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Yes.
[Non-English content] Good morning everyone and welcome to this presentation of our quarterly report for the third quarter in 2021. Welcome to you that listens to this offline at a later stage. I'll jump almost right into it. In this introduction slide as a small anecdote, you see our CTO, Johan Svensson, looking over the hills for the bright future. That's just one example of the bright minds at IMINT. For those of you who had a chance to look through the report, you see it's a very good one, a strong quarter, our best ever in almost all metrics.
Key message here is that we continue to grow and we keep on improving our margins. An all-time high record in sales revenue of SEK 16.4 million, and that is a growth of 25% over the third quarter last year. We continue to show healthy profits. We had a record earnings this quarter of SEK 6.6 million, and that means a net margin of 40% this quarter. So far this year, we have accumulated earnings of close to SEK 13 million. As a consequence, we continue to put cash in our bank, and now we are actually exceeding SEK 60 million in our cash position, which is of course extremely good for our growth ambitions going forward.
Follow the usual structure of this presentation. Key highlights on our business. This quarter, as well as the previous quarters, it's the smartphone core business that drives growth and profitability. We're keeping on working closely with our key customers, expanding with them as they are expanding. The point number two and three here, they pick up more of our technology and they are also more and more integral to our work in providing new products and tuning them and defining them in a way that they want to have them. It's really a good circle of more and more intimacy with our key accounts.
At the same time, we are investing more and more in markets outside of smartphones. This quarter, we were able to announce our second smart glasses customer, Chinese Rokid. Now we have two official customers in this new segment. With both, we've been able to do really good joint marketing, which also shows that this is an important technology leap for them as well. Here we really have a good first-mover advantage of video enhancement for this type of products. Albeit volumes are of course much smaller than smartphones, it's a market that we believe will show very strong growth in the coming years. The whole pandemic has really spiraled that growth.
We are putting more and more effort in not only public relations and key account sales, but the activities in between, where we have defined a number of verticals. Now we are more or less out on the hunt for specific customers or prospects in these verticals, and tailoring our message to fit that industry. Work that started earlier this year, we accelerated that over the last couple of months.
Equally important for our long-term success is partnership. We are a small niche player with a laser-sharp focus. We want to do the best things in the world on those things that we do. Of course, we need to team up with others, and work with partners and identify what value we bring to the partner ecosystem, which of course differs depending on what kind of partner there is.
I've spoken a lot in the past about Qualcomm and MediaTek, and they remain, of course, really key partners, not only for smartphones, but also to help us find new verticals because they have also we have the shared incentive to actually find markets outside of smartphone. Actually this slide could equally well be one of Qualcomm's slides trying to build up business outside of smartphones.
We're also taking earlier or early contacts to look at the wider ecosystem and find every opportunity to help us scale up. That also entails finding partners that can help us promote and sell and maybe also integrate and support for customers that are midsize. We don't have to say no to customers just because we lack engineering bandwidth. I think that is a very promising development as well. Of course, those things takes time. Partnerships and ecosystem building is about mutual trust building, and they take time.
Market presence, we are more and more visible as part of our strategy to grow outside of smartphone, but to leverage on that brand we have as a key player in that domain. Over the last couple of years, we've been working with English-speaking press, but this year we're also putting at least the same amount of effort in the Chinese market. I mention this here because that's typically something that our Swedish or European or U.S. owners don't really pick up, more or less two internets.
We held in end of August our first digital Chinese press conference, where we introduced ourselves to the wider Chinese tech and business media. It was very well attended and led to a number of really well-written articles. We've also taken a thought- leader position or are continuing to do that in the hype world of today of metaverse. We think we can play an important role in that scenario. No one can really tell what it means and when it will come and in what steps.
In our view, I mean, small niche laser-focused company, we see that one magic component there is the camera devices. Because the cameras and those kind of sensors will be the bridge between the virtual world and the physical world. Regardless on how they develop cooperation, the link between, the bridge between these two worlds will mainly be cameras. Here we have a leading expertise in really efficient video processing. I think this is going to be really interesting for us, and we're trying to navigate in this ecosystem to be close to the action when the action happens.
In terms of development, majority of us working at IMINT are developers, either working with customers, close to customers or integrating and optimizing or developing new products and maintaining old products. We are really an engineering company, and we're putting more and more efforts in optimizing our software for power efficiency and ensuring that we support more chipsets, more computing platforms.
That is really both really important in the smartphone domain, but also in all other application areas where you have moving camera devices that are battery-powered. Power efficiency is one of our key features. The wider platform support is of course to ensure we have freedom to operate going forward regardless of how the market landscape evolves in terms of chipsets. We want to be early when new chipsets are launched. That's also a guarantee for our current customers that they can choose smart depending on performance and price of chipsets, but be confident that they can keep the same Vidhance functionality.
I mentioned that in the last report, we are now gearing up to our next big development project, which is expanding the whole underlying Vidhance platform that will enable a new type of products popping up, a new bouquet of products. This is a major project. It will take at least a year, probably longer before we can launch our first product in this new portfolio. Patience is required here. Of course, that will also affect the cost to some extent because we need to grow our team to some extent. That's the last point. We are hiring across the board, software developers, sales, technical sales, product management, and so on. Recruitment is ongoing. As I mentioned earlier, as part of our growth is not only to hire people, but also to find fellow travelers and partners and those that can help us and that we can find shared incentives with.
Finally, of course, all options are open, so non-organic growth opportunities is also being explored, of course. Here, our cash position is, of course, also helpful. Quick, some of the pictures we see in the report as well. Number of integration projects, they are not really hard science. It gives an indication of how busy our customer engineering team is helping our customers with project. One project doesn't correspond 1:1 with one product, but roughly. You can see that the activity is high.
It's not as high as the peak in Q4, which was sort of the pandemic effect, where suddenly everything needs to happen at the end of the year. The pace is high. The result, in a way, comes six months later in the graph to the right, and that is devices deployed to the market containing Vidhance. Now we are bordering on 600 million devices out in the world that are powered by Vidhance. That's, of course, a big joy and pride to us. That's pretty amazing.
I will go through this very quickly. We keep on showing this for legacy reasons. Smartphone market in general, and as I always say, that doesn't really affect 1:1 with our revenue because there are more complicated business setups under the hood. It gives an indication. It's a fair quarter in terms of smartphone volumes. Not as dramatic changes as last year when you had two really slow and two well-performing quarters. This year has started more moderate.
Graph to the left shows the same thing. In terms of the top five, we also typically show this. Nothing very dramatic. Samsung loses to Apple and Oppo. Xiaomi and Vivo are pretty stable this quarter compared to Q3 last year. This is a new slide, and this is on the general consolidation. It's the other side, the not top five, the category others. Here you can see a consolidation happening over the last five years, but it's not very dramatic.
Others have been around 40% five years ago, and now seems to be flattening out on around 30%. We don't foresee any dramatic effects, but we think the consolidation will keep on going, but not in a dramatic fashion. Final market stat on the smartphone market. Here's the providers of chipsets, the computing platforms that our software run on. The blue bar at the bottom is MediaTek, and you can see they have shown really strong growth here, due to the loss of Qualcomm. Huawei's own chipset that is typically only used in Huawei phones have suffered as Huawei sales has suffered. You can see some newcomers rapidly taking a significant part of the market, like the Chinese UNISOC.
Two slides that dive into AR glasses specifically because I talked about our two new customers, so we'll do a little deep dive into this. This is installation-based forecast of AR glasses, and you can see a pretty dramatic growth expected. This is. Of course, forecasts are forecasts, so this is not any truth in this. It's likely that we will see good growth, and the numbers, of course, are in absolute numbers smaller than smartphones. There is completely other industry logic, of course, in this. Another price level, another product life cycle and all of that, which is very, very good, I think.
The second deep dive in the AR market, or more general, the XR, VR, AR market. Start with the graph to the right, and this is 2020, where were these systems deployed? The big majority were consumer devices, and this is likely VR for gaming who really had a big chunk of that market. You can see to the left expected growth in market size, which is also quite impressive. My guess is that the main driving factor behind this growth in market size will not be initially in consumer, but in those more industrial and maintenance surveillance kind of applications, so non-consumer markets. Here we are well positioned. Some snippets from the press. Here's the English-speaking press working in many different directions. One is getting publicity in relevant niche press for those new verticals that we are working in.
Both RealWear and Rokid are really helpful here. We're putting out thought- leader articles on our role in the metaverse as well, and both are getting good attention. I highlighted a section here that is too small for me to read. What Rokid is saying about us, stable video is critical to real-world applications. You can read that article yourself. It's really good. We get really good promotion from our partners here because they see that excellent video quality is a key selling feature of these products. Similar, as I mentioned, we mirror what we do in the West in China as well. Here are two articles on the same two themes, but in Chinese, so I won't read it aloud. This page I will not present today.
This is a one-pager for you that are maybe new to IMINT and listening in to our first presentation. Because in this presentation, we typically just report progress and results, but never take the time to explain our business model and how it actually works. This is a one-page primer. For those who are interested in learning more about this, I can recommend to go back and listen to the presentation I made yesterday at Naventus Technology Summit. That is available online, if you wanna watch that, I'm the last presenter, or in two weeks at Stora Aktiedagen in Stockholm, where I also will explain this. This is a teaser to watch us present this in other contexts.
Here's the team. As I wrote in my letter in the report, last Friday, we had a company or office kickoff for those at the Uppsala headquarters. First time in two years that we actually could gather together, and we had a lot to celebrate. It was good celebration, and we really found energy for the next chapter of our growth journey. Here you see the bright minds of IMINT and the true heroes behind this report. As always at IMINT, it's a team effort when we achieve good results.
Financial slides. I'll skip this one because this is basically other wordings from my first slide, but we usually walk through the graphs really quickly. Sales development in Swedish crowns is good, healthy growth from our first when the first revenue kicked in back in 2016. It's a 25% growth year-over-year this quarter. In U.S. dollars, the same trend maybe even a bit steeper, but this is sort of the best representation of the customer value we deliver quarter-by-quarter. This is also, as you see, an all-time high. Headcount. We are growing this quarter with a handful of persons, as we said in earlier presentations, that this was our plan. Full effect is not visible in the report on the cost level yet.
That's why the result this quarter is sort of including the revenues, but not fully taking in the increased headcount and cost. Here's cost development, and you can see it's nothing dramatic. It's actually a bit lower than Q2. That's partly one-time effect from the staff stock option program in Q2 that led to some one-time extra costs. Blue bar is direct staff cost, red bar is other costs, but that includes also a lot of consultants. About 3/4 of our cost base is staff cost. This is a nice slide. This shows our profit development, and as you can see, really took a nice bump up in this quarter, with a net income of SEK 6.6 million.
As you can see, cash position. We have been growing, have been positive cash flow now for seven quarters in a row, which is I think a really strong sign. Now we are in a very strong position given our limited size in terms of headcount and company size to have a lot of options available to us. Typically show this as well. This is our on the balance sheet, what we have as IPR, and that is slowly going down around SEK 20 million. That's really a limited amount giving our market cap and also our revenue levels.
A note here could be that we do foresee that we might be putting more into the balance sheet again next year as we are building this new platform. I think I spoke about that in the last quarter report that this type of intellectual assets and structural capital is really important for us. That's our earlier investment in these platforms is what enabled this level of profit today. We wanna repeat that trick, but broaden the possibilities and broaden the opportunities for long-term growth. It will take a year or so to build that, and that will show up on the balance sheet, but not to any dramatic extent.
Key takeaways. This is a lot of repetition, but as the numbers are nice, I think you can bear with me for repeating that. We had the best ever quarter reported, both in terms of Swedish crown revenue and U.S. dollar revenue, and the best profit margin ever, best quarterly earnings ever. Smartphone business strategy that we've been talking about for many years is the engine of growth for us, the core business engine. I shouldn't say the engine of growth, but it's the engine of investment opportunities for us. That's really what allows us now to broaden our scope with that very healthy core model. We still see the. Although the pandemic, whether it's over or not, can be debated and will probably be debated for next six months.
We do see, however, more and more activity from new prospects that basically can't postpone new product projects any longer and start to talk to us again or come to us for the first time. That is a really positive sign. Finally, as I mentioned, the cash position and our outlook for ways to grow even faster, which can include inorganic growth as well, but also room for more brave investments from our side. With that, I'm open for your questions. Looking forward to them. They are always good and hard.
Very much. Thank you very much.
Thank you.
We have received, as usual, a lot of questions. If you have questions or follow-up questions, you can send them in when we have the Q&A as well.
Mm-hmm.
We can start with one question here from a viewer asking, "Are you planning to open up an office in the U.S. or in San Diego?"
Yeah. Well, I saw that comment. It showed up in one of those Mentimeter graphs. No immediate plans. I think that's more wishful thinking. We are quite a few that has had the pleasure, of course, to be in San Diego as one of our main partners.
Yeah.
Qualcomm is located there, but there's no short-term office plans for there.
All right. A follow-up question on Qualcomm. You are joining their wearables ecosystem. Could you talk a little bit about, they launched this quite recently. You were one of about 100 partners. What's the plans here?
Right. No, I mean, we have the same ambition as Qualcomm. I mean, they have the bulk of the revenue in the smartphone market, so do we, and they see great opportunities in other markets as well. Of course, these new business units within Qualcomm are fighting from a position of being the small team within Qualcomm.
Yeah.
They are actually very open, and they understand that we can't go by ourselves. We need to have a whole product concept when we go to customers, and that will include, for example, excellent video processing software. They pick partners that have been successful in the smartphone domain and wanna tie us closer to them when they go to market. They're actually, in a way, more open to work with than the smartphone unit with Qualcomm, which are more self-reliant.
Let's touch upon the metaverse. We have received a lot of questions about the metavers e.
Mm-hmm.
We can start off on the consumer side on wearables. As you mentioned, in VR, AR, you need a lot of cameras.
Yeah.
How do you approach this market with your video stabilization software?
It takes both how we look at product roadmap long term, what are going to be key elements in terms of video enhancement, not to break the illusion.
Mm-hmm.
Because when you are in this world, you are relying on camera sensors to bring you the full sense of the real world. Of course, if there are camera issues like vibrations or noise or loss of resolution or lenses, every artifact—
Mm-hmm.
Will sort of ruin the experience. In a way, it's similar in terms of feature set in smartphones, but the application domains need some tweaking and thinking.
Yeah. I saw that you are now attending some trade fairs a gain, such as MEDICA.
Mm-hmm.
How do you view these other wearable segments outside of the consumer, which is the main—
Yeah.
Chunk of the market today?
Yeah. I think it's very interesting and very promising, but I need to be honest, we are newcomers, and we are learning. Part of visiting these kind of trade shows is to understand the market landscape. It's a bit like a child going into toy store. You didn't know there was a shelf for this one.
Yeah.
Oh, there's actually cameras used here as well. We're not that naive, but it's really interesting to see, like in a medical fair.
Yeah, like surgeons using.
Exactly.
Yeah.
Cameras are really spreading—
Yeah.
Throughout the industry.
Are you gaining valuable contacts through these trade fairs?
Exactly.
Yeah. Yeah. Right.
Just the fact that you actually can meet persons in person.
Yeah.
That's a benefit as well.
Yeah. A question about your roadmap. You are talking about the Generation 4 of the Video Stabilization. Could you talk a little bit about this new generation?
I can mention some, but we are going to make a bigger market announcement shortly.
Yeah.
W e spent a lot of time in this field because that's the foundation for both a lot of our current also in our brand as a leader in this field.
Mm-hmm.
It's really important for us to always keep competition far behind.
Yeah. A short comment on your competition. Are you gaining ground or even making the distance wider between you and ArcSoft and Morpho? Are they investing in the markets right now?
Right. No, for our core technologies, we are leaving them further behind.
Mm-hmm.
Of course, they are investing as well.
Yeah.
They are not 100% open, but especially ArcSoft is a bit all over the place.
Mm-hmm.
I'd say they are a locked into autonomous driving and, yeah, working more, I say, on the concept AI level.
Mm-hmm.
We are more laser focused on efficient processing on devices at the moment.
Yeah. A question about recruitment.
Mm-hmm.
You are recruiting across the board, as you mentioned in the presentation. How do you find the right competence out there? Is it hard to find skilled people? How do you keep people in the company?
I mean, that's a critical question for us. I mean, the whole company value is built up on brains.
Mm-hmm.
We need to have the best brains, not only individual best brains, but brains that can cooperate in a good way. I think we have an outstanding culture in being cooperative and supportive and fighting as a team. Of course, in the general market space, it's hard.
Mm-hmm.
Every tech company experienced that. E specially now post-pandemic, people are thinking, "Okay, what's my next step?" We hope we keep the company really challenging and fun, and it's pretty unique to be able to work in a small company where every voice is heard—
Mm-hmm.
But still see your code being out there in 600 million devices and—
Yeah.
Working with customers like Xiaomi and Huawei. There is a big sense of pride in the company.
Mm-hmm.
Of course, we need to be a really good employer all the time.
You are a tech company, but it's built on close relations with your customers.
Mm-hmm.
We have had Corona for almost two years now. It's opening up a bit maybe.
Mm-hmm.
Are you meeting your customers once again in China, in South Korea, or how is that going?
Yeah, in a limited way from our local presence.
Mm-hmm.
We haven't been able to travel from Sweden to our Asian customers. That is, of course, a bit worrying.
Mm-hmm.
When COVID hit us in a way, in a lucky time because we had relationships setups and projects were ongoing, and we trusted each other, so we could continue pretty well—
Yeah.
Through digital means. After a while, of course, you need to meet people, and you need to find other persons and so you get more foresight. It's a bit worrying.
Yeah. Going back to the wearables, as in the presentation, you talked about account-based marketing that you were hunting for.
Yeah.
New key customers In this markets. How do you do that, when Corona is still around?
No. A lot of the initial steps can be just through phone and email and LinkedIn and so on.
Mm-hmm.
Because I mean, it's pretty easy to just find relevant suspects.
Yeah.
You work through them and see if they can turn into prospects, and then you can come pretty far with video meetings and so on.
Mm-hmm.
Of course, this ability to, at least in Europe, visit trade shows adds spice to this because nothing beats meeting in person.
Yeah. We received a question about the MCT, Multi-Camera Transition.
Mm-hmm.
That it has been removed from the Qualcomm website, as well as your website.
Mm-hmm.
Why?
Oh, it's a bit paused. There is more things to do with that product, to make it really competitive to solve wider type of problems.
Mm-hmm.
Just part of our policy, if we put out a product, it should be the best in the world.
Mm-hmm.
Most complete in the world. It's a bit paused.
Yeah. Another viewer that watched your presentation yesterday has a question regarding MediaTek and Qualcomm. I think you mentioned that they are taking you with them when they are meeting their end customers.
Mm-hmm.
Could you expand a little bit on this and how it has changed in the last year or two?
No, but that's, I mean, for sure, I mean, if you are an account manager from one of these companies and wanna secure an account or take share of that account, of course, you need to offer, present to the customer, "This are all the things available if you pick my chipset."
Mm-hmm.
This is the excellent performance you can get. Not least, which is sort of part of our secret sauce, is the ability for us to guide our customers in the integration process.
Mm-hmm.
And tuning, because that's something that, like, Qualcomm rather would not do themselves.
Mm-hmm.
Because that's hairy.
Yeah.
We've become pretty good experts in holding our customers' hands through that process.
Yeah. We have received several questions regarding the social media company.
Mm-hmm.
Any comments? Has the product been launched?
Mm-hmm.
Et cetera?
No launch. Progress is good. It's taking time, but that's part of the—
Yeah.
The plan. So far, the signs look good.
A follow-up question on this. People are asking, do you believe it will arrive an announcement within?
Yeah.
It's a dear term.
I can't.
No.
I can't comment on that, and that's not only because I can't, because I don't know.
Yeah. All right. Yeah, another interesting thing you talked about yesterday.
Mm-hmm.
On the presentation was that you are able to grow your revenues while shrinking the costs.
Mm-hmm.
As you have a system in place now, how you work together with your customers.
Mm-hmm.
Could you explain a little bit how this is possible?
Right. No, no, but that's really— I think I mentioned that yesterday, the benefit of working with an engineering-driven company, because engineers want to make things more efficient and remove boring stuff. Sometimes in this process of removing boring stuff, you realize that that is equally boring for our customers or a hassle. Why not share these inventions.
Yeah.
As part of our SDK or utilities? Which means that the productivity in getting from A to B and a finely tuned perfect product on the market, the time we spend, is much shorter.
Yeah. We have also received two questions regarding, are you going to start guiding r evenues, et cetera, for the next year?
Yeah. Excellent question. It's being discussed in the Board of Directors. I can't comment on that. I mean, looking outside of the company, probably now we're at a stage where we have more vision into the future.
Mm-hmm.
We are making a profit, and probably the expectation from the market is that we should be able to guide more.
All right. Also, you have a quite substantial cash position right now.
Mm-hmm.
We have received also a lot of questions regarding that. What kind of inorganic growth are you looking at?
Mm-hmm.
Is it more tech, bolt-on acquisitions for adding tech? O r is it new growth, revenues, or?
All options are open. I think not the lowest hanging fruit, but the easiest fruit for us to find is bolt-on acquisitions.
Mm-hmm.
In terms of technology or products that really could make the offer even more powerful, and you have synergies between technologies.
Mm-hmm.
Maybe as a second wave, I think other type of purely growth acquisitions could be really valuable as well, but we are a bit too early in those new markets, I think.
Yeah.
To really see the landscape.
Yeah. Are you looking also at perhaps starting giving a dividend?
Mm-hmm. That's an owner and board question. My personal recommendation would be to withhold that for yet a couple of years.
Yeah.
Because we have more growth opportunities to spend that cash on.
Another question here. Looking ahead, what kind of challenges do you foresee in terms of competition?
Mm-hmm.
The insecure component market? Do you have plans to prepare for it?
In the sort of components market, it's hard for us to do anything about, and it will affect competition equally, right?
Yeah. Yeah.
We just need to —one thing is, of course, to work, as I mentioned, with different platform providers, work even more with ecosystem and partners, so that we keep as many options as possible to be really agile there. In terms of competition, it's hard to know. As I mentioned before, we have our big competitor in China, ArcSoft. They also seem to be investing, but all over the place, and they are probably looking to be one of the Chinese AI dragons like Megvii and so on.
Mm-hmm.
Of course, we have full focus on our core market as well, smartphones, but I, my guess is that they will also try to move beyond that, into more general AI.
Okay.
Where they are, I mean, as part of all the Chinese ecosystem and government five-year plans, that's really where a lot of money is put in, into general AI and imaging AI.
Yeah. One last question then. What do you look forward most to next year? Do you have any closing remarks for this quarterly report?
Yeah. I think that's the fun part of being both with a product company, because I think everyone in the company has a parenthood feeling, and now we're launching a major upgrade and the new product coming out, and it's like newborns, you wanna see them. Also being a growing company with this level of enthusiasm. I look forward to next year in general, I would say.
Mm-hmm.
There's no specific event because events follow by event. There are curveballs as well. I mean, there will be bad news as well.
Mm-hmm.
In this mix, as for every company. Being able to see the team cope with good and bad.
Yeah.
And go stronger through it, I think that's an amazing feeling.
All right. With that being said, I would like to thank you and.
Thank you.
I would also like to thank everyone watching this live. The presentation will be available on our website later today, I believe, and on your website as well.
As well.
Yeah.
Yes. Maybe a few days delay.
Yeah.
Yeah.
All right. Thank you very much and have a nice day.
See you next quarter.