Earnings Call: Q2 2021

Aug 20, 2021

Hi, everyone, and welcome to Tobi's earnings call for the Q2 of 2021. It's great to have many of you here on this call. I hope that you've had a good summer, maybe a couple of days off and a chance to relax and re energize a bit. Personally, it feels great to be back at full cylinders, and I'm really looking forward to an exciting Tobii fawn. In this presentation, I will cover our business progress in Q2. Magdalena, our CFO, is with us to take us through some of the financials. We have invited Anand specifically to talk a little bit more about our initiative in driver monitoring as well as the acquisition of Faesha. And Henrik Morby, our Head of IR, will chaperone us through the Q and A that we will do at the end. And I would like to ask you, if you have questions, it's actually great if you can post them in the Q and A window already now during the presentation and as it will make the Q and A a bit more efficient. So with that, let's get started. And Summarizing the Q2, it really is a tale of 2 halves. On the one hand, both revenue and operating result were low in Q2. However, there were specific reasons of temporary nature behind this. And underneath the reported numbers, we see a continued really good growth sales activity across the board for all the different parts of the business. And hence, I'm quite optimistic about the outlook for the coming months, and I am confident that we have a really good second half year ahead of us. Revenue for Tobii Group was 4% lower than in Q2 in last year. The main reason for this was the supply disruption in Tobii Dynavox. We announced this already early this year. In addition to this supply disruption, we also saw continued effects from the pandemic on all parts of our business, even though we see slightly different effects for the 3 divisions. But behind this, we also see continued good signs of recovery for all of the 3 business units. And sales activity is clearly picking up across the board. For instance, order intake in Tobii Pro was up 50% in the quarter. Order intake was also really strong in Tobii Dynavox and we definitely see positive signs of customer activity pickup also for Tobii Tec. After the quarter, we announced a significant initiative, which is Tobi's entry into the mass market for automotive driving monitoring systems with the announcement of our Tobii DMS solution. We also announced the acquisition of Faesha. Generally, in Q2, we made good progress on the planned spin off and subsequent listing of Tobii Dynavox, and we've also been working really hard and making good progress on the integration of the organizations for Tobii Pro and Tobii Tech. So taken together, all of this really does set us up well for a really strong second half. So let's dig a little bit deeper. And as usual, let us start with Tobii Dynavox. As most of you know really well, Tobii Dynavox is global leader in assistive technology for communication. This is Tobi's largest business unit in terms of revenue and also from an organizational perspective, it makes roughly half of our organization and team. Many companies are affected by Large scale global supply chain disruptions that are happening right now and this is a reality also for us. In March already, we communicated that we had a severe supply chain disruption to one of our main products, the i13, the Tobii Dynavox i13 device, and that this would lead to a temporary stop of deliveries and also then lead to a deferral of revenue from Q1 a little bit and mainly Q2 into the Q3 of this year. We have worked really hard to resolve this issue and it is now resolved, which is great. We have redesigned parts of the product at record pace to circumvent a specific component shortage and we are now back again at full shipping capacity since July. During the end of the Q1 and essentially through all of the second quarter, we were unable to ship this product. However, we could still keep up a high sales activity and with really good order So this led to actually a record high order backlog and funding cases in the pipeline at the end of Q2. Already now by middle of Q3, we have shipped an absolute majority of this very large order backlog. In addition to the supply disruption, Tobii Dynavox business continued to also be pressured by the pandemic. Because of COVID, many schools have continued to be closed in many regions and it's all there's also been continued restrictions on access to elderly care facilities, hospitals, other types of institutions, which are important for us, for therapists and of course for our end users. Despite this, the and despite these challenges, the underlying sales activity and order intake continued to improve and was significantly higher than in Q2 of last year, both if we look at the Q2, but also if we measure on the first half. And I'm actually personally really impressed by how well Tobii Dynavox business has actually performed in this entire past year despite the very significant practical impact that the pandemic has had on this specific industry. And To a large extent, this is thanks to heroic efforts from our team. I really want to send a special thanks to all of our team members that are working really hard on very unusual circumstances to really service our users in fantastic ways. Over to you, Magdalena, and some more specifics on the financials. Thanks, Henrik, and hi, everyone. Well, as Henrik already mentioned, Tubular Liner Box revenue was Heavily impacted by the supply chain disruption in this quarter. And in addition, also other negative effects from the pandemic that continued to affect the revenue negatively. In total, the Q2, revenue was minus 15% organically. We can conclude that due to the supply chain disruptions, around SEK70 1,000,000 of revenue has been pushed from the first half year into the Q3. And when checking now, we can see that 85% of this revenue has already been invoiced not yet today. Since the supply chain disruption started out in March this year, the picture gets clearer if we look at the first half year when we recalculate the figures instead of only this quarter. And that is why we comment on the first half year in this case. And so had we been able to deliver these SEK 70,000,000 as normal, then we would have seen an organic growth of around 7% during the first half year. And then gross margin was 64%, in line with last year. Costs were higher than last year, where we in 2020 received pandemic related government grants and work with work time reductions, where we in 2021 are back to more normalized sales and marketing levels. The EBIT margin in Q2 was 14% compared to 13% last year. And again, now looking at the first half year, we would have had an EBIT of plus 12% in Tobinayamux during January to June if adjusting for the supply chain disruption. Thank you, Alex. Thank you, Magdalena. So let's switch gears and turn our attention to Tobii Pro. And we'll just hold one second for some camera issue, and here we are. So as you know, Tobii Pro is the global leader in eye tracking solutions for understanding human behavior. And Tobey Pro is actually the part of our business, which has had the biggest negative impact from the pandemic. Half of Tobey Pro sales are to universities and many universities worldwide have been physically closed and this has also continued throughout the entire first half of this year. On top of this, a vast majority of eye tracking studies to understand human behavior, both on the academic side as well as on the enterprise side involve interacting with test participants in person, for instance, at a university lab, in a physical lab facility or when working together with a shopper to do a test in a physical retail store. And of course, this means that for a majority of Tobii Pro's customers, it has been quite difficult to actually efficiently conduct eye tracking studies during the pandemic. And of course, this in turn has obviously had a negative impact on revenue for Tobipro. The pandemic is not over and we still see challenges, we still see negative effects in the market, but the situation clearly continues to improve at good pace. We see this in much increased sales activity and very strong growth in order intake. Currency adjusted order intake, as I mentioned at the beginning, was actually up a whopping 50% compared to Q2 of last year. And sales grew rapidly across most of our key markets, including the U. S, Europe and Japan. China, however, had a particular challenge in Q2 and that is that for a large portion of universities in China, there was a budget freeze due to a delay from the Chinese government to release certain types of research grants. We do expect this situation to be so during the second half of this year. In Q2, we launched an important new capability for our sticky offering, which is to do eye tracking studies also on mobile phones. Stikke is a solution for enterprise customers to test digital media on different kind of platforms. And previously, this has only been available on desktop computers. By introducing this capability also on mobile phones, we can offer our enterprise customers this kind of testing solution cross platforms, which frankly makes it much more relevant and much more appealing for a large majority of our enterprise customers here. So Magdalena, some more numbers, please. Okay, thanks. Yes. Revenue grew 40% organically in Tobii Pro. Although being a high figure, we are comparing with a low figure last year, and we are still being negatively impacted by the pandemic in this quarter. On the positive side, we have an order intake growth of 50% organically versus last year. And with that, we are almost back to pre pandemic levels regarding order intake in this Q2. Gross margin was 69%, in line with last year's Q2. Costs and amortizations of R and D were higher than last year due to investments in Glasses 3 in combination with a return to a more normalized sales and marketing level after last year's receiving government grants and having work time reductions. The EBIT margin was minus 34% compared to minus 39% last year. All right. Thank you, Magdalena. So turning to TobiTek. TobiTek is the world leader in providing eye tracking technology to integration customers, both in consumer and professional use cases across markets like personal computing, gaming, VR, AR, automotive, medical devices, etcetera. During the past Several quarters, we've seen a lower business activity in Tovitec due to the pandemic. And mainly this is because the pandemic has delayed the introduction, the integration and slowed the ramp of sales of new products for our integration customers. We see that this situation is gradually improving and the activity level started to pick up already in Q1 and continue to improve also in the Q2. That means that we do see a good flow of new design wins coming in. In Q2 specifically, We obtained 5 new design wins, 1 for new VR headsets and 4 new design wins for medical applications. Tobii is collaborating closely with many of the big tech companies to, together with them, drive the ecosystem around their technologies and customers and eye tracking technology. So we work closely with companies like Qualcomm, Intel, Microsoft and so forth. As one example, we are collaborating closely with NVIDIA to enable their ecosystem around NVIDIA graphics to leverage the full power of eye tracking and specifically what is called Foveated Rendering. And Foveated Rendering is a technology that means that you concentrate graphics processing and graphics resource just only to where you are looking as a user. And this enables the computer or the device to deliver a stunning graphics experience or alternative to trade this for lower cost and power consumption. In Q2 specifically, NVIDIA launched what they refer to as VRSS2 or Variable Rate Super Sampling 2 as part of their updated graphics drivers. And in this, we have worked very closely together with NVIDIA to make foveated rendering, dynamic foveated rendering possible on their graphics card without any need for software development, developers to actually make any changes to the code of the software. And this is exactly the type of step forward that really helps accelerate and drive adoption widespread adoption of eye tracking, specifically in for devices such as virtual reality. We also announced our entry into automotive driver monitoring systems. This is An additional focus area for Tobitec alongside with gaming, VR and medical devices. Anand, again, will talk a bit more to this as well as the fascia acquisition in a couple of minutes. But before that, Magdalena, your turn again. Thanks. Yes. In TurboTax, revenue was minus 15% organically versus previous year. The internal sales to Tubi Dynavox was negatively affected by supply chain disruption and also external partners were affected by the pandemic and all in all, leading to a lower revenue for Tubotec in this quarter. Gross margin came in at 54% compared to 72% last year, where we had unusually high nonrecurring engineering revenues last year. And also, there is an impact on the deferred sales to Torbjorn Dynavox, which has high margin. Costs were lower than last year as an effect of the cost reduction measures implemented during 2020. And with that, we summarize an operating loss of minus SEK 48,000,000 for the quarter in line with last year. The revenue for the group this quarter was organically versus previous year. Although we continue to see further recovery from the pandemic, this quarter was heavily impacted by the supply chain disruption within Tobii Diagnostics in combination with continued negative effect from the COVID lockdown in all three business units. But then in addition, we also need to remember that Q2 normally is our weakest quarter. Gross margin was 66% compared to 69% last year, where it was the product mix within Tobitech that made up the difference for the group in this quarter. But if you look at and compare with the longer term average, the low gross margin is explained by negative scale effects due to the temporarily lower volumes in the quarter. Costs increased organically 9% between the quarters, mainly due to having work time reductions, programs and receiving government grants last year. Operating results ended on SEK99 1,000,000 versus minus SEK45 1,000,000 last year. Cash flow after continuous investments was SEK69 1,000,000 versus SEK90 1,000,000 last year, while the main difference, of course, between the years was the operating out. Cash at hand was SEK349 1,000,000. Net debt was SEK251 1,000,000. And we have a bond loan that will expire in February 2022. And here, we have a plan for refinancing, which we expect to come back to in the next quarterly report. And with that, back to you, Henrik. All right. So again, if we summarize the quarter, We did see both revenue and operating results pressured by temporary factors. Again, most notable, the supply disruption in TOBI Dynamox, which of course will lead to a large shift of revenue from the first half into Q3. 2nd, continued pressure from the pandemic. But we also really do see a continued recovery and a very strong pickup in sales activity and order intake in the Q2 already. We're leaning forward with the announcement of our initiative in driving monitoring and the acquisition of Faesha. And when we look ahead, We, of course, expect Q3 to see a significant benefit from the deferred revenue from the first half. So it should be a very strong Q3. And in addition to that, we definitely expect continued general pickup in sales activity across the board also during the fall. So taken together, this puts us in a really good position for an unusually strong second half of this year. Reaching positive operating results for the full year remains our ambition, but it has become more challenging due to the extended negative effects from the pandemic. I also wanted to specifically comment on the progress on some of the structural changes that we're implementing right now. First of all, the spin off and the preparations for the public listing of Tobii Dynavox are progressing according to plan. Our aim is to complete this by the end of the year. 2nd, the organizational integration of Tobii Pro and Tobii Tech is also progressing well and we've taken major steps here during the Q2. And both of these changes are large projects that consume significant resources and a lot of management attention, but I'm also very confident that creating the result of this will be creating 2 even stronger companies, each with much tighter focus, more empowerment and even more agility and that this will boost long term success and unlock additional long term shareholder value. We are planning for a Capital Markets Day and to present both of these parts of Tobi in more detail later during the fall, but we haven't set a date just yet, but we'll come back with that at a later point in time. So with this, I would like to hand over to Anand to specifically talk about our automotive DMS initiative and the Perfect. Thank you so much, Henrik. Now I know that I've had the chance to meet some of you, but for those who I haven't had the chance to meet, I thought maybe it would be good to start off with a quick introduction about my background. I've been at Tobey now for a little bit over 2 years as the division CEO of Tobeytech. Prior to that, I was at Intel for 15 years in a variety of roles from sales to product management, finally to P and L ownership running 1 of Intel's largest businesses, the desktop, workstation and channel business. Now at the end of the year, I'm really looking forward to the outcome of the spin off of the listing of Tobii Dynavox and taking a new role as the CEO of the new Tobi. And I'm really excited about the prospects for the company and our announcements around automotive are a significant part of that. So today, I thought I would share some additional context about that automotive DMS market. Let's start by first talking about the opportunity and why we are so excited about the value that we can create in this space. What we see right now is that over the last two decades, you see a global commitment to Vision 0 initiatives from governments and countries across the world. The Vision Zero initiative is about reducing the impact of fatalities and accidents that happen because of driving. A key component of achieving Vision Zero is actually the adoption of technologies that are active safety technologies in nature. So we have technologies that are focused on driver assistance like collision warnings or unintended lane departure warnings or, for example, blind spot warnings for drivers to understand that there are other vehicles on the road that may actually be impacted by your actions. These type of driver assistance technologies have been rapidly adopted and now they're a baseline expectation for consumers for safety features in new cars and trucks. The next step in achieving Vision Zero in our mind is the adoption of driver monitoring type of solutions. And driver monitoring solutions rely on assessing the drivers' behavior in providing indications of their state and ability to continue to drive. Tobi today is the world leader in developing behavioral assessment based on eye tracking solutions. And when we look at our mission, the automotive DMS opportunity is firmly within the scope of what we intend to deliver, which is delivering on improving the world with technology that understands human attention and intent. When we look around the world, the requirement for driver monitoring systems is gaining legislative mandate. There's legislative support already in the European Union. And when you see other markets around the world, you see that legislation is being considered, for example, in the United States, and we expect that other markets around the world will follow suit on this trend. We think that these legislative mandates will create significant demand for driver monitoring systems, especially in the 2025 year and beyond as these mandates come into effect. We started our work on our TOBI DMS product focused on driver monitoring a couple of years ago, because we see tremendous leverage between our existing technology and what's being required for this as well as this clear market potential. So let's talk a little bit about the product. Now Tobii DMS builds on 2 decades of eye tracking expertise that Tobii has brought to bear. Henrik talked about the fact that we are a leading company, both in terms of enabling eye tracking and medical systems, as well as in Tobey Pro, enabling commercial companies to understand behavior and in TobeyTech, enabling these eye tracking solutions into mass market type of devices. Our core competency as a company is centered on 3 areas that we think are extremely relevant to the automotive market. One is that we can deliver robust and reliable eye tracking and head tracking signals. Number 2 is that we have the track record to ensure that these signals work seamlessly on everyone and in almost all circumstances. The 3rd key competency is that we are able to deliver signals that meet the first two criteria with low power, low computing costs, and we can ensure that they are able to be delivered in systems that are manufactured in high scale. We think these three core competencies are extremely important as automotive DMS solutions scale into the marketplace. Our intention is that Tobii DMS will be an algorithm only product that is delivered through Tier 1s and into OEMs for integration into their solutions. One unique advantage when we look at our offering in the space is that Tobii as a company has knowledge of the full stack required to deliver a product, from sensor design to compute design to algorithms and finally, end user software. That unique knowledge allows us to work with our partners in delivering disruptive lower total cost of integration solutions. Now when we consider the product, Tobey DMS, we see tremendous leverage from our core technology investments across existing verticals. This has allowed us to accelerate our development of our product as we leverage the learnings that we've seen in implementing eye tracking solutions across vertical markets like personal computing, across medical devices, etcetera. We recognize, of course, that for any development, there will be new learnings required to put the product out into the space, but we are also quite confident that as we've scaled our solutions into new verticals, there are significant learnings we already bring into the space, which improve our chances for success here. Now when we look at our product, we see that Our core competency is around the lower level signals, but we expect that going forward, we're going to have to build on top of these eye tracking and head tracking signals to go into perception layer signals that are focused around drowsiness, distraction, cognitive load, etcetera. This is the path that the TOBI DMS product is on already. And as part of getting there, we've also started to announce partnerships with some leading companies in the space. We have partnerships in place with Sunny, who's a leading optics provider for a variety of applications, including automotive. And we've also partnered with a company called Enviso, which is providing solutions for a Next area of focus for automotive manufacturers around in cabin monitoring. The combination of these core competencies around eye tracking and head tracking, Our partnerships with these leading companies give us a lot of confidence going into this market. But one area that we understand that we're going to have to go augment our solution on is around higher level signals like distraction and drowsiness. And this is where our acquisition of Faizia is a perfect strategic fit. Faizia is a leading provider of algorithms that assess and monitor physiological and cognitive states. The acquisition of Faesia brings to Tobii a world class set of algorithms around these higher level perception signals and perfectly complements our core competency around eye tracking and head tracking, as we've talked about before. The primary rationale for acquiring Faizia is really around accelerating and augmenting our automotive product line. This is a perfect fit that sits on top of our core competency and extends our portfolio. But these higher level signals have tremendous value in other parts of Tobi's businesses as well. And so in addition to seeing the benefits that we expect here on the automotive market, we think that we have the potential to unlock significant value by scaling Faesia's algorithms into a diverse and broad set of customers with Tobi's global sales and marketing reach. In summary, the automotive DMS represents for us a significant opportunity going forward. We believe that our technology approach, which we've built over 2 decades of experience, allows us to efficiently go after new vertical markets. And our ambition, of course, is to be a leader in the automotive DMS space. With the acquisition of Faesia, we are augmenting our automotive offering, but we fully expect that the algorithms that we are acquiring here will have value to our diverse and broad set of customers. I think the combination of this automotive announcement as well as our acquisition is a fantastic way for us to kick off the second half of the year and another proof point that we continue to be focused on driving growth. Back to you, Henrik. Great. Thank you so much, Anand. And with that, that Concludes the presentation part of this session, and let's move over to questions. And Henrik Morbe, do we have any questions that have come in? Actually, no, not yet, but let's dive into that. So please post your questions in the chat. An analyst, if you wish to ask a question, indicate your interest in the Q and A or chat, and we'll let you in. And if you're not an analyst and you wish to ask a question verbally, please send an e mail to irtobio.com and we will invite you in as presenters to the meeting. So let's see here if we have any analysts. Daniel Thorson, please unmute yourself and go ahead. Yes. Thank you very much. Do you hear me? Yes. Loud and clear. Excellent. Okay. So a question on Dynavox And the supply chain, we hear from many companies in the tech industry that both component shortage and the supply chain issues have really accelerated throughout July August. But you basically reconfirmed the guidance you left in March. Has the supply disruption really resolved that quickly for you? And is it as you guided for in March without any acceleration recently? And then the follow-up is obviously what kind of organic growth do you see in the first 7 weeks of Q3. Yes. So maybe I can respond on this. So yes, the specific supply disruption is resolved. And we actually took the pretty the actual component shortage that we had on this i13 product was the actual display element. We happen to use a display element that is similar to many educational laptops And that's just extreme component shortage, and we saw that coming a while back. And we actually took the decision to redesign for a completely new display element. It's a pretty radical decision. I think afterwards, this turned out to be exactly the right decision. But of course, it meant that we had to introduce a new display element. We have to go through all the medical certification and So the product with this new display element component integrated. So that's why it actually takes a period of time, several months of the stock. But it also means now that we actually don't have to rely on a display element that could have additional supply shortages, but we're quite confident that we have good supply of this new this particular component. That said, there is also, I think, many companies see that there is Sort of from time to time in this very particular environment we have right now, there are components sort of shortages or challenges showing up. We are working very and we see this as well. And we see it sort of not only in Tobii Dynavox, but sort of for all parts of our business. This is something that we are working very intensely with and our operations team are putting in a lot of effort to handle this and manage this in different ways. The team is doing a fantastic job and so far we've been successful at mitigating any of these challenges problems that have occurred. We are also taking precautionary steps of increasing our inventory levels quite substantially. And it also means that we do pay more, pay a premium for certain types of components, and we pay a premium to put more components on the shelf to secure production and supply. So far, this is working and is working well for us. It does mean there are risks here also going forward, but as of now, we are not aware of any particular supply challenges that would prevent us from not being able to deliver to our customers in a good way. However, as we've stated, we do get a small cost increase. We had it in Q2 and we expect to have it over the coming several quarters as well because of this hedging and paying premium for some of these components. Yes. Yes, that's good. And I think the natural follow-up on that is obviously how you think the gross margin will develop. Now it was down slightly. Will it have a material effect if you pay up for products? In the short term, not material. We see right now that it might affect us around 1 to 2 percentage points within Tobii Dynamics going forward. Okay. That's fine. And then the second question on Tobii Pro. I mean, at least on my expectations, operating costs were quite a lot higher than I expected. And although sales is close to 2019 levels, the EBIT is some €5,000,000 lower here with the loss. What are your initiatives there? And what is your message for us looking into H2 on the cost side in Tobey Pro? You remind me, Mariana? Would you like to start? I can start and maybe you fill in. So it depends a little bit on how you do the comparison. Obviously, if you do a year to year comparison, then the primary reason for a higher cost is that last year we had fairly and lower cost due to both government grants and work reduction programs. So I think that's the biggest changed there, if you look at the operating cost organically. If you then look more relative to sort of a steady state of previous quarters, we are leaning forward in the Tobii Pro division. We are increasing sales and marketing activity and hence also sales and marketing expense and OpEx because we see this very rapid pickup in sales activity and customer interest. So I think those are the main explaining factors. Magdalena, anything we should add to that? No. Yes, I think and in addition, we have a slightly higher Level of amortization of R and D, meaning that as you asked, this will continue. Sort of we are on a level now that We see it will continue sort of being in the level we are on. One additional point, if you look at sort of the operating result, of course, is good to keep in mind is that the Q2, the 2nd calendar quarter is always from an operating results by far the sort of worst quarter for Tobipro. And whereas in particular the 4th and the first quarter are where sort of Tobipro has a tendency to make its profits. Okay. I understand. And then another question to Anand, I guess, on Tobit Tech external sales. When we look at the industry, we see a tougher momentum for all gaming related products, both hardware and software, due to the shortage on the components and also the reopening of the society, how do you see the PC sales development and the VR headset development going into the second half of the year? And do you still think that 2022 will be a big VR year? Yeah, I think let me take the 2 parts of the question a little bit separately. I think from a 'twenty two perspective, I think that we absolutely expect that it will be a big year for VR. We have already seen the back half of 2020, for example, is surprisingly positive from a VR perspective. And I think that is, if you're following along with the industry rumors, there's, of course, the rumors around many players coming into the space. So from a 2022 perspective, I think the big change is going to be increased focus on consumer VR. The pandemic itself, of course, has also increased the value of collaboration in general. And while we do a lot of collaboration with video conferencing, tools like VR are becoming more and more relevant as the pandemic unfortunately continues to extend beyond what all of us would like. I think from that perspective, I think VR has a tremendous amount of momentum and we still continue to believe that 2022 is both a big year for consumer VR as well as a big year for eye tracking adoption and we continue to see momentum through the course of this year. In this year, our VR momentum has been impacted a little bit by supply shortages. So we have seen announced design wins that we've had either ramp slower than expected or launch later than we expected. And so those are things that we are seeing in 2021. But again, we think 2022 is a little bit of a discontinuity in terms of the VR market. Now on the PC side, I think it's quite well known that there are a lot of supply challenges and this is part of what has been a little bit more of a global issue for tech in general, which is In general, we see that our integration customers are having challenges. Some of them may be related to things like graphics cards not being available as much, so specifically to gaming related systems, but there are broader supply challenges as you alluded to. So we are seeing that not only in PC, but also in other parts of our markets. But that being said, what Henrik alluded to earlier in terms of our business activity coming back is the peak of the pandemic where some of our more disruptive we're seeing financial challenges beyond just the supply impacts we see now or concerns about sort of the longevity of their business. Those things are starting to stabilize. And so again, we see a mix of our customer base, some that are large companies that today may be dealing with supply chain issues and some smaller innovative companies who a year ago were really concerned about where is this pandemic going to go. And so that's part of what we're starting to see normalize. Okay. That's clear. I end up with a final question for Magdalena, I think. And that's on the capital allocation in the separate listing of Dynavox. Am I right when thinking that the bond you have outstanding of SEK 450,000,000 is linked to Dynavox in the sense that the cash related to that has to be transferred to the Dynavox business, which ultimately should require a quite material capital increase in the remaining Tech Pro business. Am I right there? We are looking into the split now. And as I said, we are looking into the refinancing of the bond, which we will come back to before the split. But then we are populating or looking into the two balance sheets. And you will see Tobii Dynavox will have loans, while you will see a new Tobii will add loans. The bond will be fully on Dynavox. Yes. Sorry. The bond will be fully on Dynavox balance sheet, right? Yes, the bond slash the loan sort of. Yes. So we will finance we will refinance the bond, but we haven't said exactly how yet. So we'll come back that a little bit later. But yes, It's, of course, super important that we ensure that both Tobii Dynavox and sort of new Tobii are both have a really good and solid balance sheet and sort of capital structure. So that's something we are working on right now, and we're confident that we will be able to find good solutions for that. Okay. Okay. Thanks for that. I'll stop there. Okay. And just Christophe and Jeff, I think that the last discussion on the bond answer your questions. If not, ask another question on that topic and we'll try to Bye. Daniel Hjorbe, you want to ask some questions? Please unmute yourself. He's probably calling in. Okay, I'll try to love this number. Okay. Daniel, I think you have to use the link that I sent in the e mail and log in via your phone or computer on the Teams or call in again. Sorry about that. Okay. Let's go to one more Question from the chat then, in terms of the automotive field and entry into that space. Can we discuss a little bit about the time or volume expectations we have there? And maybe if we can comment on market share, wishes or hopes or dreams? I can take some of that. I think so As we talked about in our product, our expectation is that we think that there's going to be significant increases in the amount of cars that are shipping with driver monitoring systems that are tied to the European legislation for a start. And as I mentioned, there are other countries and regions that are also considering the legislation which will really drive the adoption of those technologies. The timing for that that we see right now is in the 2025 timeframe. Of course, there's already systems with our cars with DMS out on the street today. But when it gets to being mandated that cars have to have it in order to sell in a particular region that will create significant sales momentum. So we see that 2025 timeframe being pretty significant where all of a sudden you start to get to tens of millions of cars on the road that will need DMS in that particular year. Now from our approach, we are looking at a product that would then be targeting those kinds of cards in the 2025 timeframe. And so we expect that what we would be engaged on between now and then is in RFIs and RFQs with customers, hopefully with awards of business in the 2022 timeframe that would result in shipping products from these customers in that 2024, 2025 type of time horizon. Again, our aspiration is to be one of the leaders in the space, but we are also very humble and cognizant of the fact that there are other competitors. But we think that because of our pedigree, our capability, our immense leverage between our products, we think that we have built enough credibility that we think that this is something that we can go achieve at that point in time. I think as a market leader, I think we don't have specific Market share expectations to share with you right now, but we hope to share more details with you in our Capital Markets Day when we talk about it in the fall. Thank you. And let's jump to Carnegie. You have some questions, Mikael Yes. Good morning. I hope you can hear me. Good. Good. About this DMS opportunity on the automotive side, can you talk about the cost that you have had and expect to have more investments into this area? Yes, I can take that again. I don't think we would go into the exact detail of exactly what the costs But as we talked about, the investment in automotive relies on 2 parts in general. 1 is the fact that we are able to leverage our core eye tracking technology. This is part of why we are able to deliver this product on this kind of timeline. We're leveraging core investments that we make across the different segments that Tobey plays in today, medical, PC, etcetera. We've also started on the specific adaptions that are needed for DMS, because there are certainly changes that are required to be in the automotive space. And we started that work already 2 years ago. And so when you look at the results that you're seeing for Tobii as well as Tobii Tec, the costs of some of those investments are already played in. We don't think that there's going to be a substantial increase in base platform costs beyond what's already in our current run rate of spend. So you should think that that's going to be normal. Of course, as we start getting awards, there's an expectation that the integration work to get into a particular car, will drive some investment, but those are typically defrayed with investments from that OEM towards us in the form of NRE. So you should think about that cost being balanced by revenue for the particular adoption of our platform into a model car. And that's something that would come over the next couple of years and would be dependent on the design wins we get. Okay, got it. And can you say something about How ready the product is right now and when you need to have it integrated and sort of fully Competitive are ready to be delivered. I'm thinking about lead times in the auto industry. Yes. So again, our target is to try to be in cars that are shipping in the 2024, 2025 timeframe. Again, we're timing that based on where we see the legislative mandate in the European Union and we know that other markets like the U. S. Maybe slightly beyond that in terms of timing. That of course is what's causing a lot of, I think opportunity for disruption here, because as soon as you get DMS into these kinds of volumes, there's a requirement for trying to drive the cost of these things down. Our product is targeted to go be in awards that happen in 2022. That is sort of how we backed our way in. In order to be in a car in 2025, those cars typically get awarded in the 2022 timeframe. And so for us, we need to be ready to go and showcase our capabilities to Tier 1s and OEMs targeting that kind of timeframe. We are already participating in multiple RFIs and RFQs with this product. And we think that where we are right now, we're on track to try to compete for business that gets awarded in 2022. Okay, good. And a couple of questions on Dynavox or sorry, Pro. The university budget fees in China, Can you say something about the impact from that? And what do you see right now? I don't have the exact numbers, but it probably With the risk of being incorrect, if I still take a number that I think it's right ballpark. It's probably around maybe a 5% revenue impact on Tobii Pro in the second quarter. Good, guys. Yes. So that's the order of magnitude, because it is actually a very significant part of China sales for turbopro that has been impacted in the second quarter. Originally, if sort of Chinese government plans would have been according to plan, this budget freeze would never have occurred. It's due to a delay in their approval process. And of course, it's not super easy to have transparency on Chinese budget processes, but there's definitely the expectation on our side that this will be fully resolved in the second half. And hopefully, that would also mean that there is an element of pent up demand from these universities and actually being able to access these budgets they haven't been able to access in the Q2. Okay. And just a final one. I'm just curious about Boardmaker 7, how that is developing? Boardmaker 7 is, for those who don't know, is the latest generation of our special education product in Tobii Dynavox. The Boardmaker product represents approximately 10% of Tobii Dynavox's revenue. And this is a software that exists both as an online web platform and as a desktop software, as well as a hybrid solution between the 2. To a large extent, it is SaaS based with recurring revenue and it's sold to schools, both directly to teachers, but mainly in high volume to school districts. This recurring revenue product has It's seen very good revenue growth over the past several years, but it has faced a particular challenge and that is that the Majority of customers using the web version, the web version has been based on Flash. And Flash was decommissioned by web browsers over the past 2 to 3 years. And this has forced us at somewhat of a strain redesign the product to not be dependent on flash. This is the big part with Boardmaker 7. So it's essentially moving the Boardmaker solution from flash into non flash based product. And this is something that we started to migrate customers to around January timeframe and have continued with throughout the year so far. And given that this is happening on a sort of a forced timeline, it's not a super smooth process for us. So it is causing a little bit of challenges for us to conduct this. In an ideal world, we would have had longer time to do this migration. So it's something we're working through right now and we are very much looking forward to having all of our customers successful on the new Boardmaker platform towards the end of this year. Any more questions, Mikael? No, I'm fine. Fine, thanks. Okay. We have a few more from the chat, and I think these are probably going to be the last ones. So it's related to the DMS offering again an entry into that market. And the questions are, when will Tobey DMS be fully certified and ready for the market? The second question is, what type of RFQs are we involved in for Tobey driver monitoring? Are those for smaller or larger car manufacturers, premium or mid class vehicles? Okay. So maybe I can take one of those again. I think We are not ready to sort of share the level of details of exactly what the RFQs are that we are in, but I think it is actually a pretty wide range. Some of them are with Tier 1s that are looking for solutions with particular OEM deals in place and some are directly with the OEMs. We fully expect, of course, that Part of the reason for this announcement is for us to be more public about our participation in the space, whereas over the last couple of years, we've really been focused on trying to get the product to be more mature and also focus on a very small set of partners as we go and refine our product. We expect that now that we are more open about our ambition, we will have the chance to go and compete for more business as customers who may not have considered that we were going to be in the space now look at us as a potential technology provider as well. The second one in terms of timing and maybe regulatory or ASPICE certification. Again, this is part of our path. We understand that from an automotive perspective, this is part of the adaptions and changes we have to make on our core technology stack. Some of that certification work is already underway and we've actually planned with the expectation again to be awarded business in 2022 and to be in cars in 2025, we do have a certification pipeline that is paired with our product development to support that kind of timeline. Thank you. Let's give Daniel Jube another try. Hopefully, we've sorted all the IT issues here. No, okay, since we can't get him on the line. We apologize for that, Daniel, and hopefully, we can get that get you through next time. Okay. That's it for the Q and A. All right. So thanks, everyone, for joining this call today. And As Henrik Monde alluded to previously, if you have further questions, never hesitate to reach out. Henrik Monde is very available and he is good at funneling questions to as well. And of course, we are looking forward to seeing you on our next earnings call as well. So thanks and bye for today. Bye bye. Bye, guys.