Hi, and welcome to the Q2 2024 presentation. My name is Laila Danielsen, and I'm the CEO of Elliptic Labs. Today, with me is our CFO, Lars Holmøy. Let's go over the three main takeaways from today's presentation. First, and let me be direct, we are experiencing huge momentum in our second target vertical, the PC laptop market. Our efforts have been focused on expanding our reach in the PC and laptop market. This strong momentum validates our strategies and reinforces our market position. Secondly, our momentum in the laptop vertical has been marked by notable achievements in the second quarter. Specifically, we signed two new contracts. These contracts are valuable in terms of revenue and affirm our technological leadership within this space. Last but not least, in Q2, we achieved a significant milestone by securing our first win in the laptop consumer segment.
This is considerable as it opens up new growth avenues and establishes our consumer market presence. This win is a stepping stone towards capturing a large share of the total laptop PC market and a testament to the market momentum that we are experiencing. Our vision is to build the leading AI software platform for all user experience, making every device smarter, interoperable, more human, and environmentally friendly. Our AI Virtual Smart Sensor Platform utilizes existing hardware sensor on devices, expand the potential, or replacing them altogether to create new AI use cases that are currently deployed in over 500 million devices in the market today. How we started out? We started by replacing a single-purpose sensors, reducing cost and power consumption, safeguarding user privacy, and eliminating supply chain risk. The value proposition was and is very strong and deliver improved functionality using our software-based platform.
Now, we are increasingly seeing the value of delivering more AI task and functionalities and the potential for further use cases. Moreover, our products bring next-generation contextual intelligence to devices with capabilities like position detection, real-time distance detection, and the device-device interoperability. We started building a solid platform in the smartphone segment, where we, since our inception in 2016, have built an impressive portfolio with some of the largest OEMs across the world. In fact, three of the top five global OEMs are customers of Elliptic Labs. We have launched on 129 models in total, 33 so far in 2024. What we are seeing now is that the growing demand for our products and our platform's ability to deliver AI functionality, supporting OEMs to be at the forefront of innovation in their fields.
While we are deployed at an impressive scale with smartphones, we are experiencing huge market momentum in the laptop space, bringing a much larger potential. Currently, four out of the top six laptop OEMs are customers of Elliptic Labs, and we have launched 31 laptops to date, 13 of which have been launched this year in 2024. I should also remind you that we have only launched with one OEM so far, and we experience considerable demand for our AI Virtual Smart Sensor Platform and the functionalities it enables. Another thing I would like to emphasize is the synergy between the smartphone and the laptops. Our technology enables a range of new tasks and functionalities across devices that provides seamless interoperability, providing a clear value to the end customer.
So to illustrate, I just also want to remind you of the existing use cases interoperability between devices can provide. Last quarter, I showed you an example of a moving conference calls between smartphone and laptops. Let's have a look at another example that our AI Virtual Seamless Sensor can provide. So here, at our office, this is a live demo. You can see one of our workers, Caroline, is sitting in front of the laptop with her smartphone, looking to transfer photos over to her laptops. She clicks on the picture she would like to transfer, then she moves the phone close to her laptop, and then you see an instant visual feedback prompt up. "Would you like to transfer your images? Yes or no?" And there you go. Very seamless, very natural, very easy. All right.
In Q2 2024, we have signed two new laptop contracts with an existing customer, executing on our strategy to go deeper with existing customers. One in the consumer segment and one expansion contract in the commercial segment. I would like to emphasize what this means. Firstly, it demonstrate the huge market momentum we experienced in the PC laptop vertical. Secondly, our customers are seeing the clear value our platform provides and are continuing to deploy our technology across their portfolios. What is very exciting is that we are now also penetrating the consumer segment, the highest volume segment in the PC laptop market. According to IDC, the consumer segment represents close to half of all laptop shipments in 2023, and this is a clear proof point that our technology is not just relevant for the high-end market, but for our customers' full portfolios.
All right, so now I would leave the word to our CFO, Lars Holmøy, that will cover our financial.
Thank you, Laila. We have had a strong start of the year building on the market momentum that we see with multiple new contracts in both our core verticals. The growth highlights the strategic, technical, and commercial efforts made in the previous year and also the first half of this year. We continue to focus on fully monetizing the existing contracts. Our revenue from customers from year to date, 2024, stands at NOK 56.1 million, which is a 51% increase compared to NOK 37.2 million in the same period last year. This revenue comprises both material milestone revenues from the PC vertical and license fees on shipped units from both our laptop and smartphone customers. Our total operating expenses have decreased slightly to NOK 48.7 million from NOK 49.7 million last year.
Personnel expenses are at NOK 38.7 million, and other operating expenses are NOK 10 million. The decline can be attributed to lower option costs for the first half year. As isolated, we are 12 more FTEs by the end of June, so we have higher personnel costs, but it's offset by the option, the reduction in option cost. Notably, our EBITDA for the first half year is a positive NOK 0.81 million, a significant improvement from negative NOK 12.2 million in the same period last year, resulting in an EBITDA margin of 14.3%. For Q2 2024, revenue from contracts with customer reached NOK 33.9 million, marking a 2% increase from a very good last year as well.
The majority of this revenue is represented by laptop milestone revenues from contracts with fixed minimum license fees, alongside license fees on shipped units from both our laptop and smartphone customers. We achieved reduced operating costs with employee benefit expenses at NOK 17.1 million, down from NOK 19.3 million in Q2 2023, and NOK 21.1 million in Q1 2024. The reduction is primarily, as I noted, due to decreased share option program costs. Other operating expenses are NOK 5.7 million, down from Q2 2023 as well, partly due to a positive effect from recoveries of written-off receivables back to 2018, and of course, rigorous cost control. We have a positive operating cash flow of NOK 1.9 million, a significant improvement from the NOK -12 million last year.
Before-profit tax is NOK 6.2 million, and accounts receivable has increased by NOK 9.9 million, indicating strong revenue generation and invoicing. Trade payables has increased by [Garbled/Missing Value] , and notably, we did receive an arbitration settlement for approximately NOK 5.9 million this quarter, and that attributed to a positive cash flow as well. Investments continue to reflect our focus on R&D for Elliptic Labs AI Virtual Smart Sensor Platform. Financing activities primarily include the repayment of borrowings, with [Garbled/Missing Value] , and repaid lease liabilities, and NOK 0.1 million in short-term debt, along with NOK 0.5 million of interest on lease liabilities. We maintain a strong cash position of NOK 97 million. Current assets reflect a NOK 9.9 million increase in accounts receivable from orders booked.
We are successfully reduced long-term liabilities through the repayment of borrowings, and our short-term liabilities mainly consist of lease liability. The equity ratio has increased to 89%, underscoring our robust financial health. Overall, we are well funded for our continued growth. With that, I will leave it to Laila to, for her closing remarks. Thank you.
... Thank you, Lars. And now we will overview how we will successfully executing our strategy to reach our goals. So looking at the revenue from customer, we remain on a clear growth trajectory. Over the last 12 months, we have exceeded 2023 revenues by close to 25%, with a strong outlook for the remainder of the year. And although we are still early on our commercialization, we are beginning to see meaningful revenue traction. As a reminder from Q1, this illustrate the contract for the first laptop model, which was announced in Q2 2021, when we also booked a milestone payment. The model was launched approximately half a year later in the fourth quarter of 2021, and then took another couple of quarter until accumulated sales of the model exceeded the minimum commitment in Q3 2022.
It's important to note that the timeline is an example of one specific model, and that timelines, launch dates, and timing of revenues differ between contracts and models. All right, so we have shown you this slide several times, but it's important to remind you that is, there is a long time lag from the contract being announced until products are launched in the market, and full revenue is recognized for each model launched. That being said, we are pleased to see strong progress in the laptop segment. For those who follow us consistently, you may remember the introduction of this overview in previous quarter. This is an illustration of all contracts signed with one specific laptop customer, and we are proud to announce the addition of two new contracts signed in the quarter.
In addition, we also have recognized the first pay-as-you-go revenues from contracts 2, 3, and 4 in this overview, marking that a few of the models included have exceeded the minimum commitment volumes. We are also happy to see indication of the PC laptop market bouncing back from the dip experienced over the last couple of years. In 2023, global PC and laptop shipments were 260 million units, compared to about 300 million in 2022. While this forecast is showing a slow but steady recovery over the coming years, we are seeing tendency of increased confidence in a market that's been struggling with uncertainty and declining demand over the last couple of years. OEMs are still not out of the woods, but the trajectory is looking optimistic.
In this context, I would also like to remind you that we have, in this quarter, signed our first contract in penetrating the consumer segment, which will remain the highest volume market through the forecasted period. The expected market growth is influenced by, among other factors, the market bouncing back post-COVID, as well as a natural refresh cycle that typically occurs every 3 years for the PC and laptops. However, note the increased demand for AI-capable PC is expected to boost this refresh cycle, as the market is demanding AI functionality to enable new task, productivity, personalization, and power efficiency. In 2022 and 2023, the share of the AI-capable PC laptops in the market were about 9%-10%.
This year, the AI-enabled devices share is expected to almost reach 20%, and is up almost 40% in 2025, and reach 70% of 2028. Our 100% software-based AI Virtual Smart Sensor Platform is enabling PC and laptop OEMs to deliver exciting new AI use cases and capabilities demanded in the market, and this is driving this huge momentum that we are experiencing. So we are capitalizing on the market momentum to deliver on our targets. Firstly, we need to fully monetize our existing contract base. As mentioned, we have, in the current quarter, started recognizing running revenues in the laptop segment and launched several new laptop models. We experience huge momentum for laptops going forward. Secondly, we aim to expand our position with existing customers.
We have signed two new contracts in the laptop segment, where one contract represents a penetration into the highest volume market segment, the consumer segment. We have also signed an expansion contract with the same, with a smartphone, in the smartphone vertical. And third, we aim to launch more models with more customers. We already have contracts in place with four of the top six laptop OEMs in the world, and three of the top five global OEMs in the smartphone vertical. And finally, we aim to add more AI Virtual Smart Sensor per device, mainly building on the potential we are seeing for our Seamless Sensor... Okay, thank you. And now we will take a short break, reviewing the questions that we, that have been coming in throughout the presentation.
Welcome back, and I'll just start by, as you can see from the picture, that we had up, the image, that we are making an announcement that September 10th, this year, we will have a capital market update, and more information will be giving in due time, but the location will be in Oslo. All right, so let's jump into the questions. First, I just want to thank the investor that has, shared a lot of questions before, before our presentations.
Mm.
I appreciate that. And then, of course, not of course, but it's been a lot of questions taken in during the presentation as well. So,
Thank you for that. We have addressed at least a few of those questions that sent in before we addressed quite thoroughly throughout the presentation.
Mm-hmm.
So, but, Laila-
Yeah.
There's a lot of interest about AI laptops.
Yeah.
So the question is, like, "All major laptop OEMs have issued or communicated new AI laptops. Is Labs present in any of these?
Yes, we are.
Mm
... so as you, as you may be well aware by now, is that we're working with all the, also all the major PC chips as partners. And, as you may know, Intel is the largest one, with about 70%+ or so market share. AMD also has a good portion, market share. And then Qualcomm is the newcomer that has a small, you know, market share. But all of these players are offering, you know, solutions around AI. And then, of course, we work closely with our customer, for the new use cases around AI enablement as well. So yes, absolutely we are.
Mm.
More will come.
Yeah. We have received multiple questions around Seamless Sensor.
Okay.
So first of all, interest around it, when are you launching with it?
Yeah.
And so forth.
Okay.
It's many questions. I think it's 10, 15 questions around that one.
Okay, great.
Yeah.
Yeah. No, we... I have to say, we are very excited about the market traction and the momentum that we're seeing around our AI Virtual Seamless Sensor.
Yep.
It's been creating a ton of interest. And, you know, we, as you know, we already signed a license agreement with a customer-
Mm-hmm
... after successfully converting a POC to license agreement last fall. We cannot, unfortunately, comment when our customer would launch-
Mm
... with this Seamless Sensor, but I can reassure you that the delivery, the integration, everything, is going well.
Yep.
You know, we see also generally in the market a strong interest for the Seamless Sensor.
Yeah, good. And there's also one, like, additional questions around that Seamless, and that is the competition space.
Mm-hmm.
There is a few other solution type around here, so please comment on that.
Yeah, so this is the beauty of our technology.
Mm-hmm.
This is obviously Seamless Sensor is one of the many capabilities that we can do with our AI software platform. And the beauty here is that we can work independent and agnostic with all devices, as we are 100% software. So we don't need any sort of dedicated hardware sensor, so there's no direct competition. And if you look out in the market, there's only one player that offers one OEM-
Mm
... that offers interoperability between, for example, laptop, smartphones, headset, et cetera.
Mm.
That is Apple. As we all know, Apple has a very tight ecosystem. They control and utilize dedicated hardware sensors-
Mm
... et cetera, so they own the whole stack. So we have. So the rest,
Mm
... it's important to note, the rest of the market is not in that position.
Mm.
Our technology, our Seamless Sensor, we can enable true interoperability, not just with-
Mm
... you know, for example, Lenovo, HP, and Dell-
Mm
... and Android phones, but also with the Apple products, if they choose to do so.
Mm-hmm.
So that's, that's the beauty of it. So we do not have any direct competition for our AI Virtual Seamless Sensor.
All right.
Is there more?
Yeah, no, from competition to pricing strategies. So the hardware sensors fluctuating pricing-
Yeah
... and how does that affect our pricing?
Yeah, of course, you know, we see as some of the hardware sensors. And I also think it's that the pressure that we are also applying into the market.
Okay
... that, we see that, some of the-
Mm
... every single-purpose, simple, I would almost call them dumb sensor-
Mm-hmm
... has been a little bit lower price. But from, for our technology, for, you know, the HPD and interoperability, we haven't seen, we haven't gone down in pricing-
Mm
... based on this. But of course, we have to reflect out to the market what is happening in the market.
Mm.
So, it hasn't had that much impact on us at this point.
Yep.
In the laptop market specifically, because I see that that's what they're pointing out.
Yeah. So I'm gonna ask myself a question here.
Yeah, okay.
So it's arbitration settlement, what it's related to? So we have disclosed this in our reports for the past at least a few quarters back. So of course, arbitration is nothing that we seek. It is one of our clients, our customers, did not want to pay their bill, and of course, we have delivered our part of the agreement, and we wanted them to honor the contract. And now they have... And we, of course, we won the arbitration settlement, and we have received the funds now, so-
Yeah
... we cannot comment on who and what, of course, that's part of the settlement.
Yeah. Any more? I think we-
Yeah
... answered, like, 7 questions, and-
Yeah, we did.
... move on. Do we have any more questions, or I think we're pretty much...
Yeah
... set. So thank you very much for chiming in, and have a good summer. Thank you.
Thank you.