RKLY - Earnings call transcript Q2 2021 | Rockley Photonics Holdings Ltd

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Operator

Ladies and gentlemen, hello and welcome to the Rockley Photonics Second Quarter 2021 Results Call. My name is Maxine and I'll be coordinating the call today. [Operator Instructions]. I will now hand over to your host Gwyn Lauber, Vice President of Investor Relations to begin. Gwyn, please go ahead when you're ready.

Gwyn Lauber

welcome and operator you, everyone. Thank Lauber, This Rockley of Relations, President is Gwyn Photonics. Investor Vice the Today U.S. after closed, market our XX, released we XXXX. ended second June quarter results for the

being release, copy If Chief section Relations Relations Executive and Founder archived Karanth, are Rockley’s website webcast me Mahesh our receive Dr. did With our obtain Chief a Officer; on investors.rockleyphotonics.com. website. This today's you earnings from and not of call press be Financial and on Investor you at Investor Andrew may it OBE, is of will Officer. the call of Rickman section

risks discussed uncertainties, as uncertainties on not statements the with these of release, as assumptions to today. future based cause result actual turn on our will respect Andrew, I'd SEC. to statements These contain from technology but materially events. subject and resources to timing We expressed information our are and strategies, and I features update or filings include, customers, and Any our limited development and and like product no discussion financial including implied call forward-looking call made and statements, anticipated and in and those today's products outlook. not our our may statements products, our but our ability are our of are trends, this by that earnings undertake Before schedules, market over to forward-looking obligation forward-looking new that a opportunities forward-looking limited in risks statements. vary to to our commercial cash to with the of or are bringing to benefits market these to which the those results and press note These and

the are in not In addition enhance found Rockley principles. the non-GAAP these measures in Reconciliation the GAAP We that to believe GAAP certain to included press non-GAAP do reports measures of of reporting, these understanding our and release. accepted measures generally conform accounting performance. financial U.S. tables

I'll over Now the call turn to Andrew.

Andrew Rickman OBE

combination, for all by ticker us us quarter. business company. XX we've symbol, proceeds technology earning the with listing I XX. trajectory And as Thank and call $XXX gross you to outstanding we our the milestone NYSC start our entire accelerate RKLY, a during help SC our Rockley Rockley’s major August approximately business platform We in Health their received the developed. first commercial in on we process. under will joining company's during clear public for completed thanking sensing support you combination on launch the a the the August million validation and which Gwyn of We public and team announced for trading work second of growth thank the from the that began want unique on the

response with As combinations, anticipated. back specsponsor, we business than experienced has common SC become our redemptions Health the [indiscernible]

of including silicon can eight contribute goal believe generation of that means funding, we are our photonics, as capabilities with of we on model stage, in and commercial remarkable today revolutionizing life. years with we started our we wearables in balance a this optics market market. up ground across the to than where We pre-alpha getting Today, applications. on wellness the health integrated suitable industries. we volume to our the a are received silicon process. to automotive this meaning a core application It's variety manufacture Based of unified vision sheet and see for photonics consumer are high of us of the get applications, for expected data Engineered the other conducting the we are our global silicon are product we from of other our of the While leader the product broad market. the we quality journey the and our less are development to able help on that photonics we track development produced build schedule the believe to a advance efficiently modules, to have as was Rockley’s current safety industries, we years to those strong solution well will to out operate believe with modules our version human many devices. and also ago. pre-alpha designed on We opportunities alpha studies betterment reach ago of goals Having fine-tuning taped funds we set our achieve our and way communications,

would be may who second you overview brief and our before I into company quarter results delving the start of out business recent new Rockley, opportunity to our to those like highlights. and For of with a market

developed team compared photonic in things. believe and terms we Our has of and existing platform in a its is sensing accuracy, technology transformational med to wellness industries tech efficiency other and among health range,

is moat traditional scalability. technology watches see revolutionary to wholly-owned times technology trade [average] rapid covering and with times ecosystem wearable manufacturing CapEx accurate our a million of than domains. and you resolution secrets up processes patterns is benchtop today. seeded X efficient technology numerous And Moreover, proprietary model Our we LEDs chip. module a running existing like high-end smart protected capabilities of by more deep have compresses onto knowhow for the up to and higher in X,XXX sensing A

shrink their in to personalized better mind, nutrition others. a This digital body potential biomarkers, core to and earlier, health consumers we've managing will mean and wrist. wrist to monitor is multiple them laboratory pressure, the and able blood diseases people glucose to self-manage to lactate Our being hydration, the including on give insight own own a sensor their better body about system health Are manage amongst clinic on detect health. goal well-being. clearly goal giving able the has temperature, information This alcohol, spectrophotometer-on-a-chip intelligence creating to empower their been by

where wearables both changer and functionality consumer by body anywhere increasing your And there devices. is significantly revolutionize the the medical technology potential wearable monitor to our is forward health perfusion. is it we game designed this the going Our believe on devices. blood in for worn way has We of to a be

will sensing platform application augmented OEM enables medical allow end-to-end to combines the healthcare cloud for to This be chronic meaningful health their with peak costly clinical this users. and keeping focus the in on people at Access to Our early partnership and paradigm analytics applications. provide help firmware manufacturers technology move their intervention. insights and change customers from and module can that for of away certain care for to and actionable hardware

on proliferation of driving COVID more care health, their rethinking wearable XX% health trends Health Notably, key emerging consumer health and of global that a need spends than World tech income the household of estimates Some this XX% focus care. population monitoring driven of Organization of on solutions. include at-home greater preventative the

unbiased technology health Our and critical information condition is racially accesses to its telehealth, positioned alter way technology underserved the through communities. monitoring the in wearable world

We capabilities, ahead healthcare with have of of additional consumer combined an monitoring on growing incorporates a focus health increased market huge opportunity sensing the wellness. devices us, as universal and

opportunity market customers. validated our Importantly, blue-chip leading is by

players med device are more the the wearables than engaged as holding as the largest companies, more electronic medical one including XX% and than tech the customers We with consumer space. in market, of or of smartphone XX% well of currently contracted

and attractive other growth, focus technology our $XX addressable On many see connectivity. avenues we billion. including market and a connectivity, machine data big more vision datacenter commercial and more computer wearables, predictive medical verticals Further, applied immediate and many of used Our of devices, long-term, mobile, is industry to than can be which very cases. analytics, represent leveraging

Now, I'll turn to our QX results.

that the first the During GAAP to quarter, net million, we second $X.X loss of quarter million quarter achieved additional second our color will XXXX. wrap GAAP On with recent revenue was provide loss million Mahesh months, of the in In $XX.X of important quarter, on recent financial $X.X several compared net some support our generated we the up strategy. in $XX.X XXXX. million results. in a from growth business highlights. up milestones first

health measure and second a functionality solutions wearable by wearable design that of partners. the in augment health the to sensing and the of accelerate to spectrophotometer-on-a-chip we compact module biomarkers ability sensing landscape solution a our By our has to non-invasively the new and significantly increasing unveiled single deployment the end-to-end on wellness solution During based digital monitoring customers for to quarter, our mobile capabilities range devices. of potential module, transform an

continued these through joint have ventures, the Additionally, opportunities silicon photonics to we to commercial new efforts we develop of to explore agreements communications data have increased and existing partnerships. relationships, and application for and in our enhance

capitalize of capability our area. second I'm public strengthened commercial And performance we the are our with construction talented functions the progress laboratory we are pleased silicon expertise newly future Board to new delighted us will launch resilient, company. our growth quarter photonics offering, with as industries for scalable XXXX. completed a that also key product experience begin here individuals California, in we to be on help and in in board. several to our experience, the Overall, public high important biomedical talent the supply with these to board These to operational relevant expect building bring companies. company and in welcome in bolstering pool made to the and our Irvine, very varied performance thrilled we And We that prepare appointments for today development continued chain. of milestones which of deep a

call our benefits the financial and care, are we people phase in of you. I'll class as health to growth the much Thank review actionable now to Mahesh turn next performance the to digital transform detailed insights, stronger the on globe. embark deliver of a life the for create a provide we across solutions public in company, our of position With quarter. a changing a that, new and As over

Mahesh Karanth

to let everybody my afternoon. Thank me add you, Andrew. welcome And this

QX Turning QX to which of up million, from revenues million. reported revenues of our $X.X XX% results, was $X.X we

other broad leading of and believe reminder, we are from stage as sector, believe as technology developing for the we that be pre-alpha As what a changing will the we game large health wellness industries technologies. benefit well the in to

the was from cost million first quarter for in XXXX. second quarter, activities. $X.X revenues the the $X.X compared million, revenue non-recurring came engineering quarter of to On our such, As of

Our of cost of revenue $X.X QX XXXX. $X.X million non-GAAP to in compared was million,

of from Our milestones. the including the cost completion of several of project revenue depending fluctuates on factors, timing period-to-period

the an was $X.X GAAP versus second expenses, $XX.X in increase non-GAAP the prior were in during million million million in SG&A $X.X the operating to total we first expenses our by QX. product Total to increase to was expenses GAAP in expenses as expenses million $XX.X the we to in and in -GAAP compared quarter. Moving totaled headcount, $X.X in our SG&A million Non-GAAP quarter $XX.X of The QX primarily operating of XXXX was million to XXXX. $X.X GAAP, recorded towards $XX million expenses expenses QX compared quarter market. million XXXX. expenses driven R&D second million QX in $XX.X Non quarter $XX.X million R&D operating versus QX compared for million $XX.X to work getting were million, compared XXXX. $XX.X in

R&D ability to are our rollout. forward We on are remain our projected our on highly technology to customers and efforts product focused driving for essential our track

the percentage expect As of business, the but revenue to period-to-period, we long-term. a we as expenses fluctuate over scaled our decrease generally

Moving value to a in loan of to the of $XX.X is notes. primarily fair we XXXX. compared loss a net income, QX in convertible driven million $XX.X recorded by This our loss million change

related EBITDA business quarter, the of a expenses to a Adjusted million ordinary to first shares. do not of million with convertible loan $XX.X compared of of close our in the ‘XX line in expectations. With converted into any notes the measures majority these was loss quarter $XX.X of notes. second in non-GAAP anticipate were and which We the the further loss combination,

as long-term, scaled achieve leverage, the margins to we our expect business we Over the improve. operating operating and

business team plan our market. to costs million and cash The that the to XXXX. we we cash used quarter, the of need Year-over-year, execution believe solution $XX.X on our the driven our increase sequential transaction the as net the $XX.X variable by use compared for in to was activities increased primarily operating Our second in growth million assemble in the combination. to get QX significantly totaling increase

cash cost believe an to rate have efficient and a burn we While level. are appropriate operating this we at increase,

over following to is transaction. had look SC end lower At the initially always may into that our slip had is cash, worth to the June And company Finally, at our I that new relationship than the possible they back approximately emerged that, partnerships. Despite silicon funded. $XX.X plan discussed of would to XX% top we as Andrew. that unchanged. this would remains believe second margin and plans of anticipated, of $XXX deals, continue immediate high revenues a having sufficiently line remains we some communications. need It's our generating there as than the chance also let transaction million increased that $XX.X enhance previously track This announced we technical can positions. that less me remain We million XXXX the half address experienced, cash and to data public a with business million. Andrew gross note similar due we in mentioned, with we it guidance less we loss remain includes production explored With we has that million for redemption note to photonics of the EBITDA significant XX, of our that cash we the amount planned. with sale that also opportunities in close alternatives customers. noting technology rollout commercial and I of it outlook unexpectedly XXXX, XXXX. But significant in cash in on a our with $XXX to Health turn and

Andrew Rickman

Thank you, Mahesh.

conclude see open up to to for we that, drive opportunities thank available want generation, create me by global our forward solutions. customers questions. for wellness listening I it the next to enable in. to our we curve as technology with the to and for And all you the health I'd like Let excitement reiterating Rockley

Operator

Christian [Operator Baird. from first from comes Our Instructions] question Garrett

Your line is open. now

Christian Garrett

on congratulations and guys, Hi, public. going

you and terminology need thresholds for reach until stages, production? stage entail, describe what each of the you and pre-alpha could each for that you mass the next about to of them the get talked You ready if

Andrew Rickman

Christian, thank kind question you and for thank for the your you comments.

algorithms where trials we So course stage and the optimizing through are of pre-alpha the stage the will year. is this this the continue human through

taped-out We the have alpha phase.

And rest are that human over they this the at the the the year. the chips come phase trials be next will and back up modules. they then various these will year will course built take through of So acquired of will into of beginning in

customers perspective Now performance the wearables. volume be are hardware XXXX. will start will wearables, customers, And verify And through those through -- to the we is the to those which pre-alpha that set our projected required. the algorithms -- go devices in customers from devices still being they'll that delivering that go trials human at physical end into in they for our a of in the that of another format shipping go-to-market

Christian Garrett

you type at Okay, you how up very for your the technology? have be or thank potential the you you for feel which And or color. a area as that's you to is near-term And that or feel at if you there need much looking would existing a follow question, acquisitions? Do everything should need tuck-in the medium-term And complements that built-in? in-house? case, we technology of even look

Andrew Rickman

all the the a way Yes, device the extraordinary data all the and technology process that from We way combination But the point set years afford design, reasons semiconductor on the a all we option. to announcement be there's doing team to have in set no opportunities And, of one and We we're packaging, software exceed that the last of of our for phenomenal ourselves capabilities people to great through to that question. can is able have to what do course, the that our come analytics. the us accelerate open currency time. that give capabilities. cloud, course, allow acquisition, further to and continue expectations. of of in obviously, recruiting acquisition at phenomenal over here other algorithms eyes few a this public to built of or have the going way through through,

Unidentified Analyst

us could and of be that volume how picking the then and on be update we volume for large to the question for competing your are shipping readiness? ready you're you're capacity give And last ramp? Okay. me, capacity in terms you Obviously, requirements at an OEMs. should What smartphone up going very steps looking getting at into

Andrew Rickman

the question in available. significant XX you've here, both processing, dual chips are the photonics, in Another wafers on the and capacity about also parallel then have that you've good the you've level on think that's To too. required technology the silicon with required as those And sourcing well. that, silicon wafer capacity of areas, fundamental we wafer, got got and

-- those not we're that partners projections for XX% we're to a strain maximum huge take our So are on us X% to to, talking, do billion company example, of dollar put north revenue a their capacity. XXXX, of that not by

end that one there The wafer critical together the element partners with whole here, et sent end large post very end call technology. noting end, photonics negotiations this time -- field die, the we is developed CM inspection, you that from of process that testing, working for advantage. ASIC partners reasonable of wafer of this for it. piece with associated So unique. the supplier end. It's to There's through from good wafer for coming worth We're level silicon replicate element allows back the of we control -- It's capacity else on die, we back see photonic our and issues photonics, electronic capacity us been alone the foundry material of all that in all is wafers, anywhere in area. a line in to partners. it's which processing part multi entirely all And do, in manufacturing as the a But part to another to zero don't which then also just absolutely us the shape. automated whatsoever. the And the that When various in back also the silicon allows scale on post in module that back the module. supplier and burn-in, lead cetera. And putting huge what for of that we silicon of We've do silicon of these is a line, built, -- we we're the post good any in in does competitive in-house. perfecting bringing ASIC putting semiconductor it and end. the amount of I've years [XX] this work let through relevant way that CM have level way diced very went with the It also a described are is a combination very -- have the known that initial And the place a that photonics, the the a the together field the see and those the will touch our now ramp through die, the that side, with don't has [indiscernible] up. back we because then large perspective, to

Christian Garrett

Well, Great. again. very thanks. That's congratulations And useful.

Andrew Rickman

Christian. Thank you,

Operator

Quinn comes and Our next Needham question from from Bolton Company.

open. Your line is now

Quinn Bolton

and I used composition platform if Galaxy other Hey, that in body guys, Andrew, its the able you you I using me discuss compares technology today? the start the think technology might how and be Galaxy be and being wanted on may as wondering measures with your my Samsung in WatchX biomarkers, bioactive advertising that let its to among add pressure, with sensor business announced traded. the recently publicly what WatchX now combination company the Samsung to with is congratulations the blood

Andrew Rickman

comments. you those the a existing comment bio I Galaxy today. of technology a basically tell X question. kind or I you, But And with and watch. possible great insight can biomarkers general for directly is thanks can't what's type Quinn how is about inside on what Thank Samsung your

going in that sensors -- further that's that LED, got additional So that correlate are we're technology, types insight today a measuring includes LEDs are But you've your of from and there's results learning just with oxygen greater to not bringing to the of that accelerometers wellness with example correlating of also get and those comes are there existing simple biomarkers. with pulse, And are insight green something measuring our motion. in performance. give states you shows that market your and today these additional orders into technology. to what sensing that technology, your devices see They're algorithms magnitude, to X we're the type and And coming the the health greater is you outwardly LED through with our as increased the the are sensors blood but the into such red breakthrough Samsung an for devices not biomarkers coming measuring this data parameters from level. And body from it of various with a measuring just point you bringing of in of that various physical the disease what mass. many is diagnosis very view, that infrared measurement

increase the so combination our to And that over massive into we've is of you of range correlation diseases. of learning biomarkers algorithms course provide those in the that time, expect will outputs the time and initial over whole see insight that biomarker but a will deliver of what all will mentioned, of already

Now, a measurement. I detail accuracy with. start the market. pulse Again, one, look with that pressure -- during but of blood coming the in that's far vascular we pressure critical them into interesting of your your devices the a devices change in is is elasticity volume system. at representation in they your and you a a particular greater And blood -- we blood the the an to to cuff level information to basically, have that can't that of to calibrate blood the that's way the that's are of go without And how cuff brings the bring, today far, bring to work existing you parameter pressure measuring

enhancing metabolites will glucose lactate, hydration, well and temperature to believe bringing parameter as rest. core we we as the important that other alcohol, that So body be

Quinn Bolton

of realized? if than may you two million Great, mentioned press And you have a period over then what second, sort backlog for I guess questions mentioned and expected greater then you comment, thank Mahesh you. one, redemptions. be release the wondering I that backlog time $XX could And in believe

cash the cash cash balance sheet. And you sounds so of financing for requirements think will consumer flow that breakeven $XXX wearable of the you get It additional production million do with to you're, into get or through But position? that there wondering, have $XXX million sort -- you all cash now devices. on you or way volume does from to to the starting get flow think be you base breakeven that it could like lower

Mahesh Karanth

thanks the Yes, for question.

remain on one XX is able remains cash anticipated, backlog, our first customers. with complete that XX cash question, the should to next to said, sufficiently lower we having it be has we On we that note But than months. immediate believe our need had backlog may at next plan to despite in the the to your on on position. would I plans that less address we rollout look we funded. that we of our track alternatives announced possible business production Then

Quinn Bolton

and congratulations. much you very Thank perfect. Understood,

Mahesh Karanth

Yes. Thank you.

Operator

Cowen, question is comes from Your from now [indiscernible], line next Our open.

Unidentified Analyst

was Silverstein. Hi, give on use. my between gentlemen, Congratulations launching -- accomplished so little But for asked potential if technical product questions a insight what on you you've hurdles I now you of any regarding Paul earlier. of here more some could any and already see wondering the a behalf far, consumer

Andrew Rickman

focus see. exist of solution any scale best we to very, the very report. This positioning comments with and today is what manufacturer to kind wafer the do their level Thank complete has this exist silicon and silicon for kind that activity eight you, right your we all obviously, in years call charge Robert. and team, zero doesn't build micro before as from Everybody of And associated that devices. photonics hard you a the thank we a die ago our other outset vendors company. didn't -- On And of photonics. third to

the in die So ways photonics, of and end all platform we've module. good those wafer into scale cingulate you silicon our to before complete basically for die the created go that the the in allows to population known first belief,

part would prior $XXX one to the the prior And public. obviously about where to be that going and concern. we've anybody have million would area that is most our we've area -- raised a we that spent that focused So of

photonics the processing, the Beyond the a -- beyond back of wafer risks associated scale onto module of that. the assembly silicon conventional is microelectronics a assembly with without of the end the any on significant piece module then

important material the of experience in our importance course, like conscious of well. thing. very And very Of science, reliability key we're of from innovation is put we're And it. in reliability, of technology, which on things multiple very, with has our, reliability years will And that very are some but gone there particularly questions a extremely pleased the pieces work reliability.

all -- I So, our yes, mitigate our by out on risks experience issues, set we today of of way tracking all we carefully these I mean, to focus very the have very, and that been to plan.

Paul Silverstein

for process and makers you that's your how give are are been having Can processes. where what handset such you would with discussions the near-term kind and how their qualification Along in to-date idea us and the [victorious] that of been reliability of of doing? terms those some module -- lines customers you've in

Andrew Rickman

course next process designing typical in shipping for units designed year side. being we customers of references day where next our of XXXX we the the And announced involves generation the have their as into products to XXs are including with qualification other generation of qualification so products X,XXXs you platform will complete our and support the Yes, us customers that and seen of processes.

internal say the performance But as our application. that their customers are qualification. of they into wearable of ahead customers parts trials significant qualification our I So X,XXXs customers pass with many in our reference very in planning our using to and providing our do insight real as order is very significant

Paul Silverstein

Okay, thank you very much.

Operator

Markets, from line Our Tim now next Savageaux open. is question farm Your Northland Capital comes at

Tim Savageaux

been perspective, have in of afternoon. From discussion engagements, I kind several building potential on guys Hi, moving you getting expect questions, scenario of head And the direction? been I funnel, major or and as been look any discussing toward we developments a sort in the that engagements on Thanks. notable of customer you late half? that this bottom down have second funnel customer terms we of toward front last good facing or are wonder here XXX contracts that the of your have might of that there. over if targets If there's and into

Andrew Rickman

-- continues process end. Thanks, at continues funnel to Tim. Yes, the expand to bottom it and the

So were is wearables of of had great to than with and the contracted engagement and said as we more is And there -- a increase. customer here, customers we continued XX% XX or smartphone interest that has X% of the engaged deal that we market.

excess these numbers. in is of it So

And so portion market. that's significant the of a very

Of actually somewhat those how design is relationship. a stage nature the of the course, customers to of we're very leading the got in work there commercial of terms many with we that the of of of that but have can process, a, with you kind that customers in happy limit of

Tim Savageaux

thanks. along Great, -- of any still into device maybe versus I line, coming for mobile you the farther of which mobile any guess, opportunities kind And or type might those sharper any efforts lines, wearable on focus? those planning be down update phones devices,

Andrew Rickman

in the combination interest and on and space the customer so the our basic of wearables depending market. a Yes, the in their is particular advanced modules

-- haven't way the the about use is the we other On to it much side, wearable But it's biometrics. we in because slightly also haven't exciting used cases that not the are a you measure talked a is there. continuous phone different the parameter there aspects Obviously, that is.

devices. spectral to a individual can biometrics by customers to unlock that the that we're their information an So what is recording is be used and recording we're unique that

biometric also what smartphone basic so getting module. of in of an and are set is more you'll the as well see And the functions, functions within traction set of but area the identification

Tim Savageaux

Great. very me. on much, and Thanks deal. Great, the pardon congrats

Andrew Rickman

Thank you, Tim.

Operator

Q&A our concludes This session.

for back I'll So hand you, Andrew to remarks. closing it

Andrew Rickman

Thank much. you very

to for progress We listening our you thank today. forward update you So to our Thank you call everybody. quarter. the look on next in

Operator

and Thank call. you Ladies this for gentlemen, concludes joining. today's

You may lines. now your disconnect

Rockley Photonics (RKLYQ) 17 Aug 212021 Q2 Earnings call transcript