Earnings Call: Q4 2019

Feb 6, 2020

We hope and we expect that situation to normalize. And we therefore do not expect to have those kind of negative effects in 2020. If anything, it should actually relative to 2019, it should switch to a positive relative effect in 2020. When it comes to the U. S. And some uncertainties around research funding, both for universities and other types of government customers, we don't necessarily see that materially changing in 2020. I would personally think that, that's likely to kind of continue on the same level. But on the other hand, that means that it should not be as it was in 2019. It was something which we felt was something that pulled down the growth numbers. If we then look relative 2019 to 2020, I would expect it to be a neutral component. So it shouldn't sort of hamper growth in 2020 the way it did in 2019. All right. So let me answer your question around the efficiency topic for this year and going forward as I understood it. Yes. I mean, it will it's not going to be a new, completely new set of initiatives. We have already started on this path, which is simply put is to make sure we have a solid revenue growth. We look for opportunities in terms of COGS down and at least maintaining our gross margin. And we will be very prudent when it comes to operating expense investments. And just to give you a sense, in the quarter, we actually declined operating expenses. And we for the full year 2019, we were flat. So you've already seen some of the efforts actually resulting in 2019. So maybe that gives you a flavor. All right. Thank you. Thank you. We have no further question at this time. You can continue. Okay. So what we have is we have questions on the web. And as usual, I thought we would go through as many of them as we have time to. So the first question is on profitability from Bo. Is the profitability goal for the whole year 2020 or just part of the year? It is for the full year 2020. Okay. And how do we define profitability by the way? We measure that as our operating profit or EBIT. Okay. And here, I think, is a question for you, Henrik. Regarding the Qualcomm reference wins, do they mean that you supply both hardware and software? Or do Qualcomm deliver the hardware? In other words, the IR cameras and you are just delivering software. Will you get revenue from only software or both software and hardware? How does this work? Yes. And the short answer is, it depends. But generally, when we provide an eye tracking solution for integration in the VR headset, there is sort of 3 main parts of that. One part is the algorithm software that actually runs all the machine vision algorithms to do eye tracking. One part is the processing platform. And the third part is the actual optical system reference design, that's what it's called. And the optical reference optical system reference design is essentially sort of the blueprints for an optimized system with cameras and illumination systems and other optical components that we provide and sometimes customize together with a customer that has a VR headset. And that reference design is licensed to the customer, and it is associated with quite a bit of IP and patents and things like that. So that's a license to a design essentially. As part of that, we also sometimes can provide optical components. So it depends a little bit on the exact solution of the customer, whether we provide some of the optical components or whether they buy the optical components from a 3rd party that we typically then recommend. Then we have the algorithms. That's always part of what we supply. So we always supply the algorithms with a license. And then the third part is the processing. And in the case of the Qualcomm based headsets, then typically the processing is done on the Qualcomm Snapdragon processor. So that's typically then supplied by Qualcomm. And we have business arrangements with Qualcomm around that. And that then runs our software. If it's a solution that's not based on the Qualcomm system, then often we supply our Tobii chip as a separate component. So that's how it works. Okay. Thank you. And then we have another question on the goal to reach profitability. It's 4th year we've done that profitability we've done that. But when should we expect to be cash flow positive, Johan? So we haven't stated a separate goal around cash flow. And I'm not going to go into details in terms of where I see questions I see questions on when this will happen. But generally, I would say that cash flow positive will be in 2021 and probably not by for the full year 2020. Okay. And here is a general question on that. What is the conviction level in reaching profitability? Is this a much, much reach event for management? And how will this be affected by the M and A J agenda? We are very committed to this goal, and we have a very strong focus on reaching profitability in 2020. And we believe in our plans to accomplish this. We do not expect acquisitions, at least not sort of in default scenario, to have significant impact on reaching the profitability target. Okay. I know we have we might have another couple of questions from the telephone line. Carole? Thank you. And we've got a question from Tommy Hellin. Please ask your question. Yes. Hello. My name is Tommy. I'm a private investor. I was just wondering, TowBelt in the past chosen not to focus on the automotive market, and it was never mentioned in any report last year. But in this report, I mentioned eye tracking for the automotive market is coming at a hot pace, and you also mentioned it in the call here. So are Tobi in a place now where you can proactively focus on the automotive market? And are you in any serious collaborations with major players there? Thank you. So correctly, as you say, we have previously proactively actually chosen not to focus on the automotive segment. And it's not because we do not believe in it. We have essentially always believed that there is good user benefit and a large potential opportunity for eye tracking as part of advanced driver monitoring in the automotive market. But it's rather been a question of focus for us. And there's only we are doing a lot of different things in parallel in TOBI and there's only so many things that you can do in parallel with good quality and execution focus. And in TobiTek specifically, we have chosen to focus on PC and Doctor and niche applications as our near term targets. However, long term, obviously, we do see opportunities and potentially opportunities for Tobia also in the automotive sector. We are doing business development in that direction. And if the right opportunity materializes, we do have readiness to move into that market. Okay. So there are no active collaborations right now? One more question. Yes. Go ahead. No, please go ahead, Solly. Yes. I was last question. A year ago, you said that the interesting question is to ask how fast adoption rates would be of air tracking in PCs? Now 1 year later, could you give us a clear outlook on what to expect? Or is it still a good question to ask? I still think it's a fair question to ask at least. And I think if we look at a if we look with a really long term horizon, we've been working for a couple of years now actively pushing in the PC market. And it is taking time. And frankly, it is taking longer time to develop the PC market than we had hoped and probably some of our shareholders as well. That said though, we still believe very much in eye tracking in the PC market. And specifically, Itracking with Tobey and are extremely knowledgeable in the gaming space are going from one product model to incorporating Itracking across their entire portfolio of gaming laptop is a very strong vote of confidence from them. We definitely are progressing and growing the value proposition around eye tracking, both in PC gaming and generally. And we see a lot of interest for our new lower cost Tobia Ware offering also outside of the gaming market. So we are looking positively on the development of eye tracking in the PC market over the coming years. But I still think it's reasonable to have a realistic expectation on the growth rate. It's not a very large long term opportunity for us. Okay. Thank you. Carol, we have another couple of questions on the web. At least one I would like to. Please go ahead, sir. Okay. So here is a question from David. Any new updates on IS5 integration in laptops and monitors from new OEMs other than Alienware? Nothing specifically that we can communicate today. Okay. Yes, I think we covered that. Or anything else to say about well, we've talked about O2MOC here. Okay. So I think that's it for today. And to Andreas, I can tell you that I see your question, but I see your comment, but I don't see a question and I don't have you on the phone line. But please feel welcome to drop me a mail, ollalmlandtogo.com, and I'll do my best to answer your questions. Okay. Thank you. With that, thanks everyone for attending our earnings calls today and for good questions. Have a great continued day and I'll see you on the next earnings call hopefully. Bye for now. Thank you. And that does conclude our conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.