Polight ASA — Earnings Release 2020

Aug 21, 2020

Second quarter 2020 - Earnings presentation 20 August 2020

Disclaimer

This presentation (the "Presentation") has been produced by poLight ASA (the "Company") exclusively for information purposes. This Presentation has not been approved, reviewed or registered with any public authority or stock exchange. Further to the aforementioned, this presentation is the result of an effort of the Company to present certain information which the Company has deemed relevant in accessible format. This Presentation is not intended to contain an exhaustive overview of the Company's present or future financial condition and there are several other facts and circumstances relevant to the Company and its present and future financial condition that not been included in this Presentation. This Presentation may not be

disclosed, in whole or in part, or summarized or otherwise reproduced, distributed or referred to, in whole or in part, without prior written consent of the Company. This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates or intends to operate. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any of its subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation to update any forward-looking statements or to conform these forward-looking statements to our actual results. Furthermore, information about past performance given in this Presentation is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor any of its parent or subsidiary undertakings or any such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. By reviewing this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the businesses of the Company. This Presentation must be read in conjunction with the recent financial reports of the Company and the disclosures therein. The distribution of this Presentation in certain jurisdictions may be restricted by law. Persons in possession of this Presentation are required to inform themselves about, and to observe, any such restrictions. No action has been taken or will be taken in any jurisdiction by the Company that would permit the possession or distribution of this Presentation in any country or jurisdiction where specific action for that purpose is required. No shares or other securities are being offered pursuant to this Presentation. This Presentation does not constitute an offer to sell or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a solicitation of an offer to buy or subscribe for, any shares or other securities in any jurisdiction, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. By reviewing this Presentation you agree to be bound by the foregoing limitations. This Presentation speaks as of 20 August 2020. Neither the delivery of this Presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. The Company does not intend, and does not assume any obligation, to update or correct any information included in this Presentation. This Presentation shall be governed by Norwegian law, and any disputes relating to hereto is subject to the sole and exclusive jurisdiction of Norwegian courts, with Nordre Vestfold District Court as legal venue.

Today's agenda

• Key events
• Introduction to poLight
• Operations and markets review
• Financial review
• Outlook
• Q&A

Dr. Øyvind Isaksen

Chief Executive Officer

Presenting

Dr. Isaksen has been CEO of poLight since August 2014. He has previously held several CEO positions, most recently in the publicly listed company Q-Free ASA, which he left in January 2014, after 7 years as CEO. Øyvind Isaksen holds a PhD in Applied Physics.

Alf Henning Bekkevik

Chief Financial Officer

Bekkevik is a senior executive with a background from Arthur Andersen (E&Y), Wallendahl, Fjord Line, Grenland Group and lately from Wood Group Mustang as VP Finance. He holds a Master in Business & Economics (Siviløkonom) degree from NHH and is a state certified public accountant.

Key events

• Generally good progress on new customer cases
• Post Q2 poLight received a purchase order from a Tier 1 barcode customer
• End-user sales of smartwatches picked up slightly, but are still lower than in a normal situation
• Share issues carried out in Q2-20 raised NOK 50 million

poLight at a glance

• the mobile, barcode, augmented reality and other markets
• Founded in 2005 and has since build state-of-the-art expertise in optics, polymers MEMS technology and image applications and processing
• 13 worldwide patents families, 10 pending applications and 3 registered trademarks
• 21 employees + consultants
• Headquartered in Horten, Norway, with offices in Finland, China, France and representation in Taiwan and Korea

poLight enables unique use cases

poLight´s products well suited for multiple uses

Operations and market review

Barcode: getting closer to commercial breakthrough

• Received an order of 0.5 million NOK in Q1 and follow-up order of 0.7 million NOK post Q2
• Last order to qualify mass production and commercial supply
• Planned market release in third-quarter 2020, dependent on successful testing and other external factors
• Low volume product
• Initial market response has been good
• Involved in several other barcode cases

AR: TLens considered for next generation glasses by several OEM´s

• AR market is still at an early stage, with low volumes
• Potentially the next "big thing" in the consumer mass market after the smartphone
• TLens offers several advantages related to power consumption, speed, compactness and no gravity sensitivity
• poLight is well positioned for market entry at an early stage
• Within reach for poLight to be included in an AR product to be released in 2021, depending on ongoing design and successful testing
• This is potentially long term the most important consumer segment poLight can be in

Smartphone: continued interaction during the quarter

• TLens considered to be used in an advanced add-in lens design to realise a compact nose front-facing camera with AF
• Using the poLight technology platform to realise new products;
  • Enhancing back-camera solutions
  • Bigger aperture TLens
  • and for other applications not directly related to imaging
• poLight has strengthen the business development team to efficiently be able to mature the above-mentioned cases

Progress within several market segments

				Progress within several market segments
		Ongoing supply	Project	Completed PoC	Ongoing PoC	Planning PoC
Consumer		2 (2)		7 (7)	12 (8)	8 (9)
Industrial			1 (1)	3 (2)	8 (7)	1 (1)
Other (e.g. medical / automobile)					6 (5)	0 (1)
		2 (2)	1 (1)	10 (9)	26 (20)	9 (11)

(x): last quarter number

11

Financial review

Key financials

Key financials
Income statement				Balance sheet summary
(in NOK million)	Q2 2020	Q2 2019	FY 2019
Revenue	0.6	0.5	3.0
Cost of sales	-0.1	-0.4	-2.1
Research and development expenses Sales and marketing expenses	-4.0 -1.9	-5.6 -1.7	-19.9 -8.7
Administrative expenses	-3.4	-3.5	-17.1
Operational / supply chain expenses EBITDA	-1.6 -10.4	-2.6 -13.3	-8.2 -53.0

• Revenue from delivery of TLens, ASICs, evaluation kits and services to customers for product testing
• EBITDA loss of NOK -10.4 million vs. loss of NOK -13.3 million in Q2 2019
  • Reduced salary expenses of NOK 1.9 million due to reduced head count

Q2 2020	Q2 2019	FY 2019
48.8	77.0	53.9
9.3	8.3	7.7
89.9	91.4	73.5
145.6	175.4	128.4
11.0	12.5	15.9
0.1	0.1	0.8
156.7	188.0	145.0
Cash position of NOK 89.9 million, compared with NOK
Current cash position could potentially fund the company

• Current cash position could potentially fund the company into 2022

Cash Flow

• Q2 cash used in operations was NOK 8.3 million, compared with NOK 14.4 million in Q2 2019
• Q2 cash from financing activities was NOK 47.5 million
  • net proceeds from the share issues in Q2 of NOK 47.8 million
• Q2 net increase in cash was NOK 39.1 million

50,9 89,9 -8,3 -0,0 47,5 -0,1 Cash at Operating Investing Financing FX effects Cash at (NOK million)

activities

activities

Q2 2020 cash flow development

period start

period end

activities

Outlook

Outlook

• Increased customer activity, serval different market segments
• Good progress in the past six months
• Have overcome many of the hurdles inherent in bringing new and innovative technology to market
• Market focus on;
  • securing the first design-win for barcode
  • position poLight for the first AR case
  • follow-up orders/new design-win for smartwatch cases
  • and bring poLight existing products, and longer-term potential new products, into the smartphone market
• Expect good progress on all the above activities the next twelve months

Next event:

Appendix

•Appendix

Management Team

Dr. Øyvind Isaksen

Craen is a senior executive with more than 20 years' experience in opto-mechanical systems engineering. Prior to joining poLight, he managed product development teams at Bekkevik is a senior executive with a background from Arthur Andersen (E&Y), Wallendahl, Fjord Line, Grenland Group, and, most recently, as VP Finance for Wood Group Norway Chief Executive Officer Dr. Isaksen has been CEO of poLight since August 2014. He has previously held several CEO positions, most recently in the publicly listed company Q-Free ASA, which he left in January 2014, after 7 years as CEO. Øyvind Isaksen holds a PhD in Applied Physics.

Alf Henning Bekkevik

Chief Financial Officer

AS. He holds a master's degree in business & economics (Siviløkonom) from NHH, and is a certified public accountant.

Pierre Craen

Chief Technology Officer

Varioptic, Barco and Motorola/Symbol. Mr Craen holds an MSc in Optical Engineering from Sup-Optic, as well as an MSc in Applied Physics.

Marianne Sandal

Chief Operating Officer

Sandal is a senior executive with background from Tele-communications (Nera) and Road User Charging (Q-Free). She holds a BSc in Mechanical Engineering in addition to courses from Norwegian School of Management (BI). She has been responsible for world wide operations for more than 15 years.

Board of Directors

Eivind Bergsmyr – Chairman, independent (from March-2020) Mr. Bergsmyr has been a partner at Viking Venture since 2009, and serves on the boards of several Viking Venture portfolio companies. He is the current chair of Xait AS, DinERP AS, Tamigo ApS, Flowbox AB, Humly Edtech AB and board member of Attensi AS. He is the former chair of GasSecure AS (sold to Dräger) and former board member of Nanoradio AB (sold to Samsung). Mr Bergsmyr was previously CEO of the Norwegian startup Nacre AS, sold in 2007 to Sperian Protection and recognised as the Nordic Venture Exit of the Year. Prior to this, Mr Bergsmyr acquired extensive industrial experience during his time at Siemens. He holds an MSc in Electronic Engineering from NTNU. Ms. Kongsnes is an Investment Director at Investinor AS. Kongsnes has over her career gained extensive experience from investments, development, M&A, IPO's and exits of technology serves on the boards of 6 of Investinor's portfolio companies in addition to 4 Chair/member seats in Nomination Committees. She holds an MSc in Economics and Business Administration from Grethe Viksaas - Board member, independent boards of various start-up companies. Ms Viksaas has a master's degree in computer science from the University of Oslo.

Ann-Tove Kongsnes - Deputy Chairman

companies. Prior to this, she worked 7 years with international marketing, and was formerly a Director of Marketing and Operations. Kongsnes has extensive board experience, and currently HIB and took the Advanced Program in Corporate Finance at NHH.

Mr. Alakarhu is the VP of Imaging at Axon in Tampere, Finland. He runs the Axon R&D office in Finland and is responsible for the imaging system for Axon camera products. Dr Alakarhu's oversampling (the 41-megapixel camera), optical image stabiliser, and virtual reality technology. Juha Alakarhu holds a PhD from Tampere University of Technology. international experience in the semiconductor business, previously as Director for the Nordic region for Xilinx Inc. He has also been working at Philips Semiconductor. Ms. Viksaas has a long career from the Northern European managed service provider Basefarm AS. First as founder and CEO, and later as executive chair of the board of directors. Prior to Basefarm, Ms Viksaas served as CEO for SOL System AS and in several management positions in IT companies. She has experience from numerous board positions, including Zenitel Group and ICT Norway. She currently chairs the foundation Norsk Regnesentral and is a non-executive director on the boards of Telenor ASA and Crayon Group Holding ASA . She also serves on the

Dr. Juha Alakarhu - Board member, independent

entire career has been devoted to developing cameras. Before joining Axon in 2018, he worked for Nokia and Microsoft, where he developed several pioneering camera solutions, such as

Svenn-Tore Larsen - Board member, independent

Mr. Larsen is an Electronic Engineer from the University of Strathclyde, UK. He was appointed Chief Executive Officer of Nordic Semiconductor in February 2002. Mr. Larsen has broad

Statement of income

Statement of income
NOK 000	Note Q2 2020	Q2 2019	YTD 2020	YTD 2019	FY 2019
Revenue	622	519	1 158	548	2 988
Cost of sales	-133	-382	-194	-385	-2 075
Gross profit	489	137	964	163	913
Research and development expenses net of governmental grants	7,8 -4 020	-5 565	-9 526	-11 166	-19 874
Sales and marketing expenses	-1 908	-1 717	-4 172	-4 094	-8 729
Administrative expenses	-3 414	-3 499	-8 741	-8 613	-17 073
Operational / supply chain expenses	-1 596	-2 624	-5 095	-3 891	-8 216
Operating result before depreciation and amortisation (EBITDA)	-10 448	-13 269	-26 571	-27 601	-52 979
Depreciation, amortisation and net impairment losses	9 -3 056	-1 256	-6 109	-1 885	-26 191
Operating result (EBIT)	-13 505	-14 524	-32 679	-29 486	-79 170
Net financial items	6 36	317	-59	561	1 430
Loss before tax	-13 469	-14 208	-32 739	-28 925	-77 740
Income tax expense	-18	0	-17	-2	-124
Loss for the period	-13 488	-14 208	-32 756	-28 927	-77 864
Earnings per share:
Basic, attributable to ordinary equity holders of the parent (NOK)	-1.52	-1.75	-3.90	-3.56	-9.59

Balance sheet

Balance sheet
NOK 000	Note	Q2 2020	Q2 2019	FY 2019
ASSETS
Property, plant and equipment		1 068	1 206	1 235
Intangible assets Right-of-use assets	9	48 791 1 327	77 024 1 315	53 936 1 923
Total non-current assets		51 186	79 545	57 094
Inventories		9 254	8 298	7 728
Trade and other receivables		6 046	8 364	6 147
Other current assets Cash and cash equivalents		283 89 945	400 91 419	565 73 463
Total current assets		105 527	108 481	87 903
Total assets		156 713	188 026	144 997
EQUITY AND LIABILITIES
Issued capital		1 809	1 623	1 623
Share premium		172 027	198 748	124 385
Other equity		-28 206	-24 975	2 369
Equity attributable to equity holders of the parent Non-controlling interests		145 630 0	175 397 0	128 378 0
Total equity		145 630	175 397	128 378
Lease liabilities		110	108	766
Total non-current liabilities		110	108	766
Trade and other payables Current lease liabilities		8 500 1 284	10 082 1 251	11 911 1 241
Provisions	11	1 189	1 189	2 701
Total current liabilities		10 973	12 522	15 853
Total liabilities		11 083	12 630	16 619
Total equity and liabilities		156 713	188 026	144 997
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Cash flow

Cash flow
NOK 000	Note	Q2 2020	Q2 2019	YTD 2020	YTD 2019	FY 2019
Operating activities
Loss before tax		-13 469	-14 208	-32 739	-28 925	-77 740
Non-cash adjustment to reconcile profit before tax to net cash flows:
Depreciation and impairment of property, plant and equipment		481	393	962	1 012	1 895
Amortisation and impairment of intangible assets	9	2 575	863	5 146	873	24 297
Share option plan expense		888	1 488	1 916	2 989	4 877
Other items related to operating activities		-139	14	-164	243	-1 459
Net foreign exchange differences		39	-48	226	-107	-112
Movements in provisions and government grants Working capital adjustments:		495	1 546	-2 740	-1 603	3 230
Decrease (+) in trade and other receivables and prepayments		323	-552	718	-515	-560
Increase (-) in inventories		-287	-1 202	-1 526	-927	-356
Increase (+) in trade and other payables		636	-5 120	-2 518	-5 549	-4 718
Interest received Interest paid	6 6	201 -18	0 -15	296 -39	0 -15	1 584 -107
Income tax paid		-55	-0	-108	-227	-367
Net cash flows used in operating activities		-8 330	-14 437	-30 569	-32 751	-49 538
Investing activities
Purchase of property, plant and equipment		-50	0	-203	-10	-319
Development capital expenditures Receipt of government grants	7 8	0 0	-764 0	0 0	-2 068 0	-2 931 526
Net cash flows from/(used in) investing activities		-50	-764	-203	-2 079	-2 724
Financing activities
Proceeds from exercise of share options		685	0	685	0	0
Issue of share capital		50 000	0	50 000	0	0
Transaction costs on issue of shares Repayment of lease liabilities		-2 857 -308	0 -283	-2 857 -613	0 -562	0 -1 120
Repayment of borrowings		0	-600	0	-600	-600
Net cash flows from/(used in) financing activities		47 520	-883	47 215	-1 162	-1 720
Net increase in cash and cash equivalents		39 140	-16 084	16 443	-35 992	-53 982
Effect of exchange rate changes on cash and cash equivalents		-65	32	39	-13	20
Cash and cash equivalents at the start of the period		50 870	107 470	73 463	127 424	127 424
Cash and cash equivalents at the end of the period		89 945	91 418	89 945	91 418	73 463
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