our understanding is today.

Is poLight still supporting and supplying TLens for the project related to March 2022, designed in AR case that include support for our display solution development, also is a design-win likely for this solution in the near future.

Yes, we are engaged still with this company. And this is related to a display, so using TLens for controlling a display. Customer is super enthusiastic. They claim that TLens is a key enabler for their performance. They -- we have shipped what they order. We have no dialogue with the customer on a revised packaging because also here, we are responsible for how to package TLens into their system. And when that is being designed, we expect there will be more orders coming in this. When market? Well, we don't know. But if you say that it's -- to all these AR consumer cases is quickly 3, 4, 5 years ahead of us, we believe. There are different companies saying different things, but it's definitely not a next year thing. It is a longer-term cases.

As you -- as the recently upgraded Mini2P in its 2023 version becomes commercially available. How do you anticipate these changes will affect poLight's profit margin and sales volumes?

I think that version in itself is still using the same stack, four-stack TLenses. So in that way, it's same. But what I would say more importantly is that it seems that more and more companies are engaging in this area and want to make and sell these kind of units and I've said before that I don't see this as a big revenue maker, but it has been relatively significant. And I think that as the rest of the world engaged using the same thing, I think it will -- seems like it will increase at this stage at a very healthy margin.

Juha Alakarhu served as a Director of the Board of the Directors for the past years, but did not continue following this year's general meeting. He is listed under the conflicts of intersection in the rights issue prospects due to his role as VP of Axon Tampere, a company that from time to time has and will likely in the future, assess use of poLight's products in operations of Axon Tampere. Is this the likely reason for his non-continuation?

I have to say I'm a press what you dig out -- but I think you have to ask Juha, but I think the main reason for him, he is a very popular guy and he's a very tough job in actions. I think it's more like a capacity availability issue than anything else. We still have a relationship to Juha. And then as generally speaking, I would say, not related to action, but everything camera on the body on being wearable has a high relevance for TLens, of course. But I wouldn't say that it's more like a capacity and availability thing.

Do you have any intentions to take part or in additional conferences, seminars or presentations within the next 6 months.

Yes. We will be present at AutoSens, which is our first effort in the automotive area to learn and to meet key people. That is coming, I think, in September in Brussels, if I'm not mistaken. Then we will be, and I will be at CES in January. And then we -- and I will be at SPIE photonics West in San Francisco in the end of January. So we are -- as you may have seen, we are more and more vocal and more and more present in different shows and conferences. And that's part of our strategy. We have hired a marketing consultant who help us with posting and stuff like that to make us more visible in different settings.

PoLight owns very strong patents if TLens and TWedge can become standard components for many larger companies, and then the ownership of the patent must be worth a lot of money. Then I wonder what poLight envisions the value of the patents to be?

There's no doubt that IP is a key for us. and we are working very actively on protecting our solution. And we spend millions on that per year. So this is important for us. And it's also important for our customers. I would say that if we engage like this question is indicating, with larger companies shipping both TLens and potentially TWedge, I think the valuation of the company will be very interesting. I don't like to comment specifically on that. But of course, IP will be a part of it, but the case that you're shipping to major companies is in itself a big value driver, of course.

Which companies are poLight's assembly partners. Do you plan for more assembly partners in the future?

That's a good question. And we have kind of qualified 2 -- I should say 3 because Tongxiang, which is our main assembly partner today has most qualified in the type A. And also, they have now qualified their factory in Philippines. But now we have moved everything to Philippines for cost reasons. But as I said, Taiwan have also done it. And then we also have another company in -- we work with in Taiwan. So in a way, like then you can say 3 sites has been used. Today, we only use one and the reason for that is that you need to make sure that you have volume enough for the partners we have. And today, we consider that it's efficient what we have in the Philippines.

Honeywell still has the EX30 in production with TLens, and it seems that it maintains Honeywell's position in the market. What can you say about Honeywell as a customer and about their feedback to you in the now almost 3-year-old barcode product they have? Are you still in dialogue with Honeywell?

We are definitely in dialogue with Honeywell definitely. And I would say that they have -- that product seems to be well received that EX30. We also see that otherwise to do something similar. So it's a high-end product. So it's a low volume as we commented a little bit. So the way we see it is that it seems like the claim ones Honeywell that this product is a product which gives them new accounts and keep them with old accounts. So it's a key product for them to kind of keep the customer in their portfolio. So that's -- but it is a low volume but they are still shipping. And the way we understand it, there are several years lifetime on that product.

In May 2022, 1 to 5 share split was carried out. What was the rationale behind the split?

Yes. The rationale behind that is that it's a little bit -- we are a share, which is quite popular between smaller investors. And there is this feeling that if the share is costing, say, NOK 200, that's a lot. And so there's a psychology effect by saying that splitting that in 5, it will be perceived as a cheaper share. And that is -- maybe it seems stupid, but that's basically the mechanism. And so it was meant to be more accessible for more people and it was meant to be important for the liquidity.

You mentioned that you have shipped several test samples for TWedge for OEM. Can you say something about the feedback?

It's a strong word. We're just starting to sample customer. And as I mentioned in my presentation, the one -- the first customer who received it has so far given positive feedback.

Can you say something about time to market for TWedge?

Yes. First of all, we have to take a final decision whether it's going to be a product that we shouldn't kind of take that for granted. It's also a costly development program. But if we do it, it will typically -- that kind of development will typically be, yes, a couple of years, 15 to 18 to 24 months or something.

Does TWedge use piezo activators from STM or are you targeting other partners for this product?

That could be possible. But the way we see it today, it's more likely to have a kind of bulk piezo -- discrete piezo solution. That's what we're using on the prototyping.

If TWedge will be used in glasses having 2 screens, wouldn't that mean 1 TWedge per glass, so possible 2 TWedge per pair of glasses.

Correct.

Where in the supply chain are poLight related to TWedge? Is it so that you make the whole TWedge model yourself? Or do you rely on partners for assembly of this product?

Yes, good question. That can go in both directions. It can be that we do a special highly integrated version for selected customers. But we also definitely have -- will have a strategy to have a kind of a stand-alone component of the shelf available from poLight. So potentially both.

Thus, OEMs see lower risk going for TLens now after you show that you could deliver on quality production capacity and organization-wise?

Yes, I think that's an important element. We have seen -- we have shown that we can produce. Actually, as I said, we produce all the TLens to the Meizu phone in one month. So I think it's a big yes to that.

Have Meizu 20 Infinity sales generated more deliveries from poLight than first ordered follow-up orders?

No. We have so far only received 1 PO and delivered that. Then, of course, the phones relatively recently start shipping. So we don't know yet what's going to happen in the next, but as I said many times, this is a super high-end phone. It's expensive. Market doesn't like expensive things anymore. So that will probably sell relatively few. It's for Meizu, this is a showcase for look what we can do. The greatest of all technology is in this phone. So this is not made for being a huge kind of millions. But let's see how it sells.

With the Meizu 20 Infinity in the market, have other manufacturers considered to do the same?

Yes, we are just, I would say, starting the roadshow showing this phone showing the auto focus, which I showed on pictures, so that's early to say. But what I can say, they are listening to us.

Can you say something about the yield on the production of TLens for the Meizu phones?

What I can say is that the yield during that process improved significantly. And what we said before, our target yield of 90-plus is clearly within reach as we see it.

How is the progress on compression -- progression, sorry, to add in models from other CMM standard first.

Yes. We are working with a few other camera module players working on adding solution. You've probably seen one of them being relatively vocal in the press, a Japanese company. So -- and we have others who is working with add-on solutions. Also one of the add-on solution is actually in the VR space. So step by step, they're coming more camera module players. And that's, of course, important for us to create the correct dynamic in that market.

Can you tell some one about the add-in concepts area of use? Is it only within smartphones? Or is there activity now within AR, industrial or the verticals.

Clearly, the smart phone is the first one, but we see this having relevance for all markets, to be honest.

Bigger TLens Platinum. Jon Edwards mentioned in the tech [ blink ] video can come in 18 months, if there are customers who demand it. Is the TLens intended for rear cameras or what are the areas for use for this?

Yes. TLens, typically TLens Platinum case is a part of the back-end structure typically. So on this, as you know, this is highly related to the image sensor and image sensor on the back camera is typically bigger than they use in other like selfie camera. So Platinum is in a way intended for that kind of use.

The development of TWedge. Is it something you were 100% responsible for yourself? Or is it in partnership with another company?

The TWedge asset is today is 100% poLight activity. But we would like to -- we do engage with user of that product to make ensure that we are hitting the right specs and performance parameters.

For external core, you supply more than just TLens. Have others shown interest in the same solution that TLens poLight provides our total solution.

We have seen that in the medical space, we have seen that including Kavli, we see that we are often asked to do a little bit more than just shipping the TLens, building it into some kind of yes, should I say, interface so that we -- it will become easier for them to interface the TLens into their system. So yes, we can see that, and Xenocor is one example.

Magic Leap 2 has recently unveiled new features and software capabilities, including the mixed reality capture enhancement. Has poLight involved in these enhancements and do Magic Leap with this update, utilize more of TLens advantages.

To be honest, I'm not quite sure, but I don't think it has a high relevance for the TLens, potentially some, but at least it's nothing we are aware of.

Are there any ongoing software development initiatives led by poLight's OEMs and producers or other entities that involve integrating TLens' advantages to offer functionalities such as all-in focus, refocus, bokeh, 3D photo, background removal or similar features.

Yes, I'll show you the pictures and that is an Almalence SDK, which is used, which is quite well recognized company in that software space. That is, as you can see from the picture, it's a printing kind of -- this is an Almalence demo time. So it's a demo software, which they developed for quite a few years ago, actually, which we used in the Google phone. But then you have this company called [ Vortex ], which has -- is a Spanish company, which has also done something similar. So there are activity. I think also -- but what you can see from the OEMs. They don't like to pay license fee. And in this cost sensitive world, you can see typically also they have internal development activity for doing things like this. We of course, try to motivate Meizu team to make sure that they have that when they release the phone, but there were no capacity for them to do it. So -- but I think it will be a mix between them doing kind of other software companies, so like Almalence or [ Vortex ] to install it or they would be doing it themselves. So hopefully, they will do it. But so far in this phone, it's not. But as I said, we have software, so we can demonstrate it to customer. That, I guess, is the most important thing at this time.

How many ongoing projects or PoCs are related to TWedge?

It's 3 ongoing PoCs and 3 planning PoCs.

I have seen that there are -- there is enormous activity in AR/VR among all the big well-known tech companies in both the U.S., China and Europe. Can you say something about the status and position poLight has as a company vis-a-vis these large companies?

Yes. I think we have answered that question during my presentation, but given the status of ongoing PoCs and planning PoCs, I think it's quite obvious that we have a very good position there and a very good relationship with many key players.

When do you make a pipeline chart also for TWedge?

That will be when we have decided to go that -- to develop that product and we start shipping kind of -- start selling that as a product. Today, remind us -- Today, it's a prototype, and we are sampling. And so when we have the product and we're starting to actually offer that product, that will probably be the time we do that. But I will keep you updated on how things are progressing, of course, both from the tech side and the market side, in the quarterly reports.

Will you use the same supply and assembly chain partner for TWedge? Or will you at least partly have to invest in new process equipment, et cetera.

Yes. Assembly wise, I think we can typically use the same type of partners from assembly perspective. What will be -- could be different is the [indiscernible] whole estimate.

It has been relatively few announcements from poLight last month compared with what could be expected from the pipeline. Could we thus anticipate a catch-up effect in third or fourth quarter?

Nothing will please me more.

Do you see any sign of a more predictable order intake except, for example, or repeat orders from existing customers?

I think step-by-step, we will build that. But I think when you still -- I know that you have been patient so far, but I think we need still to be patient. We are addressing big markets, some of them like automotive, like health care or market, which it will take to develop. So I think we still need to be patient. We still need to be very dedicated. But over time, that is definitely what we hope.

Do you see an increasing interest from the U.S. market? Or is it Asia dominating?

I would say it's quite impressive activity. We have built in U.S. in relatively few years. We now increased 100% staffing in U.S. Now we have 2 people in the U.S. And the reason for that is that there's basically too much to do for one guy even he works day and night. So that -- but then, of course, Asia is a key market for us. But I wouldn't say -- I wouldn't place one of them kind of -- I think they're equally important.

How about competition increasing new players, incumbent improving their alternatives or cutting their prices?

It's an extremely good question. I think the main competition we have today is incumbent technology evolving and having extremely cost-efficient solution, and that's the main competition.

Can you expand on the price sensitivity and how to cope with it? The world currently indicates that the price sensitivity is temporary, but is it really?

Yes. Price sensitivity is specifically, I would say, the case today. But then there is a price on different levels. We have the component pricing from TLens which we control, of course. But then also we have the pricing of the camera module. I think that we need to mature about a component. We need to produce more. We need to enhance and our camera module players need to mature and produce volumes to be able to kind of produce cheaper. But I also think that at the moment, our partners also would like to say that, okay, this is something new, if you -- so you should pay a premium. So they're also taking a little bit of that position. So it's difficult to say. I think the sentiment and I know I'm talking to consumer. I think the sentiment needs to change before things to change on the competitiveness on pricing.

You have stated that you had to say no to projects because of resource limitations. What kind of projects are they? What kind of support is generally required from you by your customers -- potential customers?

Yes. Obviously, those we have said no to. I wouldn't say that I would be -- it would be wrong to me to say we are saying very often no. But -- there are some cases which are very, very extreme like military, space type application, which never will be significant in volume, which will potentially mean that we need to do something new and being resource intensive. And then we say thanks, but no thanks. So we try to keep loyal to the focus area we have defined. And then we are opportunistic, but we have a lot of things on our plate so we need to try to be loyal to our strategy.

Regarding the income of NOK 3.8 million from the [ canceled ] phone, will this mean that the project with this client has been canceled for good.

Yes. That project was canceled and the reason this was the beginning of the downturn, where a lot of the OEMs saw a drastic drop in sales of phones. And they decided to reduce the number of variants, decided to delay new releases. And that was the reason for that project. And then -- but we manage, which is not easy to achieve that we received some compensation for the preproduction we did. So yes, so that is canceled.

There are 4 DI AR related camera up from 3% in the first quarter 2023. One or more of these one of the top players in the industry. Do you expect the one not -- do you expect the one not expected to be released this year to be released within the next year?

The additional low and the signing on the AR space is actually a VR case. And it is -- that one will be most likely next year. The 3 other ones has the chance to be released this year.

Second quarter had all-time high revenue and revenue in first quarter and second quarter together had higher revenue than the full year 2022 in total. This shows growth worth mentioning.

Yes. Yes. At the same time, there is a reasoning why we didn't, in a way. We could have -- if you don't look into the details in the numbers, you can say, yes, yes, another record high quarter, but it is related to history, which we finally managed to get some payment for what we shipped quite some time ago. So that's why we didn't make a big thing about it.

In the health care market, you say increasing number of endoscope cases. Will that mean more cases than the top tire product already announced and Xenocor.

Yes.

Considering that Finland, especially Tampere, is a center of excellence for camera technology development. How crucial is poLight's presence in Tampere to the company's operations.

Now that was the whole reason why we established Finland. And you may remember that Microsoft acquired Nokia and when they then decided to withdraw and shut that down, we used that opportunity to fly in and recruit people with a system knowledge in the camera industry. So in a way, people employed by us in Nokia partly today have many, many years of experience in working with Nokia and Microsoft, which is key for us to understand the system aspects. We have always been super good in the component TLens, but when I joined the company it was clearly to see that we needed to be more competent in the system. So that's why we did that. And we tried in many places to find those people with relevant background. And it was extremely difficult. You don't find them in Norway, at least not easily. We didn't -- we tried, but we didn't find. You could find them in Sweden in like a [indiscernible] at Sony Ericsson, but the best case we saw was in Tampere. That's why we jumped in there, and we're still there. But we also step-by-step now have built a little bit similar set up in Asia. In Taiwan and China has key resources with years of experience from OEMs and camera module suppliers.

Could you provide an overview of poLight's various locations, highlighting their core capabilities and unique contributions?

Okay. So that is -- our strategy is to be in the different markets with key competence. And that key competence is related to sales and marketing and it's related to customer support. So those are the 2 reasons why being close to partners and markets is being able to sell [indiscernible] and be aiming to support [indiscernible]. So we have this -- I'm not saying I made this a slogan, but we have this strategy that we think globally and we act globally. And if you only do fly in, like I do a lot, and you just leave then you don't have the continuation of what you do to have to do every day with your partners and your customers. So our clear strategy be in the important markets with competent people, both on the sales side and support side. And then headquarter, Tampere, U.K. setup will be kind of the third line when -- and more on the R&D side.

Do you think TLens will be approved for automotive during 2024. If when that will happen, how will you communicate it?

Now I think we just need to take that a little bit step by step. It's still early days, and I will keep you updated during the quarterly presentation. I think we need soon to round up. Where are we? Is there many?

1 of 3, 4 more.

Okay. That's true.

What is the benefit of the reference designs? Is it a starting point for customers? Has anyone made use of the reference design.

Yes. You could say a good example here is [ Aden ]. When we, a couple of years ago, when Xiaomi came out with this smartphone with this big screen, remember that, then we were super close to design-wins. But at that time, the design-win was based on -- we have -- the screen had quite free space for the camera and both top and bottom and sort of a space for the selfie camera, and we were very close to design-win. Suddenly, the world changed and everything -- it was all about the biggest possible screen and a small hole as possible. Those design-win we were close were stopped because the mechanical ID designer, he said, no, there's no space for a better camera. I prefer, have a bigger screen. Then, of course, we were very depressed. But then we said, let's do one last try. Let's show them a reference design on [indiscernible], which will enable a small hole in this way which will fit into the new mechanical ID. We did a tour, me and the CTO and Redfar Yang in China, all OEMs, and we put that business cut down. And well, they listened, but they didn't do anything. But suddenly, they started to work on it. So let's see the value of showing reference design. It's a kick start for our customer. Yes.

Can you say something about the big TLens order that everyone is speculating in on [ Hornet ]? Or is it just a rumor?

I don't know. I haven't seen it. I cannot comment on that, sorry.

Could it be relevant to sell wafers.

No.

There are 2 Robert icons in the consumer PoC, what kind of product is that.

How about icons, I think that's smart home.

Is it possible to get an update on the future financial ambitions?

We haven't updated the guiding. So we will come back to that. We need to see now how we can ramp the next couple of years. And the only volume market today is smartphone and that we need to understand better how that can ramp.

With what you know now or consideration is the company heading for sure success?

Yes. Yes. What can I say? We are a team of small 40 people, which are working day and night for creating the success and creating shareholder value, spending so much energy and time on this is obviously driven by that we believe this is a fantastic technology platform, and we have so many opportunities. And so -- but I can't guarantee anything, but I can guarantee 100% effort and dedication.

Under the screen camera seems to get slightly more interest. Are you involved in projects related to under the screen?

Yes, we are in discussion with some OEMs who would like to improve the -- under the screen camera. But it is, and I think it will be a transmission issue light true screen, which is not optimized for transmission of light will impact the quality.

Apple Vision Pro is a showcase now. What does this product mean for poLight?

I think it's a part of the AR/VR space. And I think the more kind of accepted that kind of solution will be in the market and consumer, the bigger -- the faster the consumer market will develop.

The latest design in smart glasses is VR -- is this a big company.

What I can say is that it's a company who has a very high end VR solution and maybe 1 of the most advanced.

And maybe the last one now, AR and consumer a few years ago, medical, a few years away -- sorry, the AR and consumer are a few years away, Medical a few years away, automotive a few years away, mobile web, no near-future projects will -- where will revenue come from in closed future?

We have a lot of small orders in -- we do sampling in all the market segments. We do -- we ship to industrial customer. We ship to AR customer. So there are -- but there are no huge volumes and -- but it's a mixed bag.

Okay.

Fantastic. Thanks a lot. I appreciate a lot for you. Today, the audience is completely -- the room is filled up. We need to have a bigger room next time in November. 2nd November is Q3.

We have a microphone. If anybody would like to ask to...

I think we have to round up to be honest. I think we have to round up. But thanks for your participating through web. And let's keep in contact and see you back on 2nd of November. Thanks a lot. Thank you.