Good morning, everybody. Welcome to poLight's First Quarter Presentation 2023. Together with me today is the CFO, Alf Henning Bekkevik. Chair of the Board, Grethe Viksaas, is also present, and for those who is present, you can have a chat with Grete afterwards. The agenda of today, key events, introduction to poLight. I extended that a little bit in case there are some new shareholders, investors. Review on market, financial review by CFO, outlook statement, and Q&A. If there are questions from the audience being present at Continental today, please wait asking the question until you have the microphone in your hand, so that everybody can hear what you say. We have a huge attendance from webcast.
Those following us from web, please, when you enter questions, leave your contact details, so that we can secure that you get answers in case we are running out of time. Okay. The key events in a quarter, no doubt that the fact that we now finally have our first design win in smartphone has kind of colored the quarter a lot. We were present in the release event in Shanghai. That was a fantastic experience. This is of course an enormous milestone for the company. I will come back to that. Augmented Reality cases, I would say, continue to develop overall very positive, and it's maturing. As you know, Magic Leap 2 and LLVISION are already using TLens in commercial supply, and there are others coming.
I was asked to comment on the existing design wins more than I normally do. What I can say that one of the design wins in the machine vision side gave us a follow-up order during the quarter. That's typically an example of things which we do not make a press release out of. Of course, we could do, but we re-reckon that a order of NOK 650,000 will not be share price sensitive. I'd give that kind of update through the quarter report. That's actually a new order from an existing customer using us for a machine vision case. All-time high revenue, still small, we know, we have to take all positive signs as a good progress.
NOK 7.1 million is significantly higher than it used to be. Of course, we, at least half of it is driven by activity with Meizu. Also there is another half, which is a lot of small things, which indicates the spread of the revenue. The right issue was fully underwritten and gave NOK 135 in gross proceeds. Thanks for those who participated. poLight, in one slide. Global player in tunable optics. Global, you can see from the geographical footprint that we are relatively well distributed. Started in 2005, it's been a long journey.
Have today achieved, I would say a high maturity when it comes to product technology and are in the process of establishing more and more important reference designs. 19 worldwide patents, which is a little bit increase from last time, seven pending. IP is something we do really invest a lot in. We're using several NOK million per year in maintaining patents. 37 employees, I guess that's one down from last quarter, so that's a little bit up and down. There is no planned major changes at the moment. Some can come in and some can go out, so that's basically flat during the quarter. Listed on Oslo Stock Exchange since 2018. I added 1 slide, which I normally don't show in case of new investors and shareholders is participating.
What we do is basically replicate the function of the human eye. Human eye has a lens, it has eye muscles. When you want to change the focus where you're looking, the eye's muscle is shaping the lens, changing the focus. That's what poLight TLens does. How we do that is that we have developed a polymer. If you look at the, the top left drawing animation, that polymer is the blue dot, white dot material in the, in the middle there. You can see there is a membrane which is bending, which is shaping the polymer exactly like the human eye works.
This is used in compact cameras and displays, and it's competing against the conventional way of doing it, which is when a lens, when a camera's gonna change focus, they change the position of the lens stack. What we do is not, we ask the lens stack to stand still, and we add TLens, which bend slightly to do that function. It's quite a unique technology, or it is a very unique technology. When it comes to supply chain, we make on the bottom drawing, we make the polymer in the headquarter at Horten. Some of you have been there and seen it.
1 liter polymer is million of lenses, it's really, really scalable. Also a relatively simple setup, that's why we keep it in-house, we also do not need to share the recipe of making the polymer. Polymer is one of the key values and components in TLens. Polymer's been with us all the time. That was basically the beginning of the company was that polymer. The iMuscles, which has been also a big investment for us to develop, we are together with the MEMS fab ST. ST is producing an eight-inch wafer, which you can see the disk on the bottom of the screen there with the logo ST. That disk is eight-inch and is comprising more than 2,000 dice.
Dice meaning the 2,000 iMuscles. Those polymer and the MEMS wafer is shipped to Asia. In Asia, in Philippines, there is our manufacturing assembly partner. Assembly partner meaning that they put together the components to make the complete TLens. That's happening in the Philippines. Historically, we have been in Philippines and Taiwan. We are now in the process of moving everything to the Philippines. We can then produce two type of kind of TLenses. We have a TLens which is without clothes, a bare TLens, and we have a TLens with a package. You can see that in the drawing, the bare TLens, the package TLens. The advantage with the package TLens is easier for customer to handle it. It's protected, it's easier to connect with.
The disadvantage is that it's a little bit more bulky. The bare TLens, as you know, the Add-In design is using a bare TLens, and that is to optimize the compactness of the camera module. They use the bare TLens, and they take care of the handling of the sensitive little TLens themselves, whereas the package would have helped them to do that, but that will increase size. Those are the two kind of versions of TLens. We foresee that smartphone will move with bare TLens as standard. We foresee that the package TLens will typically be industrial, initial AR, initial medical, but we also foresee that longer-term AR will move towards bare and potentially also other markets.
Of course, for us, it's easier to make a bare TLens, it costs less, and it gives our customer the ability to differentiate themselves, integrating TLens in different ways. I think we're heading towards bare TLens as standard, but today we have to serve both. We have TLens with different aperture size, meaning the hole in the middle is different. 1.55 Silver, typically industrial, some medical cases. 1.9 millimeter hole, which is typically smartphone and others. On the engineering sample level, there are a 2.2 aperture size, which we call Platinum, which is today not in mass production.
Okay, and just to say that as an example, for medical cases, it could potentially be that we over time will actually make a smaller TLens. You can think about endoscopes going into the body. They want to be as small as possible, and this is where our technology play best. Our technology likes to go small. That's so for us an evolution towards smaller TLenses is much easier than evolution to a bigger TLens. Okay. We. Then of course, we have our own driver, ASIC driver, that is putting voltage on the iMuscles so that they bend. You can see from the drawing on the top left that you have voltage changing from 0 to 50. That voltage makes the piezo change and bending the membrane.
That voltage supply is coming from the ASIC driver. That is our ASIC driver. These are the products we sell, and we sell to camera module partners. They are some are doing the Add-In design, like the bottom camera module you can see there. There the TLens is buried in between a TLens stack. We have the top one, which is using it, the package TLens, as an Add-On, in an Add-On construction. Then we sell to a lot of OEMs, as you know. Not only do we work directly with the camera modules, but we also work directly with the OEMs. The OEMs are key for us because OEM are the bosses. They dictate what the camera module is supposed to do.
This is a good technology because it's extremely fast. You can think about competing technology moving the lens stack, very slow, high power consumption, whereas we are ultra-fast. We don't move anything, very low power consumption, no magnetic interference at all. Think about products getting more and more compact and slim. You have antennas for different things and then of course, if you don't have anything magnetic interfering with all the other components in the system, it gives the designer more freedom to design. Of course, no gravity impact. So these are key attributes in our solution, in addition to be a very compact solution. Okay. You can see it's a very small component.
If you look on the top right, there's a tip of a pen, a normal pen, and you should see the TLens, so, a bare TLens underneath. Okay. That was a little bit of the basics since I understand that there's a lot of new people following us now. Where do we work? Well, we are working in, I would say today, three main markets. Consumer on the left, represented by a smartphone, a wearable, accessories. That's a very important market for us. We are working on the augmented reality space, which is maybe potentially even more important for us over a longer time period. We are focusing also on more the high-end kind of industrial segment, like high-end barcode readers. Those are the three important legs.
Of course, the consumer side, the left side, is driving the volumes quicker. The future, many believes, lays in the AR space. All innovation happens there these days, and has done for a long time. People believes that AR will actually be a part of the consumer. AR will be both enterprise, high-end, and consumer. That's why it's important, as we have said many times before, to build a position now. Now claim the space. Claim the space, that's what we do. If you look at the fight we have had for how many years in smartphone, that fight we had to take then was, of course, related to that when we started to fight, there was already a well-established technology in place. From engineering perspective, why should I change? It worked.
They have deployed millions, hundreds of millions of phones. You need to show something extra. You need to do, you know, demonstrate why should I change? Why should I take that effort and risk? That's what we now have managed to do after so many years, but it took some years and money. Whereas in the augmented reality, we claim the space. We are there now when it's small, and we are building extremely key references. Barcode Industrial is kind of an example of type business which will be there as a fundament over time. There are products being there for 5-10 years, same customer, same product, shipping, repeating.
As long as we are managing to build more cases and maybe getting into more the point of sales area, that market will be a, call it more like a little bit the recurring revenue of the company. Whereas this sexy smartphone, wearables, and augmented reality will be the cream on the cake, giving us the volumes over time. Good to have something solid in the fundament. Yes. Other market segments which I will tell a little bit more, talk a little bit more today is the medical and automobile. In a way, we are extremely eager to move full-fledged also in these areas. Of course, there is a limit what this organization can handle, so we need to take it step by step.
At the same time, there are some trains leaving the platform now, in these market segments, and we don't intend to lose them. We want to be on that train, and I'm gonna talk a little bit more about that later. Hopefully next quarter, I have to split this into two slides. As you can see, and you have been following us for many years now, many of you, it's not so long time this was an empty slide. 11 assignments. 11 assignments. Meizu 20 Infinity, smartwatch, webcam, consumer side, AR, Magic Leap, LLVISION, Barcode, Honeywell, SuperLead, Hikrobot, Teledyne, and unnamed customer. 11 assignments. Actually, SuperLead is using the same imaging system in three different products. If, if you are creative, you could count 14, or what is it, 13.
We're starting to build an impressive reference in all the, I will say, existing market areas I talked about here. Okay. Smartphone, consumer, barcode, augmented reality. What I do expect gonna happen this year is that we're gonna add also references, hopefully more in the same segments, but also hopefully having the first reference in a medical space. Okay. Use case consumer. There's no doubt that adding TLens design is fundamental for consumer. It's difficult. It's super difficult. as I mentioned, it's more difficult for a customer to handle the bare TLens than a packaged TLens, and adding needs a bare TLens.
We are trying as good as we can to help our customer to ease that pain to use a bare TLens and to use Add-In. I have many question whether there's only one partner in Add-In TLens. What I can say is that there are more on its way. We are also focusing more and more on making so-called reference design, so the customer we have is don't start from scratch and understand how to implement TLens in the lens stack. We are ourself making reference design. We have employed people in who has worked with lens design in other companies to be able to kind of make those reference design, which we actually publish on our webpage.
In the consumer side, smartphone, clearly, and augmented reality, also which also we have consumer activity, has mainly been the main activity. We have a few more webcams cases also for consumer. We're starting to see some interesting development on laptop side. Early days, but enhancing screen will potentially dictate a better camera in the laptop. Of course, it's a challenging application due to the, you know, the screen is thin, and it's limited thickness and all that. We're starting to see some traction there and have some cases coming. Drones, yes. I have to say not big, but we have some drone cases which we're working on. Then some smart home type application, iris type recognition.
It's not only smartphone and Augmented Reality, there are also other things which I think potentially can be important for us. This was a fantastic day. This is in Shanghai. It was the release of the Meizu 20 Infinity. You can see on the slide on the picture on the right, there were several hundred people in this event in Mercedes-Benz Arena in Shanghai or what it's called. We were invited, and actually a lot of the beginning of the show was related to the Meizu 20 Infinity, which is the high-end phone.
Not often you see this from a small company from Norway that the company releasing a new product is mentioning actually powered by poLight. It's like Intel Inside, isn't it? It's poLight Inside. Which is fantastic for us as a marketing tool. In Chinese, of course, I know that you can read Chinese, but if not, those Chinese on the slide, there is no pumping very fast. Millisecond focus speed, that's what they say. This is a flagship phone. I said many times before, I expect it to be a low volume case. It's a showcase for Meizu 20 Infinity, see what we can do type phone. You know, see how good we are, that kind of phone.
They say that achieve the most compact selfie camera and instant smooth autofocus in the world. The spec is actually a 32-megapixel camera, so it's a good spec. F -number 2.5, very compact, as you can see from the specter. They are using bare TLens Silver premium, aperture size 1.9, and they have it inside the lens stack, as you can see from the right bottom figure. They claim that this is the smallest camera module and pupil size with AF on the market. Those who have some of you have seen the camera module, those of you will come to us and see it, can see it in Horten. Status, we have fulfilled the first PO that was done during the quarter.
It was launched to market in March, end of March. Now we are kind of waiting for when will that phone be available. I know many of you also do that. I will for sure buy one, if not more. I'm sure some of you will do. We don't know the details when. We don't know the details where it will be available, so we need to come back to that. You can rest assure we ask them. There's no doubt that this happening will increase exposure in this market. The fact that soon there is a phone in the market which people can buy is a significant event and for sure all the other OEMs will buy it and test it and dismantle it.
Of course, as you may know, we have many who have done POCs with poLight, smartphone POCs. I met a few of them already when I was in China during this event. They said to me, "We are really looking forward to see and test the phone, and maybe this is a good thing for you," something like that. Of course, this creates a lot of interest. I think the interest is already there due to the release and the event. I think the main impact we will see when people have started to test and use it. Of course, based on what will be the user feedback in the market. It's a great opportunity for us. It's not only for the smartphone market, obviously generally for the company.
If you have a company which has been able to go into get this design win in this area and on the other areas, it automatically gives you a credit that, okay, they can do. Many also can see that potentially, you know, it's a little bit risky, can they supply? Are they able? We supplied faster than we were obliged to. Of course, it was a relatively small case, but also I think it will be important for removing/reducing the perceived risk of dealing with poLight from a supply chain perspective. Super positive, and we're gonna use it for whatever it's worth, and it is a major event for us. Having said that, I mentioned before many times, and you can hear to all CEOs talking about the consumer market, it is a depressed market.
There is no doubt about it. They are having lower sales, even Apple. It is a situation impacted with whatever, that today the. You can see also the innovation in that area is I would say is quite little focused. It's more about deploying inventory, old components, releasing new phones, same [audio distortion], new wrapping. It's a lot of that. Also when sales is dropping for the OEMs, that of course means that they have to, yeah, they have to reduce releases and we are seeing that for a while. What the only thing we know is that situation, that sentiment will change one day. That will change one day.
Spending will increase, they need to renew, that's where we have established the references. That's where poLight will be and make and get new opportunities when people at OEMs are ready. It's super positive. At the same time, it's important to co-communicate. It is a difficult market at the moment, but we think it will change. When it change, we will be there with excellent references. I'll try to make to confuse you a little bit. I'll try to make a little bit different layout on the status. Let's see how that works. It basically shows, I have a summary table also, but it shows four assignments in consumer, one design-in. That design-in is related to AR.
Eight POCs. You can see how that is distributed on the different market segments. Smartphone, AR, Iris, laptop, and then a lot of planning POC. You can see a lot of the planning POC is also, what should I say? Camera, web or similar kind of related. Very good activity. Let's move on to AR. Impressive position in a mega trend. I think, we have talked about it before, compactness, ultra-low power consumption, fast focusing speed, constant field of view, no gravity impact when you move your head, athermalization, super important, meaning that when the temperature in the glasses change, which they will do in use, we by design, in a way, TLens is compensating for that.
If you have a fixed focus camera without any TLens and the temperature change, that fixed focus camera will quickly go out of focus. That athermalization effect in TLens is super important. The use cases, of course, fast and sharp focusing of object text regardless of distance, fast QR barcode scanning, reading regardless of distance, hand gesture recognition, all in focus still images and continuous video focus re-recording moving object. I just myself tested the LLVISION glasses the other day, which we have our Chinese GM was visiting us and had LLVISION glasses with him. It was impressive to see when you moved around to see what because then there was people looking back office and trying to help me with kind of giving me instruction what to do.
I was in the field and doing something and to see how well that worked with the TLens and autofocus, that was quite impressive. This is LLVISION. Allan Liang, who is the Co-Founder of LLVISION, I was visiting them. It was an impressive visit. Had a lot of use cases. Here is what he say, "TLens has millisecond response time, faster to focus for and remote video streaming experience for AR devices that need to move quickly. It also allows the AR recognition result to be more accurate. Also the low power consumption while used in continuous autofocus mode is key for us.
So far we have to customers like TBEA, advanced energy manufacturer, SANY Group, a construction machine manufacturer, China Southern Airlines, an airline company, Agile8, an AR solution company for healthcare in Australia. Already shipping this, exactly this device to this customer. He's kind enough to say that he would like to strengthen the cooperation with us. This is again, it's a small volume case, but a fantastic reference. In general speaking, I would say the AR segment has been developing positively during the quarter. A TLens is used planned for both world-facing cameras and display. We are, as I said, already in Magic Leap and LLVISION. Three more products is planned to be launched in second half 2023. I have to say if according to plan, because this is how it is.
Every day there is a change, this and that, later, earlier. We cannot say that at it will happen, it's out of our control, but that is at least the current plan of these three companies is that they will launch this year. In addition to to TLens, we have TWedge, and which is enhancing micro-LED displays, which is receiving, I would say, super good interest. I can just say a few words about that. TWedge, we're expecting this is still a project within an early prototyping stage. We decide to be quite open about it because we already we are quite vocal about it in the market.
We are spending money on it, your shareholders are deserve to know where we spend our money. When it comes to new development, this is where we do most activity at the moment. The feedback we have from the market is positive. I would say maybe very positive. We will have technical samples in mid this year, we're gonna do a roadshow showing this function of the TWedge. A very interesting product which will kind of add another leg to the company's product portfolio.
As I said, so far, there is no firm decision that we will go all the way with TWedge, we are doing the screening in the market to understand what TWedge should be, what spec, we will decide during this year to move ahead or not. We will talk about that more later. Everything seems very promising at the moment. On the AR side, we have two design wins, enterprise. We have four design-ins, enterprise and one consumer. We have six POC, three enterprises and three consumer-related, and we have 15 planning POC. I run out of icons, and there is a mix of different type of application in that space. Okay. Use case industrial, barcode. Yeah.
Opportunity pipeline is developing. It's also a slow-moving market. We are five customers now which are shipping and they are also most likely to be in the market for several years. All these five is still have several years of lifetime. As I mentioned in the beginning, we recently received a follow-on order from one of them, a machine vision case. We are discussing new releases with existing, already, existing customer. We're also having a lot of companies planning to qualify or is qualifying our technology. If you look at the on the number side, there are five design wins. There are 16 POCs. 16 POCs.
You can see they are very often related to barcode, but there are some machine vision cases, and there are some other, I would say, more camera general-related things. LLVISION is planning POCs. There was a question asked where is the customer coming from? I would say they're spread all over the world. All over the world, including Europe. Now I'm gonna talk a little bit more about healthcare and automotive. There's actually a new design design-in during the quarter. It's a company which is developing a miniature two-photon microscopy for commercial sale. Remember the Kavli case? This company is actually doing something similar, and they plan to sell this instrument to different labs around the world. They will start in China and then go from there.
They have purchased and confirmed that they have designed TLens into their instrument. Again, I was telling before, I'm gonna say again, even that this is a commercial company doing it, we don't expect it to be anything high volume, but it's gonna be a very high value for us, of course. Again, it's step by step building poLight and TLens brand in this healthcare area, which I think is super exciting. Senokot. Senokot is the laparoscope. You can see the picture of the tip of the laparoscope on the right. Our understanding that human trials is soon happening, that's our understanding. It happened around mid this year, and they expect to do a release shortly after that.
I feel that that is in a medical space, Senokot is definitely kind of the first commercial design win we will claim. When that happen, I will we will of course announce. As I said, the Kavli case has generated a lot of activity for similar research cases, I don't know how many, 10, 15 customers is now kind of using TLens in their labs. As I said, I think it's a great brand building. Also we see more and more that more and more commercial companies using TLens in more standard products is showing visibility. I mentioned before, we have especially, I would say, one case maturing very well, which is a tier one player.
It is so far, it's progressing well, very advanced design. They're using two TLenses. And we don't know how far it will go, but today there is no sign of it not happening all the way, but it will take a couple of years, we feel, before they can qualify the whole process. It's a really high-end device, and it's a I think, again, volume-wise it's nothing close to anything like bigger barcodes or AR or for sure consumer. Again, the value of it per piece is really high. Endoscope area we feel will probably be the most key area for us in the medical. Of course, AR.
AR glasses used in a medical environment is, of course, also a big area. Healthcare. I still I think it's fair to say that I feel still in this area, it's not on the three main boxes. Still it's an area we are a little bit scratching on the surface. I think there are more to learn and then more to see in this area. I think engaging with these tier ones, engaging with the first ever AF based laparoscope, engaging with the Kavlis, the institutes who make publication and talk about TLens, fantastic. You know, that's how we step-by-step plan to build a position. Which is nice about this area is that the smaller, the better. What TLens won't like to do is to go small.
I have question many times about the pill cam, but there's no activity today on the pill cam. You can see the pill, which you swallow and hopefully find its way through your body and make nice pictures. I, I, this is still only my wet dream. Automotive. We haven't really talked much about that. This is, what should I say? A non-trivial volume opportunity. The in-cabin camera requirements, it demands new solution. Whether it's monitoring the driver, monitoring the back seat, it will trigger need for different new technology. Autonomous driving will change also the need for and the spec in a camera.
Without going into the details, but what we see is that more and more, is people is coming to us and want to find a new solution for the focusing functionality because they don't believe that the mechanical focusing mechanism will work. You can think about the car, you think about the super tough environment, and they don't think that a mechanical system will work like a VCM. We are one of the guys they are considering. Actually, in the quarter now, we have engaged in two POCs, which is new, and a few others are planning POCs. Those are big names. Those are big names. Very big names.
there's no doubt that this is not gonna be a easy market to penetrate, but there is a need for new technology, and TLens is one of the solution being mentioned and explored. market is huge. market is huge and it will take years to develop. I think, I think the slogan or the statement in the, in the heading here is a very describing statement, a non-trivial volume opportunity. I think, over the year, next year to come, I think we're gonna talk more and more about this. I think this is also an example of claim the space. There is a need, poLight is the solution. Okay. on the summary then, on the consumer side, and just, so that you know, in this table, consumer line doesn't include AR.
All the AR cases is under AR. Okay? The slides I showed earlier today, the consumer also included AR. You could see from the icons. That's there is a difference there. design win form, project zero. What I have to say there was in the Q4 report, there was one design-in, remember, in consumer. I didn't talk about it, but it was there. That design-in, I consider today to be more a mature POC. I moved it to ongoing POC. It's not gone, it's just my consideration today is that it's less mature in timing. That's why I moved it to ongoing POC. Hopefully it will be back next quarter. augmented reality, same there. one of this design-in is moved to POC for the same reason, for the same customer. Okay?
Still, as you can see, 12 design wins, six design-ins, and that's down from two due to those two cases which is moved to mature POC. This is an assessment we do. When we classify design-in and mature POC, it's very difficult to judge. My judgment today is that it's more mature POC than a design-in. That's my judgment today. Completed POC 70, ongoing POC 43, up from 38, and planning POC 48, up from 47. In a way, the pipeline remains and continues every quarter to mature and improve. The problem we have now in the pipe is that we need to be careful to not be over-eager to add new cases and not be able to support our customer in a good way. That balancing act is super difficult.
Not at least when we now start to engage with POC with in automotive industry. Of course, that's that is gonna be a super demand. They are big companies. We are engaging with tier ones in the medical space, just starting in a way. In a way, we have a situation where we are potentially having a challenge with capacity. We need to be selective also. Okay. Alf Henning, would you join me for the financial review?
Sure. Thank you, Øyvind.
Mm-hmm.
Good morning to you. Deliveries of TLens and ASICs gave NOK 7.1 million in revenue in the quarter, compared with NOK 1.5 million the same quarter last year. As already mentioned by Øyvind, about half of that revenue is from the smartphone market. The EBITDA loss was NOK 14 million, compared with NOK 18.5 million the same quarter last year. Well, you could say it's still a small volume when it comes to revenue, but it contributed to this development in the EBITDA. Also there have been less third-party involvement in the R&D projects, explaining the improved EBITDA. On the balance sheet, the cash position was NOK 53 million, compared with NOK 84 million at the end of last year.
Inventory went from NOK 45 million at the start of the year to NOK 56.8 million. That is NOK 11.2 million increase during the quarter. That is wafers from STMicroelectronics, which is a long lead time component. On the cash flow, we started the quarter with NOK 84 million. We used NOK 30.6 million in operating activities, compared with NOK 6 million the first quarter last year. There's mainly two factors explaining that significant increase. That the first one is that the inventory has increased by NOK 11.2 million, and also the fact that last year we received a VAT claim of NOK 11 million. The other activities were insignificant during the quarter, the cash ended up with NOK 53.6 million at the end of the quarter.
I could also mention, as always, or Øyvind also did, is that the rights issue was oversubscribed by 25%, so we received NOK 135 million in gross proceeds in May, this month. Okay. Thank you.
Thank you Alf Henning. Okay. Sorry for, it's a little bit longer today due to me talking too much. Outlook. Yeah, high activity, as I hope you see and appreciate. Smartphone case key, not only for smartphone, but for the whole company and all segments. It's a great opportunity for us to showcase our technology and also potentially receive or reduce the perceived supply chain risk working with our technology. As I said, consumer market is depressed. We are not. We will be there when the market is there. Augmented reality, it continue to develops, I would say very positive. We know we are Magic Leap, we are on LLVISION and more to come for the next quarters to come and onwards.
Don't forget that we're also involved in consumer-driven AR cases and that other market segments such as industrial, medical. In the longer term, automotive represents significant business opportunity for future-proofing poLight. There is all reasons to maintain dedicated to poLight. We are a team which is very motivated to develop this company step by step. We all want things to move faster, but I think that step by step, we have proven that we take positions and we claim the space. Thank you. Should we then go to the Q&A? Alf Henning, do you want to join me?
Okay. The first one is about smartphone market. The Meizu Infinity design win came as a surprise for many of us. Did it come as a surprise for other players in the market?
Yeah, I think so.
I think so. When I was in China now last time, for the event, when we visited other customers, they were positively surprised and impressed that we managed to do so, and I think that's will trigger an interest from other smartphone OEMs for sure. I think yes, it was a surprise for many.
Does Meizu Infinity need to be in the market to be seen as a valuable reference? Can you tell us more about what the design win in smartphone means for poLight?
I think we addressed that during my talk.
Yes, I think so too. Did you receive more interest about smartphones from other players in the market after Meizu announcement?
I think yes.
How do you consider the robustness status of the Add-In design?
Yeah, if robustness means reliability, I would say that the add-in camera module design doesn't have a major difference when it comes to reliability performance as compared to an add-on. I would say very similar.
The-
Having said, robustness and reliability will always be chasing us. The market would like to have it more robust. The phones and the products are getting more and more stiff and thin, meaning that extreme impact when you drop it. So this will kind of hunt us for forever. But we hopefully will be on top of it. Design-in due to the time schedule and maturity. Yes, it is a low volume flagship.
Which geographical zone are the other potential smartphone customers located in?
I would say that the smartphone cases we are working on are mainly, I need to think, mainly in Asia, but there could potentially be some others, but mainly in Asia. Yeah.
Does Meizu also work on products needing TWedge? Is that in automotive?
Yes. Meizu has shown quite great interest in TWedge. They, we don't know particular what is the case. As pointed here, Meizu is owned by a company called Geely, which is a automotive vehicle company. But I don't think TWedge is related to that. I think TWedge is more related to AR glasses they are potentially are considering to develop. AR.
Are there more than one player with Add-In design for smartphones that is ready to enter into real project, projects with OEMs?
I think as of today, I think Sony is clearly the one. There are other in the process.
Are there more camera models makers like Sony that will be ready for mass production soon?
Yeah, I think that's. Sorry. Yeah, repeat.
Does smartphone companies request dual source? If yes, is this the reason TLens are not used in more smartphones?
I think it's a good question, and it is an element, I think. I don't think that's the reason why we are not in more smartphones. I think that, when TLens is being kind of considered more and more by more and more people, I think that will quickly become a question. Then you can say, at what level do they need dual source? I think first and foremost, the most important for them is to have dual source on a camera module level. You see? They need a Sony and they need somebody else. Then that I think is the most important thing for them. Of course also they would like to have that TLens could be supplied by different companies, not only using TLens from poLight but other technologies.
Like the VCM industry as an example, which is a huge industry, having many, many players. The TLens is poLight. I think that yes, that can come. I feel that the ways of doing that is that we could of course license our technology to others if we want. There could be like liquid lens type technology which may also find a space there. Let's see how things are. I think first and foremost, I think the from a supply risk perspective, I think the most important is that there are more camera module suppliers using TLens. I think that's the first step of de-risk.
Can you say something about how long you have worked with Meizu and how they got into the project with TLens?
Yeah. It's as we started working with a company called Xingji Shidai probably one and a half year ago or something. That's a company that was started by Geely, you know, the company who owns different brands in the automotive. They have Volvo, Polestar, like we all know here in Norway. They wanted to kind of build an ecosystem around the car, and they wanted to kind of have a tighter integration between the communication equipment, glasses, phones, and the car, and the satellite, and everything. That's where we started. The Xingji Shidai , which they called then, was very innovative, and they wanted to be different. You know what? You need a guy like that to come in with new technology.
You need a guy who would like to be different, he would like to be better, he would like to be top in class. That was our possibility. We managed to convince them that we are one element of being different. Since then we've been working very closely with them. What happened is that Eric, the Chairman of Geely, he acquired also Meizu, which was quite a big supplier of smartphones back in the days. After Xiaomi took the role they had in a way, and they dropped from say 10 20 to a few hundred K per model. They decided to acquire Meizu so that the smartphone initiative in Xingji Shidai was merged with Meizu.
That's why they call New Meizu, and that's where that phone was kind of packaged into the Meizu kind of family. I think if it was Meizu from the beginning, I think which is more of the same like the other do, I think it would not be TLens inside. The case now was it was starting as with a company who would like to be different and innovative, that gave us the opportunity.
Meizu launched a standard version and a pro version of phones at the same time as Infinity with TLens. Both the other models were ready. Has already set sales records for Meizu even though they had just been launched. When the TLens model goes on sale, how likely do you think it is for us in Norway to be able to get one?
Yeah. We really don't know. We tried to chase that many times latest this morning. What we know is that they say soon it will be ready for pre-order. We don't know where you can pre-order and for which countries and frequencies. That we don't know yet, we just need to come back to that.
Meizu is probably not the smartphone customer poLight has worked with together with a camera module player for a long time on the development of add-ins. What does the original customer say about Meizu becoming the player that launches the world's first phone with a tunable lens in a selfie camera?
Yeah. Yeah, good question. Let's see. I think that customer who initially worked with the camera module supplier, and developed the Add-In concept, they for sure will test the Meizu Infinity phone. Let's see. I don't know. It's gonna be interesting.
Does poLight still work with the original smartphone OEM?
We, you know, work with. What's the definition of that? We are engaging with them. We are talking to them, we are promoting to them, every day, every week. In that context, yes. Are they one of the active POCs? No. Are they one of the completed POCs? For sure.
How will poLight continue to work with Meizu in the future with regard to more models?
Yeah. We will of course, hopefully they will be happy. Hopefully, what they tell us, the continuation with us and all other suppliers they use is of course dependent on how we perform and what is the user feedback, end user feedback from that function. We hope that Meizu will develop more kind of application around utilizing TLens' technical advantages like all in focus, bokeh, so that the end user really appreciate it, which will be difficult to realize with other alternative technologies. I think it all depends on the feedback they get from the market and that we will learn in the next, well, six months or whenever it was, will happen.
Selfie camera with add-in is now design win on. Has this speed up work also with rear camera with from some camera model makers or OEMs and are there any back camera POCs in the pipeline?
No. I would say that the main activity still for the company is the selfie camera, I think it's too early to for the OEMs to think about going to the back camera. I think we need to concentrate now in claiming the space in the selfie camera and then stay there for a year or two and then go back to the back camera. I think it's a little bit premature.
Is poLight involved with under the screen selfie camera with one or several companies?
Under the screen camera, I only talked to one customer recently who's talking about that. It doesn't seem to be any big push in that direction. The answer is no.
Now there's.
The reason is image quality, that you lose a lot of image quality through the screen.
Now it's question about AR/VR.
Mm-hmm.
Did you gain increased interest from VR players after Sharp showcased their solution with TLens?
All noise around using TLens in different application helps. Sharp is quite vocal about it. I can't say specifically, but I think all these kind of presses and demonstration. I meet Sharp on regular basis, and I met the customer in China, AR customer who just had met Sharp talking about They call it the polymer lens. So that, you know, I suddenly we have Sharp as a sales entity of poLight selling the polymer lens, which is of course helping a lot. Sharp being big, being global, being in many different market segments, of course that's super good.
Last quarter, Vuzix was mentioned as a customer, and the project is Shield. These glasses were very similar to how you imagine consumer glasses. Is it conceivable that this project will be able to come out as a consumer product in the long term?
Yeah, totally agree. They look nice, huh? They look very nice. I have one sample in our offices, and they really look like a more decent, little bit bulky Ray-Ban type glasses. They are nice. As far as we understand, Vuzix's commitment is AR enterprise. We don't know at least any plan in that direction. Of course, there are many other companies which we also engage with, which are thinking the consumer space direction, and they will look a like, little bit like the Vuzix glasses. Agree. Maybe even more compact.
Can you say something about how many major players are in projects with poLight on AR and VR?
No, the only thing I can say is that when I say that we are well-positioned in the mega trend, it is because we are engaged, we are doing project with big names. That's the only thing I can say.
Which function should TLens cover in possible VR projects? Are they the same functions as for AR?
Well, it is a camera. In that sense, yes. For the VR, you know, VR is virtual reality, you're wearing a glass, a display which is covering your eyes, and you can't see through it. That's virtual reality. You're in a virtual world. AR is augmented reality, you have glasses, you can see the world. In addition to see the world, you can see something in addition projected into the onto the glasses. That's the difference between AR and VR. VR, since you don't see through the glasses, they sometimes use a see-through camera, that sometimes is an RGB high-end camera using AF, and that's where we play the role, is in the see-through camera.
How do you feel selling a TLens product to major players in AR now? Is it difficult, or do they come to poLight themselves with inquiries?
No, we in poLight we have the genetic of being proactive, so we do reach out for sure. Yes, we also have incoming calls. What is interesting now to see is that you have different camera module suppliers, which is also saying, "We are also capable. We are also capable of integrating TLens in an Add-In design for AR." They do that because the big players in the AR space say, "We would like to use TLens." Again, it's an example of how important the OEM drive is. If the OEM said, "You know, yes, Mr. X Camera Module Guy, we can work with you, but you need to show capability with TLens.
This is a fantastic space to be in. They have to go, we have to build the prototype and go and show the big guys that we can do. In a way, in addition to reselling direct, and we step by step will build up other players who's also coming to them with solution. We come with a component, they will come with a solution, having TLens inside. Interesting dynamic.
Are there any, slash many players who have started with, Add-In cameras in VR/AR?
What is shipping today is Add-On. I think next releases for them is also potentially Add-On, but a little bit longer term, I think Add-In will be the solution.
Can you give an update on how the work with TWedge is going and something about the interest in this concept?
Yeah, I think we covered that.
Is poLight working with more than one company regarding TWedge?
Again, definition of working with, yes, we are engaging with several, related to TWedge.
Does poLight have a patent covering TWedge?
Yeah, good question. You know, the technology platform for poLight is covered by a patent, and that patent is basically, to put a little bit simple, two thin glass membranes, polymer in between. Okay? That is what is patented of poLight. Polymer and two glass membranes. TLens do that, okay? One of the glass membrane is bending, okay? TWedge does that, tilting. So it's basically, in that respect, should be covered by the same patent. Are there arounds? Are there tweaks? Maybe. The way we see it, yes.
Okay. Some question about the barcode and then industrial. Can you say something about how you work with existing customers in the vertical to be able to win more projects from them?
First of all, the most important thing is the supply quality. Be trustworthy, and that's of course not always easy, but we try hard to do that. It's obviously try to engage in the roadmap discussion with the customer, which is sometime difficult because they want to keep that very, very secret. We try as good as we can to stay close to the customer, like every company will try to do with customers. We are already engaged with some of them for next generation. Even the next generation we talk to the customer about is even to potentially to do coexist. It's not gonna replace the existing one because they typically last for a long time. It's gonna be an additional new product.
How are the customers who have joined POC and design-ins distributed geographically?
I think the answer to that is basically worldwide.
What are the possibilities for projects in drones? Are there any in progress?
I would say few. A few, yes, but not massive. Little bit surprised over that, to be honest. We have some tests about vibration, which we should be a big advantage using TLens, today we haven't seen any big traction in that area, but we have a few cases, yes.
On the medical side, project has major POC projects underway with a tier one player who, to whom you have already delivered several lenses. Can you say something about how this project is going and what possibilities there are for some volumes in such a project if design win is concluded?
This was actually one of the cases, if I understand the question correct, I mentioned during my presentation. That project goes well. It's still a POC. I would say it's maturing. We don't know how far away it is from a design-in, they are doing an extremely thorough job. It's a big company, bigger, the more thorough in a way. We, we support them well, we do supply, the feedback we have so far is that so far so good. I will give you a regular updates on that case, it looks very promising. Big volumes? No. Decent volumes? Yes. High value? Very high value. Very interesting. Financially also an interesting case.
If-
Of course, if that kind of company release a product with this technology, I think that will be, that will be fantastic.
It was mentioned somewhere earlier that the Kavli Corporation has led to a commercial player taking up the work of designing a similar scope for sale. Can you tell someone how far this work has come?
Yeah, I think we mentioned that during the talk.
Can you say something about pill cameras and-?
I think we covered that also.
... where poLight is
Yeah.
Okay. Then there's other questions like, how is the weak Norwegian krone affecting poLight?
CFO will answer.
Thank you. Well, we are selling our TLens in U.S. dollars. When it comes to revenue, it's positive that the weak krone. We also have expenses in foreign currencies, so it depends on the sales. If you look at the first quarter, I would say that the expenses are higher than the revenue, so a little bit negative affected by the weak krone.
As the sales increase.
Well, that's another story.
Thank you, Alf.
Has there been any geographical change in companies working with or asking to work with poLight?
I think that more and more we are more and more global, I feel. Now we have presence in Asia. We have presence in Europe. Don't forget we have a good setup in U.K. also. So we... I feel that we are... In a way, it's Latin America, nothing. North America, Europe, Asia I would say, is the three very important regions. I feel more and more global.
Will there be more employees in the near future, and in which categories?
I think we actually were one down this quarter. There is, we don't in the next kind of quarter, we don't see any massive buildup. There is a couple of people potentially, but, then, we are as we know ramp-up manufacturing, of course, we need to be more and more equipped to ramp. That means that we need to develop and professionalize the data management in the manufacturing process. That's one area which we are focusing a lot now. I think that we're gonna be... I mentioned that we are squeezed on resources when it come to supporting customer cases. People are working extremely hard, and this is not the work.
This is, being a poLight, it's a hobby, I have to admit. There are so many people who are working day and night and weekends and in all time zones. I think, the customer support, which is very, very techy, extremely techy, is taking a lot of resources, and we also need to step by step strengthen them. My sales team is saying that, you know, now there are so many customers that I really need, some help to do the account management. I think also potentially in the account management side, we need to add, maybe a couple of in the regions like in the U.S., in Asia and potentially in Europe, but nothing massive but say a handful, throughout the year potentially.
When do you think it's realistic to see the first product using TWedge?
Yeah, I don't know, to be honest. Say if technical samples are going well, and we don't need to do major changes to the design, which rarely happens, then I think it could happen within the next two years. I think it's on that timescale. I don't think it's realistic to say this year and potentially also not next year. There could be a scenario where one of the TWedge customer are saying that can we do something special for me, and that will be the potentially the start that we do a special design for a special customer. That could potentially be faster. Of course, we would like to make a generic TWedge product which we can sell as like TLens.
I think it's, if everything goes well from now when we take a decision and the board approves, then maybe a couple of years around, I would say. Mm.
The design in VR case, is this from a company most people have heard of?
Petter Bjerke. I'm a little bit uncertain. Yes. Okay. Yes, there is a design in on a VR case. Yes. I need to think. Yes. This is what should I say? This is a very high-end professional company. Sorry, product. They are known to be the best high-end VR headset in the world. In that sense, yes. Will Petter and Ole in the street know them? No. It's for the professional market, but very high-end.
You have earlier mentioned a second mobile phone in 2023. Is this still an option?
A little bit uncertain, what that refers to second mobile in 2023. Yeah, okay. Yeah, it depends. Maybe what you're referring to is, a next, kind of, Meizu potentially. That is too early to say. Too early to say.
The recent fundraise have been connected to customers needing assurance that poLight is in a financial secure position. Is this customer Matsu, or are there other players needing this raise?
I would say, Gunnar, that this is more related to general speaking, that not a particular customer. That of course, poLight being seen as financially well-funded is a fundament to play. It's a ticket to play. If you don't have that, you will not get customers. Not a particular one. Have we been exposed to a lot of critical question regarding that? Not really, but that's also why we act when before we need in a way.
Hello. Thank you for the presentation. I'm curious if poLight has considered the potential applications of TLens technology in flame detectors for industrial segments such as oil platforms and refineries, where each platform might have around 20 detectors and refineries up to 100. Could TLens fast focus and high optical performance benefit this market?
You know, I'm coming from that market. Yeah, potentially. Have we explored it? No. I think we, I'm not saying that it cannot happen, but I think that we have the plate full, so we can't explore that market at the moment.
Do you think that poLight deserved a drop in share price the last year? If you see the progress you have achieved the last year, don't you think poLight is better positioned today compared with a year ago?
To answer to the latter part of that question is that poLight has moved very positively forward the last, say, 12 months. That's beyond any doubt. The design win slides shows that. When it comes to share price, I will answer this way. That's nothing I can control. My role is to manage this company, build the company, build new design wins, build a good organization, and then over time, the company will be valued what is deserved. Sentiment in market, what triggering, what share price, you know, we can't focus on it. Is it more motivating as a CEO to see the share price increase than decrease? Definitely. Is there more happy shareholders when the share price increase than decrease? Definitely.
I need to try to kind of keep that out. It's noise. I need to concentrate on the operation.
How about SMA solutions from, for example, Cambridge Mechatronics competition, cooperations, or what do you think?
Thanks, Dan. Yes, good question. I think potentially both. I think potentially both. We do talk to them, of course, and they are a good company, they have good technology, and so I think both is possible to see. We also know that they are exploring AR world, of course. They also talk about many of the same things. I think, we can both potentially be competitors and we are competitors in many ways, but, we also could potentially be partners.
You are still using a picture of a pill cam in the presentation-
Mm
... and now also made an icon of a digestive system with a pill cam. Do you expect TLens to be in a pill cam in the future?
Evan, this is my wet dream. I really feel that this is something where we can have a role. Do we have a POC? Do we have a planning POC in this area? No. I think it's an extremely interesting area. We actually have one employee which has been working in this space now. And he says the same, it happened things there. Think about the power consumption, the compactness and all that, which is kind of our kind of sweet spots. Let's see. It's my wet dream.
You are having quite a lot of ongoing projects and POCs. Are you close to your capacity? Can you cherry-pick the best projects?
Mm
Do you have to reject any requests?
Yeah. Good question. We mentioned it already a little bit. Yes, we are, I would say, at peak load. We are at peak load. Some things we do say no to, typically like things which are a little bit too much on the edge and too much far away, which will need a different TLens. In a way, we typically say, "Thanks, but no thanks." We have been contacted by companies wanting to do contact lenses and implants in the human eye, which would be fantastic to be involved in, to be honest. It's. Those are typically things we cannot today concentrate on. We do...
Cherry-pick, I think, is a strong word because we are running like crazy to find new POC and new customer, but at least there are things we need to say no to.
Are there any real competitors in tunable optics for small devices without gravity and thermal challenges like TLens?
That I think is a small world.
The DI already given in smartphones in the fourth quarter. Will it also be flagship model and low volume?
I think we answered that.
What geographical zone are the other very mature smartphone companies located in?
Yeah. I think we had. These questions has been sent in also through mail, I think.
Okay.
Yeah.
Maybe that was the last one. Let me check. Yes. That was the last one.
Yeah. Let me see. Maren Sæbø. Yeah, I think we answered those two. Yes.
Yeah. Yeah.
Okay. Is there any question from the guys and ladies in the Continental? I already, Evan, you have answered a question through the interface, which actually is a nice way of doing it. Are there any other questions? You want to have them offline, huh? That's fine. We've the time for that. Okay. Thanks for attending. Thanks everybody for an extensive Q&A session. I think this is record long quarterly presentation, one and a half hour. Next event, annual general meeting in 24th May in Horten. Of course, welcome to participate. Give us a message if you will be there. We will prepare for that. That will be in Sunday, 24th of May.
We have Q2 report, 17th of August, with the suntan, hopefully, and after being recharged at the good summer holiday. Hope to see you back in Continental then. More and more people is coming and participating in this quarterly presentation face-to-face, which we find extremely encouraging. Thanks to those participating through the webcast. Have a great day and see you next time. Thank you.