Earnings Call: Q1 2019

Apr 26, 2019

You that this conference is being recorded today, Friday, 26th April, 2019. And I would now like to hand the conference over to your speaker today, Henrik Eskelsen. Please go ahead. Thank you, Serena. Good afternoon, everyone, and welcome to our earnings call for the Q1. As usual, it will be myself and Johan Wilsby, our CFO, who will present, and we look forward to some questions from some of you at the end. So let's move to next slide, please. We had a great start of the year with a new sales record for the group in Q1. Sales even grew sequentially despite a very strong Q4 last year, which where we typically see the 4th quarter being extra boosted by seasonal effects. Sales this quarter grew by 34% over Q1 last year or 20% adjusted for currency. And we see all three business units continue to grow nicely. Tobii Pro showed another quarter with very high profit margins now in Q1. Tobii Dynavox showed continued solid growth both in touch and eye tracking product lines. And in Tobii Tec, we had positive developments in all of our core focus segments, PC, VR and our niche application segments. Let's dig a little bit deeper and let's start with Tobii Dynavox. As you know, Tobii Dynavox is the global leader in assisted technology for communication. We have about 70,000 active users of our communication solutions, 70,000 users who would otherwise not be able to communicate and interact with the world in an effective way. Next slide. Revenue in SobiDynavox in the Q1 grew by 40% over Q1 last year. This very strong sales growth is driven in part by the acquisition of SmartBox, in part by favorable currencies and also by strong organic sales growth. Adjusted for both the acquisition and currency effect, the revenue growth was a solid 10%, well in line with both previous quarters and our long term targets for Tobii Dynavox. Sales grew nicely in developed markets, such as the U. S, Sweden and Norway, and we saw rapid growth from low levels in several new markets, for instance, in countries across Eastern Europe. We also grew nicely in both touch and eye tracking product lines. Sales of our new touch products were particularly strong in Europe, in part driven by our recent investments in localizations of our solutions. On a global basis, we estimate the total penetration of communication solutions for people with speech impairments to be around 1% to 2%. So there are still many, many people out there to reach and to help gain a voice with our solutions. In the Q1 alone, we added some 5,000 new voices or users of our communication solutions, which is 25% more new voices than in the Q1 of last year. Spreading the word about our excellent tools is a top priority for us and training and educating therapists, prescribers and users is a key activity. One of our tools for this is something we call Power Academy. And just in this quarter, we've trained about 7,000 professionals on assisted technology and on our solutions worldwide. The numbers from SmartBox for the acquisition that we made last fall are consolidated into Tobii Dynavox Financials, but the acquisition of SmartBox is still under review by CMA, the U. K. Competition and Markets Authority. We are expecting a final outcome of this process at the end of July. And until then, we cannot integrate SmartBox into Tobii Dynavox and thus cannot leverage any other benefits from a tighter integration. Over to you, Johan, on some of the financials. All right. Hi, all. TobiDynavox continued its momentum of delivering good revenue growth. And this quarter, we saw an organic 10% growth restated for FX and M and A. We're happy to report growth in both eye tracking and touch enabled technologies as well as in all price offerings ranging from medical grade to sales of apps. Gross margin was down 4 points in the quarter compared to Q1 of 2018, but in line sequentially. The variance was primarily driven by product mix changes arising from an extended product portfolio. This includes the SmartBox acquisition and some nonrecurring costs and the relocation of license costs from operating expenses to COGS. A restated gross margin would be 65%, and this is including the fact that we have not integrated the SmartBox entities due to the ongoing CMA review. Our operating expenses were up in Q1, which is mainly due to the acquisition of SmartBox, but in line with Q4 of 2018. And there were several onetime costs in Q1 that affected our EBIT in the quarter, around SEK 8,000,000 primarily M and A related. Organic headcount growth was around 3% over last year. And in addition, we had increased R and D efforts and increasing costs for large scale training program that Henrik mentioned earlier. The Q1 EBIT margin was in line with last year and sequentially. EBIT adjusted for nonrecurring item was 11%, which is an improvement but still not where we aspire to be as our long term target for EBIT margin is 15% to 20%. However, the investments we are making in training and R and D are strategically aligned for the long term growth and both related to top line and our operating profit. So back to you, Henrik. So moving over to Tobipro. Tobipro is the global leader in eye tracking solutions for understanding human behavior. Let's move on to the next slide. So we froze business is growing and expanding as the market is maturing and eye tracking is more deeply and broadly adopted across several different areas. As a consequence of this, we see significant opportunity in focusing our product development and sales efforts more clearly into segments. We have in this quarter reorganized parts of Tobey Pro's team to be focused towards 3 main segments: scientific research, professional performance and marketing research and user experience. And by doing this, we believe that we will be able to much more powerfully address customers and their needs in each of these segments and thus continue to rapidly grow our business within each of them in the best possible way. The next slide. Revenue in Tobipro grew by 18% in Q1 over Q1 last year or 7% adjustable currency effects, and this was despite a very strong and tough comparison quarter last year. Underlying demand in total gross markets continued to be strong across the board. In Q1, we had particularly strong sales in China, which grew by almost 50% over last year. Our academic business within our Scientific Research segment has however been somewhat dampened in the quarter, affected by its American government shutdown in Q1 and also Brexit related uncertainty regarding EU funded research grants in the UK. We continue to invest a lot in broadening and refining our product portfolio for Tobipro. In the quarter, we announced a new version of our flagship analysis software, ProLab. We also recently opened a new sales office in Singapore to more forcefully address the Southeast Asia markets for Tobii Pro. We see an important repeat order from a large global market research company of our solution, Sticky, which is our fast solution for large scale eye tracking tests. Our new fast growing segment, professional performance, has initially been really successful specifically in Japan. We're now increasing focus and consequently sales growth in this segment also in other geographical markets such as in the U. S. And in Europe. Over to you, Johan, and more financials this time Tobii Pro. All right. So Q1 was a good sales quarter for Tobii Pro with 7% FX adjusted growth even if Q1 of 2018 was an exceptional quarter. This is the 2nd quarter ever we record over SEK 100,000,000 in revenues in the quarter, despite the fact that we saw some dampening effects in a couple of countries' academic sales, as Henrik mentioned. Gross margin came in at 76%, up 2 points year over year and flat sequentially. Products versus services mix in the quarter was behind some of the increased margin, but we also saw some scalable cost elements. Operating expenses show continued growth versus last year due to the investments we're doing both in sales coverage and product development. The acquisition of Acuity earlier in 2018 also contributed to discrete increases in expenses. Having said that, 1st quarter operating expenses are below Q4 of 2018, and we expect more modest growth in Tobey Pro's expenses going forward. EBIT margin came in at 20%, which compared to last year, it was up 4 points. As you know, we tend to have strong seasonal patterns in this business, where Q4 and Q1 are the strongest from a profitability view. But the Tobipro business unit starts to see some positive scalability in its business model as we see healthy top line growth. Next slide, please. Thanks, Johan. So let's move to Tobitec. Tobitec, as you know, is the world's leading supplier of core eye tracking technology for integration into devices of our OEM customers. Next slide. In the near term, our key focus segments in ToveTech are PC, virtual reality and niche applications. We see very large market opportunities in each one of these 3. Next slide. In Q1, we started shipping our new Tobii IS5 platform for integration of eye tracking in PC devices. With its invisible illumination and small form factor, this new platform offers up for integration of eye tracking in more form factors of devices and larger volumes of PCs. The Alienware Area 51M gaming laptop by Dell is the 1st device to integrate IS5 and this product started shipping in Q1. Sales in the PC segment grew rapidly in Q1 compared to last year and you should expect to see IS5 in more devices and significantly higher volumes during this year. We continue to see traction for eye tracking in both streaming, esports and in games. For instance, more than 800 unique streamers stream their gameplay with eye tracking in almost 8,000 streams and had 10,000,000 views in Q1 alone, which is actually double that of the previous quarter sequentially, so Q4 2018. Eye tracking is also being used in a rapidly growing range of major Esports broadcast events. In Q1, for instance, we introduced eye tracking in an event called WESG, World Electronic Sports Teams, which is a very large e sports event by Alibaba in China. 7 new games with Itruckin were launched in Q1, including The Division 2, probably one of the biggest launches in the games industry this year. Next slide, please. This morning actually, we announced a major new generation of our so called Tobii Aware solution. Tobii Aware is a sophisticated algorithm and user interface software that provides a number of key benefits to PC OEMs and their end users. Examples of benefits include improved privacy and security, for instance, by instantly blurring the screen when the user looks away and digital well-being and how device performance, increased efficiency are other examples. Most of these features are brand new in this new generation of the software. Lenovo is our is first out as a major PC OEM to integrate this new generation of Tobia Ware into their Lenovo Yoga A940 All in 1 Desktop PC. Tobii Aware is an entry level solution from Tobii that enables some of the benefits of a high fidelity eye tracking system, but at a significantly lower cost points. And thus, Tobii Aware allows us to already near term address a much larger portion of the overall PC market to drive higher volumes faster and establish a differentiated set of offerings towards the PC OEMs. Next slide. Moving a little bit into the VR segment. The research firm IDC recently updated their projections for the VR and AR device market and reiterated their estimates of rapid growth. Their recent forecast is that the number of device shipments will grow over 50% to almost 9,000,000 units this year and with an over 60% CAGR to reach almost 70,000,000 shipments by 2023. As we mentioned already in our previous earnings call, HTC is first out to announce a major VR headset with built in eye tracking. HTC has pioneered many of the core aspects of modern VR and they are a perfect early go to market partner for Tobey in the space. Their new device called the HNC Vai Pro I will start shipping tentatively end of Q2. Several other devices with built in eye tracking are also coming to market this year, both with and without Tobii technology. For instance, Microsoft recently announced the HoloLens 2 AR headset with built in eye tracking. And this evolution of several headsets with eye tracking coming to market drives a strong acceleration of market adoption. And we expect that within approximately 3 years, a majority of headsets will have eye tracking natively built in. Our ambition is absolutely to be the market leader for eye tracking technology in this space, And Togui is already collaborating closely with several major partners and customers to bring devices to market with our technology integrated. To accelerate market adoption, we're also working closely with software developers in VR and as a part of this, we this quarter launched a new powerful SDK or software development kit for eye tracking in VR and AR. Next slide, please. Sales in our niche application segment grew very rapidly in Q1. We almost quadrupled sales to external customers in this specific segment compared to Q1 of last year. This is a segment with numerous opportunities across a broad range of applications in fields such as medical, industrial and entertainment. We signed a couple of more customers in the quarter and now have over a dozen design wins with very innovative customers in this segment. In many of these applications, the value of eye tracking is fundamental. So even if we typically see lower quantities of units here than in consumer electronics, we typically sell at much higher price points and at high margins. This is already today a profitable sub segment within TobiTek with strong growth opportunities. Johan, your turn. All right. Thanks, Henrik. And let's turn to the financials for Tovitec, where revenues in the quarter were up 21% year over year adjusted for FX, and the external revenues were up 36% on the same basis, which is really strong. This quarter, the PC segment and customers within the niche markets contributed strongest to the growth. Gross margin was up 2 points to 44%, primarily due to a different product mix, obviously driving a different cost of goods sold than last year. As communicated earlier, our organization in Tobitec has reached capacity needed to execute the business plan, and hence, the operating expenses were in line with the last 2 to 3 quarters. We saw some year over year growth in Q1 since we have grown the organization since then to pursue multiple businesses and our business opportunities, mainly contributed from an increased effort in R and D, sales as well as in the patent area. Next slide please. The group revenues showed continued growth in the Q1 and increased by 20% adjusted for currency effects year over year, where Tobidenavox and Teck contributed mostly to this growth. The $393,000,000 is actually a record high for the group. Gross margin for the quarter was 68%, down two points compared to last year but in line sequentially. Obviously, the delayed integration for SmartBox impacts the quarter as do some nonrecurring COGS. TOBI's EBIT for Q1 was a negative $37,000,000 which is in line with Q1 of 2018 despite having $9,000,000 of nonrecurring included. Operating expenses have flattened out sequentially despite the negative FX impact from international teams. And the combined EBIT for our 2 mature businesses, Tobii Pro and Tobii Dynavox, grew nicely with over 40% growth despite material one timers. Next slide. Let's wrap up the financials with a look at our cash flow, which was a negative $99,000,000 in the quarter. The change versus last year was primarily driven by an increase in several items in our net working capital, among those an increase in accounts receivables following the sales growth. As earlier communicated, we issued a bond of $300,000,000 in February to refinance acquisitions made last year and also to enable future M and A activities. At the end of the quarter, we had a cash position of $390,000,000 Lastly, I want to make you all aware of that the implementation of IFRS 16 around leasing impacts the balance sheet as well as the EBITDA and hence key ratios where these variables are included. You can read more about this change in our report. So this concludes the walk through of the finance section. So back to you Henrik. Thanks. So summarizing the Q1, we had record sales for the Tobey Group. We saw growth in all three business units. Tobii Tec grew external sales by 36 percent, FX adjusted. Tobii Dynavox grew revenues by 40% or 10% adjusted for both FX and acquisition, and Tobii Pro delivered a profit margin of 20%. We have now reached the size of organization we need in order to deliver on our plan, and thus, we proceed with a strong focus on reaching our goal of profitability for the group already next year. So with that, we're done with our presentation, and we're handing over to you, Serena, and specifically to questions from the teleconference. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Q and A Your first question comes from the line of Mikael Larsen. Please ask your question. Hi there. Yes, I have a few questions and start with a couple of financial things. Can you say something about net working capital going forward, what we can expect in the coming quarters? Yes. Michael, I mean, the effect that you saw in Q1, some of that was a temporary effect. Some of that came through the, as I said, with increased sales. We also have some of some receivables increasing temporarily as a result of our incorporation exercise that we did at the start of this year, which is in the VAT area, etcetera. So they will actually sort of more or less go away in the coming quarters. But it's hard to predict anything. But there's nothing major going forward in terms of the net working capital. Okay. Good. And SmartBox, can you just say something about how that company performed in Q1 and the sales contribution approximately? As we are in the process with CMA and in Phase II right now, we're unable to give specific data on the company and that performance. So I'm sorry, we can't say anything specifically. Okay. I understand. And the nonrecurring cost in Q1, why did you have SEK 9 million? So most of that is related to the CMA process, around 7 of the 9, and the other 2 is of nonrecurring nature sitting in cost of goods sold. Okay. So that's in Dynavox? One is in Dynavox and another one is in Tech. Okay. Good. Yes. And when it comes to the business units, starting with Pro, I'm curious here about the impact from the U. S. Government shutdown and the UK funding situation, approximate effect from that and if the UK side is continuing or if that was a temporary thing in Q1? If we start with the U. S. Government shutdown, I mean, we see that as a temporary effect isolated to Q1. I think we will hope at least, although there is some randomness in that perhaps. But I think that's a temporary effect. So over a longer period of time, we would expect that to maybe even catch up. In terms of the UK, I think there is a risk that we will see a continued dampening of academic research grants in the U. K. Markets until there is clarity on the Brexit situation. So basically, a fairly significant portion of academic research grants have actually been financed by the EU and are financed by the EU in EU countries. I think long term, the effect would not be there because long term, the U. K. Government would sort of compensate for it by having U. K. Research grants for the same amount as they funnel through the EU. But while we're in this Brexit limbo, we might have this situation. We do see though in the U. K. Market, we see quite strong traction on the other hand on the commercial side of the market. So for the UK market overall, we don't necessarily see that as sort of a negative trend. On the contrary, we do believe in continued growth in the UK, but strong growth on the commercial side, but a dampening maybe at least as long as we're Brexit uncertainty on the academic side. They're not super large. I mean, this is not a super large effect in the big scheme of things for Tobipro since it's very isolated to the academic side, specifically of the U. K. Market. Okay. I see. And it would be interesting also to hear if you can, customer examples in the professional application side, how they are using it and so on more sort of background on that. And maybe some comments on the order book for the Pro segment. So generally within Professional performance in that segment, which is, again, a relatively new segment within Tobipro, this is a market segment that has really sort of been born out of our Japanese market with a lot of really deep customer engagements in Japan. One of the absolute main use cases within professional performance is to use eye tracking as a tool for training and knowledge transfer. So be able to expedite the training process of a person in any kind of process really by getting a much deeper insight both into what is a person doing who is trying to learn something new, but also how does that compare to an expert in the field and what can you do to improve and accelerate the training process. And we actually have numerous customers that are now that have used eye tracking for quite some time and are seeing very strong proven results in fantastic exploration or training processes. And of course, training and knowledge transfer is something that's very generic. It cuts across a lot of different industries, a lot of different types of customers and so forth. So within professional performance, we actually see a strong growth of customers across all kinds of sectors, everything from manufacturing companies to medical companies to hospitals training doctors, to law enforcement, to pilots or air traffic controllers or train drivers or so there's actually a large number of different types of customers. We do work today in deep relationships with, for instance, large manufacturing companies in the automotive industry. We work with companies in process industries. Again, we work with law enforcement companies, even sports teams that are using this. Thanks. Great. Interesting. And my final question is about the tech side. And this quarter was driven by the external side, PC and niche applications. Can you say something more about this mix? And maybe help a bit with the outlook here and how these new contracts will develop in the coming quarters. Will it be very back end loaded or more of a gradual increase from here? So big picture level within Togotech today, we these three focus segments, PC, Doctor and niche applications are roughly equally important from a sales perspective today. And in terms of growth opportunities over the coming 1 to 2 years, we see approximately equal strong opportunities in each one of these three segments. We anticipate to see strong revenue growth in Tobotec over the coming year. That's specifically in second half, we can say as well, right? Yes. Okay. Thank you. Thank you. Your next question comes from the line of Daniel Thorson. Please ask your question. Thanks for taking my questions. I have a couple. I'll start off with Dynavox and Pro together. Is it mainly gross margin improvements or scalability and OpEx that will drive EBIT margin improvements to your target EBIT margins? So for those 2 combined, I mean, there are several aspects. You have scalable elements sitting in the gross margin, but you we've also made a number of investments in both of them actually over the past few years, which will, to some extent, level off in terms of investment pacing or growth, but we can actually scale on those platforms to a greater extent. One of them being, for example, the training exercise and the teams that we've built up in Tobii Dynavox is an example of that. So you will see elements of drivers for the profitability improvement, both sitting in COGS as well as in operating expenses. Okay. I understand. And a follow-up from Mikael's question, I think it's quite similar. Out of the external sales in ToberTech in this quarter, can you say anything on the split between PC gaming and VR, etcetera? Yes. The split of the external sales is between the 3 segments, PC, VR and niche applications is roughly onethree each. PC is somewhat larger than the other 2. Okay. That's very helpful. So continuing on Tobit Tech, R and D spending from here, are we seeing increases in the coming quarters or flattening out sequentially? I mean, in general, it's hard to I'm not going to guide on specific cost element. But in general, as we've said before and you saw some proof of that now in this quarter as well, cost the total cost base in Tobitec is leveling off, right? It's fairly similar if you look at Q4, Q3 and Q1, right? And in different quarters, you will see we might do some specific things in R and D projects, which will drive some expense. But roughly, in terms of team size, we're there where we need to be. Okay. That's great. So if we see other vendors within VR launching products in the near future with eye tracking And if it, in that case, is not the Toba eye tracker, what could it be done? Do they have proprietary solutions or other suppliers? So within VR, there is definitely a healthy competitive landscape of eye tracking vendors. So, Tobia is competing with other independent eye tracking vendors for design wins with headset manufacturers. And in addition to that, there are also internal development efforts of eye tracking technology with some of the absolutely largest players. We are optimistic that we are very well positioned within the VR space and that Tobitec has good probability to take a strong market leading position in supplying air tracking technology to VR. And do you mean a strong market position in terms of the ones that are not in house produced or a strong market position within all the VR devices? A large strong position across all VR devices. Okay. Excellent. And to reach the profitability target in 2020, do you include any sorts of acquisitions to be done to reach that? Or is it based on the current business mix as you made the SmartBox acquisition after you launched this target, for example? It's not based on further acquisitions, our financial targets. Okay. That's helpful. And the final one, just to understand the dynamics behind potential sales contribution from, for example, HTC Vive Pro I that will be launched in Q2, When do you deliver and book revenues for your products into that category? Has that already been made in Q1? Or will it come as it comes when they deliver it to the market? So the absolute majority of our revenue from an ILAC and one with H2C comes from when we ship components to them, which we typically would do 1 to 2 months prior to them shipping products to through their sales channels. So we see initial revenue of components to HGC starting now early Q2. Hello? Are you still there? Hello. This is the operator. This is the operator. I can hear the main feed. I think that it's Mr. Thorsten line, which is not working. Okay. So why don't we switch back to the webcast questions then for now and see if Daniel comes back again. Yes, I see that. Otherwise, Daniel, please call us up afterwards and we'll sort the last of it. So there are a couple of questions from the web. The first one is from Hans Arberg. And he notes that you actually Hendrik, you are doubling here as the CEO and the Head of Toby Tech. So how is the recruitment for TogeTech head new TogeTech head going? Yes, yes. I am doubling. And although that is a lot of fun and exciting, of course, we are also in the process of search and recruitment of a permanent CEO, division CEO for Chobitec. So that search is ongoing with full force. We are very, very focused on making sure it is the absolutely perfect right recruitment, and that's much more important than that the process concludes quickly. Okay. Then we have a question from Sebastian Olsson from SEB. Will you please give us some flavor on the development of touch products versus eye tracking products in the quarter? And what does the sales split looks like today? So in the quarter, we saw good growth in both the touch product line and across the eye tracking product lines. We grew specifically quite strongly on the touch products in Europe, whereas we had stronger growth on the eye tracking side of the product portfolio on the North American side. Roughly, the sales split is about 2 thirds of revenue with eye tracking products and onethree with the touch based products. Okay. And a second question from Sebastian. If you can mention anything about how the demand from Doctor OEMs look after the announced deal with HTC. Do you see increased demand or is it pretty much the same? So already before the HTC announcement, we saw a very strong and solid interest in demand from VR headset manufacturers. But obviously, on the back end of HTC's announcement, that temperature has increased further. We definitely see that this clearly accelerates the interest in the market adoption for VR. And I am more convinced and confident than ever that eye tracking is going to become a must have feature in VR headsets over the next coming years. Okay. And one final question from Sebastian. Could you explain a bit on the de novo deal that you mentioned in the report, expand a bit on what's the scope there and what's happening now? Yes. So specifically, Wille Novo, again, they are our first OEM customer for this new generation of Tobia Ware, and they're implementing our Tobia Ware software into their Yoga A940 product. So that's great. It's they're a very, very good first customer on their software. And I mean, on a business level, this is a license agreement with Lenovo. We do see strong interest and a very healthy pipeline for the Tobia Ware solution for potential additional products with Lenovo and also with several additional potential PC OEM customers. And I could also add that you can find more information about Aware on aware. Tophi.com. And you can look at the press release we issued this morning. So one more question from Anne Katrin Engwall. Is the long term goal for ToberTech to achieve sales in the SEK 1,000,000,000 of Swedish crowns region with good profitability realistic in your opinion, even if no significant penetration will be made in the smartphone market? Yes, absolutely. I think that at least the for instance, the PC opportunity and the VR and AR opportunities, each one of those, even on a stand alone basis, are SEK 1,000,000,000 revenue opportunities. Okay. Serena, do we have any more questions? I don't have any more questions on the web. Yes. Your next question comes from the line of Tomi Helling. I have four questions. The first one is, can you please give an insight into why you are so optimistic about reaching the long term financial goals for Teck in particular? And how confident are you that Teck will make a profit in 2021 instead of being delayed to 2022 or '23? I think that we are quite confident in our possibilities of reaching our target of profitability for Tobey Group next year in 2020. We have line of sight of that, and we have a good plan to accomplish that. And sort of the next milestone there, as you point out, is profitability for Chobotec on a standalone basis by 2021. And obviously, that requires a very strong revenue growth in the Tolbertek division. And we are in terms of customer pipelines and dialogues and integration processes ongoing, we are on track for that, but it's clearly an ambitious goal. So I mean, there is always a component of uncertainty, but we are trending and working clearly towards that goal for Chobatec as well. And also, it says in the Tobi yearly report that patent licenses deal could potentially give TOVI a substantial increase in revenues in the future. It says that TOVI today has patent licensing deals with some smaller eye tracking companies that makes eye tracking innovations that are protected by Tobii patents. Could you please explain more about what this means and what it would amount to? I mean, does it all come down to if these smaller companies gets bigger and therefore will generate more revenue to Tobi? And is it also possible to mention some companies that you have this type of deal with? So on a high level, we have a strong portfolio of patents in Tobii, coming close to 500 granted or pending patents in our portfolio, which is clearly one of the strongest patent portfolios in the eye tracking space. We do see a medium to long term opportunity to create and establish a sort of a complementary business model, a patent licensing program. This is not something that we have fully structured and enforced today, but we do see it as a potential future opportunity. We don't see it as a main part of our business or sort of one of our largest revenue streams. Rather, we our main strategy is, of course, to supply world leading technology, where actually the patents are still very important component on that to both help us ensure that we actually have freedom to operate for ourselves as a tool for that, but also to help us maintain strong healthy margins when we sell our technology. But we do have the ambition to also over time establish a patent licensing program. I would say it's a little bit too early still today to put specific estimates of how large that could be and so forth. I don't think that it that would the intent of that would, of course, not to just have that based on a few smaller players that might exist today, but rather to do something that we would aim to roll out in a broader sense if we do that. Okay. And then I would like to get more insight into the development part of eye tracking VR games. I mean, you released the 2VXR SDK not too long ago. To me, that sounds like eye tracking VR games maybe be a couple of years away. It takes a long time to develop good VR experiences, especially since there are no headsets available on the market with eye tracking. Or is it I mean, how far back would it have been possible for a VR game company to get adequate developer tools from you to start using eye tracking in their VR games? I mean, when could the earliest they'd be for starting development for VR eye tracking games? It's a good, great question. First of all, maybe to elaborate a bit is benefits of eye tracking for VR are not limited specifically to games. Really, any type of application in VR can benefit from eye tracking often in numerous ways, everything from what's called foveated rendering, which makes it possible to deliver much more powerful graphics in a more efficient manner, to social interaction, to better navigation of the user interface, to doing very valuable analytics in different forms of software. So we actually see at least equal interest in this early stage from enterprise applications in VR as we do from games and other forms of entertainment or social experiences in VR. We have had early stage dev kits for VR with eye tracking available for the past year approximately, but in smaller quantities. So there's definitely been development and applications ongoing for some time already, and there are at least a dozen different titles spanning both games and enterprise applications on their way into markets. But of course, the really big larger scale developments can start now as the HTC Vive Pro I comes in the marketplace and this becomes much, much more available to developers at large scale. This is, of course, also a very important part of collaboration with HTC and they have very, very strong channels to their developer ecosystem with thousands and thousands of developers out there. So 2019, to a large extent, is going to be a year of exploring and growing and developing and really realizing all of these different values and use cases of eye tracking across both games and enterprise. But we see also here on the software side, we see very good traction and interest in the VR market. This is a very innovative ecosystem that is embracing seem to be embracing and tracking with full force. Okay. So talking about the SG and A Pro, it's targeted at the business side and not so much towards the consumers. So should we expect the large number of eye tracking games and experiences and such to be a couple of years away when most of the VR headsets have eye tracking in them? I think that we will see both games and more enterprise oriented applications already now in 2019. But I do think you're correct in your observation that sort of the very first headsets incorporating eye tracking are primarily focused towards the enterprise side, which is a good thing. Enterprise, the enterprise side of VR is where actually a lot of the real stronghold is and both is today already. But I do expect myself to see the games and entertainment side to kick in quite quickly as well. Okay. Okay. I think we need to move on. Okay. Are we okay with that, Tommy? Okay. Back to you, Serena. There are no further questions at this time. Please continue. Okay. Thanks, everyone, for joining and for the questions. And if there are any questions outstanding, you can always reach out to me, Ola Elmland, at Investor. Thank you. Bye. Thanks, everyone, today for the call. This does conclude our conference for today. Thank you for participating. You may