Earnings Call: Q3 2017

Oct 26, 2017

Thank you, Julien. Hi, everyone, and welcome to this earnings call for the Q3 2017. I am Henrik Eskason and with me today is also our CFO, Johan Wilsby. We're doing this call today from Torbjorn's office in Pittsburgh in the U. S. Let's start the presentation. So we continue to pursue ambitious strategies for all three of our divisions, both Tobii Dynavox, Tobii Pro and Tobii Tech. Each division has exciting opportunities to grow and evolve their respective businesses, and we're expanding and improving both our core technologies, our products, our sales, marketing and operations to cater to this range of opportunities. Compared to a year ago, we have added more than 100 new colleagues to the Tobii Group and are now over 850 employees worldwide or a bit over 800 full time equivalents. The largest growth of the team has been in Tobii Tech division, although all three divisions have expanded as organizations. Overall, this quarter was characterized by very strong sales in Tobii Pro. Sales in Tobii Dynavox was slow, mainly impacted by temporary effects and we're now standing strong with a largely revamped product portfolio. In Tobitec, we continued to see even stronger traction in virtual reality. We will go through these and other events for the quarter during this presentation. So next slide, please. As you may know, I myself, I moved over to Silicon Valley in California a couple of months ago. North America is by far our largest market. I have almost as many colleagues here in the U. S. As I do in Sweden Since we're now more than 300 Tobians over on this side of the pond. Tobians have 3 offices in the U. S. In Pittsburgh, in Falls Church just outside of Washington, D. C. And in Mountain View in California. My intent is to spend close to a year in the U. S. To get closer to customers, partners and our teams over here. I spend most of my time working out of our small Mountain View office, where I can contribute in strategic relationships with a very dense cluster of existing and potential customers and partners for Tobii Tech here in Silicon Valley. But my presence in the U. S. Also allows me to spend more time with the U. S. Side of our Tobii Pro and Tobii DynaMox businesses. So far, the U. S. Is treating me very well. It's a lot of fun. It's really exciting, and I believe it's truly valuable for me to be over here. Next slide. In September, Microsoft and Tobii announced that Microsoft is introducing eye tracking as the 5th modality in Windows. And this went live now in the October update of Windows 10. And previously, only the keyboard, the mouse, touch and pen have been natively supported by Windows as sort of official input methods. And now eye tracking is joining this exclusive club. Initially, the implementation of eye tracking in Windows is focused on a set of core accessibility features, so that users who cannot use keyboard and mouse can instead use eye control to operate their PC and that this works natively and seamlessly in the operating system. Tobii has supported Microsoft in its implementation of eye tracking into Windows. Now that eye tracking is natively a part of Windows, I believe this also opens up the door for long term introducing even more user experiences based on eye tracking. And thus, I think this is a real milestone for eye tracking overall and quite an important stepping stone towards long term broader adoption of eye tracking in mainstream computers. Next slide, please. Another interesting recent development was Apple's announcement of iPhone 10 with Face ID. This is a bold step away from fingerprint sensors where this new iPhone instead uses near infrared cameras for face authentication and a couple of other use cases. And this is yet another strong proof point of what we see as a very powerful long term trend, where our devices are gradually becoming better and better at understanding us as users by incorporating an increasingly capable set of sensor technologies. At Tobii, we fundamentally believe that pretty much all of our devices, our computers, our tablets, our smartphones, our virtual reality headsets, our augmented reality glasses and our cars will all be equipped with intelligent camera based sensors eventually and that these sensors will make our devices much better at understanding us as users and thereby enable more intuitive, natural and engaging user experiences. Eye tracking is perhaps the most potent of these sensor capabilities and is a natural progression of this overall trend. Worth noting is that the cameras that are required for eye tracking are also suitable, for instance, for face ID, for presence detection and several other use cases. And I believe that Tobii is well positioned to participate as this market unfolds. With that, let's move to Tobii Dynavox. Tobi Dynavox accounts for 60% of the group sales and is the global leader in the assistive technology for communication with a global market share of over 40%. Moving to the next slide. As you may remember, we launched several strategically important products in the second quarter, including our new speech tablet, Indi, our new Symbl communication software, Snap, the eye tracking peripheral PCI Plus and the Windows Control 2 software. In the Q3, we continued on the set path by releasing Imobile Plus and the Tobii Dynavox i110. Imobile Plus is an accessory device that contains an eye tracker, powerful speakers, standalone battery and wheelchair mount. And you attach it to a regular Windows tablet to make this into a capable eye controlled communication solution. Thus, this product offers similar functionality as our best selling i12 and i15 products, but without the medical grading, comprehensive and without the comprehensive service and support package and at a significantly lower price point. So with this product, we're able to offer eye control communication at a price point and in markets we have not been able to reach or compete in previously. The I-one hundred and ten is our new medical grade top of the line touch based speech generating device. It's a very ruggedized device that withstands tough everyday usage. You can drop it on hard floors without a problem. It withstands rain and splashes. It features powerful speakers, the right ergonomics and many other capabilities required for a great speech generating device. When combined with our Snap software, this is our main product for the touch segment for those individuals who have access to reimbursement. Thus, this is a state of the art successor to our T10 product, which has been in quite dire need of a replacement. Next slide. As you can see, we have now extended our portfolio with new product types and upgraded several of the old products, and we can now offer great products at a broad range of price points from low cost apps all the way to medical grade high end devices with comprehensive service bundles. And I believe that this is a fantastic strategy. Disregarding the size of the customers' available wallet, we have a good offering that can match this. We're very driven in Tobii DynaMox in particular and Tobii overall by our mission to bring communication to many, many more users with special needs. And this product portfolio really enables us to do this, which I think is fantastic. But it's also a sound business strategy. With these products, we can reach many users who live in countries with limited reimbursement or who don't have the right type of insurance coverage. We can sell directly to schools and even private individuals. And this allows us to increase our market share overall. All of the new products that we have launched over the past 2 quarters have been very well received by both end users and therapists. The new devices, the new software, the language system, they're all great products and stand very strong compared to both our own previous products as well as compared to competing solutions. From experience though, we know that it takes time before new product launches result in increasing sales. In particular, when we launch new software, we introduce a conversion phase during which we have to make a significant effort to inform and train therapists on the new software. Johan, over to you and please walk us through the financials for TobidienaMox. All right. Hi, everyone. And let's turn to the next page. So our Q3 revenues declined by 16% compared to the Q3 2016. Adjusted for currency effects, the decline was 13% and adjusted also for temporary backlog effects related to the I-one hundred and ten launch, Dynavox revenues were around 5% lower than last year. This is of course significantly lower than our long term target of growing top line by 10% per year. We saw good initial sales of our recently launched products, while our older touch products continue to show materially slower sales. As Henrik mentioned, we're going through a conversion phase of our product portfolio where sales of our new products have not reached expected run rates yet. From experience, we know that it takes time for new products to become well established. Furthermore, the new portfolio introduces several strong lower priced products where we expect it to take a bit of time for higher volumes to compensate for lower ASPs. Our training of therapists in sales channels is intense and will create the right momentum in the quarters ahead. We're confident that these new products will contribute to growth going forward. In the quarter, our sales in Southern U. S. A. Were hampered by the major hurricanes as well, especially in Texas. We kept our gross margins at a healthy level, unchanged versus last year, and we were up from Q2 of 2017. Our operating expenses were kept in control, partly helped by non recurring items, but also including a strong negative FX effect from revaluation of our working capital. The lower EBIT margin was mainly a result of our revenues coming in short in the quarter and the FX impact just mentioned. In the 1st 9 months, revenues declined 6% or FX adjusted 8%. Our EBIT margin was 9%. With that, let's move to Tobipro. Thanks, Johan. So, Tobii Pro is the global leader in eye tracking research solutions used for understanding human behavior with a global market share over 50%. This business unit makes up around 30% of the group sales. Tobipro's products include both eye tracker hardware and analysis software that allow our customers to conduct various types of studies on human behavior and consumer responses. We also carry out eye tracking based market research projects for our clients. Next slide. The Q3 was characterized by very strong sales growth in FobiPro. Revenue in Q3 was up by 44% compared to last year adjusted for currency. And this also follows on a strong second quarter and our year to date sales are now up by approximately 20%. Let's go to the next slide. One key driver for this positive sales development is that we have invested significantly in establishing a strong product portfolio in Tobii Pro. The Tobii Pro glasses continue to contribute to strong growth. The new ProSpectrum high end eye tracker is starting to kick into gear. The new ProLab software and sticky sales are growing and the new solution for eye tracking behavior research for virtual reality that we launched in the second quarter has been well received the market as well. Next slide. Underpinning this growth is also a general trend where eye tracking is gaining increasing acceptance and momentum as a powerful research method. We see solid growth in existing segments for Tobipro, including various fields of academic research and consumer insights. In addition, a high performing segment in the quarter was the new professional performance segment. And here eye tracking data is being used for training and educational purposes in areas such as automotive industry, process industry, simulators and sports. And this is an exciting development as we see potential applications for eye tracking in training and education across a broad range of industries and different sites. Over the past year, we've also invested in growing our sales organization, which we now see translating into higher sales as well. And lastly, Tobii Pro sales were also positively impacted by the fact that its main competitor, SMI, was acquired in the Q2 and appears to discontinue its sales of eye tracking solutions for the behavioral research studies market. Joe, I'll now turn to you on the financials for Tobipro. Okay. So as Henrik mentioned, Tobipro had a great 3rd quarter with revenues increasing 37% or 44% adjusted for currency effects. In the quarter, we experienced good growth in all our segments and geographies. We also saw clear signs that our Professional Performance segment is creating material sales opportunity for us. Gross margin was strong at 76%, up from last year as well as sequentially, driven by product mix and increased software sales. We saw significant improvements in our EBIT margin compared to last year, despite the fact that we keep on investing in R and D and sales and marketing. Year to date, Tobipro revenues grew by 21%, which is similar when you adjust for FX effects and our EBIT margin was 4%. With that, moving on to Tobitek. In Tobitek, we are working to introduce eye tracking on large scale into volume markets such as gaming PCs, mainstream computers, virtual reality smartphones and beyond. Generally, we're still at an early stage of market adoption in the different areas that Fotetech addresses. Several of these opportunities are very large, but we will need time and significant investments to realize these. We move to the next slide. On the PC gaming side, we continue to grow the ecosystem of games that support OBI tracking. We've added another 10 games in the quarter and we're now at over 90 games. One exciting initiative in the 3rd quarter was the introduction of eye tracking into this year's edition of ELEAGUE's Counter Strike Esports tournament. And this was the result of a tight collaboration between TOBI, Dell's gaming brand Alienware and ELEAGUE. At the tournament, the professional players were equipped with eye trackers and their eye movements were recording during the gameplay. And during the commentary section, the commentators used visualizations of where the players were looking and what they were paying attention to, to show and analyze the players' performance during the games. And this is a first taste of using eye tracking in esports. And going forward, we see several opportunities to create interesting use cases in this area. Turning to the next page on VR. In virtual reality, we again saw significantly increased interest and progress during the quarter. And if we look back a little bit, throughout last year in 2016, we engaged in early dialogues with potential partners and laid the technical foundation for adapting our core eye tracking technology to be suitable for integration in virtual reality headsets. And to be able to accelerate and broaden our activities in VR, we raised additional funding by the year end. Over the past 9 months, we have executed on that plan. We have recruited a large number of new employees to expand our capacity, mainly in this segment. In Q1 this year, we showed VR eye tracking technology in public for the first time with great response. In Q2, we started shipping our development kit for eye tracking and VR based on the HTC Vive headset. And now in Q3, we're engaged in 5 major development projects with potential customers and partners with the goal to integrate eye tracking into their VR headsets. These projects are in prototype or product development phase, mainly aimed at reaching products to be launched in the market in late 2018 or 2019. In addition, we have dialogues underway with about 10 additional potential customers and partners. And during this time, we've gradually increased our investments and resources allocated to VR. And also in Q3, we've allocated further resources to this area to be able to drive numerous simultaneous customer projects. Tobey is well positioned here, and I strongly believe in our long term ability to build a substantial business in the field of VR. We're also seeing initial interest from a number of players in the area of augmented reality. With that, Joanne, back to you in the financials. All right. So revenues in the quarter increased by 26% year over year and the external sales were up around 47%. Despite this, sales were on the same level as Q1 and Q2 of 2017, meaning stable sales to the PC gaming segment. The slightly lower sales in Q3 compared to the 1st 2 quarters was mainly due to lower sales to the other TOBI divisions during the quarter as well. The gross margin was 46% and the change versus last year was driven by a greater share of sales to external integration customers in the PC gaming area. We have grown the organization significantly in Tobitec over the past few quarters in order to pursue multiple sub segments, for example, to address the strong interest in the Doctor market as well as to work in integration projects with multiple parallel customers. The largest growth has been in R and D, but we've also increased our resources in sales and marketing. This of course drives increased operating expenses, which in the near term means increased level of negative EBIT in the business unit. Compared to Q3 of 2016, the operating loss increased from SEK42,000,000 to SEK67 1,000,000, but sequentially our EBITDA in the business unit increased from Q2 of 2017. For the 1st 9 months, Tobii Tec revenues grew around 50% and our EBIT ended at a negative 230,000,000 dollars Let's now continue to the financials for the Tobey Group. So next slide please. The group revenue declined 2% compared to the same period last year, but revenues increased 3% adjusted for currency effects. As mentioned earlier, the material growth drivers in Q3 came from Tobii Pro and Tobii Tec, while Tobii Dynavox had a tougher quarter from a top line perspective. Gross margin for the quarter was healthy at 73%, unchanged compared to the same quarter previous year, but up two points compared to the Q2 of 2017. Main reasons for the higher GM are product mix changes as well as increasing sales in Tobii Pro. The group's EBIT for Q3 was a negative $49,000,000 significantly lower than Q3 of 2016, but higher than Q2 of 2017 by around $20,000,000 Earnings for Tobii Dynavox were lower than last year as mentioned earlier. Within Tobii Tec, we continue to invest in accordance with our strategy, which was also the main reasons for lower earnings in total for the group when comparing to Q3 of 2016. We kept our operating expenses in control despite some planned investments in R and D, but we also had material FX related costs relating to our revaluation of the balance sheet in our EBIT. So next slide please. For the group, cash flow after continuous investments was 56 $1,000,000 in Q3. The change versus last year was related to our EBIT development and the increased investment within R and D in all three business units. Compared to Q2 2017, we improved our cash flow materially despite somewhat lower overall revenues in the quarter. We continue to have a strong cash position of more than $570,000,000 at the end of September, well prepared for future investments in other words. That concludes the presentation in terms of the financials. So back to Henrik. So sort of the quick summary, July to September was another intense quarter. We continued to grow the organization. TobiDynamox launched a series of new and important products and now stands strong within the Avance product portfolio, but sales were lower than last year. Sales growth in Tobii Pro was really strong. And in Tobii Tec, we saw a stable momentum in PC gaming and an even stronger traction and increasing investments in VR. So with that, we're handing over back to you, Gillian, and questions from the Tel Aviv conference. Thank We will now take our first question from Mikael Masan from Carnegie. Please go ahead. Yes. Hello. Hi there. I have quite a lot of questions, if it's okay. We can maybe start with Dynavox. You had positive one off effects according to the report. Can you explain what that was? Are you relating to operating expenses? Yes. On the results and the comments there, you say that there were a bit some positive. Yes. So it's related to improved accounts receivable in our funding related business. And is that one off and how much was it? Yes, it's non recurring and it was a handful of 1,000,000. All right. And you also mentioned that the hurricane held back sales. Is it possible to quantify that maybe? No, it's very difficult for us to quantify that exactly. We can't really tell that apart specifically, but we roughly estimate that that's also a handful of 1,000,000 of SEK. Okay. In negative and effective the Q3. Okay. And the backlog effect from the new product launch, can you explain that how that works? So that is basically when we late in the quarter, we launched the I-one hundred and ten and at that time we already had customers who had placed orders on other touch related products and they basically wanted to review and look at the new product that was launched and that caused delayed in shipments, etcetera, and also opportunities to upsell to the I-one hundred and ten. Okay. And do you see an uptick now when they have changed their mind or made a selection? Some of them have moved to the newer product and some of them stick to the product that they had initially ordered. So it's a mix. Okay. And also one other question regarding the U. S. Is the market development, if you can talk about that for the medical grade side. Yes. In general, we don't see any material changes in the market climate on the funded side, on the reimbursed side of the market. Throughout 2017, we've seen a slightly tougher climate in the reimbursed markets for no sort of evident particular reason, which has led to longer cycles for going through the funding process, for instance. But it's not specific to the Q3. Okay. And in general, do you expect the normal seasonality also this year? Or do you expect the product launches to have a larger impact or a continued delay of the sales developments? So generally in Tobii Dynavox, we don't see that strong seasonal patterns. The quarters tend to be reasonably even, maybe with a slight uptick in the 4th quarter has been sort of the trend historically. We are confident that the new products on the touch side in particular will have a positive impact on the sales in the touch segment in the reasonably near future. But we don't want to give specific projections for a single quarter. All right. Fair enough. Can I also ask you a couple of questions on TobiTek? Do you expect all those 5 projects that you talked about to reach the market late 2018 2019? And can you say something about the timing of the projects and your revenue potential? Maybe help us a bit there. Generally, most of these projects are at an early stage, meaning that there are uncertainties clearly in those projects. I would be disappointed if at least not a majority of them led to actual product launches in the late 2018 or during 2019 timeframe. It's for fairly obvious reasons, it's difficult for us to say anything specific about the volume opportunities in sort of individual projects as such. When we do look at the overall market, there are plenty of sort of estimates out there by different analysts of, okay, how many virtual reality headsets will be sold per year in 2020, etcetera. And typically, those type of estimates range from everything from, say, 10,000,000 units per year to 40,000,000, 50,000,000 units per year on that time frame. We believe that a majority of virtual reality headsets in the mid- and high end part of the market will be equipped with eye tracking by roughly that time frame, like 2020 beyond. So that gives maybe a little bit of a feeling for what order of magnitude of numbers that we see as possible here over time without stating specifically the numbers for these specific projects. Does that answer your question recently, Michel? Yes. Thank you. Could you also mention or comment on the notebook and gaming application side? It's been a bit quiet there recently. What is the development there for you and near term outlook for those applications? So we're continuing to invest in that area and both to continue to grow the game ecosystem and other applications around that, which is very important for the long term adoption in that market among gamers. Another key investment is the next generation eye tracking platform for computer integration. So we launched as you know, we launched the IS4 platform a bit over a year ago and we've been working on the IS5 platform for some time now. And it's still roughly a year before that will be available for integrations, and then it would take some additional time for actual products to be launched with that platform. And we are right now in a little bit of a sort of a a middle phase or period because, of course, both our existing and potential new integration customers in the PC market are well aware of our development of this new platform and are keen to have a look at that platform rather than the existing IS4 platform. Okay, got it. Thank you. Yes, the conclusion from that is that we certainly could have opportunities for some additional design wins on the current platform, but it's not unlikely to believe that we will see a sort of a clearer step up once we launch the new platform. Okay, thanks. We will now take our next question from Rob Stone from Cowen and Co. Please go ahead. Hi, guys. I have a few questions as well. First of all, on Dynavox, it seems from your commentary versus sort of prior presentations that you're describing the market share on a slightly lower percentage. I wonder if you could just comment sort of about the overall competitive environment and how you see the Dynavox share? I don't think it's really our intent to describe the market share in a different way. We perceive that the market shares are have been largely intact over the past couple of years. We have perhaps seen a slight decline in our market share on the touch side over the past 2 years due to a less favorable sort of competitive situation with our products there. If anything, we see opportunities to grow our shares of the market on the touch side going forward. And with respect to the new product launch, you said it takes some time to educate your customers and channel partners. Can you characterize sort of how long a period you would expect to see that transition persist? Typically, from experience, we know that it takes a couple of quarters for new products to kind of kick into gear. So do you have any potential inventory effects? Or do you foresee a possibility that you would need to mark down or write off any of the older products as a result of all the new launches? Hi, Rob. No, we don't. We look carefully at the product life cycles all the time and this has been planned in terms of the new releases. But it's always tricky to get that 100% right, but I don't foresee that right now. Okay. And you mentioned having introduced some lower price points, so it takes time to build up the volume to generate sales growth. Do you expect to see a mix impact on the gross margins for Dynavox as the new products start ramping up? No, not in any material way. The products have been designed with decent gross margins in mind. So we don't expect that to shift radically due to the new product portfolio. Great. Generally speaking on the overall headcount, I think you said you added about 100 people. Do you expect to continue on that pace? How should we think about the headcount growth for the next few quarters? Generally, we have done a significant ramp up of the organization over, say the past 18 months. We're now getting close to a level which gives us sort of ample muscle to pursue a lot of different opportunities. So at least the current plan is to not continue to grow the organization at the same rapid pace. We probably we do intend to grow the organization somewhat, but probably significantly slower pace going forward from here. Great. Turning to Tobey Pro, which was doing very well this period and you mentioned the benefit of your closest competitor being acquired. Can you quantify that in some way in terms of the potential market that's maybe left available for Tobey to capture? We estimate that SMI had a market share in this market of somewhere around 15% 15% plus and it appears as all of that will essentially go to other players where Tobii Pro is the market leader. Great. And finally, a question on a couple of questions on TobeyTech. You mentioned that you would need significant additional investment in order to capture many opportunities in front of you. Can you quantify, again, similar to the headcount comment, sort of the level of expenses or pace of growth of investment in Tobeytech? Yes, I think it's reasonable to expect us to have sort of an investment level of roughly order of magnitude where we are in the past couple of quarters to continue also going forward. It will still take some calendar time before the opportunities we see in gaming and VR, etcetera, to materialize in significant revenue. As Joao mentioned, we are, however, well funded with cash in the bank account, which means that we're well prepared for this investment phase ahead. And finally, with respect to TobeyTech, how do you think about sort of the target cost per platform to achieve significant market penetration of a mid- to high end VR headset, for instance, $100 How much would eye tracking add to the cost or be contributing to the price in a well implemented tech implementation? So in high implementation? So in high volumes, we're probably looking at an additional cost for a headset manufacturer in the range of striking north of $10 to $20 that range. And then that includes costs for different parts of the hardware system and licenses, etcetera. And then our share of that would be a fraction of that total cost base, depending a little bit on which parts of the system we would be supplying in each particular implementation. Okay. Final question for me, and thanks for taking so many. With respect to automated driver assistance systems, one of the fundamental challenges as the car takes over more and more responsibility is keeping track of whether the driver is engaged or not. How do you see an opportunity, if there is one, for Tobey in autonomous and semi autonomous vehicles? We definitely believe that there is an exciting and significant opportunity for eye tracking in the automotive field. So far we have prioritized to focus Tobey's resources mainly on other segments including computing and VR and smartphone. We do that with a heavy heart because we believe there would be clear opportunities for Tobey in the automotive space, and we would definitely be able to contribute and add things in that area. But we also fundamentally believe that by focusing on other segments, we maximize the opportunity the probability of success in those markets. And we believe that for us, the opportunities are even bigger and more imminent in those areas. All right. Thank you. That's all I had. As there are no further questions in the queue, that will conclude today's question and answer session. I will now turn the call back to your host for any additional or closing remarks. So we have some questions from the webcast as well. The first question comes from Bo Engmal. I read his first question. Hi, Henrik. You have stated earlier that you believe that Tobey's technology is well ahead of your competitors. In that respect, what is your comment on ad hoc Microsystems' new camera less eye tracking technology as a possible future main threat to TobiTech's current and possible future position as the market leader in eye tracking for integration customers? And overall, does this include Tobii Dynavox and Pro as well? Hi, Bo. Thanks for that question. So we have seen over the past several years that roughly on a quarterly basis, a new competitor pops up in the field of eye tracking. I think that's a strong healthy sign that there's a lot of interest in the field of eye tracking. One of the recent entrants is, as you mentioned, both this company Ad hoc that sort of came out of the closet just very recently with a new twist on how to do eye tracking. We are definitely always keeping a close eye on new competitors. I think that's important to be agile and stay on our keep on our toes. So we will definitely have a look at a close look at ad hoc and follow their progress as well as we do with other competitors. There are other technologies for eye tracking, also camera less technologies for eye tracking that have been around since long time before actually. So they're not the 1st company to bring out that type of approach. And we are always evaluating and assessing all possible ways for how to accomplish eye tracking technology in the best possible way. I think that's my quick comment on that one. Next question is, do you see any significant sales potential for Tobii Eye Tracker 4C to end users in the next few years after Microsoft has integrated eye tracking in the operating system of Windows 10? So the Itracken 4C is our own consumer peripheral, which mainly targets gamer users today. And I definitely believe that over time, the fact that Microsoft natively now integrates sidetracking into the operating system contributes to help drive adoption in the PC ecosystem, both for device integration as well as for our own peripheral. We do see a good and healthy growth rate in general from quarter to quarter of our Itraki 4C sales. And I expect that to continue going forward as well. All right. So next question is, can you give an estimate of the Tobii eye tracking current penetration rate in the segment of gaming computer specifically? If we look at the PC market overall, that's a couple of 100,000,000 devices per year. If we look only at high end gaming PCs that are specifically focused for gaming and at a price point for the computer of north of $1,000 there's about roughly $20,000,000 of those sold per year, including both gaming laptops and desktop gaming computers. And I would say that the current penetration rate of eye trackers is in the range it's less than 1% of those high end gaming PCs. So the penetration level in the gaming PC market is still very low, meaning we're still very early on the adoption curve, meaning, of course, that there is a large opportunity as we are become successful in driving adoption in that market. Okay. Next question. Before the share issue last year, you announced a defined win in the smartphone area. Was that just premature capitalized rising teeth there a long way before possible genuine smartphone penetration for ToberTech? Or can we expect something happen in that segment along with VR during 2018 2019? We are in dialogues with potential partners and customers in the smartphone space. But these dialogues are early stage, and it is difficult for us to comment specifically on those at this point in time. Long term, there is clearly an interesting and exciting opportunity for eye tracking in smartphones. We have a couple of questions from Pergo Nachon as well. First question is how has Tobey Patent position in comparison to the competition changed from the time of the IPO to today? Is it stronger or are the competition gaining ground? So Tobey does we have done now on 2 occasions a study of the patent landscape using an external firm, an IP specialist firm that have basically looked at available publicly available patents in the U. S. And Europe and done a study of that looking at patents that relate to eye tracking, how are they distributed. And we did that both in conjunction prior to the IPO, and we also did it last year and published those numbers in the most recent annual report. And that study showed both on both of those occasions, it showed that Tobey had the largest portfolio of patents related to eye tracking. We are since then, throughout this period and also since then, continuing to invest a lot in further strengthening our patent position. We think this is very important. And compared to our direct eye tracking competitors, our patent portfolio very clearly outnumbers and dwarfs what they have. The closer sort of the players with large portfolios that are sort of coming close to us or other sort of consumer electronics giants, companies like Microsoft and Google, etcetera. And it's, of course, difficult for us to know their pace of patents. We will likely continue to do these external studies at the regular intervals and publish the results of that in, for instance, annual reports. But it's an important area. We continue to invest a lot of resource and efforts in this and are able to come up with several good patents. So Per's second question is how the company is working to protect itself from the government's government violations? That's a fairly sensitive topic. It's difficult to comment too much on in public because situations like those are yes, they are naturally of very sensitive nature. We do look carefully at competitors and potential IP infringement aspects, etcetera, of that. One thing to note is that most of the competitors we see today have quite limited size of business, which also means that there's limited monetary rationale for looking too carefully at IP infringements, etcetera. But it's something that we are we have been involved in a couple of processes related to IP infringements in the past with some of our competitors, and we are looking and thinking carefully about those topics going forward as well. Okay. There are no more questions from the webcast. Do we have any more questions from the teleconference? There are no questions on the telephone. All right. So thanks, everyone, for attending the call today, and thank you also for a lot of good questions. We look forward to seeing you again on our next earnings call. Have a great day, everyone.