poLight ASA (PLT) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to poLight's second quarter presentation. So the normal agenda, together with me today is the CFO, Alf Henning Bekkevik and Board Chair, Grethe Viksaas. So the agenda key events. A quick recap of poLight, what we are, update on the market side, a financial review by the CFO, outlook statement and Q&A. So since this is webcasted, so please, when you ask questions through the web, leave your contact details in case we need to answer offline. And also for those in the audience today, please wait for a microphone if you have questions to be asked. So key events in the quarter. So finally, Vuzix Shield announced and released final version -- production version of the Vuzix Shield AR smart glass, really nice-looking glasses. We also received quite some POs for TWedge wobulator, technical samples from, I would say, significant OEMs confirming the interest in this product. Wooptix, quite interesting. We have been working with Wooptix in different aspects. Now they have released, what they call, wavefront phase camera, which is miniaturization of another more expensive equipment to have, still not released for -- I would say, for production, but released for evaluation. They call it RT1000. Again, I would say, an interesting observation for what type of application we step-by-step may go into. So also good to see that we got another order for the barcode scanning market. We had an important share issue net NOK 124 million. We have employed a new CFO, Rolf Joakim Hines Bredahl. He will start 2nd of September. So you will meet next time. We had a very successful Capital Market Day, 5th of June. We had a lot of, I would say, interest and a lot of people being face-to-face. We had a very successful demo show during that day. And I encourage you to go to our web page and watch that offline. So a lot of information. We had a deep dive into all parts of the value chain with the people who's being responsible for it, so not only me, but significantly kind of dominated by my team. So that I think is worthwhile going through. Then we had an amendment to the share option plan, replacing existing agreement with new agreement at the strike of NOK 3.2, but also then resetting the vesting. Post quarter, another purchase order worth NOK 950,000 and it's related to -- you may remember the first barcode design-win [indiscernible] and is also kind of illustrate the lifetime potential in this kind of product. I think back in 2020, we announced this design win and is still shipping. Okay, poLight, in short, a global player in tunable optics application, so many you can imagine in a way, focusing on AR/MR, consumer, mobile, industrial. That's the focus coming back to that. Started in '05, we have 22 worldwide patent families, 10 pending and 4 trademarks. We have 48 employees. We have increased over the last year, building a more stronger organization, both on the sales side, on the operations side and also on the R&D side. Headquartered in Horten, with employees around the world, we are more employees outside Norway than in Norway. We -- lastly, we added a resource in Japan for addressing that market. Okay, listed since 2018. If you were to kind of summarize the key characteristic of poLight's technology, extremely fast, very compact solution, constant field of view, no pumping and very low power assumption. So the technology is all about replicating the human eye. If you look at the left side of this graph, you see a voltage being applied to 50-volt on a membrane. Membrane is partly covered by piezo layer, which is then when you apply voltage, you bend that membrane, shaping the polymer, the lens material in between, changing focus from close to infinity. So basically, exactly the way the human eye works. The implementation, you can see on the top right corner, very small compact device compared to a tip of a pen. Supply chain, we produce polymer, that's what we do. And the rest we do through subsuppliers. So we have STMicro doing the wafer, which is basically the activator, the muscles. And we have an assembly partner in Philippines, who is assembling everything together to realize a TLens being bare lens or TLens with the package around. And then, of course, we have the driver, which is supplying the voltage to the lens. Camera module partners is super important for us, of course, even though we do, I would say, majority of our sales and marketing approach towards the product owner, the OEMs. We do have -- we are highly dependent on the willingness and the competence of the camera module players. So that's also we spent a significant time in supporting them. So they integrate our TLens instead of VCM or instead of not having it to focus either adding our TLens on top of a camera module without to focus or adding TLens inside the lens stack, realizing a very compact solution. This is the way they've done for the smartphone program and also enabling us to support a wider range of image sensors, okay? So the key market areas we focus on is, as last time, smartphone, wearables, accessory, the consumer space on the left side there. We also are highly dedicated, I would say, to the AR/MR market. We'll come back to that and also the industrial barcode, machine vision market. So those are 3 legs, we stand on. And as I've mentioned before, opportunities also exploring some case-by-case in the area of automotive and health care. But I will say more on the observer than actually allocating a lot of resources. The resources go into these 3 segments we just listed on the website. So yes, as I said before, I'm looking forward to having to use 2 slides on this one. But still, we managed to squeeze them into 1 page. It's actually now in 23 products. And we are in all the, I would say, focused market segments. So that is quite good achievement. Of course, we're all wanting things to happen faster, but the fundamental we have built through this assignments and the references we have now built is quite impressive. Okay. Let's go into the details on the different markets. The focus in the -- on the consumer side during the quarter is -- has been, I would say, AR/MR, a laptop and smartphone. Those are the 3 areas. There is also others. I can mention, as an example, wearables and then in specific watches, which is also something we are, yes, discussing with the customer. Generally speaking, the consumer market remains challenging and maybe smartphone, in particular. And adding to that, as you know very well, we have TLens, which is fitting mostly the front-facing camera. Front-facing camera has a lower budget. So having a new technology costing relatively much more into it for the camera module players than VCM means that it is challenging to convince, follow-up design wins in the smartphone area. But I've seen things changing rapidly before. We have -- many years back, we kind of, which should I say, gave up or had a little faith on the smartphone market, then we innovate this add-in design and suddenly, we created a lot of momentum. So things -- even things can look a little bit slow now. Things can change through the sentiment, but also through technology evolution. So as you know, we have initiated quite some important activities to, what should I say, optimize the success rate in this market segment. It's related to making TLens easier to integrate, so that more camera module players can integrate TLens in a very compact manner, EI add in. So we are facilitating a different way of doing that. Today, they have to do a quite a complex assembly process, and we try to ease that through a different design. We also have significant activity related to make TLens bigger, meaning fitting the back camera structure. Those are very advanced research. We have many of our senior people dedicated to that activity now. That's also partly why we have increased many employees, is that to release the R&D department from supporting the operation and manufacturing and to make them focus on innovation. That's clearly a strategy we decided to take. Even though it costs more money, we think it's super important for the long-term development of the company. So we have clearly, I feel that, yes, there is a challenge today. I've seen things changing very quickly before. And we have initiated activities, which should optimize the success rate in this market segment, both in the existing front but also on the back. So we are continuing to be persistent in this market. We have 5 design wins. We have 38 completed. We are ongoing PoCs 2 and 4 is planning. Here, you can see the -- this also shows including the AR/MR consumer, which that table didn't. But this shows also the consumer-related AR/MR. As you can see, a significant activity in consumer AR. So AR/MR. As I said, it's probably the area which we today are engaging most with customers today. And it feels like the TLens, as mentioned before, is an extremely good fit for this market. Why? It's compactness, small glasses. It's important to have a compact solution. Power budget in glasses like this is super critical. We have the lowest power consumption by far for any AF solution. Speed to make it natural, a constant field of view to make replicating the human eye feeling. You don't need that pumping. You need the speed. You need a smooth focusing. You've moved your head, you don't need any gravity impact by moving parts. We don't have. Athermalization, heating in these glasses makes it camera which is focused, drifting out of focused. We, by design TLens, compensate for that. So there are many reasons why TLens and it's also many different use cases, which is listed here on the bottom. And we are at today involved in all of these use cases in different type of projects, at different type of maturity. So this is why TLens. But as you know, we are also working on a product called TWedge. I haven't mentioned that specifically here, as it's not a product yet, but we do sell technical samples. And the strategy we have with TWedge is to continue doing prototyping, continue selling these samples -- I mean we sell them quite expensive. And through that engagement for a customer, we are feeling the market. We try to understand the market where it's developing. So instead of kind of kick off a big mass production project with TWedge alone, we want to see customer commitment because there are still kind of different direction that market can take, and we need to kind of learn that from engagement with customers and see the commitment before we push that bottom go to mass production. This is a different strategy compared today with TLens, but also I think it's the safest thing to do, even though that will result in a purpose-made TWedge for a customer in the beginning before it comes as standard products. I think this is just a way to do it. Okay, so as I said, key focus area, already shipping, as you see on the right side, to 4 glasses. The last one is Vuzix, really need glasses. I have the glasses in Horten, if you would like to come and see. And I think step by step, this is quarter-by-quarter. I would say we -- even it's only -- since beginning of the summer, we had this Q1 -- late Q1 presentation, it's -- we feel really that there are step by step moving in the right direction. I feel that, as you have seen, the volumes are relatively small. And that is because this is the characteristic of this market. The volume market in AR/MR has been shifting to the right for many, many years. But still there is a great belief and major players are investing heavily in this. You know Apple Vision Pro came to market and has created a new momentum again. So this is -- we feel it's a matter of time, but there are technology challenges, which needs to be solved, and we are one of them. So -- but what I feel is, what should I say, more and more visible inside poLight is that the engagement with the consumer related AR/MR cases is starting to be more and more and more and more mature. And that is, of course, the trigger of having a significant up step in the revenue in this company is that for that to happen. Of course, in addition to having a further breakthrough in the smartphone market, which we emphasize a lot. So we have now 5 design wins, enterprise, low volume, fantastic references. We have 4 design-ins. One of them is consumer-related. We just recently shipped our version 2 of an integrated package purpose made for that customer, and currently in testing. They are planning to have a very, very advanced demo of the concept, including TLens end of the year, which they will do roadshow with and hopefully, they will see interest and take it all the way to mass production. Exciting project, difficult project, huge investment from our customer, huge. Many, many hundred people working on that project inside that company. So let's see what the market says when they do this roadshow with this new real form factor glasses. Okay. As you can see, 19 completed PoC, 12 ongoing PoC and 17 planning PoC. Here we can see again, we have a significant number, those icons, which is -- what is it, light brownish is the consumer part and a significant part of the activity. Industrial, yes. This is -- market is comprising so many different things. Of course, the most kind of, should I say, cases are related to barcode and machine vision, but also other things. Take an example like Thorlabs. Thorlabs is now selling optical cage system. You can see the picture on the top left. They are view spot for VL19 and VL15. That's basically aperture size difference. So they are using -- and they are selling this to, what should I say, science, industrial testing, people who want to evaluate TLens by these kits. So it brings us into wider audience, and yes, super. We -- on a regular basis, we get POs for this company because they are selling these kind of devices for more science and scientific instrumentation. Wooptix is another example, wavefront phase camera compact. It's an application we didn't think about. So it's interesting to see. We -- during the quarter, we received a new purchase order NOK 600,000. We have now 6 companies are having using us in 11 products. And we have more to come. We are engaged with existing customers for new products, and we are engaged with new significant customer for the first time. It will take time to develop this market, but it's -- I would say that the pipeline over the last 12 months, I feel have had a very positive development. But as I said many times, today, we are in the machine vision manufacturing line, logistics kind of area, whereas we hope to get closer to the end user point of sales, which will mean a lot for the volumes, 7 design-wins, 2 design-ins, 36 completed PoC, 14 ongoing PoC, 19 planning PoC. Yes. As you can see here, we can -- we try to illustrate the distribution between barcode and machine vision, which is the eye. That's the machine vision. And then there are kind of other application areas, which I'm using the same icons, but I'm trying to set a different label on them. So it's just to kind of illustrate the distribution of application. Use case, health care automotive. As I said at the beginning, it's basically left hand, left finger, observation but still important to follow. We have now 2 design wins, 2 design-ins and we have 13 ongoing PoCs and 10 planning PoCs. So not a small activity. But it is -- it feels like -- no doubt that is Mini2P has created a lot of interest. And we are -- recently, we sold to another lab in Europe with a very good price point, of course. We have now -- but what has been new is that after Mini2P and the labs came themselves to order TLenses -- stacked TLenses -- full stacked TLenses. Now we see step-by-step that commercial players like PhenoSys is now wanting to supply this technology, this turnkey solution into the labs instead of the labs building themselves. One of the design-ins is actually another commercial player, who is planning to do the same. So it will end up with, we think, minimum 2 European -- 1 European player, which is the PhenoSys. There will be 1 Asian player, and there will also be 1 U.S. player, selling Mini2P solutions. Of course, they take that investment and -- it means that there is a market out there. As I said, there's never going to be a volume market for poLight, but it's a very, very, I would say, attractive pricing point of this activity and which I will be saying many times, I'll repeat, also, the people who receive this equipment get to know poLight. I myself is visiting these companies, and they are talking about -- there are so many other products where we can use the TLens. So -- and of course, they are selling to labs and those people in the labs, PHDs and professors. They are also ending out in the industry, and they take this experience with them into that industry -- health care industry. So it will be -- we think it will be a door into that segment. But it -- we will make that happen through this activity and not that we are not knocking on all the health care company doors to position ourselves even though we are engaged with some PoCs in endoscope world, which are industrial players. But some of them, we have seen say that, okay, interesting research, interesting technology. We may need it in the future, but currently, we are using an image sensor, which is only 2 mega, which maybe don't need an AF but future 5 and 8, then we need AF. So it is a market which is helpful, step-by-step develop. Automotive, yes, nothing really new this quarter. 2 PoCs has been completed. So it is again something a little bit back to what we said about smartphone and big aperture. This market also need big aperture. So even though you can say in the extreme that smartphone will not take TLens into the back camera, which we will make sure they do. This market will ask for exactly the same -- the AR/MR market will ask exactly the same. So this big aperture TLens is fundamental for many applications. And what the market is saying on this market is that cameras in cars increasing. You see big cars, they have so many cameras. And the criticality in this camera is super important, and they day-to-day have fixed focus. They need to focus sooner or later for different reasons, and they have said to us many players that they don't want to have the mechanical moving parts. You can imagine a car environment, having a mechanical moving system is not optimal at all. So they see TLens as one of the solutions. So -- but I wouldn't say that we would -- I don't think we will take this market to reality before we are able to ship and sample the players with a bigger TLens because they clearly need that. We have those some players, particular players, who is looking for, as you can see in the picture, some in-cabin solution, which may use the current TLens, so that is the exception, I would say. But everything outside the current, it's a bigger TLens. Okay. So here is the table I'm presenting you every quarter, 17 design wins. I said that we are in 23 products. So you could say that we are not counting everything, but it's 17 design-wins, 8 design-ins, 106 completed PoC. We have 42 ongoing PoC and 52 planning PoCs. So our hands is full. We do have a challenge to, of course, attend to everything and support everybody in a good way, but I think so far, we are okay. And of course, having grow this company for some 22 to 48, it means that our capability and capacity has also increased significantly. So illustration from where we started, when we started to report this, which we did trigger by one of the shareholders. And to today, you see there is a significant development on the activity. So Alf Henning, financial review.

Thank you, and good morning to you guys. Deliveries of TLenses and NRE income related to customer development projects gave NOK 5.3 million in the quarter compared with NOK 7.2 million in the same quarter last year. EBITDA loss of NOK 21.7 million compared with NOK 18 million last year. The reason for the decreased EBITDA is -- one of the reasons is that we have increased the provision for inventory obsolescence of NOK 2.2 million. And also last year, we had a reversed accrual reducing the cost with NOK 1.8 million related to the share option program because of the decline in the share of poLight at that quarter. On the balance sheet, we had cash of almost NOK 200 million at the end of this quarter compared with NOK 140 million at the beginning of the year. The inventory ended at almost NOK 65 million compared with NOK 70 million at the beginning of the year. So the same explanation on the inventory is that we have decreased the value of inventory with NOK 2.2 million. Of course, we have increased the provision related to obsolescences -- difficult word, sorry. Cash flow. We started the quarter with NOK 95 million in cash. We used NOK 19.3 million in operating activities, NOK 300,000 in investing activities. We received NOK 124 million in net proceeds from the rights issue and ending up with almost NOK 200 million at the end of this quarter on cash. Okay, thank you.

Thank you, Alf Henning. So one slide left and then Q&A. So it will be a little bit repeat, but progress in the AR market is definitely happening. We expect more positive news and progress during the year. We have built a fantastic, strong platform. We are -- when it comes to pure AF solution, in this market for these products, poLight is dominating definitely. And I'm not saying that, that's going to -- I hope that's going to stay like that, of course. But I'm not saying that there will be no competition because there will be competition. As this market kind of step-by-step grow, there will be tough competition. But I think we have as opposed to -- as a big difference between what we do here and what the position we have here compared to what the position we started within the smartphone, which has been sliving with VCM for decades, whereas in this case, new market. They have looked at the technologies and many of the big payers say TLens is the best, a big difference. Also, as I said, from an outlook perspective, no doubt that consumer-related devices is starting to pick up. We have activity in that direction in all regions, Europe, U.S. and China. Then in addition to the existing TLens driven activity, we have major OEMs, who is willing to invest in buying expensive TWedge samples. And some of them are in early testing, some of them are in relative advanced testing. And that means that when and if we are able to bring that into a mass production through a customer lead customer, we will end up by potentially having multiple TLens and TWedge in the same product. So that will be poLight, hopefully in the AR/MR market, huge opportunity. Smartphone, clearly, the biggest market, and that's why we will continue pushing that market. We will continue doing what we need to do to get into ramp that market. We do short-term activity to ease integration so that we'll be more competitive on the selfie camera, enabling more camera module players. We -- because there's no doubt, if you look at the Meizu performance, everybody admits yes, very good, super good. Everybody admits that, even the highest hardcore VCM engineers in our customer base admitted, yes, it is fantastic. So it's a matter of time before where things can change, and we will be there when it change. And we will, of course, do what we need to do to scale that one. And then initiatives, longer-term initiatives to get into the back camera, progressing also quite well. Industrial market, barcode machine vision as well as more scientific type application is gradually revealing more opportunities. And I think it will be a significant, should I say, margin contributor in the end of the day. We feel we are now -- we are very present. I think the market really knows about poLight. I think we get feedback that we are highly respected and highly regarded both as a company and people, but also the product. I think we have built a super good brand to be honest. Key references all -- in all key market segments has been established. And we have initiatives, which is progressing well, both to strengthen the organization and the portfolio. That concludes my outlook statement. And I think we are ready for Q&A. Alf, will you join me?

Okay. Are you ready?

Yes.

Okay. First of all, are there TLens in the XanderGlasses based on Vuzix Shield, yes or no?

Yes. It took some time to get that clarified to be honest, but XanderGlasses is using a standard Vuzix Shield, which do have 2 TLenses in the world-facing RGB camera. I just wanted to say Xander -- which may be created this confusion, XanderGlasses is using that and there are 2 TLenses. However, the main application for XanderGlasses is not dependent on the AF because they're for different use case, but yes, if they can sell and if they can get a high interest in the market for these glasses, it will be also important for the volume for Vuzix Shield.

When do you expect poLight to scale up TLens supply and services for the display projects final phase?

Yes. I think if I understand that which product that is -- or project that is related to, it's the design in display-related project, which I just mentioned in the presentation. And of course, we don't know for sure. But what we do know is that there's a huge investment ongoing. We have shipped version 2 of TLens and package. They are already received, and they are now building a form factor, very slick demo, which they will do a roadshow with end of the year. And feedback from the market, I guess, will dictate when they ramp and we ramp.

Are any of the ongoing camera projects advancing soon or focus capabilities simultaneously and maybe even OIS, optical image stabilization?

This is about 2, it's something which it's a lot of interest around. We don't see how that can easily be achieved to be honest. So -- but on the OIS side, yes, we have customers, who are looking for that function, which is different from the way they do it today. And we have a technology platform, which can enable that. You can imagine a little bit about the TWedge. TWedge is a beam steering. So -- and that's basically a little bit also that OIS functions doing is the beam sterling. So that's, of course, something which we can evolve to OIS solution in different ways, although TWedge has a very slight angle, whereas OIS typically have a bigger tilt tanker, so it's same, but different.

What potential does TWedge offer for optical image stabilization?

I think I answered that.

And how does this aligned with current market demands? Do you foresee TWedge OIS capability function independently? Or primarily in conjunction with its pixel shift resolution enhancement?

Both.

Okay. How do you see the growing pipeline of projects converting to mass production projects over the next 12 to 18 months? And what impact will this have on your revenue growth strategy?

Yes. Good question. And I think that we hope that in that time scale, that we are getting at least very close and maybe already in a consumer product in the AR/MR, of course, depends on customer progress and market feedback, but at least it should be getting closer definitely than smartphone. Of course, as I said, things can change quickly. Even though we feel it a little bit kind of test these days, we are doing quite a lot of initiatives, and we have a fantastic reference. So it's dependent on the AR/MR market, how that consumer-wise develops, and it depends on what's happening on the smartphone. I think that's the most precise answer I can give. But of course, it will be a huge revenue trigger, of course.

What sets poLight apart from other versatile optical companies, both in terms of new technology and new business model and how will this drive future success?

I think, of course, I have to be humble to say that there are super many good companies out there. But I think that the technology platform, which we have developed and further improved has so many opportunities. And it's a little bit amazing to see how many different applications over technology can be used in. Take an example. You know what we are focusing on, but look at the opportunity level which can be in health care and automotive. We have even not only scratching the surface. So I think that this company over the next decades, we have tremendous opportunities. And I think it's new. VCM is old. There's a limit how much that can happen in that -- with that component. So I think that -- and you can see also from the activity -- if you look at patents and articles, you can see that they are all trying to position themselves -- many are trying to position themselves in that tunable optics space. And there are not so many players there.

Are you involved in any projects which aim to bring several variable products together like smart watches and glasses. How do you see the market opportunities for TLens into specifically smart watches that aim to be supplement for AR glasses?

We -- I don't know, to be honest. We have some cases which may -- I saw some links related to this also this question. And we don't -- as far as I know, we are not directly involved in -- with that kind of links watch and AR glass, but there could be opportunity that we haven't seen.

How is the progression to add in models from camera module makers?

Quite okay. Of course, we -- as you know, this Meizu phone, which was first add-in design, is a very advanced, I would say, a camera module supplier. But now, there is others. This HMD very advanced head-mounted MR glass are actually using an add-in TLens design from a different supplier. You have seen shop and friends around shop is having activity. We are developing an easier way to integrate an add-on solution. We are talking to many. So I think step by step, there will be many more being able to offer this add-in solution.

Our concept has been developed for the new small package. You mentioned that the slide in TLens is for simplified construction of camera models. Can you explain why this simplification for camera module makers? And what is -- and what this could potentially mean for time to market?

Yes, it's a good question. And so we have now developed a design of way of integrating TLens into the lens stack, which is -- we think, is a simplification. But there's also some market, yes, some other markets, maybe no. And what we would like to simplify is the assembly process of a lens stack? Because what they have to do is quite complex. They need to do active alignment of this lens stack. And that's -- that UPH, unit per hour, in doing that alignment is very low, so hence, costly. So that active alignment process, we are trying to kind of simplify, avoid, meaning that UPH go up and costs go down. So -- but there are different -- it's highly dependent on the science back of the optical, highly depend on lens stack image sensor resolution. So we are now kind of in the process -- I would say, in the beginning of the process of learning the market feedback, but we are showing the market now you can do this, you can do that to avoid this and this and that, to simplify assembly process. So it's part of the learning process. But I think that for many markets, it will be super, super important to ease integration and ease time to market.

I have now been able to try the Meizu Infinity for quite some time, and it has an absolutely fantastic autofocus in the selfie camera. How are you working with Meizu and other OMEs now after the phone launch with TLens.

Yes. Yes, good question. And I subscribe to your statement. It's a fantastic solution. It's a fantastic performance. It could have been better tuned from a color perspective, but it is super good from a perspective, no doubt. The -- yes, what do we do? First of all, Meizu 20 Infinity is still shipping. So Meizu 21 has been released, as you're probably aware of. But in Meizu 21, they have standard version and a pro version, I think. In none of them, there is AF. Meizu 20 Pro and Meizu 20 is end of life. Meizu 20 Infinity is still shipping. So Meizu 20 Infinity is still the flagship, they are selling. Meizu is an extremely cost-sensitive company. One of the, should I say, best diverse. And when they were -- when Meizu was -- when Xingji Times acquired Meizu, they merged activity and the future Meizu became with the Meizu DNA. That's why they have shipping now without AF in the newest releases. So I think that what do we do? Well, we are running around and showing this Meizu 20 Infinity phone and demonstrate that one, what it can do and all the focus and stuff like that. In addition to that, we are the showstopper today, why not more is cost. And we know how tough cost pressure is in the smartphone industry these days and still is, may change, meaning that -- which is illustrated by Meizu 21. When they even don't have a VCM. A VCM is costing maybe $0.3, and they don't take it, illustrate kind of a little bit of sentiment in this market. But what we're trying to do to enable is to make it cheaper, is to make a TLens camera module significantly cheaper than it is today. And that is really -- of course, we can reduce the price of TLens. That's in my control. But it wouldn't help because the way they do it, the way they integrate it is so costly and many times more expensive than the VCM camera module. So what we do is exactly that. We try to help them to do it in a smarter way, a cheaper way so that the difference is much less. That's what we can do.

Have you received inquiries or feedback from other smartphone OEMs ultimately drop the bomb and they are the first company with TLens?

Yes. But they don't need to contact us. We are contacting them every week. So we are running around the market with this demo and show them these new designs. And now we are in the phase where we're doing roadshow, showing this new way of integrating. And this is a little bit taken back to some years where we felt that, My God, we're not going to -- remember, last time -- this is a good story. Remember, we had -- we were so close to the sign-ins in smartphone. Then Xiaomi came out with this big screen remember, meaning that there was no place for a better, bigger comer. So suddenly, all the PoCs we had stopped because they didn't want to have that big hole in the screen. We went back home. We invented add-in design and show them how they can do it. We went back into market, advocated add-in design. And they said, yes, but difficult, but difficult, yes, but possible. One year later, they came back, "You know, you mentioned this add-in design, can you do that together with this camera module player. Of course, we can." And hence, we managed to get into the smartphone. So the same now. Nowhere in the market after a very depressed smartphone market, we go out. Yes, we agree. We are more expensive than VCM solution. We can reduce sales pace of TLens. It wouldn't help significantly. You need a different way of doing it. And we know -- we show you how you can do it. So now, we are there, again, showing them innovation, showing them creativity, and that will help.

When poLight received a design win with the Mini2P scope from [indiscernible] it triggered several new Mini2P projects, also design wins. How are things going in the pipeline with Mini2P-related projects? Are there more in the pipeline?

Yes. I think I covered that in my presentation.

The CMD, the Capital Market Day, it was mentioned that TLens has taken over all of the first AF camera projects leading OEMs customers. What does that mean? Does it really mean that TLens can become the preferred standard in AF, in AR/MR? If so, can you say something about which customers?

Yes, I can answer to the latter that is I cannot, but hopefully, it will be visible one day. But yes, that's how we feel it today. We can become the preferred AF and population technology in AR/MR, but we will never be along. There will always be -- they don't like single source, of course. There will be other ways of doing it. So -- but today, we have an extremely strong position. And today, we feel we are the preferred solution.

Can you say something about the progression in AR concepts and MR concepts such as is the progress with 6 months or is it going slowly?

I think that there's no doubt that the AR/MR market has been slipping to the right. and that's nothing we can do with that. That's basically the nature of this market. There are some technology development, which is needed for this to become -- to scale. Display solution is 1 example. Good camera solution is another example and use case is a third example. There are many things which is making this market uncertain when and the how big. But I think what -- my takeaway when I wish it customers is that when I look at all the dedication and investment, it's difficult to not believe in it. That's difficult to do. But -- and when Apple, as an example, is launching product in this area, it is also a very good indication. So I think -- but we -- as I said, we -- what we do feel is that enterprise, yes. There is a lot of things happening in the enterprise market using this technology, AR/MR. But when you see of overactivity mapping, you can see that there are so many now consumer-related activities. So -- and that is people being preparing themselves and not only in the Bay Area, which was really at the beginning. It was very centered around Bay Area and still is. But when I go to China and Asia, and when I see other market areas, there are -- you can clearly see a huge activity in -- throughout the world. And we are -- as I said, we are engaged with -- to compete all the regions in this area. So I can't see it not happening, but of course, when? Difficult to say.

What is poLight's role in the AR/MR projects now? Is it a support a component, camera module level or system level? .

Yes. I would say that in all applications, both in consumer and AR/MR. I would say that we are -- the biggest successes we have is that poLight is being let in on the system level, meaning -- because it's not only -- sometimes we feel that the customer just want to not let us be too close. They want to do them system and design themselves and then they just want the TLens and the data sheet. And we are hammering the OEMs, but you have to connect us in because we can see that so many stupid mistakes is happening when they're keeping us outside, but they're so afraid of us knowing, us telling other customers because they know that we are talking to everybody. So they are so afraid of learning of too many things or -- so that's why it's a fight to get in there, close enough on the system level. But it's super important, and we are trying to get as engaged as possible. Sometimes, we are successful in doing that, sometimes not. But definitely, the recipe for success is that we are highly involved in the design. Now we have established a quite, I would say, a senior team in the lens design, which we didn't have a few years ago. And then -- so we are now presenting as you've seen reference designs, which is giving them a very good starting point and also give them trust in us in a way. So it is difficult sometimes, but it is definitely something where we want to be.

What is poLight's role in the AR/MR projects, now -- sorry. I have seen that there is enormous activity in AR/VR among the big well-known tech companies in both the U.S. and China. Can you say something about which markets are most active in the work with poLight and how this has developed or changed in the last 1 to 2 years?

I think I answered that. It's basically we are in all regions and started from, I would say, Bay Area, but now it's happening all over the place.

PoLight owns very strong patents and are protected and that protected the company against copying the technology. While at the same time, customers have freedom to operate, a great many large companies seem to have opened their eyes and got a fear for the technology solution that poLight has. If TLens and TWedge become standard components for many larger companies, then the ownership of the patent must devote a lot of money. Can poLight estimate what the value of the company's patents would be worth, if they were to be bought by someone?

Yes. That's, of course, a good question, which is impossible for me to answer. I think that -- the thing is that if we can get the position we think we can get in a booming market, assuming, of course, this is worth a lot. Then we just need to not having 1 or 2 who sees that way, but you need to have many who sees it that way. And then the sky is the limit.

There are still PoCs from Honeywell on the EX3 in production with TLens. And it seems that it maintains Honeywell's position in the market. Can you say something about whether you are working with Honeywell or the products?

What I can say is that we are in very frequent dialogue with Honeywell. And we, of course, are promoting our technology for other products and other products group in Honeywell and time will show whether we are successful. But of course, a successful EX30 shipment and repeat orders is, of course, a good indication.

It was a long battle for Zebra with the patenting of TLens after the patent dispute between demo and Honeywell. Honeywell surely putting Zebra back to the drawing board. Can you say something about Zebra and TLens?

What I can say is that Zebra know TLens very well, and that is a player which we have done a lot of tests and characterization with. And yes, it's in our kind of pipeline, I would say. Then, of course, Zebra is a big player. They have already established kind of AF solution internally -- not internally, but using other technologies. So it's, of course, not the easy sell, but it's something which we step by step, we'll try to evolve products to meet those type of players demand.

Do you have projects in the barcode segment that go towards projects that are closer to the end customer? Example, products with higher volume potential?

I think we -- at least that we are seeing some -- what I feel, though, is that they would like to trials in a segment which doesn't have so much high volumes at the beginning. But we are in dialogue now whether you have a particular customer in mind, which is having that plan to take us into a higher volume bulk winning product. They are early days, but they are now taking -- hopefully taking us into lower volume type product. And then they are having indicated to us that there is a path to higher volume. So yes.

Is there any ongoing activity with Meizu in other verticals?

Yes. We -- there has been some activities in the AR/MR space also in that company. But so far, they haven't kicked off any huge project as far as we know, but we are highly and well connected in other verticals also.

In the display project where TLens is used in LBI solution. Is there one TLens per solution that is potentially 2 TLens per AR glasses?

The case we are involved in is won, yes.

In the AR space, one of the reasons that TLens is needed is because of the II -- AI. Do you get traction for in other application verticals because of AI as well?

This is a mystery for us. There is a lot of talk about AI. I think AI is on everybody's strategy now these days. And -- so yes, we feel that some of the -- I think we mentioned in the AR/MR slide is that we do without customer wanting to tell us, but we do see the AI application, which also drives the need for AF. But we have to say that we are not -- we don't fully understand the use case, but seems to be relevant also for us. .

Laptops are now listed as 1 of our 3 main customer focus areas. Could you share some insights on the progress in the laptop market and provide a realistic time line for when we might see these products released?

Yes. Good question. This laptop market is coming and going, I feel. But last, I would say, quarter, we have seen quite some good activity. There has been over camera module players, minimum 2, have developed demos for big laptops players and show them and got, I would say, good feedback. So yes, this quarter has been more promising when it comes to laptop. Of course, there are design challenges here, a big screen, a little room for camera thickness -- not thickness, the screen is very thin. So there are design challenges, but it feels like it's progressing quite well at the moment. Then of course, quickly, it can die again because that's happened before. But at the moment, it seems quite good. When? I think this is probably a relatively long design and process. But yes, I think -- maybe you will see at the end of next year, you may see some sign of taking some commitment, meaning design in, not design win, but maybe design in. But it's very difficult to say we are not sitting in the product plan of this team. But I would say -- all in all, I would say that there has been more positive signs than for a long time in this market.

Webcam projects -- projectors -- I'm sorry, accessories are mentioned as planning consumer PoCs. Can you explain the difference between these webcam projects?

There are everything from normal webcams to -- which is maybe few to more, I would say, advanced pro-consumer type devices. So there are -- you remember this MAXHUB type webcam. Those are, I would say, less represented, that type of application, but more the prosumer, the advanced high-end conference-type activities. So -- yes, so it's more in that direction.

Do you see options to move up in the value chain being a camera module supplier in some markets for delivering complete solution? .

Yes. It's -- that is something which has been on the table for -- since I started, to be honest, because I have quite interesting reflection there. When we started to see that AR/MR could be very key for us. What we did see at that point of time is that the big camera module players, they didn't want to support because they were so busy with ramping a smartphone. And that's what we felt really the pain. That, okay, the OEM said, yes, your technology is interesting, we would like to have a camera module. And then the camera module guys, they didn't pay attention. So that's why when we felt that we should really try to find somehow to nurse these early markets being health care, being AR/MR, we should really try to have the capability ourselves to give solution because for the OEM, the TLens is a problem. That is not a solution. And they didn't manage to engage the camera module guys. So we did look quite actively how to do that. And we did have some quite mature plans. But then something changed. The smartphone guys started to reduce volumes, difficult, difficult. AR/MR became more visible. And suddenly, the consumer -- sorry, the camera module guys started to facilitate again. And then, of course, we have to be super careful to not become a competitor to our customer, because, in a way, from a cash perspective, very often, those camera module guys are our customer. So even though it's the OEM, who normally take the decision. So it's yes and no. But that's definitely something which is -- has been on the table and in a way or on the table without having any concrete plan.

You mentioned laptop as 1 of 3 focus areas you have been working...

Yes, I think we have addressed that, yes.

When you are looking for partners to develop TWedge as a product, will this be restricted to one partner in the beginning, as in? Is there room for more than 1 customer development their version of TWedge?

Yes, good question. I think that there are opportunities for having more than 1 lead customer. What we see is that all of them are -- many of them are thinking differently, how to use TWedge. So that's why I am saying it like that, yes, maybe. Maybe it could be interesting to see what happens.

We've observed significant sales of TWedge evaluation kits and samples to major customer OEMs over several quarters. It's particularly noteworthy that these companies are proactively investing in the development process by purchasing samples rather than poLight having to pursue them to adopt the technology. Can you describe the process for evolving TWedge from its current evaluation phase to the long-term profitability product?

Yes. I think I would say like this, when we talk to a customer now, we show demos. You show demo at the Capital Markets Day and that demo we are driving around within all over the world. I'm soon heading for U.S. and Asia. And so these will be topics we discuss. So after we have a successful demo and they show interest, we are offering them to buy technical samples, which we charge a significant number to -- for them to get because what we tell them, you have to line up in the queue, and this is the tickets to be in that queue. And then they negotiate and they try to get discount and then we try to show some flexibility. And then they do -- they start testing. And that takes time. It takes time for them to rig and to test it into their system. So this typically takes time. And then the plan is to then follow these and support these customers, having these technical samples integrating into their kind of solution, then we follow them up very closely. And then we are seeing, if there is significant interest, we then try to get them into an NRE program, meaning, guys, do you -- would you be interesting for us to develop a TWedge for your particular application for you, say, whatever exclusivity period for that particular application on offering us, say, hundreds of case of dollars of NRE, meaning showing an enormous commitment, showing that we will like to take this product to mass production. That is kind of the proof of the pudding is in the eating. So if you can sign a customer after having a value after technical samples -- after acquired and bought technical samples, take them into the system, are then willing to take the next step and the next step being a part of the product-specific development for their application, hundreds case of dollars cash. Then success, then mass production for that customer, then standardize offering, which we sell to everybody. That is in our head. We could be tougher. We could say we move ahead, we take all the cost of ourself but take a chance. The problem with that, in that market -- in this market, which is so difficult to see and understand what display solution? Is it LCOs? Is it a micro LED? Is it -- what is it? What would be the kind of maturity landscape here? And if we're going to sit in over little books and take that decision, it's super risky. So that's why we would like somebody tell us, I would like to have that solution, and I plan to take into product in 2028. So that's why we have that strategy.

I am excited to hear about ongoing innovation concerning new and cheaper add-in solution as well as bigger sized lens. When do you expect these improvements to be available for the market? .

When it comes to a different way of doing the add-in design is already in discussion with the market. We are, at the moment, doing prototyping of this new compact package solution as we speak. I just went to the lab yesterday and they were assembling this and testing this new stuff. We already have started a project with a well-known player to see how that add-in solution based on this is -- could be working. So they are doing now activity. It involves an OEM. And it involves a camera module, lens maker -- it involves actually a camera module player, lens maker and the OEM. When it comes to bigger TLens, what we have as a plan is to have prototype this year. We have a couple of concept on the table, one of the concept we showed at Capital Market Day. So again, going and look into that presentation. That is -- the question mark there is will the specification be attractive enough? Will we achieve, say, as an example, optical power in it as an example, that's to be learned. That's to be investigated. I meet the design specialists every day at a [indiscernible]. And so yes, I think we will probably show to customer depending on what we achieved in the prototyping this year, something to see if again, little bit TWedge concept business-wise to see if there is anybody seeing the prototype saying, yes, this is something I can use and then move on. But it's a super advanced program. What is interesting is that we -- after we start to talk a little bit about this, we have seen other areas, which is saying that this is interesting. And actually, even if you don't meet kind of the optical power, which is needed for that application, we may are happy with that optical power. So there are many, many doors which can be opened in this concept.

are you involved in drones? And if so, in Europe, U.S. and/or Asia?

Again, drones is coming, it's very on and off. But yes, sometimes we are, and sometimes it dies. But yes, it's coming up on a regular basis. But I wouldn't say it's not a big activity at the moment. And a little bit, why is that? It is -- it seems like that the AF is not so important for drones. Typically drone, they will take -- they will fly high and take a picture or video from quite far distance, meaning focus in Infinity, meaning no need for AF. But there are maybe other applications, which is they're going to fly closer, inspect something which they maybe want to have that function. We've also been talking about landing camera, which may also need that. But again, big aperture.

Are the headcount in Japan serving specific verticals or customers and is the headcount related to sales or technical?

Sales -- definitely sales. And so we have got a very senior guy in Japan, super, super nice guy, very experienced. He was proposed by our network actually. So he will be basically focusing on everything -- focusing on the market segments we have defined, everything from industrial machine vision to more consumer related. Quite important to have a local language guy in Japan. They prefer to speak Japanese. Even though our Head of China is speaking Japanese, there is still a long flight to Japan and also having somebody being there every day. We can already see that there are some leads. We will never be finding if we didn't have a local guy. So we try this and hope it will be beneficial.

Can you elaborate a little regarding TWedge, U.S., European or Asian customers and/or OEM?

TWedge, I would say the gravity there is in U.S. and Europe, but starting also in China.

Watches, same players or new ones, EMR, U.S. or Asia based? Can you say more in this regard?

Yes. We have actually ongoing a project now at early stage, though, I have to say, which is watch and that probably will be end up, if it happens in the U.S., if we understand it correctly.

Given the low market cap, how well protected with poLight in a hostile takeover action or our acquisition bid as there have been any bids in the past.

I can't be concrete on that, but of course, there are to be able to acquire poLight, there needs to be somebody willing to sell. And there are, as you know, a significant shareholder sitting on quite some shares, which -- and they will, in a way, somehow dictate what is possible or not. So -- but I'm not going to speculate on that. My focus is to develop this fantastic company into even more fantastic company, give shareholder value becoming even more visible, that's my focus, and then it happens what happens.

How is the cooperation with players like Vario going on?

Yes. Vario is a player in this segment. And I know that there's a lot of speculation on what they use. But I think that the only thing I can say here, listen to what they say and then take your own conclusion.

Is the market for gadgets like robot vacuums, lawn movers, doorbells, security cameras, a market that can use TLens, TWedge on a bigger scale?

It has been a product area we have been exploring for quite some time. But we haven't really seen a lot of activity here, I have to say, but -- and I would say if it was something, it will mostly -- most likely be a TLens application. We have seen some, but we don't have very much activity at the moment.

I think that was the last one. .

Okay. Then we have some audience. Some of them have already sent in questions through the portal, which is good. Is there any other questions from the audience? .

Well, it's maybe this one -- last one. Have just logged on, but what is the time frame for bigger TLens aperture, sample, PoCs, volume, shipments, et cetera? Have any dialogues, et cetera, reared in Raven?

Yes. So we -- as I said, there will be hopefully prototype tested this year on the bigger TLens. But -- and depending on the results, we get from those tests, we will or we will not show the customer. So that's what I can say.

And there's one more coming in -- I think no.

Okay. I think we need to round off. Is there any question from the audience? Sorry for dragging you through a long presentation, even though I thought it's going to be extremely short because we just met each other just before we took summer vacation. Super thank you for your interest in poLight. We are very, I should say, enthusiastic about what we are doing. I know that you would like the things to happen sooner, and I am on the same page on that. We will work hard for that. Thank you a lot for following us through webcast. Thank you for being here -- to the audience being here and looking forward to see you next time, which will be Q3, 31st of October at the same place. Thank you a lot.

Thank you.