poLight ASA (PLT) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to poLight's third quarter presentation. So, the normal agenda, joining me today is CFO, Alf Henning Bekkevik, also the Board Chair, Grethe Viksaas is here for anybody who could mingle and discuss with her. Key events, introduction to poLight for those who are new, and I'll see a few ones. Operational market review, financial review by CFO, outlook statement and Q&A. There is normally a lot of questions during the Q&A, also today I expect. For those who would like to give questions through the web portal, please leave your contact details in case we need to do offline reply. And also for those, who would like to ask questions from the audience, our Chairman, sorry, Board Chair will hand out the microphone so that everybody can get the questions being asked from the audience. Key events in the quarter, I think we have to say that's a relatively soft quarter, although we are have been super busy in supporting many customer projects and on different, I would say, improvement projects ongoing in the different parts of the organization. We did though receive a quite an important and strategic order related to this Mini2P microscope from a company, who is actually planning to develop this system and manufacture the system selling to different labs around the world. And then also all this going to be a repeat order, so we had a follow-on order from a Machine Vision/code scanner customer from China. So, for those who are new to poLight, poLight is having a unique tunable lens, a lens, optical lens which can be tuned by putting a voltage on it. And tunable lenses are more and more talked about and will be a key technology in many market segments, we believe. It's been a long journey, 2005 we started, that was the invention. It was a part of Ignis, this polymer. And from that, some very clever guys and ladies invented this polymer was a fantastic basis for replicating the function of the human eye. A strong IP, we are a small team, 40 employees give and take, very much distributed throughout the world. As you can see from the top right, we are placed where we find talents and where we have customer and partners. Of the 40, only around 15 is actually in headquarter in Horten. And we were listed in 2018. So that has been also a few years, but up and downs on the Oslo Stock Exchange. If we're going to say 4 things about our technology, it's super fast, probably the fastest on the market. So meaning that, you can change focus really, really fast, so that the way the human eye doesn't notice the change. It can make very, very compact solutions, which is important for many applications. Also, this annoying field of view change, this breathing or pumping when you change focus. It's something we don't have because we don't move any lenses, we just deflect or bend. And then more and more important in many, many market segments, basically a state of the art when it comes to low power consumption. So I like to compare this to the function of the human eye. So, and I think it's also important to stress that the -- what we have is a technology platform which can realize different types of products. The product which is already in market is the tunable lens, but there are other products development which can realize other functions based on the same technology platform. So, again, back to the human eye. The human eye has a lens, as you know, and there are eye muscles surrounding the lens. The brain gives a message to the eye muscles to squeeze the lens. Then you change the shape of the lens, hence you're changing the optical power and where you are focusing. That's basically your human eye. And we do the same. The thing is that the lens in our case is a polymer, a gel. It is the eye muscles, it's a membrane which you can see on the top left corner. That membrane can bend. The scent of the membrane is transparent, so that's where the lights go through. And when you put voltage on that membrane, it starts to deflect. The polymer being just below that membrane is then being shaped by this deflection. Hence, you are changing focus from infinity to close and anything in between depending on the voltage. So simple and when I first joined this company I was amazed that it was possible to innovate such a component. And I have to give all credits to those researchers who made that happen. And when they saw this, they got this idea they saw that this is a super good technology for small compact cameras. You can see on the top right, it's a very small component. It's compared to the tip of a pen. You can see that membrane. You can see the yellowish surrounding the hole. The hole is transparent, the lights go through. The yellowish color is the piezo material which is bending, making the membrane bend when you put voltage on. So really, really, we have a different version of this TLens. And from a manufacturing perspective, we are fabulous. The only thing we do is producing the polymer. It's a very scalable 1 liter polymer with million lenses. It takes very little space, so we can handle that ourselves with a few people, and we do. And the good thing about that, then we don't need to share any recipes with anybody else. This is the start of the company, this is the heart of the company, and we have a lot of high-competence people who have been developing this over the years. This is a component we have full control of and we can tune for different characteristics. Then we have the lens and then we need eye muscles. That's what is done at ST MEMS Fab in Milan, Agrate. So they are producing an out of the fab, is coming a big 8-inch wafer, which you see a picture on this side. That wafer comprises more than 2,000 eye muscles. And these are basically what you see on top here. Those are the simulated dyes on that wafer. Super difficult development phase, I would say that the innovation part of the company was, I wouldn't say easy, but it was relatively quickly innovated and prototyping was built. The last, say, 5 to 10 years has been all about being able to manufacture it with a high reliability and quality. And that has been super, super challenging. Many is asking me, what about IP? What about protection? I would say to do what we do, you need much more than IP. You need a long, long and a lot of investment to make it happen. So it's a protection in itself. So that has been a big investment for the company. So basically then we have the eye, sorry lens, we have the eye muscles. We ship these components to our assembly partner in now in the Philippines. Now everything is happening in the Philippines, both assembly and testing. And then we are producing, you're kind of dicing the wafer so that you have singulated dyes. Your dispense polymer on the back of the dye. And you do a pick and place with back window, which is closing the system. That's basically the steps. All of us say standard assembly, pick and place activities. And we have been working with our assembly partner for more than 10-years. We moved from Taipei to the Philippines, but it's the same company. So we then sell TLens, either a bare TLens without any clothes or packaging, or we sell it as you see on the bottom here with a package surrounding the dye. And the reason for that is that sometimes it's easier for the customer to integrate that package TLens because it's less sensitive. It's a little bit sensitive lady in this component and needs to be handled with great care and that's why we have those 2 options. The Driver ASIC which is doing basically the voltage from 0 to 50 volt is a purpose-made driver by our self, which we sell as a product also needed when you buy a TLens. So when we sell, we sell a TLens and a Driver. And then we after doing all what we can to convince as many OEMs, product owners, that this technology is great. And then these are, I would say, a lot of the sales and marketing effort we do is directed to these product owners. But of course also, different camera module players is important to massage and support and train, so we're also are doing of course a lot of activity towards those, but in a way it's very often the OEMs, the product owner, who is I would say dictating the camera module player what to do. Okay. And this component we have is very well suited for small, compact camera solutions. And there is a roadmap how we can take this to kind of bigger camera sensors and there is also a roadmap how we can take it to even smaller sensors for endoscope as an example, and this is things we are investigating more and more and are building a stronger team to do accelerate those -- those tasks. Yes, so we are focusing on, I would say, the 3 left -- TLens windows, Consumer, Industrial and Augmented Reality, or AR or MR or whatever you will call it. Those are the 3 key areas. And also I think it's important to say that, very much the same product goes into the similar, the different market segments. Then I would also fair to say that, we are more and more seeing other application areas and I think the 2 most interesting ones at the moment is automotive and healthcare. But we are rushing it carefully because there are so many activities related to these market segments that we need also to be careful not to spread too thin. I've been CEO in tech companies for 25 years plus and the recipe for disaster is not having focus, so we need to be careful not to be too spread also in doing this. It helps of course that we basically don't have very specific products for these different markets segments. It's basically the same platform we are selling to these different markets. So today then, after years of investing, and thanks to investors and shareholders and those listening to us today for the support, which has been very long lasting for many of you, and hopefully 1 day we will give you the return you are expecting. It's been a really, really a long journey for many of us. But in 2000, late 2000 was it? We started to see that we finally, after a lot of qualification process, finally we started to get the side wins. And you know them all, most of you. The latest 1 is the MEIZU 20 Infinity phone, a super good phone. I know that many of you have that. It started with the smartwatches for kids, and we are still exploring that market. And also we have a webcam, which I know many of you are using. So that is the consumer side. When it comes to Machine Vision and barcode reading we have quite some good and important references. You can see Honeywell, Superlead, Hikrobot, Teledyne and then there's a 1 unnamed one also Chinese which are all very happy with TLens and we can see as an example now that Superlead is now actually using our technology for not only 1 product but basically for 4 products. This is a little bit difficult for us to actually monitor because in a way we could be more vocal about that. But sometimes it just happens and without us knowing. Just last week in, now this week in Sainte-Cène there was a Machine Vision show. And suddenly we saw one of our existing customers showing a new product with TLens, which we didn't know about. So this will, I think, will be more and more normal that the things are happening without us knowing. In the beginning, they need a lot of support. But now they are skilled themselves to do it, and it's difficult for us to follow everything in detail. Even though I know that you hate me for not making noise enough about what's happening. But sometimes it's really difficult to -- sometimes you find out faster than me, to be honest. So that's -- this is starting to be a very, very important reference platform. I remember in the beginning, when we were out selling without any design wins, super difficult to convince to convince customers when you don't have any references. Okay. So let's move into that was a little bit the intro. And let's go into operational market review, focusing on the market. So I would say, consumer for us is still quite challenging. You can see that there was 1 question, which I got yesterday, which is in a way true, because you can see that some of the camera module suppliers in China do report a little bit better situation. It's very much related to -- the fact is that, yes, anyway, that's true. We haven't really seen so much of it. But it's true because you have seen Huawei coming back. That is hopefully triggering some new dynamics that people need to step up on the innovation side. But what you also see is very related to the back-cam. Back-cam, and as you know, we are not still in that space. We are in the front-cam. But you can see that the specification of the back-cam is starting to be tougher and tougher, meaning that the value of the back-cam and the camera module supplier are up-pricing that back-cam, meaning that they see better revenue and better profitability. But still, I would say, the volume is still very low compared to what it was from a smartphone device. But there are -- there is a back-cam or the camera is something which they are emphasizing on and they're investing out. But it's very much related to the back-cam as of today. So the focus of the quarter was smartphone, and I would say augmented reality cases, which I believe is where the innovation is happening and will happen for many years. I think the innovation in the smartphone is very, very low. It's some sheet new wrapping with some new megapixels in the back-cam or what have you. But the innovation side on the smartphone is, I think, is flattening out definitely. And I think the innovation will happen here. That's why we focus a lot on augmented reality, MR cases. We also do webcams, laptop, smarthomes, wearables definitely. But as I said, the cost focus is kind of, I would say, currently, I would say damping the cases we can explore on the smartphone as long as we are not addressing the back-cam, which we are starting to do. We have 4 design wins. There are 37 completed PoC. So there's a -- there is progress. There is ongoing PoC 3 and there's planning PoC 9. We see what's happening here. There's no doubt that having a smartphone on the market is helping us a lot in the communication worldwide. So demonstrating this Meizu 20 Infinity is, I would say, giving a lot of interest and a lot of -- from a performance perspective, a lot of positive feedback. I mean the speed, the smoothness, the very small hole in the screen. It's quite unique and they brag about it also if you look at the Meizu 20 Infinity statement from Meizu's own webpage. They say that among all the highlights, among all the highlights, it's selfie camera is equipped with a hybrid lens TLens, latest innovation of the company poLight, which aims to revolutionize to autofocus on our mobile devices. So they are really -- we were participating in the release event in Shanghai and they -- you spent a lot of time talking about that Meizu 20 Infinity phone and poLight. So that was a great a great experience. I think the cost is today a challenge we have. And it's not so much about TLens. Of course, that's also a -- we try to sell that as costly as possible. It's also about the add-in design, which we talked about a lot is -- has a relatively few players who can do it, and they know how to price it. So that's a little bit the problem is the system level cost, or should I say price, which is making a VCM-based camera module, or even a fixed focus camera module in a selfie camera being very, very competitive compared to a TLens module. That is status today, but we don't think that will be the status forever. So key action to secure further development in smartphone is of course focusing on maturing and cost optimizing TLens-based camera module solution. But we need to look at the camera module solution, not only the component. So we need to address both component of course, and system level, component cost is very linked to volume and that we learn as we go. System level aspects is of course in control of the camera module supplier, which we try to support as good as we can. So we are actively developing the capability and relationship with more camera module suppliers, and of course, existing, so that we can get that cost competitive into that design also. Then we step-by-step, we will address higher value applications in the smartphone area. And then we have to look at the face the main camera, the back-facing camera, the camera in -- on the back, which we are working on. We are doing reference designs for telephoto, wide field-of-view. We have our own lens designer in the team now in Tampere. So we're doing a lot of work there and we are in dialogue with key players regarding this. But I think also it's important to say that the sensor format in the back camera is huge. And we need to also have an evolution with a TLens to make a TLens, which is better fit and having a bigger aperture size, which is an over roadmap and which we will do. So another key action, of course is to communicate the Meizu 20 Infinity phone, finally, we have that. And that's key. As you can see from the pictures on the right here, which is taken by the Meizu 20 Infinity phone, it's super good. You can see focus both close and Infinity at the same time using a prototype ALMA lens software. So this is creating also a lot of interest still and we do this much better than any other actuator technology like VCM. So all these actions we are talking about here is important and they are also key for other market areas and specifically for the AR, MR space. Yes, so here we can see an overview, I don't need to go through the details, but here you can see the based on the icons there. You can see what type of application we are addressing and this also includes TWedge. AR, MR I should say yes, you know the drill, key selling points, ultra compact size, very low power consumption. You can imagine a glass like an all-day wear glass, how important it is to have low power consumption, because there's not a kind of a big space for battery as an example. Fast focusing speed key, constant field-of-view key, think about -- I think about a see-through camera in VR. If that field-of-view change is there, which is very annoying, you will be basically seasick. So having a TLens, which is having all the attribute, but in addition to that having a constant field-of-view is super important for the user to not get basically sick by using VR glasses. No gravity head -- no gravity impact, you are moving your head. You better not have any effect on the on imaging quality there. And this small units will -- when will during use will change temperature and that what you call design with TLens is by design, it's compensating for temperature drift, so that if not having a TLens with AF a fixed focus camera will drift out of focus. And -- yes, I think here is a super, super important market for us. And I feel that it continues to develop very positive the last couple of weeks, we have been engaged with big customers, having a high attention on TLens and they are communicating in a way which make us very, very motivated and encourage that TLens will be a super important component in this market. And we're talking about significant players. And so we are already shipping to Magic Leap, if you have $3, 000, $4,000 going by super impressing glasses for enterprise AR. And then we also have a design win with LLVision, which are shipping already. And those are relatively, Magic Leap is the biggest one and the most known one, the LLVision is also super nice application, but they're shipping in smaller volumes. That's a little bit the cases we see are relatively small volumes. In addition to the design-wins, we have 5 design-in's. 2 of them may be launched end of this year. But there is a risk for further delays nothing to do with TLens, nothing we can control. There is definitely one of the design-wins is delayed. That's -- that we know for sure. The consumer cases we are -- we have one of the design-in's is consumer related is progressing extremely well. I was -- myself visiting the customer and has showed us an extremely convincing prototype demo for an all-day wear application where they use TLens to, I would say, improve the display. And I would go so far and say that without the TLens the thing wouldn't work, super, super interesting case. Then in addition to TLens, as I mentioned, we have a technology platform where you -- TLens is doing 2 glass membranes, polymer in between and bending like this, deflecting that's T Lens. TWedge is doing tilting, creating beam steering, which is used for making a low resolution Micro LED as an example display to a much higher resolution micro LED display is known to be trade-off between brightness and resolution. If you get too hybrid solutions, you lose brightness. So to instead of doing that, you're using a T -- you could use TWedge as a wobbulator to enhance the resolution by beam steering, super interesting. We had a roadshow a couple of weeks ago in the U.S., showing our technical sample, workable technical samples, super important feedback from key players, key players. So then one day, we will be in TLens, and we will be TWedge. So we'll be in 2 products in those type of glasses. Think about that huge strategic positioning. I've said it before, I said it again, a TLens -- TWedge, sorry, it's still a product where we have, only I would say, a de-risk prototyping program ongoing, where spend some millions. But we are still to make the business case and convince the board that this is a good thing to do, and that I hope to take that decision within this year. And then after that, we will of course report on progress on that development and when and if launched to market as a commercial product, we will also of course start to report that as a separate line. 2 design wins, 5 design-ins, completed PoC 13, ongoing PoC 11 and planning PoC increasing still 14. And here you can see the mix between the greenish is more the enterprise, whereas the yellowish is consumer. So you can see a quite good mix between those different stages of process. And it does include TWedge also. Industrial, Superlead, follow on order, worth 11, sorry, NOK 1.15 million. And you can see the picture here. This is the latest 1 they use. It's a sister company, in my understanding. So step-by-step, they are using it more and more, knowing 4 products I mentioned already. Currently, 5 companies shipping with our solution. We know that a few of them are also thinking of expanding even more, the use of TLens. And then there are new customer, which is in the process of qualification of the technology. 5 design-wins. 1 design-in. So that's new. Meaning there's 1 customer who has now decided to use TLens and is in the qualification phase and have decided to release that in we expect the first half next year. 12 -- 30 completed PoC, 12 ongoing PoC and 7 planning PoC. Here you can see, again, the split. Actually there is a little reclassification on the design-wins, because we experience that many of those we have is actually Machine Vision cases. And that 1 is typically the classic barcode reading from Honeywell. The rest is basically Machine Vision. Machine Vision means typically a place where you have in a manufacturing line, you are having cameras to monitor the plant, the manufacturing assembly, and whereas the barcode reading is typically say, supply chain related, warehouse related. We hope that 1 day that we will be brought into product, which is closer to point-of-sales where the volume is higher, because there are barcode reading cases, which represent millions actually. So I think step-by-step we hopefully can get into that part. So the eye is the Machine Vision cases. The handheld barcode scanner is the traditional barcode QR scanning. And you can see there are also other applications, which is not related to barcode scanning or Machine Vision. Different types of applications, which are only represented by these dotis. Last market, healthcare. Yes, Xenocor, many of you are following that company very closely. Our understanding is that they do experience some unexpected delay. They did human trials. As far as we know, they have went back to the lab to look at some redesign, for reasons we don't know. But we are in contact with them and are still very keen on using TLens. But there are some delays, we don't know more than that. So I guess some of you have very close contact with Xenocor, I know, so you need to find out more, but that's the situation. But still an important case for us. And over cooperation, cooperation with Kavli is extremely interesting and has actually to be honest given us more than I dare to expect. And it's giving us a lot of -- it has significant revenue also. We see more and more universities or, I should say, labs using us. We also, as you know from the release, we have also a company now who is starting to develop this system for cell -- commercial cell. It all started with Kavli, who I met Moser and his team in Trondheim, and they are super, super enthusiastic about the TLens and what that does for them. You can see here, this is us visiting the team in Trondheim. You remember the sketch, they are using 4 TLenses stacked on top of, on a -- you can say, mounting fixture here. They are using a glass kind of transparent section hole in the mouse head and they are imaging through that glass and to study the reaction on the brain activity in the brain by imaging that using TLens. And this is what he says. He says that this is the key guys. TLens has been instrumental to achieve the performance of the Mini2P system. The speed and the temperature stability of TLens is much better than any other tunable lens we have tested, implying we can achieve results we never have been able to do before. This is very important for our research to understand the mechanism and information coding in the brain. We have seen a lot of interest in our work from many other research groups around the world. TLens will continue to be important for our future solution, Dr. Weijian Zong says. This is super, super interesting cases for us, and we see more and more activity around it. Not only in that area, but these guys are publishing in very well-known and recognized journals. And of course, this is helping us a lot also when it comes to other healthcare applications. 1 design-win, 2 design-ins. On that 17 PoCs, there is several endoscope cases but also several type Kavli cases. There is 1 which I'm getting a lot of questions related to that. There's 1 which is maybe particularly interesting. It's a big player in the endoscope world, 85% market share guy, and that program is progressing very well. All good so far. There is a long process, but we expect that there will be important milestone -- in milestone being a design-in discussions in the first half next year potentially if things go as they plan. Automotive, not so much new in the quarter, only I would say confirming that this is a really tough market, but also its market will clearly state there is a need. There is a need for autofocus in automotive. And why is that the case? Well, the sensor format, the resolution is increasing and hence there is a need for AF, basically by design. And this is happening inside the car and outside the car. So we do see we have started some testing to characterize TLens for this kind of use case. Still early to say whether we need to change or not change anything, but there are definitely very tough demands. What the market is telling us is that they don't believe conventional mechanical moving components can survive in such application area, and that's why TLens is 1 of the candidates they are considering. Early days, significant potential if we are successful, but don't expect some quarter-by-quarter big news flow in this era, because it will take time. But we also need to have goodies for the next 10 years to come and not only in the short-term. Pipeline, as you can see, 12 design-ins, 8 design-ins, 85 completed PoCs, 46 ongoing PoCs, and 41 planning PoCs distributed among these verticals. I even triggered me to make this graph. And you can see here how planning PoC, ongoing PoC, and completed PoC, how that has developed over the years since 2020 Q1. Quite an impressive activity. And let me see we can feel it on the body. Alf Henning, would you help me with the financial review?

Sure. Thanks. And good morning to you guys. Deliveries of TLenses and ASICs gave NOK 3.1 million in revenue in the quarter, compared with NOK 5.3 million the same quarter last year. The EBITDA loss was NOK 20.5 million in the quarter and 11.3 million in the third quarter last year. The main reason for the increased or decreased EBITDA is we have a little bit more head -- heads as I've been told we are strengthening the team. So approximately 3 more heads. But also there are some expenses related to the sheer options that are higher this quarter compared with last year. And I should also mention that we have some projects, so the external expenses from quarter-to-quarter varies a little bit. That also explains that it's a little bit higher this quarter than last year. On the balance sheet, we have had approximately NOK 132.8 million at the end of the quarter, compared with NOK 84 million at the end of last year. Inventory at approximately NOK 70 million this quarter, that is an increase from NOK 45.6 million at the end of last year. So the inventory has increased by NOK 3.3 million in the quarter, which is mainly wafers from ST Microelectronics. On the cash flow, we started a quarter with NOK 153 million in cash and used NOK 20 million during the operations compared with last year with NOK 19.6, so approximately the same spending as last year. And that is the share option expense that I mentioned doesn't have cash effects, most of it. There's a little bit portion related to security, social security, that's also cash effect when the share options are exercised. So at the end of the quarter we had NOK 133 million in cash. Thank you.

Thanks, Alf Henning, So, the heads, Alf Henning talks about is coming also with a full body. So we have them all in. Outlook. Yes, consumer markets remains challenging for us, and we don't see any very, very clear sign of improvement. I could, of course, be a little bit more optimistic saying that yes, but things are happening, yes, they are happening, but so far, I cannot say that it's extremely visible for us. But we continue pushing and we believe in changes. We will continue focusing on, as the key action I mentioned, to strengthen our position in the smartphone will be a very important activity. And that has a direct relevance also for other markets like AR, VR. AR, VR, MR, key market for poLight. I'm super optimistic about this. There's a good match between the market need and the properties we can offer, and also for TWedge at a later stage. As I said, automotive healthcare market being explored, could become very important.

In their smartphones.

I think it's a fair point. I think there's a synergy between that. When you start to work with a customer using it for certain areas, they are more -- we need to adapt to big sensors will be a very important activity and that has a direct relevance also for other markets like AR, VR. AR, VR, MR, key market for poLight. I'm super optimistic about this. There's a good match between the market need and the properties we can offer and also for T-Vetch at the later stage. As I said, automotive healthcare market being explored could become very important. I think it's a fair point. I think there's a synergy between that. When you start to work with a customer using it for certain areas, we need to adapt to big sensors.

How can TLens in back camera improve user experience?

Same way as we do in any camera, smoothness, speed, autofocus, touch and refocus, I think same characteristic which in any other camera.

Can you elaborate more in what poLight can contribute to within the automotive industry?

Yes. I think we mentioned that already in this. I feel that all the key market segments we are selecting to focus on, I think will be, tunable optics will be key. And I think it's a matter of time before we start to see that.

Do you expect module players to be able to manufacture TLens modules at a lower price anytime soon?

Yes. I think competition will take care of that and also maturity of the assembly processes will take care of that. So I think over time they will, but of course, they also camera module suppliers, they also try to maximize the pricing of course, they are not a high margin business, so they really try also to maximize the profit. So when they come with something new and great, they want to sell it as expensive as possible. True, I mentioned it briefly in my presentation. I think see-through is quite an interesting case. I think all the good things about compactness, speed, power consumption are super important. But this constant field-of-view, if you have in a see-through camera, if you're starting to see something pumping and being not stable, you will be really, really uncomfortable in using it And I think that fact that we are having no concept of field-of-view change is a key attribute for see-through camera.

XVisio have 3 AR glasses on the webpage that uses 3 13 megapixel autofocus camera. The SeerLens One, SeerLens One Pro and SeerLens One ST. Are all these 3 using TLens?

No, only one of them.

Using Teledyne 2MP MiniP with TLens, Are there any income from this project worth mentioning yet?

Teledyne is very active promoting. I think also they know, I think it was mentioned here in 1 of the quarter presentation, they also used it to follow 1.5 mega unit. There is a very niche application, so it's very low volume. I would say for us, it's been insignificant from a revenue perspective. So that's why we haven't been bragging so much about it. But they are definitely seeing around the world in different shows, kind of doing marketing and selling this solution. So I think Teledyne is a big company, hopefully that will pick up 1 day.

Among camera module makers, we've spotted TLens with Sunny Optical, O'Film, Teledyne, Sharp, Kantatsu, Shenzhen, United Optic Technology, Jiangxi Jingchao Optic. Have you implemented any recent improvements in the TLens product family lately, such as anti-reflecting coating, optical quality, focus.

Done, which is improving optical quality. So meaning light coming in is being less reflected and all go in. So that is an ongoing, I would say, research activity we have to get with partners. When it comes to aperture size, this is a little bit back to what we were saying, We need a little bit different structure, but still the same concept, 2 glass membranes, some kind of actuation and polymer. We are talking with customers which are asking about this and the roadmap and they are also being explained and giving a time schedule for when they can expect to see those products. So this is a matter of time and money by the way. So this is optical polymer is something which we do. Take an example now, for different application yields may need some different recipe for the polymer. So this is something we constantly potentially do some changes to.

Could you specify the verticals for the revenues of NOK 4.1 million in the first quarter and NOK 3.4 million in the second quarter, which were not linked to publicly announced orders in those quarters? Are these revenues related to previously announced design wins, PO, DI or ongoing projects?

There is not a one-to-one, say we announce an order in a quarter, there's definitely not the one-to-one that that will be revenue that quarter. So we can't connect in this way. But what I can say, that there is more and more of these smaller things coming in. And individually, they are not significant. But in some, like say, of that NOK 4.1 million, a big part of that is actually related to healthcare through 3, 4, 5 customer. But every -- each of them not so super big, meaning not a press release, but in sum. So luckily we started to get these kind of smaller things. Second quarter, if I remember correctly, that was related to a pre-production fee we negotiated with the smartphone project which was cancelled. But remember, order and take and revenue doesn't necessarily happen in the same quarter.

At CES in January, are there any projects involving this camera model with Sharp or other OEMs?

Sharp is doing a lot. The other big ones we are highly, I would say, related to and talking to without being specific.

The AR consumer market is...

I've been saying before, but yes they seem to be coming and we are very well positioned. I think, we think, TLens is a key component, TWedge is a key component for those markets. And when it comes to capacity, just back from a few, they are really drilling into all the details, the amazing details they drill into, both headquarters at SD, at Tongqing in the Philippines, and this is one of the key questions they are. So far we have been managing to convince them that, we are ready when you are ready.

You have an ongoing...

With key partners to receive potentially NRE for a purpose-made device. So the answer to that is yes.

You mentioned made to significant interest in TWedge and its potential related to AR glasses. How is the progress for this?

Actually, our entrance into Magic Leap 2 was exactly that problem. Oh shit, we have a problem? Do we have a solution? Yes, we have. A little bit of a risky partner because of size, of course, and capacity. But so far, we have been able to massage that quite well. But that is the topic which we need to be aware of.

poLight has 2 active VR AR displays solutions projects, laser beam scanning and wobulation. Which solution do you expect to reach the market first and which 1 could potentially offer more long-term value for the poLight?

I think they will co-exist. I think LBS will be a solution for more simple messaging type device for all-day wear glasses. I think micro LED LCOS displays will be more like the high-end being a big high resolution screen using TWedge hopefully. So I think that 2 different applications, I think they will coexist. From a timing perspective, I think they will be relatively the same time, '26, '27, we don't know, but around that.

Is the growing inventory or wafer's value at cost or sale price, and can you estimate the inventory value in competitive TLens?

It is historic, first all of, all handful of value of fixed T-lenses.

Is there currently any other tunable optics solution with a similar level of compactness for the adding solution as poLight TLens?

I don't think so.

Is the newly released patent related to a larger aperture size from Sony Optical connected to TLens Platinum and does it represent progress in the development of TLens for back cameras? How is the progress for TLens back cameras in general?

I think this general comment about patents, I think there are many patents but there are very often patent applications and many of them we don't think will never be granted because they are going into an area where it's very populated with other IP from among others like us. But then also some of the patents are also very much, you can see, triggered by positioning themselves, freedom to operate. That particular patent, I think, yes, seems to be very related to TLens whether it's for back camera or not, I'm not sure but I don't expect in the next short term. On our roadmap, we do have a TLens, which will out actuation for a thermalization. And as I said, it's quite an interesting application. One of the very expensive part with poLight TLens is the actuation, is what's happening on the MEMS FAB. So if you could kind of have a basically a glass membrane and the polymer mounted in a camera and actually the thermal effect of TLens is having the opposite thermal effect on the rest of the camera and hence is by design compensating. It's a super, super attractive thing and we have a customer who is trying that out. We haven't started any projects for --

Prioritize selling TLens modules over VCM modules and what is poLight doing to enhance TLens priority amount camera making models' customers?

It's actually an extremely good question because some of the camera module supplies, they do have VCM solution themselves. Dictate, you know, use TLens and then they don't have a choice.

Among compactness, low power consumption...

So the market savings, I think is the quick answer. Sorry.

poLight sent out a message that there was a very good reception for the MEIZU 20 Infinity. Can you tell us a little about this?

Yes. I think I mentioned it already, super good performance feedback, small size, small hole in the screen, speed, smooth focus, all these good things, all in focus, touch and refocus. I think we mentioned that, I think it's super good performance feedback but there is a cost issue.

The Meizu phone was the first project with a number of lenses which were to be delivered in an incredibly short time and which had the potential to stress the organization production testing. Can you say something about how the yield has been on this batch of lenses?

I don't want to use exact numbers but what I can say we can see from start of the project to we shipped out this 100 plus in three weeks significant improvement on yield was seen as expected.

Do you still work?

And by the way that yield work is continuing as we speak we have bi-weekly top management meeting where we are drilling into the details on the yield work and super important activity in the company. That's one of the improvement projects I'm talking about.

Do you still work with smartphone customers both in China and other parts of the world or can you say which parts of the world?

I think we are exposed to worldwide cases.

Can you say something about whether there are more camera makers that have been ready, ready add-in designs?

There are as you know the Sunny, then the Sharp Katatsu, Foxconn, those are I would say the most advanced and then we expect more to come.

Can you say something about how things are going with a large Tier 1 customer in medical? Lenses for POCs have been delivered, how is the way forward towards a possible launch design win here?

Yes, I mentioned that in the presentation, it's super positive progress and we hope that the second half, sorry first half next year, that we will see some kind of progress which is moving from POC to more. The volumes being extremely high can be, going back to laparoscopes and disposable laparoscopes, of course volume can be very significant, but the other important thing here is the price point. Whereas the price point in the consumer market is low, the price point in this market can be 10x, 20x more.

It is very impressive to see that the Kavli project provides a very solid revenue contribution, far beyond what I have expected. How do you envision projects with a similar design? And going forward, will there be more similar cases?

Yes. It's a good question because for me also it has been surprising to see what this has given us also from revenue perspective. I've always been saying that I don't expect anything more, but now there are I think there are 2 or 3 commercial companies which are starting to sell to worldwide labs. And what I learned also when I visited Kavli is that there are many, many of these labs, I don't know, hundreds, and these are not only having one setup, they have many setups. And the mouse is destroying the system, so it's not ever lasting, it's lasting maybe for a year and then you have to change so you know you know what can be much more than important than we ever envisage.

Can you say something about the VR customers you work with? Are they only small players or do you also work with big players in VR?

We work with many of them, small and big.

I am curious about mentoring or something else?

You have some intricate complex questions but I understand why. But this is a customer I think we announced this customer in March 2022. I think it was a value of NOK 3.5 million, quite a big, and they are planning using TLens. It's a display solution, it's a big player, more I can't say.

What does the interest in TWedge look like now? Is it the case that you are approaching a decision to start designing a new project?

I think we have handled that one.

If there is a lot of activity with TWedge and projects there, would you consider separating TWedge as a separate category in the project table so that we can follow this development more specifically there?

Yes, I think, that's a fair comment. To be decided when and there is, as I said in the presentation, still a bold decision to be taken there. And if it's positive, we will start reporting that when it's launched in a separate kind of line, yes.

Very many customers seem to have come a long way with designing scanners with TLens. How does this vertical look in terms of possible design wins going forward?

I think it's interesting to see that those starting to use it seem --

T-Lens appear exclusive and expensive or do they get feedback from customers that it is quality and they could image and that more people consider TLens because these big customers have products?

Yes, I think again, the fair point. Those references are key. Getting into those names are very difficult and I think it's only serving us good.

Can you say something about how the work with various web cameras, with laptop cameras is going?

I think it's quite slow. They are very cost concerned also, but we are -- we are having some activities and we are due positions us there, but I would say no big progress during the quarter, but we are hammering on that area also, as I mentioned.

The cost difference…

I think we need to put 5 minutes more maybe, and then we need to open for the audience. I think it's not working, is it? It is? Okay, good.

Yes, it is working.

You have said before that you spend most of your energy on the mobile phone market and mobile phone customers, but you too, now you're saying that the development in the mobile market is not so they're not?

So anyway, we have to steer the resources and the energy where you kind of feel the biggest and the most important opportunity at the moment. At the moment, innovation, as I said, is happening in the AR VR space. But I would say that we are also very active. We are spending a lot of time on the market on convincing both camera-model guys and smartphone guys to move with us. Even though it's kind of difficult, you can never stop hammering the drawer, very high.

I'm glad to hear. About NDAs with different companies, can you say something about what they can demand of secrecy from poLight? And what your obligation is?

I would say any news and information which we believe has an impact on share pies, we need to disclose. Sometime you need to --

I think in your presentation -- can you say something about the outlook here?

Yes, I agree with you. It's kind of groaning. Yes, but we are exploring smart phone related application, I would say. I am amazed, to be honest, and if we go back to the quarter presentation when we talked about smartwatches. For old fishing, the only thing you need is this with a camera. I can't understand why it's not moving. I think it's a matter of time. But we are exploring that market still. Okay, I'm exhausted. And I'm happy for so many questions. I like that dynamic. I think it's so much better presentation. I think you contribute a lot to that. So thank you all. Thank you for those following us on webcast, which I'm sure is a few hundred. Thanks for filling up the audience also today. We're going to work hard to create values for you and us. And next time, we're going to meet is Q4 2023. And it's related to Q4's '23 and it's 27th of February. So we have Pinner Chat, Lutefisk before that and see you next time. Thank you all.