Q1 2018 Idex ASA Earnings Call
May 09, 2018 AM UTC
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IDEX.OL - Idex ASA
Q1 2018 Idex ASA Earnings Call
May 09, 2018 / 07:30AM GMT
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Corporate Participants
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* Henrik Knudtzon
Idex ASA - CFO
* Stanley A. Swearingen
Idex ASA - CEO
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Presentation
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Stanley A. Swearingen, Idex ASA - CEO [1]
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Good morning, everybody, and welcome to the first quarter of 2018 presentations. So I'll be doing a brief presentation, try to keep it within a half an hour, and then I'll invite Henrik up to go through the financial part of the presentation. I'd like to draw attention to the disclaimer. I will be giving forward-looking commentary, so please refer to the disclaimer relative to that forward-looking commentary that I'm going to provide.
So the first [thing I'd like to talk about is our] leadership in biometric cards. I think we've clearly demonstrated we are in a leadership position, so I want to talk a little bit about what that means and what we're doing to make sure we're building a moat around this business, and we're creating the kind of barriers we need to create to make sure that it survives, and we can deliver exceptional business performance.
So it starts up with a unique sensor technology. So with any technology company, it really is based around core technology. And what's important is that core technology has certain attributes and certain advantages, and it has advantages and attributes that relate to certain markets. As the previous CTO of 2 Silicon Valley companies, I can assure you that off-chip is the superior architecture for biometric cards. I won't say it's a superior architecture for every application because that -- it's not the case. So with that superior architecture, once you have a superior architecture, well, then you have to go to execute, so there is another side to the equation. But if you start with an [inferior] architecture, you're going to have the best execution engine on the planet, and you won't be the company that has to write architecture. So check the box, I think we're really in a good place with our off-chip architecture. And there's 2 elements to that. There's one which is basically just the performance and its applicability to the application, but there's also one which is our ability -- leverage industry technology. And there's 2 pieces to this, [there's] what's called Moore's law and how Silicon progresses and gets finer and finer in, what's termed in the industry, geometry. And what that means is that we can integrate more and more technology into our solution. So if you look at a smart card, there are other content on a smart card and two, being able to leverage Moore's law, we can pull that value and content into our solution. So there's a lot of examples in other industries where the point of integration or where value moves, it tends to move towards -- in our type of a solution, towards the sensing element. So there's a lot of proxies, if you will, that says by moving this value, and when I'm talking about value, as you move value, it helps you get accretive margin and a better business, right? So as you're riding the cost curve because your solution has to get more cost-effective, by bringing in value, you're able to preserve margins. So that's why that's an important topic. Well, as I mentioned, if you -- we believe we have a superior architecture, now you have to have a team that can take that architecture and turn it into products. And we look at this application as a system. So what we have built is a systems organization. So we have people that look at the entire solution. So we're not just a sensor saying, "Oh, we'll leave it up to a partner to figure out how the rest of this works." We actually figure out how the whole system works, and we create something called a reference design, so our partners can go to market very quickly. So with our systems solution and the reference design, we're, in essence, doing all the work. And then it's a turnkey. Now there will be partners that will say, "Well, we want to create our own value, and we don't want to use the MCU that you put into your solution. We want to use a different one," and we'll support that, and we're fine with that. But what we do is we have to think through all of these trade-offs and ensure that our solution is optimal for the biometric smart card.
And then, we take the systems solution and our superior architecture, and then we have to create the total solution. And when we talk about a total solution, I think last week's announcement from Mastercard speaks to, we don't just look at our piece of the puzzle. One of the things we saw as we worked through, and I'll talk later in my presentation, as a first-mover, we saw there was a major challenge with enrollment. And so we sought to solve that problem because we thought it would be an impediment for this market to explode if mass enrollment couldn't be solved. So we took on that challenge, and we solved that challenge. And that's what I'm talking about here. And that challenge was a challenge we identified more than 12 months ago. So as you can imagine, the pipeline of innovation didn't stop. So we have identified problems and created solutions for things our competitors don't even know are issues yet just because we're a first-mover.
And from here, we then go into our global partnerships. So we have the right architecture, right team, and we're solving total solution problems. We have to have the right relationships and have, what I term, a privileged view of the market. And with our partnership with Mastercard, we get to see things and hear things and understand challenges well in advance of the -- of our competitors who don't have these relationships. So it's very important for this, I call this a virtuous cycle, to work is that you have to get these keen insights. But if you get this keen insights, and you can't get them into your product, well, then the innovation cycle stalls, and we can't allow that to happen.
And then the last piece of the puzzle is we then take these insights, our architecture and our system team, and they become the front end for the -- our next-generation products. To give you an appreciation of our cycle times, it's roughly about an 18-month cycle for us, from the time we want -- from a Silicon development perspective, from the time we get architectural insights to when we're sampling the product. So needless to say, 18 months ago, we were learning things about security and enrollment and all the different issues and certification that we put into our next-generation product. So this virtuous cycle is a very important concept for us.
And so now we'll talk about our evolution as a company. So 2013 to '17 was really building the foundation. So this was development of the off-chip sensing technology. We actually have an in-house matcher that we've really focused and optimized for biometric smart cards. And then we established the partnerships -- not only the partnership with Mastercard, but the partnership with IDEMIA is equally important to us and other partnerships in the ecosystem so that we could understand the insights I mentioned previously.
And the other was to build a world-class team. So I've been in the industry 30 years. I can say, with all confidence, this is probably the most technically-talented team I've had the opportunity to lead. A lot of really talented folks, a lot of really great inventors. And that was 2013, '17. This year, '17 to '18, it's really all about how do we leverage all that great investment in building the fundamentals, and that's all around [ramping] and getting the product to market. So '17 and '18 is really going to be all around how do we get to market, how do we expand our customer base, how do we expand into different verticals? And when I use the word vertical, that means payment's a vertical, corporate identity's a vertical, government ID's a vertical, so we're at a point now where we have a base technology platform we can expand across the globe into multiple verticals.
And then the next step, which is important to me, is really defining the future. So this is -- we can't rest on our laurels and say, "Wow, we did a great job to get here, and we helped build the market, and we had a good year or two." We have to define the future. And what I mean by that is really what are the technical trends, what are the things we're going to do to create the competitive barriers I talked about before.
So here are some of the key actions in my first 30 days, so it's kind of consistent with that previous slide is my top priority has really been preparing the supply chain for a volume ramp. And what this is all about is having the relationships at senior levels at our suppliers. And we have Tier 1 suppliers, and we want to make sure, when the time comes, and somebody says, "Hey, we need 1 million units," we want to make sure we have the priority, and we have the support. So a lot of my first 30 days is working with those senior executives. And what has been quite rewarding for me is they all are quite cognizant of the fact that the smart card market is about to explode. So the smart card biometric market is a strategic objective for almost every supplier, which makes my job a bit easier because they understand the story, and they want to be a part of it. And so I feel really good with the meetings I've had, and I go in and do basically the same pitch, talk about why we are the leader, why partnering with us and giving us priority is an important thing for them and their future. And I can say that we've had a lot of success there.
The second part was really all around if we're going to go to market, we need a strong sales organization. So I made that a priority, and we hired, I think you saw the announcement, David [Oram], and David comes to us from Rambus, and he's also been very involved with the payment ecosystem. So he comes out of the payment ecosystem, and he was a CEO of a company that was in that space and had achieved a lot of great things. So I'm really excited to get David on board. And we also have spent energy in China to kind of shift our sales organization from one which had mobile background to one that has card background. So I feel really good about the progress we've made pretty quickly in 30 days on the sales foundation.
And we also -- market communications is important for me as well. And the reason being is our investors invest very significantly to help to build this market. So by investing in IDEX, you invested in building a market that 3 years ago people didn't believe in or understand. My experience is, if we created the market, we want to get credit for it. And when somebody thinks biometrics smart card, the first thing we want them to think about is IDEX. So if there's somebody saying, "I want to [go] biometric smart card," I want the first thing is, "Hey, we should contact IDEX," and that's what this is all about. So communication's a very important topic. And so for me, it's something that I've spent personal time in my first 30 days to go hire -- bring in a great marcom leader and talk about what kind of an agency will help us with this messaging and making sure that we do the right job on that front.
So the markets, and I won't dwell on this. They're huge. All you have to do is take a small fraction. IDEX just has to take less than 1%, and we'll be profitable, and we'll be in a great place. So for me, this is not about is the market opportunity there, and can it be a profitable business? It's there, multiple verticals. I'll give you one example. If you look at government and health care ID -- [because, see], the people who do these projections and analysis on future-looking markets tend to be way off. They do a pretty good job looking in the rearview mirror. But looking forward's a very difficult job. And I'll just point to the government and health care ID. What they're saying is, in 2018, 0.6. So let's project out. Well, if everybody in India has a government ID that has a biometric smart card, you can imagine what that one segment would look like. So that's just 1 example. So what's happening here is this is kind of projecting with the thought of biometric smart cards replacing smart cards. One of the things I haven't seen yet is does a biometric card replacing a smart card expand the opportunity? Is it not just a replacement but it's a new -- a whole new dynamic that changes how people use that particular smart card, and I believe it does.
So here, the momentum is building. And I think people in the room and on the webcast have seen it. What you've seen is Mastercard and Visa announcing multiple customer trials. So we're seeing a competitive dynamic between the schemes where, then, the global announcement last week over modem [roll] to me was significant, right? So Mastercard went out and said, "With modem roll , we are now ready for mass deployment." That was the last piece of the puzzle. So they're not concerned about the core technology. They're not concerned about biometric performance. They're not -- the last piece was how do we get enrollment solved? And with the innovation and partnering with Mastercard, we made that happen. And then the issue was also tremendous pull from the issuers now. So the issuers are now seeing biometric as a competitive weapon to take customers away from their competition. So we're seeing competition between the Visas and Mastercards. We're now seeing a competition between the issuers who want to be the first to roll this technology out. And then new regulations, whether it's GDPR and PSD2, which are new regulations that are coming out that are talking about data protection and security. And with these new regulations, this is going to be a great catalyst for biometrics to be in smart cards, particularly with our remote enroll. Our remote enroll, the fingerprint template never leaves the card. So there's no wireless interconnect. So it's securely stored on the card, which is a big, big deal, right, versus other types of transactions, whether it be mobile payment, that fingerprint is actually available and can be hacked, and it could be put out on the net. And then a strong pull from the customers. So here's a few quotes. But every survey, every kind of interaction from pilots, we see that there's a huge, huge interest from customers to have this. People think it's easier, and Mastercard's really shifting from what people know, pins and passwords, to who people are. And that's what the whole theme is. Then you don't have to remember passwords and PINs. And I think most people -- I'm guessing that a large portion of people, their PIN is probably their spouse's birthday, their birthday, their son's birthday. So it's just very common, from a security perspective, if you have passwords and PINs, there's a large part of the population that use very common things that people who want to get your identity can guess. But with a fingerprint, you don't guess a fingerprint.
And then the last one, I think, is really important. So if you're an issuer, and you have substantial data that says a customer will move away from you if you don't have biometric in your offering, that's a pretty significant statement because it's all about customer acquisition and customer retention.
So here is Bob's announcement last week. We are just super proud of this to a, have the opportunity to collaborate in such a way and solve such a fundamental industry problem and to see it showcased by our partner, I mean, you can't ask for anything better. It was just a great day for us. And it really, as I mentioned, it -- such a huge enabler. So when we -- when you look at this, it just -- it's so simple and elegant. When you look at it, it's so obvious. But it was so obvious, nobody had thought of it. And when we want to go through the -- because we're doing all the work to get all the patents and very broad applications, and we're feeling really good about where we are from a patent positioning for this technology. It was a total greenfield because nobody had been working on this type of a problem, which is about as good as you want to get from an IP perspective.
So I want to talk about the market because I know investors are looking at what transpired in mobile and saying, "Well, okay, is this the same as mobile? Is this going to unfold like mobile?" And to give you a little background, I spent the last 15 years of my career in mobile. So I know mobile pretty well. I know how it's played. It's a brutal market, but you can win and sustains great businesses. You have to re-win your business every 12 months, and the switching costs are next to nothing. So I thought it was important to put this slide together to talk about the biometric cards and talk about our position, what we're doing to build that motor on the business. So if you look, fingerprints, really from a biometric modality on cards, it's really -- it's the answer. You're not going to have a camera on a card for the -- maybe someday in the future, but not in the time horizon we're looking at and other types of sensing elements. So capacitive sensing, or your biometric capacity fingerprint sensing is the right answer for this, and we don't see other modalities impinging upon this. Like in mobile, you saw facial recognition and other technologies impinging. We don't believe that will happen. And because cards have limited power and the sensors have to be durable and flexible, it really is kind of -- takes your competitive set down to a very small group of players that can do this sort of thing.
I'll talk about first-mover advantage. The other is high switching costs. So it's not like somebody comes in and says, "Okay, I'll give you a nickel less for the product." There's such a -- high IP barriers and certification and security, and it's rigorous, and it's done by companies who respect intellectual property and really take their time. So this is an important thing because what this says is once a card's designed, it has a life. And it will have a somewhat of an annuity stream-like attributes.
And then we have the off-chip which I talked a lot about, which is, we believe, superior relative to our competitors in the capacitive sensing space. And then the big ones, the first-mover advantage, right? So the first-mover advantage is we get insights, we then have IP, we then have products. And all this comes together, and that's why I feel really confident in our position in retaining our position. Because looking at what are the barriers we can put up? An example, remote enroll is a classic example of -- that's a barrier we just constructed. And we're not just construct one. We're going to construct a lot of them. So when you look at this market, this market to me -- because I've -- talk about my career in mobile, I also have quite a bit of experience in automotive. This market feels to me much more like an automotive market. So when you look at the automotive market, you'll see a very different dynamic. You'll see a much richer margin profile, you'll see a much richer net income profile. And we believe this market has those kind of attributes.
The other thing we've talked a lot about and really want to make sure we're clear in our language, and because terms like pilot have been used to represent many different things, we constructed this slide. So the important thing is we're ready to ship the customer orders and as contactless and contact. So from our side, we're ready. Now when we look at the process, you start on the far left with a sensor design. And the far right is custom order. And here's the process. And this is really a card payment process. Now other verticals won't have as many cycles like on the pilots and the certification. But I wanted to use this just to give you a feel for kind of the gestation period as well as what are the different terminologies that we're using. So prototype testing is essentially what we were doing 21 months ago. We've seen some recent pilots from competitors that, from as best as we could view them, they look consistent with what our term is, prototype testing. Then you move from that to once you do prototype testing, you get the insights, you then integrate your design, and then you have something called proof-of-concept. And then proof-of-concept is basically representation of the thing that you're going to show to customers in a broader scale. And then from there, you optimize that, you then go to trials. You then go through a certification process, which we'll give you a little bit more color on, and then you get customer orders.
So a higher level view of the certification process, there's an element of certification, security certification, and it's really all around code reviews, locking code down, hack reviews, can -- are the programming practices consistent with security programming practices? So there's a whole set of rigor and discipline where your solution is scrutinized against a set of standards and understandings. And then you have the physical aspects, which is chemical test, EMV, flex -- If I put this in an ATM machine, it goes through 3 wheels, does the sensor break or fracture? And then the last piece is biometric testing, which is can I get the level of biometric performance necessary for this application? So these are the 3 major steps. And back to -- this is what creates a huge part of the competitive barriers, right? Having to go through these and understanding all the nuances. And so that's an important part of the -- constructing competitive barriers.
Now I know the question is, okay, on contact-based carts, we're expecting orders shortly. And so we have delivered -- all IDEX deliverables are successful -- have been delivered successfully for certification. And we're currently in active commercial discussions and ramp planning. So I'm quite proud to say the market is really now getting into the phase of -- the customer order phase for us. So we've got multiple customers, and we're talking about ramps. And so that's -- it's a good place to be. Hence, why my focus is on supply chain and getting that prepared. We are expecting a lot of additional trials on both -- and this is contact-based. And then, they're based -- there's a lot of promotion happening to card issuers and merchants as well as governments.
And then, for contactless. So contactless was a pilot in Q2. And as I mentioned, the solution is production-ready. We have multiple vendors integrating our sensor and actively demonstrating to issuers. So cards have been built, and they're all promoting to issuers. And then we have several end-customer trials planned, and then we're accelerating through this process. So the previous one, when I said 21 months before, we were -- that was the first time because we were working through this with our partners on what had to be done. So it is a very -- it was longer than it will be now that the process is understood. So we expect to go much quicker for contactless through this process than we did for contact.
And so in summary, I think it's obvious that momentum is building with the global payment providers gearing up. I think we've completed -- as I've mentioned, we've completed all our deliverables for the contact-based solution for certification. We're in multiple active discussions commercially, and then we've initiated all the things we need to initiate to prepare for our production ramp. And then upcoming milestones to look for. Additional customer trials will be launched on contact-based solutions, the proof-of-concept I talked about with contactless, with subsequent trials thereafter. Our initial production orders, as I mentioned, will be in shortly. And then we'll see several additional major card vendors integrating our solution. And then the -- we've seen a global expansion in our customer base as well as the opportunities within these customers. So with that, I'll turn it over to Henrik. And then I'll come back up for Q&A.
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Henrik Knudtzon, Idex ASA - CFO [2]
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Thank you, Stan. So I'll take you quickly through the financials for the first quarter. The revenues in the first quarter was about NOK 2 million. This level is really reflecting our shift from mobile to the emerging card market. Most of this revenue was sales -- service sales, which had a very high gross margin of 100%. So the gross margin of the quarter was actually 80%, and the product sales margin was 20%. Again, that 20% is really reflecting the low volumes we have of sensor shipments. And we expect those to increase as we have more volumes.
As you can see, the OpEx -- the quarterly OpEx run rate is going down. And in fact, the cash OpEx in the first quarter was about NOK 6.5 million, which is what we indicated in the first -- in January, where the average would be for 2018 by quarter. This is going down for a couple of reasons. Number one, we're doing more of the development in-house. We have hired a lot of people, and we have capacity and the know-how to actually do development internally. We've also had an adjustment in the headcount based on our shift from cards to mobile. So end of the fourth quarter, we had the [117] FTEs and end of Q1, we have 108. So there's a slight reduction there as well. Other OpEx is at fairly normal levels.
End of Q1, [the cash balance of IDEX was NOK 245 million]. There's no financial debt. The cash flow in the quarter is mainly because of operational costs and a slight increase in working capital. As you saw from the previous slide, we do expect -- the OpEx rate has decreased. And we are, of course, monitoring the costs carefully. So balancing the need to invest and accelerate to capture the opportunity in cards, at the same time, ensuring we get maximum return of our spend in investment. And if you look at the cash at end of Q1 and look at the OpEx cash cost in the quarter, doing that [match], then we have 4 to 5 quarters of OpEx coverage. And with that, I think I'll just open up for questions.
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Questions and Answers
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Unidentified Participant, [1]
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When you start to make orders, (inaudible) you were a small company, you had never done anything commercially. Will some of your customers, will they demand a cash payment or payment in advance before you -- before they ship anything to you?
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Henrik Knudtzon, Idex ASA - CFO [2]
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We have already supply agreements with our main suppliers, and it's in normal payment terms. So we won't -- we don't expect to see any loss there in unfavorable payment terms.
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Unidentified Analyst, [3]
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It's about certification process. Is it [Mastercard] that has finalized the certification -- is confirming the certification? Or is it corporation Visa for these (inaudible)? So who decides the certification?
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Stanley A. Swearingen, Idex ASA - CEO [4]
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This would be Mastercard certification.
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Unidentified Analyst, [5]
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And you have delivered everything to...
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Stanley A. Swearingen, Idex ASA - CEO [6]
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Yes, everything is delivered to their requirements, right.
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Unidentified Analyst, [7]
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So you're just expecting now a signature and a whole set?
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Stanley A. Swearingen, Idex ASA - CEO [8]
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Say that again?
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Unidentified Analyst, [9]
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You're awaiting for a signature and then all's completed, and you can go into the production and sell the sensors to every of the [Mastercard] customers?
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Stanley A. Swearingen, Idex ASA - CEO [10]
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Well, actually, there's a bit of parallelism going on which is, as I mentioned, we're in commercial discussions right now. And one of the things, for me, I'm kind of old school, I don't believe it's IDEX's responsibility to announce and articulate our partner's process and strategy, right? It's up to them to kind of message that and announce when that completes. But I think for us, what's important for our investors are we've delivered every single thing we need to deliver for certification, and we are starting -- we are in earnest commercial discussions, and we're being asked for -- give us a supply plan for this kind of a ramp and this kind of a volume. So there is a bit of parallelism going on. So I think it -- that's why I wanted to have the slide. I didn't want people to say, "Oh, it's serial, that -- everything's got to be Is dotted, crossed -- Ts crossed and signed before this happens," which is another statement of the amount of inertia and pull that the market is now demanding, that they're saying, "Okay, yes, we've seen enough. We think that you're confident that this is going to happen." Let's start talking about when we want to launch, [when we want to go, right?]
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Henrik Knudtzon, Idex ASA - CFO [11]
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[Also], just to add to Stan's comment. [There's also a] -- it's really up to each customer and each vertical what is -- what level of certification you need. So obviously, we are targeting multiple customers in multiple segments. So I mean, payment -- the payment segment has more stringent certification requirements than access control or -- and government ID may be different. And we are now targeting all of those customers so it's -- certification isn't a binary event which upon all our volumes depend. So we have multiple customers, multiple verticals and the level or the threshold to certify is different for each one. So...
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Unidentified Analyst, [12]
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According to Visa, are there similar -- is there any cooperation between those 2 companies? Or does the Mastercard has their process according to certification and these -- their processes or certification (inaudible)...
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Stanley A. Swearingen, Idex ASA - CEO [13]
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Yes, [sure], we don't have visibility. Then -- Yes -- Again, we don't have visibility on that. And even if we did, that would be up to Mastercard and Visa to talk about. It's not appropriate for IDEX to talk about the sharing and what's shared and not shared and unique. So I think -- what we know is Mastercard is obviously, by their announcement last week, this is really, super important to them, and the magnitude of impact it has on their business, I think it's representative. And for us, we know what they expect, we know what they demand, and we're quite proud that we've delivered pretty exceptionally to every single thing they've requested of us and more. So I think with that, I just wanted to make sure people didn't get the impression that, okay, nothing's really going to happen until "certification" happens. I think what we're saying is we've done everything we can, every -- all our deliverables, check the box. We're now in earnest discussion, as Henrik said, not only with payment customers but multiple customers. And we're seeing the ramp. It's real. Okay?
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Unidentified Analyst, [14]
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Last question. As far as your [memory] business, how about could you say some comments about the in-display and the future of your in-display solution?
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Stanley A. Swearingen, Idex ASA - CEO [15]
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Sure. So one of the things we believe in, and the team we've assembled, some of the inventors I talked about hiring, are the inventors of some major capacitive sensing approaches in Touch. And so we do have a vision for display integration. And we actually see -- [without tilting our hands too much,] we do see display and display technology and the applicability of that to the card market, believe it or not. And so we do have a team working on display integration and the stepping stone would be how do we use displays that find themselves in cards or backplanes, and that's another off-chip sensing element. So we are doing that research now. We do have a lot of really good ideas and a lot of good prototypes. So our job, first and foremost, as I said in this slide, is let's stay close, let's make sure this ramp happens flawlessly, make sure we build the barriers for competitive entry. And make sure that we maximize the opportunity in front of us. But as I said, first-mover advantage, you have to continue to innovate, it's a business on innovation. And so once we do that kind of fundamental display integration work, all the work we're doing is -- will and is applicable to a full display integration for mobile. And so -- but we would never enter the mobile market unless we had something truly disruptive, and that we could do the same thing we're doing in here in cards which is create huge competitive barriers so...
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Unidentified Analyst, [16]
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I also then -- a quick question. You said something about volatility. I think this business, it's much more loyalty when you partner up with someone, do you think about partnership? So when you think about the Visa, the biggest player, I guess they have a partnership with [SBC] and the Norwegian Zwipe company. Does that mean that this will be difficult for you now to come into Visa in the future? You have to sneak through Mastercard?
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Stanley A. Swearingen, Idex ASA - CEO [17]
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Well, I think it's a great point and spoken like a true salesman that -- well, I believe the true asset of any company is its relationships with its customers and its partners. That's the true asset, right? And so I think we've done a phenomenal job with Mastercard. From what I've seen with Visa, there's a different types of loyalty, right, and there's different types of models. So I would say, Visa is -- and again, this is purely from the outside looking in, is using much more of an open market type approach. And I think at the end of the day, it all builds -- it all boils down to if you have the best solution, it trumps everything. And that's why, as a technology company, and as a technologist, you can't lose sight of the fact that you could -- you can't have an inferior product and have loyalty with the customer because loyalty only gets you so far. Loyalty is if I have the same thing as my competitor, I get it. But you have to have superior technology, and that's what I'm focused on is building the team, building the technology and building the business models and business relationships, that kind of comes together. And so for us, I don't foresee -- in the future, I don't foresee us "locked out" of Mastercard. But we've been pretty clear in the last few presentations, this is going to be a huge market, and huge markets need more than 1 supplier. So we have no illusions. We actually want to see some other suppliers because we want this to be a multibillion-dollar -- multibillion unit market. And single suppliers don't support multibillion. We want to have dominant -- not dominant share, we want to be the #1 player with the largest share, and we think that's anything north of 30%. I've seen models where you can get 50%, 70% in these types of markets if you do your job right. And so for us, will there be other players? Absolutely. Will they look at, "Okay, where, when and how can they come in?" Obviously, loyalty and other things factor into that. So I think we feel pretty good about where we're at today and really good about where and what we can do to expand the business. So I don't see it as an impediment going forward.
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Unidentified Participant, [18]
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Stan, in your commercial and professional view...
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Unidentified Participant, [19]
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(inaudible)
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Unidentified Participant, [20]
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In your commercial and professional view, do our patents hold up to, at this point, keep the competition out?
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Stanley A. Swearingen, Idex ASA - CEO [21]
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Say -- can you repeat the question?
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Unidentified Participant, [22]
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Yes, I can. Do you believe our patents will hold up to keep the competition out for a period of time?
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Stanley A. Swearingen, Idex ASA - CEO [23]
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Patents are a tricky one. I think we basically have patents in certain geographies with certain customers. I think it will be sufficient, but we're not just -- we're not going to just hang our hat on that 1 pillar, right? So we're going to do everything we can from a patent position. And anybody who's been in patent litigation or -- I -- part of my career, I was at Lucent and Bell Labs, and so I'm pretty well versed in the patent litigation and patent assertion and all those sort of things. So for me, I think it is -- this type of a market is much more sensitive to that than some other markets. But is it the sole thing that I think would create a sufficient barrier against every scenario, I don't think so. I think it is a significant barrier, but I don't think it's the only barrier that we need to construct.
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Unidentified Analyst, [24]
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You're traveling around, Stan, to make some deals with your suppliers? I guess one of the topic is volumes. They are asking you when you're talking about IDEX and how great they are, and I think they should give you IDEX priority, then I guess they will also say, "Well, what's in it for us? What are we talking about when it comes to volumes?" Can you share a little bit on what's there?
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Stanley A. Swearingen, Idex ASA - CEO [25]
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Well, what we just show is the slide I showed which is multibillion unit market, and we're a leadership position and connect the dots, right? It doesn't take a rocket scientist to look at the data and say, "Yes, we're worth investing in" from a supplier perspective. And I haven't had any pushback.
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Unidentified Analyst, [26]
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Do you have any target for yourself in your head? How many sensors you should manage to deliver this year?
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Stanley A. Swearingen, Idex ASA - CEO [27]
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Well, I think we have not been consistent in this answer. So my experience in these types of markets, and I have quite a bit, is these markets don't go from a 0 to 1 million units overnight. So what you tend to see is kind of a progression of 0 to 10k sort of monthly to 10k weekly to 100k. And so the big question is what's that ramp? When do you shift from 10k to 100k to 1 million? And so the steepness of the ramp is what we're really trying to get our heads around. And that's why it's tricky because it's an emerging market. And as the emerging market happens, issuers aren't going to go from 0 to huge numbers. What they're going to say is, "I want to deploy this, I want to make sure the infrastructure is right." And then once that's all done, then we'll amp up the volume, right? So I think, for us, that's the kind of profile. So one is, we're looking at the profile as best we can, and the other is then working with the supply chain to make sure we have the relationships in the event this is much steeper than we imagine. We want to make sure we're able to react to that. So it's not a market that you can just go to a customer, and they say, "Well, here's my forecast." Because they have no idea. And then we have customers that are staying, "Well, it could be 500,000 units, or it could be 20 million units." I mean, that's the variability because they don't know. But everybody knows it's going to be a big number. They just don't know how that's going to ramp over time.
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Unidentified Analyst, [28]
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Can you say anything about Feitian? How that -- and Card Tech, how that relationship is developing?
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Stanley A. Swearingen, Idex ASA - CEO [29]
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It's developing phenomenal. They move quick. And I think what Henrik was talking about, their process is very much streamlined. And so they're well into the phase where -- well into the phase of promotional activities.
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Unidentified Analyst, [30]
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Both? Both or just Feitian? Or Card Tech?
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Stanley A. Swearingen, Idex ASA - CEO [31]
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Who?
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Unidentified Analyst, [32]
------------------------------
Card Tech.
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Stanley A. Swearingen, Idex ASA - CEO [33]
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Sorry, I was just talking about Feitian. Card Tech was part of the contact-based program, so it's a bit behind.
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Henrik Knudtzon, Idex ASA - CFO [34]
------------------------------
Okay, that concludes the presentation. Thank you very much.
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Stanley A. Swearingen, Idex ASA - CEO [35]
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Thank you.
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