Polight ASA — Investor Presentation 2020

Feb 14, 2020

Fourth quarter 2019 - Earnings presentation 14 February 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 14 February 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 in poLight since August 2014. He has previously held several CEO positions, most recently in the publicly listed company Q-Free ASA, which he left January 2014 after 7 years as CEO. Dr. Isaksen holds a Ph.D 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 authorised public auditor & accountant.

Key events

• First commercial product launched in January with poLight TLens enabling advanced auto focus (AF) in new smartwatch phone also with advanced TLens autofocus function in a • Record deliveries of TLens and ASIC drivers in the
• Second commercial product launched in February, new smartwatch phone
• Several other customer cases progressing in different market segments
• Increased probability of additional design-wins in 2020
• fourth quarter to support smartwatch phone launches

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
• 22 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

Commercial breakthrough in smartwatch phone segment

• First smartwatch phone with advanced autofocus functionality based on poLight TLens
• Children's smartwatch phone with two cameras designed for the Chinese market
• The main camera used to take pictures uses advanced AF delivered by poLight
• Secondary is an in-screen face camera without AF

Pictures taken with the smartwatch phone

Followed by a second smartwatch phone with TLens functionality based on poLight TLens launched in February

• XUN Smartwatch Max Pro with advanced autofocus
• Second design-win in two months with the same OEM
• Two cameras designed for children in the Chinese market
• The main camera used to take pictures uses advanced AF delivered by poLight
• A total of 125k TLens and 122k PDA 50 drivers shipped to the OEM in 2019 to support testing and initial mass production of the two launched smartwatch phones

TLens offers strong smartwatch phone value proposition • Features set to increase – app usage, payments, camera, AI • More smartwatch phones with cameras coming to market • Typically one or two cameras

• Key poLight selling points:
  • Small size
  • Low power consumption
  • No gravity impact fundamental when person is moving
  • Constant field of view enabling improved video-call function
• A growing and maturing market
• -

Positioned for Barcode market evolution • Key poLight selling points: • TLens supports high AF cycle - A barcode product change focus > 250 million

• 2D code/QR replacing 1D barcode requiring shift from laser to image scanner
• Barcode reading combined with image capture for increased accuracy
• Autofocus/all-in-focus required to enable robust barcode reading
• AF enables one scanner for multiple applications
• AF required to minimize illumination power while maintaining working range
• • times over its life-time
  • Fast focus and high accuracy enables higher decoding rate and throughput
  • Small size provide more design freedom and more compact scan engine
  • Gravity/vibration insensitive important for handheld devices
  • Low power consumption

Progress within several market segments

Progress within several market segments
	Ongoing supply	Project	Completed PoC	Ongoing PoC	Planning PoC
Consumer	2		5	7	5
Industrial		1	2	7	1
Other (e.g. medical / automobile)				3	1
	2	1	7	17	7

Financial review

Key financials

Key financials Income statement Balance sheet summary (in NOK million) Q4 2019 Q4 2018 FY 2019 FY 2018 Revenue 2.0 0.5 3.0 1.0 Cost of sales -1.3 -0.1 -2.1 -1.5 Research and development expenses -3.7 -6.0 -19.9 -28.9 Sales and marketing expenses -2.5 -2.1 -8.7 -7.6 Administrative expenses -5.5 -6.3 -17.1 -35.8 Operational / supply chain expenses -2.7 -1.5 -8.2 -3.4 EBITDA -13.7 -15.5 -53.0 -76.1 • • Revenue from delivery of TLens, ASICs and evaluation kits Cash position of NOK 73.5 million, compared with NOK to customers 127.4 million at year-end 2018 • Orders in Q4 related to smartwatch design wins and product testing in other segments into Q1 2021 • 109k TLens units and 91k PDA50 drivers delivered in Q4
• EBITDA loss of NOK -13.7 million vs. loss of NOK -15.5 million in Q4 2018
• Decrease in external R&D expenses

• Revenue from delivery of TLens, ASICs and evaluation kits to customers

  - Orders in Q4 related to smartwatch design wins and product testing in other segments

• EBITDA loss of NOK -13.7 million vs. loss of NOK -15.5 million in Q4 2018
  • Decrease in external R&D expenses
  • Provision of NOK 1.5 million was recognised in the fourth quarter of 2019 related to severance packages for 6 FTE (full time equivalent) employees

(in NOK million)	FY 2019	FY 2018
Intangible assets	72.2	75.8
Cash and cash equivalents	73.5	127.4
Total equity	146.7	201.5
Total current liabilities	15.9	18.1
Total non-current liabilities Total equity and liabilities	0.8 163.3	0.0 219.5

• Cash position of NOK 73.5 million, compared with NOK 127.4 million at year-end 2018
• The current available liquidity will likely fund the company into Q1 2021

Cash Flow

• Q4 cash used in operations was NOK 5.9 million
• Q4 cash used in investing activities was NOK 0.3 million
• Q4 cash used in investing activities was NOK 0.3 million
• Q4 net decrease in cash was NOK 6.4 million

Q4 2019 cash flow development

(NOK million)

Outlook

Outlook

• Commercialisations of TLens in early 2020 serves as proof-of-concept and supports new customer cases both in the same and other market segments • TLens is currently being planned used in several products by • In addition poLight supports several other customer
• Good progress in the barcode market;
  • leading vendors
  • The estimated earliest market launch for this segment is mid-2020
• cases for different markets at different stages of development
• Increased comfort for additional design-wins in 2020

Next event:

Appendix

•Appendix

Management Team

Dr. Øyvind Isaksen

Craen has more than 20 years experience in opto-mechanical system engineering. Prior to joining poLight, he managed product development teams at Varioptic, Barco and Motorola/Symbol. Craen holds a M.Sc. degree in optical engineering from Sup-Optic and a M.Sc. in Applied Physics. 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 authorised public auditor & accountant. Chief Executive Officer Dr.Isaksen has been CEO in poLight since August 2014. He has previously held several CEO positions, most recently in the publicly listed company Q-Free ASA, which he left January 2014 after 7 years as CEO. Dr. Isaksen holds a Ph.D in Applied Physics.

Alf Henning Bekkevik

Chief Financial Officer

Pierre Craen

Chief Technology Officer

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 Mr. Bergsmyr is Partner in Viking Venture since 2009. Bergsmyr was previously CEO of the Norwegian start-up Nacre AS, sold in 2007 to Sperian Protection and recognized as the Nordic Venture Exit of the Year. Prior to this, Bergsmyr acquired some extensive industrial experience from Siemens Telecom and Siemens Electrical Heating. He holds a MSc from NTNU.

Ann-Tove Kongsnes - Deputy Chairman

Ms. Kongsnes is an Investment Director and Head of International Affairs at Investinor AS. Kongsnes has over her career gained extensive experience from investments, development, M&A, IPO's and exits of technology companies. Before this, she worked 7 years in international marketing, serving as Director of Marketing and Operations. Kongsnes has broad boardroom experience, and currently serves on the boards of Investinor's portfolio companies, Numascale AS, Vitux AS, Calliditas Therapeutics AB, Spinchip Diagnostics AS, Curida AS in addition to Polight AS. She holds an MSc in Economics and Business Administration from Bodø University College, and has completed the Advanced Program in Corporate Finance at Norwegian School of Economics (NHH).

Grethe Viksaas - Board member, independent

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. Juha's entire careerer has been about developing cameras. Before joining Axon in 2018, he worked in Nokia and Microsoft, and he developed several pioneering camera solutions, such as oversampling (the 41 megapixel camera), optical image stabilizer, and virtual reality technology. Juha holds a PhD from Tampere University of Technology. Ms. Viksaas has a long career from the Northern European managed service provider company Basefarm AS, both as CEO, and later as working chair of the board of directors. Prior to this, Viksaas served as CEO for SOL System AS and Infostream ASP. Viksaas has experience from numerous board positions, including Zenitel Group and ICT Norway. She is currently Chair of the Board in the foundation Norsk Regnesentral (Norwegian Computing Center) and non-executive Director in the boards of Telenor ASA and Crayon Group. She also serves as board member in various start-up companies. Ms. Viksaas has a master's degree in computer science from the University of Oslo.

Dr. Juha Alakarhu - Board member, independent

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 international experience in the semiconductor business, previously as Director for the Nordic region for Xilinx Inc. He has also been working at Philips Semiconductor.

Interim consolidated statement of income (unaudited)

Interim consolidated statement of income (unaudited) NOK 000 Note Q4 2019 Q4 2018 FY 2019 FY 2018 2 017 533 2 988 1 038 Cost of sales -1 335 -79 -2 075 -1 488 682 455 913 -450 Research and development expenses 7 -3 654 -5 988 -19 874 -28 918 Sales and marketing expenses -2 523 -2 119 -8 729 -7 586 -5 475 -6 302 -17 073 -35 770 -2 682 -1 496 -8 216 -3 384 Depreciation, amortisation and net impairment losses 8 -3 046 -235 -7 911 -1 025 Operating profit -16 699 -15 685 -60 890 -77 133 6 621 276 1 430 211 -16 078 -15 409 -59 460 -76 922 -50 -88 -124 -243 -16 128 -15 497 -59 584 -77 165 Attributable to: Equity holders of the parent -16 128 -15 497 -59 584 -77 165 0 0 0 0 Earnings per share: -1.99 -1.91 -7.34 -12.66 Diluted, attributable to ordinary equity holders of the parent (NOK) -1.98 -1.91 -7.33 -12.66
	Revenue
	Gross profit
	Administrative expenses
	Operational / supply chain expenses
	Net financial items
	Profit before tax
	Income tax expense
	Profit for the period
	Non-controlling interests
	Basic, attributable to ordinary equity holders of the parent (NOK)
	23

Balance sheet (unaudited)

Balance sheet (unaudited)
NOK 000 ASSETS	Note	2019	2018
Property, plant and equipment		1 235	1 605
Intangible assets	4*, 8 3	72 216	75 829
Right-of-use assets Total non-current assets		1 923 75 374	0 77 434
Inventories		7 728	7 372
Trade and other receivables		6 147	6 399
Other current assets		565	901
Cash and cash equivalents Total current assets		73 463 87 903	127 424 142 095
Total assets		163 277	219 529
EQUITY AND LIABILITIES
Issued capital		1 623	1 623
Share premium		142 665	270 935
Other equity Equity attributable to equity holders of the parent		2 369 146 658	-71 103 201 456
Non-controlling interests		0	0
Total equity		146 658	201 456
Lease liabilities	3	766	0
Total non-current liabilities		766	0
Trade and other payables		11 911	15 172
Interest-bearing loans and borrowings		0	600
Current lease liabilities Income tax payable	3	1 241 0	0 225
Provisions		2 701	2 076
Total current liabilities		15 853	18 073
Total liabilities		16 619	18 073
		163 277	219 529
Total equity and liabilities
* See note 4 in the condensed interim consolidated financial statements 24

Cash flow (unaudited)

(unaudited)
Cash flow
NOK 000	Note	Q4 2019	Q4 2018	FY 2019	FY 2018
Operating activities
Profit before tax		-16 078	-15 409	-59 460	-76 922
Non-cash adjustment to reconcile profit before tax to net cash flows:
Depreciation and impairment of property, plant and equipment		473	226	1 895	966
Amortisation and impairment of intangible assets	4,8	2 573	9	6 017	59
Share option plan expense		863	1 520	4 877	4 719
Other items related to operating activities Net foreign exchange differences		-1 514 -10	-158 -87	-1 459 -112	-300 -183
Movements in provisions and government grants		1 763	-928	3 230	-3 456
Working capital adjustments:
Decrease (+) in trade and other receivables and prepayments		231	505	-560	532
Decrease (+) in inventories Increase (+) in trade and other payables		808 3 787	123 -27 948	-356 -4 718	-5 591 57
Interest received	6	1 327	786	1 584	1 057
Interest paid	6	-69	-697	-107	-740
Income tax paid		-34	-27	-367	-118
Net cash flows from operating activities		-5 879	-42 084	-49 537	-79 919
Investing activities
Purchase of property, plant and equipment Development capital expenditures	7	-180 -619	-207 -4 160	-319 -2 931	-749 -10 433
Receipt of government grants		526	1 989	526	1 989
Net cash flows used in investing activities		-273	-2 378	-2 724	-9 193
Financing activities
Issue of share capital		0	4 689	0	134 689
Transaction costs on issue of shares		0	0	0	-10 709
Repayment of lease liabilities Repayment of borrowings		-279 0	0 -600	-1 120 -600	0 -1 200
Net cash flows from/(used in) financing activities		-279	4 089	-1 720	122 780
Net increase in cash and cash equivalents		-6 430	-40 373	-53 981	33 667
		-14	187	20	110
Effect of exchange rate changes on cash and cash equivalents		79 907	167 610	127 424	93 648
Cash and cash equivalents at the start of the period Cash and cash equivalents at the end of the period		73 463	127 424	73 463	127 424