Hello, and welcome to Redeye. My name is Mark Siöstedt, and I work as an equity analyst here. Today, we have Andreas Lifvendahl with us, CEO of IMINT. Welcome.
Thanks a lot, Mark.
You reported your Q1 yesterday. Could you summarize the quarter and give us your highlights?
For sure. No, the good trend from last year continued, so we continued to grow, especially over the Q1 of last year. It's once again a record quarter in terms of revenue and keeping very healthy profit margins for that as well. Albeit we are, as mentioned before, increasing our costs as we are increasing our recruitment, but we are still very safely on the profit side of the business. It was a good start of the year, basically.
Yeah. We will come back to some of these parts later in the interview. Your add-ons, such as Selfie mode, have sold very well, as you have mentioned, and you can see it clearly in your reports as well. In this Q1, you highlighted Motorola's Edge+, which included three features.
Mm-hmm
from Vidhance, Video Stabilization, Lens Distortion Correction, and the Dynamic Motion Blur Reduction. Could you talk a little bit about the trends you see in the amount of software per phone project, and also how the penetration in the mid-range market proceeds?
A good question. Now, I mean, the long-term trend is, of course, that we add more products and more features to the phones. Some of them are long-lasting features, and some of them are more gap fillers that might have an end of life as cameras improve. Overall, we try to bundle, especially like a core package of like basic hygiene to get.
Mm-hmm
Professional video. As you mentioned, you have video stabilization, a lens distortion correction, and motion blur reduction. They are typically sold as one unit because they work extremely well together, and when we can implement all three of them together, we can also make it really time and power efficient. Then more high-value features like Selfie mode can be added on top of that, especially on certain phones where this feature is really asked for.
Mm-hmm.
You had a question on mid-range as well.
Yeah.
We continue to move broader in our key customers' product portfolio, so that is also a part of our growth.
Yeah.
If we go back maybe four or five years, it was more borderline whether our algorithms could run on the chipsets of those days. Now we're really efficient, even in mid-range chipsets.
Yeah. That's a question of hardware than much.
Exactly.
Yeah. Generation 4 and the Photo Zoom Stabilization were launched recently, and in the report, you write that they are in a pre-launch and evaluation phase at certain customers. Could you add?
Mm-hmm
Some flavor to this?
Right. Generation 4, we launched end of last year. It wasn't totally new to our key customers because we've been working in close cooperation with some of them, getting their feedback and so on. For us, it was an important investment because basically, since 2007, when the company was founded, video stabilization has been our thing, and we want to have the leadership, a clear leadership there. We could call it 2007 version, the Generation 1. Now we are at Generation 4. We learned that with our previous version, Generation 3, that is still best-in-class, but the gap to competition is smaller. We decided that we really want to show the market that this is our expertise, this is our market.
We really made a real sort of redesign on how we implemented the Generation 4 Video Stabilization. As you said, that is now being evaluated, and we're hopeful that we'll very shortly see first product launches containing this feature.
Right. Interesting. On April 14th, you announced a collaboration agreement with SIMCom Technology, a leading Chinese IoT and mobile communication device manufacturer. Could you talk a little bit about this agreement and what types of end customers you can reach with this kind of partnership?
Right. Look, we were very happy with this kind of partnership because it's also, I think, a symbol or a sign on a new approach, especially when we go outside of smartphones, where we need to be scalable, not only in how we develop our products and deliver our products, but also how we actually meet customers and sell and integrate and support them. Here we basically need much more hands to help us out. SIMCom Technology is an impressive company, as they are really focusing now on the industrial AR segment, and has built themselves a really good reputation within China but also overseas. Also a lot of non-Chinese brands come to them for advice and design.
I think we are through this partnership, well exposed to a lot of different AR device makers that turn to them for their expertise.
All right. A follow-up question. What kind of competition do you meet in these new verticals? Could you elaborate a bit about the price structure as well that you face?
Sure. The competition, in a way, it's the same old that we meet in the smartphone domain. However, I think we have the element of surprise here. We are really winning and sort of staking this territory for ourselves. We seem to be very successful so far in the project discussions that are ongoing. Price structure varies a lot. I mean, for consumer articles, royalties is still the default model. And in a way, we like royalties as well for these kind of markets because we share and scale success together with our customers. For industrial equipment, it's more of a product life cycle kind of thing.
We're also experimenting with some customers to look at different subscription or software as a service models on top of implementing on the device. 'Cause some of these devices like AR headset could be like a computing platform, and then the end user, not the manufacturer, the end user could then upgrade it and subscribe to features that they need. To give an example, I mean, theoretically, it would be possible for us, through SIMCom Technology, to implement our software on AR headset from Maker X, and then Maker X has a number of customers that subscribe to software features.
Mm-hmm.
With over-the-air updates. That is interesting because it enables exploration in business models that's much harder to do in the consumer space. It's kind of the anticipation is that you buy your phone in the store, and then that's it.
Yeah. How far have you come in this exploration of the new types of business models?
We don't have any deal like this, but we are discussing and especially we are learning because many of these AR headset makers, I'd say, are also in like a start-up or scale-up phase. There's a lot of buzz in this industry and a lot of newcomers as well. They are also experimenting to see what kind of business model they will apply because they are as eager, I think, as us to get away from this sell a device, get paid once.
In the smartphone segment, like 50, 60 million smartphones a quarter are equipped with Vidhance.
Mm-hmm.
What kinds of potential volumes are we speaking of in this new vertical? For an agreement such as SIMCom Technology, is it possible to say something in between, like a range?
Not yet, but obviously, the volume of devices is substantially smaller than the smartphone segment. Everything is smaller than the smartphones.
Yeah, it's hard to.
Hopefully we'll be able to communicate the joint customer success with SIMCom Technology going forward.
How many similar partners are there out there in these new markets and verticals such as SIMCom Technology that you potentially could approach?
There are a handful, at least. A lot of them are based in China, but not exclusively so. We also have other discussions going on in China on similar setups, but for different verticals or different niches.
Let's shift focus a bit still on China.
Mm-hmm.
Some parts of China have been in a lockdown due to the country's strict zero-COVID rules. How has this affected you and your business?
Nothing in a dramatic way, although it's worrisome, of course, given our high exposure to China in our core business. We saw a pretty sharp decline in phone sales in China. However, although our customers are Chinese or many of them are Chinese, they have a global market.
Mm-hmm.
We didn't get really that affected by the sort of local decline in China. Longer term, of course, it's problematic when it's much harder to meet with customers and sit with them and explore future opportunities.
Yeah.
We hopefully will see an end of restrictions coming because that will ease up our dialogue. We're lucky we have many Chinese origins working for the company, both locally in China but also here in Uppsala. Communication is good, so we are able to network and virtually meet with customers and partners. Face-to-face is, of course, ideal.
Nils Hulth joined IMINT as its new Chief Product Officer about two weeks ago.
Mm-hmm.
What will his first focus areas be?
Right. No, overall is to structure ourselves and our product management, which basically sort of connects the whole company to enable us to handle more complexity. What that really means is we have a really streamlined machinery for the smartphone business case. So it will spend more time and more focus on the next things, the new verticals, combination of our technology into new products, see what we can add to our portfolio that would make a perfect fit for other verticals and so on.
Mm-hmm. It appears as if you were not lucky, but you could recruit some more people last quarter.
Mm-hmm.
What kinds of roles did you fill, and how well staffed is the organization now to accomplish the new growth initiatives?
Right. No, I think we've been really lucky, actually surprisingly lucky because it's a tough job market.
Mm-hmm.
We've had a number of really solid engineers joining this last quarter and also now this the present quarter. Many of them go into our product development team, but also within sales engineering and product integration and so on. If you look at our capabilities, I would say that with this recruitment wave, I think we have close to double our capabilities to develop new products. Because you get a backpack of maintenance work when you have success with customers and products.
Yeah.
Even with the same amount of staff, your speed forward gets slowed down because you need to take care of old stuff. Now we're really set to much more aggressively accelerate our roadmap plans.
Yeah. You have about SEK 64 million in cash on your balance sheet. This is a good problem.
Mm-hmm.
What are your plans with this capital?
Right. I mean, it's always good to have a solid buffer.
Yeah. Especially in times like this.
Exactly. What it does, like, more like in psychology terms, it provides us with confidence to actually pursue these growth targets that we have because we see there are opportunities, and we don't sort of hesitate to pursue them. One thing that it enables is, of course, opportunities for inorganic growth and acquisitions and mergers, which has been on the agenda for the last 6-12 months. I think this would even accelerate even more our discovery in that area as well.
Yeah. What kinds of things are you looking at then? Is it more technology-wise or?
I mean, we're really doing a broad search, but are very picky in that broad search. No, ideally, it would be a combination of technology and market presence, like where we find a company where product portfolio is complementing ours in a really nice way, and they have more traction in market domains where we are not present and vice versa. I think that the potential for synergies are extra high.
Yeah. Thank you very much, Andreas. Always a pleasure speaking to you.
Likewise. Thanks a lot, Mark.