Neonode Inc (NEON) 2017 Q4 法說會逐字稿

Hello, everyone. Thank you for standing by, and welcome to Neonode's Fourth Quarter and Full-year 2017 Earnings Conference Call. (Operator Instructions) I would now like to direct your attention to the company's PowerPoint slide deck that you are capable of viewing now that are logged on to this call.

The company will control the navigation through the slide deck to coincide with their prepared remarks. At this time for opening remarks and introductions, I would like to turn the call over to David Brunton, Neonode's Head of Corporate Investor Relations. David, please go head and start the call.

Welcome, and thank you for joining us. On today's call, we will review our fourth quarter and fiscal 2017 financial results and provide a corporate update. Lars Lindquist, our CFO, is not able to be with us today as he has taken -- been ill all week, and I will be covering the financial portion of the call in his unexpected absence.

Before turning the call over to Andreas Bunge, our CEO, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call, other than historical facts, are forward-looking statements. The words anticipate, believe, estimate, expect, tend, will, guides, confidence, targets, projects and other similar expressions typically are used to identify forward-looking statements. These forward-looking statements do not guarantee the future performance that may involve or be subject to risks, uncertainty and other factors that may affect Neonode's business, financial position and other operating results, which include but are not limited to the risk factors and other qualifications contained in Neonode's annual report on 10-K, quarterly reports on 10-Q, and other reports filed by Neonode with the SEC to which your attention is directed. Therefore, actual outcome and results may differ materially from what is expected or implied by these forward-looking statements. Neonode expressly disclaims any intent or obligation to update these forward-looking statements.

At this time, it is my pleasure to turn the call over to Andreas Bunge, Interim Chief Executive Officer of Neonode. Andreas, please go-ahead.

Thank you, David. Today, I will present the highlights from the fourth quarter and also provide you with a strategic update of where we see Neonode today, and our opportunities going forward. So a quick glance at the fourth quarter. Our sales increased by 14% year-on-year to, almost $3.3 million in the quarter, primarily due to continued strong performance in the licensing business. For the fourth quarter, we did record a net loss amounting to $1.7 million. The loss includes a noncash inventory adjustment of $1.4 million, which I will discuss later.

During the quarter, we reached some important milestones. We launched zForce AIR modules and shipped to Chigoo, the Chinese producer of smart luggage carrier. And zForce AIR sensor modules were made available worldwide for worldwide shipment through Digi-Key. During Q4, we also now have some intention to regain compliance with Nasdaq minimum bid price requirement. And we can now confirm that the board will ask stockholders to approve a reverse stocks bid as part of the annual meeting in early June.

On January 1, Thomas Eriksson resigned as CEO of Neonode and as you have seen, we have appointed Håkan Persson as new CEO from 1st of April. During my time as interim CEO, my main focus has been to rebuild the cost structure and to help organization to put full effort on specific customer projects to drive sales. As you know, I came in as an investor in August and joined the Board of Directors in October. Our decision to invest in Neonode was based on a couple of observations, which I believe still apply. In general, there is an increased demand for more intuitive user interfaces. This is true for a number of industries, for example, automotive, consumer electronics and industrial applications. Neonode has the unique technology and a stronger relationship with a large number of high-profile customers. The company deals in licensing operations that generate steady cash flow. But we also saw, which was confirmed in our review of the operation, the need to focus the business growth and to build on strength and the customer relationship.

We are convinced that Neonode has the technology, the resources and the capacity to see profitable growth and our actions to realize that can be summarized into 2 key priorities. Our first priority has been to secure a balanced cash flow. We are focusing on existing products and customers where we are in close -- where we are close to a deal. We have taken action to adjust the cost base. For increased focus on customer driven projects, we have seen that we can free up resources today assigned for noncore development and more or less speculative projects. And then in this context, we have taken the decision to minimize the investment in the AirBar business. As a consequence, we have taken a conservative approach in reviewing our working capital, leading to an inventory adjustment of $1.4 million in the quarter, of which AirBar represents the main part.

But as previously communicated, we continue to value our strategic partnership for AirBar going forward. In addition to these savings, we are also introducing a general tight to cash management and cost control. This means that through the cash flow generated by our sales and licensing revenue, we can secure a balanced cash flow and also see a lower risk in the leveling operation.

Our next priority is to step up product sales. We started sales of zForce AIR modules, and we are focusing on closing key customer deals. With the believe that this is the real growth opportunity -- we believe that this is the real growth opportunity for Neonode. Development into new areas will be in close collaboration with key customers in selected strategic markets. To execute on this, we recruited a sales focused CEO starting the 1st of April. The new CEO, Håkan Persson, has a solid experience from leading positions in technology companies.

Our license revenues -- licensing revenues play an important role in our first priority to secure a balanced cash flow. As you can see, we continue to see stable revenues from the 3 segments, e-readers, printers and the automotive segment.

Our licensing fee grew by 13% to $2.35 million in the fourth quarter, driven by a strong performance within the printer segment. We continue to see this as a solid and profitable business foundation, which we will continue to nurture. But the area where we see the big future opportunity for Neonode is our zForce AIR modules which was launched in Q4. With this launch, we have increased our offerings to include not only touch interaction, but also mid-air interaction and object sensing. As I mentioned previously, we are now focusing on closing these already in our pipeline. Development into new areas will build on our close relationship with key customers in selected strategic markets. Based on the key offers, we can do a lot. We just offer adjustment to cater the customer needs and thereby also open up new application areas. This is a shift in our way of operating the business. As we believe that close customer collaboration is more relevant and an efficient process to product development than the speculative in-house product development strategy.

Through redirecting our R&D resources to customer driven projects, we can free up engineering resources and also reduce the risk level in the development. Our zForce AIR technology is relevant for a broad number of applications and industries, which we will be able to address over time. One industry that we already started to address is automotive, where we have a good traction and ongoing customer projects. This is a long-term opportunity that can generate large volumes, both in licensing and zForce AIR modules.

Through our licensing business, we have already a strong presence in this segment. Within infotainment systems, we have ongoing relations with 7 Global Tier 1 customers, and a number of OEMs. This is an area where we'll continue to increase our presence. In control system and the steering wheel project with Autoliv, we have now entered into the commercialization phase. Regarding entry systems, door and tailgate solutions, we currently see a strong interest and are in discussion with several potential customers.

And with that, I'll leave the word to David for financial updates.

Thank you, Andreas. You can find our 2017 10-K and quarterly 10-Q's available for download from the Investor Relations section of our website at neonode.com. I will focus the majority of my prepared remarks on the fourth quarter. Please see the MD&A footnotes and other sections in our 10-K for a full discussion on the year-to-year results and other activities. I will start with a summary of our fourth quarter revenues and operating results.

Our fourth quarter revenue increased 14% to $3.3 million from $2.9 million in the same quarter in 2016. The main drivers are an increase in license fees from printer customers, plus an increase in NRE revenues. During the fourth quarter, we earned approximately $600,000 as we completed final milestones for 3 NRE projects, of which our steering wheel project with Autoliv is the largest. We do expect NRE to continue to generate revenues both from licensing and sensor module customer projects in the future. Our total license fees increased to $2.5 million in Q4 compared to $2.2 million in the same period in 2016.

I will discuss license fees in more detail on the next slide. As Andreas previously discussed, AirBar sales have not met expectations. As a consequence to the slow sell-through, we have significantly reduced future investments in AirBar development, marketing and sales efforts. We are also evaluating -- we also evaluated the expected net realizeable value of our inventory and recorded a $1.4 million non-Cash reserve of our component in AirBar inventory in the fourth quarter. Our net loss for the quarter, including the noncash inventory adjustment, was $1.7 million or $0.03 per share, compared to $400,000 or $0.01 per share loss in Q4 2016.

I think it's important to note at this point that on a pro forma basis, excluding the noncash inventory adjustment discussed above, our Q4 loss would've been approximately $300,000 or $0.01 per share.

Our licensing is a solid and profitable business, which remained stable during 2017 in which we'll continue to nurture going forward. Our total license revenue increased 13% for the fourth quarter 2017 compared to Q4 2016. Printer license fees in the fourth quarter from 5 OEMs increased by 45% compared to the same period in 2016. The increase is primarily due to steady fees earned from HP, plus an increase in total printer shipments and fees from both Canon and Epson. Our automobile license fees actually decreased 32% in the fourth quarter compared to 2016. This decrease is primarily due to certain of our customers reaching volume milestone per unit license fee reductions, plus decreased sales volume in certain car models in the Chinese market. These decreases were partially offset by increase in shipments of new cars from Volvo and other OEMs.

Our licensed customers combined shipped 3.2 million units with zForce during the fourth quarter of 2017, compared to 3 million in Q4 last year. Neonode technology has now been integrated into more than 56 million products since 2011 and continues to grow each quarter.

I'm going to end by talking about the balance sheet and cash position. As Andreas said, we've taken actions and continue to take action to secure a balanced cash flow. And as he discussed, we have implemented tighter cash management and cost controls, we focused our development and support activities on key customer driven projects and our total operating expense are currently in the range of $3 million to $3.3 million per quarter, and we ended the year with $5.8 million in cash, $1 million of accounts receivable and $6.2 million of working capital. Our current liabilities, including accounts payable, deferred revenue and accrued expenses, are well within plan.

Now, I would like to turn call back over to Andreas.

To conclude...

(technical difficulty)

only with strong customer relationship and a new line of sensor products launched. We have taken actions to secure a balanced cash flow, and we believe we have sufficient cash flow from operations to build a sustainable and growing business. We remain optimistic about revenue growth opportunity in both licensing and sales of Samsung modules. And with Håkan Persson joining us as our new CEO, bringing solid expertise from driving sales and technology companies, we believe that Neonode can secure execution of strategic -- of a strategy towards achieving profitable growth. And with that, I open up for questions.

(Operator Instructions) Your first question comes from the line of Mike Malouf with Craig-Hallum Capital.

Can you drive down a little bit into the auto side from the licenses, it sounds like you're getting some pretty big volume discounts. But I haven't -- we haven't seen a lot of volume in that area. So I'm just a little bit confused about that. So can we talk a little bit about that and how you see some of these programs that you've had in the works for a while rolling out over the next year or so?

Sure. There actually have been in certain of the cars some volume, and so it's sort of a mixed bag in the license side. We have some cars that didn't -- especially in the Chinese market that are moving off of the production line, I think is what's happening and they seem to have a shorter life cycle than some of the cars that we had seen in the U.S. markets. But there have been some discounts. And that, combined with the cars that are leaving the market, is what's depressed those from last years. It's not that big of a number, but it's gone down.

So in the future, we do see cars like the Suzuki and Volvo and some of the others are actually increasing the number of models, and we are -- our sales force is actually going to be going out and meeting with our Tier 1 customers and OEMs in the near-term. As Andreas said, we're putting our focus on growing the revenue from existing customers where we can in the short-term and so there's to -- capture some more cars.

Okay. We've had discussions going on, on the tailgates and the door handles for, let's just say, quite some time. And I'm just trying to get a sense of, where are we with that? The discussions could go on for many more years, I guess, technically, but are we close to getting designed in and how long will it take even if we do get designed in this year. Can you just give us a sense of where that revenue is. And then also if we can address the steering wheels as well. Because I know that, that was kind of hoped for to come in end of this year, but it doesn't sound like that's probably happening.

Okay, I can take that question or the 2 questions. First, when you talk about tailgate sensors and entry sensors in general, that's one of the areas where we really see a big interest. I know there were a project before I came in that has been delayed, so it hasn't happened so much there, but that's one of the more interesting projects that I try to see that we could focused on. And I think we got a really good response from the industry. So we are picking up discussions with several companies that has been a bit in a waiting mode for Neonode. But we have picked up those activities and it looks really good.

We are -- we have decided to be very careful about project -- giving projections and forward-looking statements, because we think it's important for Neonode to be very conservative on that in the future. But the only thing we can say is that, that's something we really are working on. And I can't give you any more of timing there.

And yes, you had a second question about the steering wheel. What we can say there is that we have ended a concept validation phase with Autoliv in the end of last year in Q4, and we are now in the commercialization phase. So we are out discussing with them, OEMs and users -- sorry, OEMs about the steering wheel and of course, discussion had already started before that. But now that's the phase we're in, and we have to come back when we have something to communicate around...

Okay. That's really helpful. And If I can just ask you a little bit of a personal question. You know, when you came in last year and put your own money into the company, stocks down over 50% from that investment. I'm wondering if you could just give investors and myself just a little bit of clarity into what you saw with Neonode over the next few years? Where you think the company is going to go to? And what attracted you to make this kind of investment? And is that investment thesis still valid in your opinion?

As I said in my presentation, we saw some positive things. We saw that there's a good -- really good technology. There is a lot of customers that are both big and right for Neonode to work within the future. And they have a really good relationship with the customers, I would say they have a really strong relationship and it works fine. The problem has been with delivering to the stock market and to make this profitable company. We have -- company existing for quite a long time and it's still a promising company. And we saw that the technology was fine, but we saw also that it was quite -- it was not focused, and we needed to focus on sales and that's really what we are looking to. And to benefit from all these interests that we have in the market. And also not going for too many speculative projects that has been developed in the company, like AirBar and others.

(Operator Instructions) Your next question comes from the line of Victor Westman with Redeye.

I am wondering if you can tell us something more about the reallocation of resources from non-core to customer-driven project, if you can give some examples of projects that have been canceled?

Yes, one project is, of course, the AirBar that we have minimized the investments in. We have other development projects that are to develop projects in pure speculation that we think is not right in this situation because we have a lot of interest from customers. And we mentioned some of the areas where we see the customer interest, for example, tailgate and entry systems, and we think it's better to put the resources into those projects and work together with customers in those projects rather than make our own development. So more of a partnership and customer project orientation.

And does that mean, for instance, that you will focus more on automotive where you have lots of customers? Or can you say something about what areas will be the focus in terms of segments or how you want to...

Automotive is for sure one area that we are focusing on because we see a lot of interest from the automotive side, both in tailgate, but -- as we mentioned, the steering wheel. There are other areas and of course, touchscreens -- on the touchscreen side, where we already have a lot of customers, may be going for more of larger screens where I think we have a strong opportunity. So it's -- but automotive is for sure one area and that's why we mentioned that separately in the presentation.

Yes. And one follow-up also on the steering wheel. Now given that there are some Level 3 cars in the market today, what do you -- what are your thoughts on the competition there? Because there are clearly some cars that are semiautonomous that are not using the zForce steering wheel.

There are, of course, alternative ways of solving this and there are cars out on the market and there's different technologies that could sense that you are holding the steering wheel or not. But I think we add much more than that in the steering wheel from Neonode. So it's the next generation as I see it. And we got a lot of positive feedback and if you look at, for example, the CS show in Las Vegas, Autoliv presented it and got a really good interest there. But it takes time and it's long-term business. But I can't give you any more projections on when this -- when we can get sales, but it's -- we got a good interest from the market.

Understood. Last question from me is, I just wonder if you can say something about the split in sensor module sales, like, for instance, how much is automotive and how much is AirBar?

In the sensor module sales, we haven't really sold to the automotive for the modules so far. So what we are selling there is some part is AirBar and then we have made other sales outside the AirBar business. But we just launched the sensor module in Q4. Before that, it was just prototypes that were out on the market. So we believe that we can see the sales pickup during the year. But, as I said, we will come back to that once we have the sales.

Your next question comes from the line of Walter Schenker with MAZ Partners.

Could you basically give us a better understanding if you have one, why AirBar didn't work? You had pretty good distribution, you were down at Walmart, Best Buy. Did people just not -- did technology just not work?

Walter, this is David. The technology does work. I think we were -- we definitely had the distribution in place for those companies. But those companies are purchased-from, they are not out marketing, which is, I don't think at the bottom of it, we probably weren't the right company to actually sell AirBar. We are a B2B company, and we do best when we work with other entity and other OEM or Tier 1 supplier and they integrate our products into their products and then they take it to market and sell. And our expertise is certainly -- and I think the AirBar sort of hit us over the head with that, is certainly not going out and trying to roll-out a consumer product globally.

And that's why Andreas said at this point, we're sort of minimizing the investment and taking those dollars and investing in our core business, which is really the B2B business. And then trying to find someone who will either partner up by market or do something with AirBar. It does work, it certainly is a product that may have a life out there, but we certainly couldn't realize it.

Therefore, since AirBar basically, from a production standpoint, not needed some inventory. That means the facility that you really build sensor sales really has been largely mothball, I mean some mothballs, but isn't being utilized?

No, not at all. It's quite the opposite. The sensor -- the one good thing that AirBar did do for us is that it proved the sensor concept because the same architecture inside of the AirBar is the same architecture that is used across all the sensors that we're embedding, that we're presenting to other companies. And so that was, I guess, a bit of goodness that came out of AirBar for us. But the actual facility for manufacturing is still up and running, and there we're selling sensors -- sensor modules, albeit in smaller numbers. But we're still selling AirBars. We have inventory of AirBars and you can go to Amazon or any of those sites that you mentioned and still buy them. And Ingram Micro has AirBar in stock. In fact, we just got another purchase order from them and it's a small purchase order. Our issue was the volume. I mean, it's just AirBar is not in volumes that makes it a fit for us. And so we'd rather focus our resources on our core business at this point and that's where we are pivoting to and that's, on this call, we're trying to reset in your mind is that AirBar didn't make it for us.

And the last question, given the much better economics in selling sensors than licensing, maybe you see over the next couple of years the conversion by your customers that is in the business machines [portable wear] really ramp the sensor sales.

Well, that's what we expect to see. To be fair, we still expect to see licensing. And we now -- we offer an alternative to licensing and that's the sensor modules, but we still would enter into a license agreement depending on the customer's need. What we're trying to focus, and I think Andreas' presentation was leading you down this path, we're moving from sort of a speculative development company to a customer-focused product company. And those products are either licensing or they are buying a sensor. And we will manufacture the sensor and sell it to them and support them and do all of that, or if they say, "Hey, we'd rather do a licensing, hey, we can manage to do that too."

(Operator Instructions) We have a question from the line of Craig Hewitt of Gerard.

Hello? I'm not sure I heard you. Can you hear me David?

Yes, I hear you.

Okay. I just wanted to know on customer-focused new business, for example, would you consider the C-Trolley such an opportunity? Or what other examples like that will you give? New names, like not only auto, where would you...

Yes, that is definitely an opportunity. And we have already shipped a series of sensors to them. And so it's up to them now to put them into their trolleys and become successful with their products, but they definitely are. But other markets are medical. There are some industrial things that we're working on and so there are other markets. And certainly, the auto segment, I think, is probably, in terms of customer contacts and customers that have either seen prototypes over the last year and a half or things -- they haven't seen final, I'll call it, production-ready sensors yet, or they're just starting to see them. That's probably our more mature market when it comes to the sensors that we -- at this point, but they're certainly key markets. Let me let Andreas add some color to that, okay?

I just wanted to say the other thing is also to go on larger screens. I mean, what we have done with the licensing technology is more smaller screens for printers and so on. And we see opportunities in bigger screens where we can expand to our customer relations that we have. So there's a lot of -- it's not -- the problem is not that we don't have market for it. It's a lot of market. We need to focus on and get them roll out in certain areas where we see that we have a good interest. And if you talk about this trolley, it's really not the trolley that we use the sensor for. We use the sensor for a screen that they attach to the trolley. So it's a bigger screen really that they used for this and what they like is the robustness. And I think we will see more of screens coming out with our sensor modules, not just for licensing. But the licensing business is good and it's a good foundation for the company and for us. It's what can generate a steady cash flow that can build this company on.

Okay. So C-Trolley is just using the screen, but you say you are having interest from other end-users for this type of screen now in all different industries?

Don't confuse that it's a screen. We're not building a screen. We're building the sensor module that's going to be going in, but the answer is yes. We are working with numerous customers -- potential customers I will call them. They have not -- we now have signed agreements, but we have delivered prototypes or they bought prototypes or development kits from Digi-Key, for example. And so all of that is in motion and as you know, that this embedded business is not -- doesn't happen overnight. And so don't walk away with the idea that next month, all of a sudden, you're going to see a bunch of things in the marketplace. It's a process that we're in and the license fees is a key part of the strategy going forward to provide a stable -- stabilization of the revenue as we move down this road.

Your next question comes from the line of Jack [Mayer], private investor.

Can you comment on what the cash burn was in the fourth quarter and what the trends are on cash in the first quarter now that you are more than 2/3 into it?

I can talk about the fourth quarter, but we're really not going to talk about the current quarter or any future stuff at this point until we get a lot more visibility into what's going on. So fourth quarter, actually the cash burn was from operations -- is if you take out the noncash expense for the inventory write-down, you get a $300,000 loss. There was probably about $200,000 to $250,000 of noncash depreciation and stock option expense in there. So I would say the operational cash burn for the fourth quarter was probably in the neighborhood of anywhere from $50,000 to $100,000.

And in terms of how you see that business going forward and what you're investing in, do you see anything in '18 that would significantly increase the cash burn rate from where you were in the fourth quarter, without getting too specific.

Okay. No. As we see now, we have done the major investments and on the opposite, we believe that we can increase the sales, and we are focusing on increasing the sales, both in licensing and sensor sales. Even as David mentioned, sensor takes a little longer time because we have licensing customers that expand their range of products and that could add to the licensing, but the sensor sales takes some time. But from cost side, we don't see anything and our goal, as we said, is to have a balanced cash flow over the coming year, and we still believe in that.

Okay. So then asking it somewhat differently. You're comfortable that the cash that you ...

(technical difficulty)

Enough to do what it is that you're looking to do in...

Yes. What we mean by balanced cash flow is that we have sufficient cash to do the business plan that we have set in front of us.

Okay, in terms of AirBar, are you actively looking to partner that out with someone else? Or do you intend to just sort of gradually move?

Yes. We have had someone who can get around that and we will continue when we see that we have the right partners on that. So we put some energy on it, and of course, it's not easier when we haven't sold so much as we expected. This make it more difficult to find a partner. But we still believe that it's a good technology and people get very impressed on what they see and with the right partner, I think it could be a good product also.

And finally, if I understood you correctly with respect to the Chinese auto business, which you said is not a very big part of it, but if I understood you correctly, the climb in sales has to do with the fact that the model life for these particular models was shorter than it might have been in the West. Did I understand that correctly?

Yes, I think that's true. It's hard to sometimes get your arms around what's happening there. But let's get the Baojun, I think it's the 560 or something. Last year, at the end of -- at the beginning of 2017, end of 2016, that was like the biggest

(technical difficulty)

For the #1 selling car in the country, right? And that seems to be a pretty common occurrence that we know they're still using our center -- we're not talking about the numbers using our center consoles versus not, we're talking about the total volume of those cars.

Understood. So to say it somewhat differently, your customer is Delphi, not the automotive manufacturer?

That's right. That's right.

Okay. And then for arguments sake, if they have a follow-on SUV, where there is someone else is now taking over, if it's not, it's basically a question whether Delphi is a supplier to that other model?

Well, no. Because we're not talking about models that are using our touchscreen. We're talking about total models sold in the market. You can go to China, what is at Autonews, and look at the monthly sales of every car in China. And so when you follow that, the actual total volume, whether they are using our touch or not in it, is dropping rather quickly over the course of 1.5 years, let's say 2 years. And so talking with our internal auto sales guys, they said the life cycle seems to be very short. They're on top of this stuff. And as Andreas said, we're going to push out to these Tier 1's in an aggressive measure to see if we can find out what's at the bottom of it and also pick up some of their new models, if that's what's happening.

So you would be working with Delphi to try to get Delphi incorporated. They will obviously out there selling, trying to get the business for themselves. But you would be working with Delphi to try to go into the new models whatever they are.

Yes. Because you remember in the licensing business, one of the barriers to entry for us is that -- and the cost structure for us, is that for a new model, to bring on a new Tier 1, to do all of this stuff, there's a lot of upfront cost on our side to get them into tooling and to design all of the stuff. With our current Tier 1 suppliers, that has all been done. They already have all the tooling. They have the manufacturing process. They can actually build the thing themselves. And I'll use Alpine as an example, they are the supplier to Volvo. Alpine, we worked for a lot -- put a lot of hours and upfront expense into getting them live for the XC90, the first one that is out.

Volvo has released several new cars that have award-winning center consoles and they're all using our touch., Alpine is providing that touch, but we're not having to do anything. They already -- they just paid the license fee because they've already got the tools, the design, everything in place. And so that is the short -- kind of short-circuited. These guys don't have to do anything more. All they have to do is build more. And so we're going to go out and try to encourage them to push out to their customers, their OEMs and use ours. That makes sense?

Yes. So the Delphi relationship is also a licensing relationship, not a selling center module?

It is. It is. All of the auto-infotainment systems are licensing.

We also look into deals where we have the sensor module sold for screens as I mentioned, and there may be a bigger opportunity for that, as the screen grows in size. So for bigger screens, the new sensor modules is perfect. But for -- and for special screens, like curved screen and so on, then we are unique. But for the traditional smaller screens, licensing is the best option for the car manufacturers. So we have different markets for the different solutions.

(technical difficulty)