Earnings call transcript: Elliptic Labs Q3 2025 sees 50% revenue growth

Elliptic Laboratories AS reported impressive financial results for the third quarter of 2025, showcasing a 50% year-over-year revenue growth to NOK 42.3 million. Despite the strong performance, the company's earnings per share (EPS) and revenue forecasts were not directly provided, preventing a comparison of actual results to market expectations. The stock showed a modest increase of 1.69% in its last trading session, closing at NOK 8.54.

Key Takeaways

• Revenue grew by 50% year-over-year to NOK 42.3 million.
• EBITDA surged to NOK 12.7 million from NOK 0.5 million the previous year.
• The company launched 58 smartphone models in 2025.
• Strong market recovery observed in global smartphone shipments.

Company Performance

Elliptic Labs demonstrated robust performance in Q3 2025, with a notable 50% increase in revenue compared to the same period last year. The company's year-to-date revenue reached NOK 93 million, up from NOK 84 million in 2024. This growth is attributed to the successful launch of 58 smartphone models and advancements in AI Virtual Smart Sensors.

Financial Highlights

• Revenue: NOK 42.3 million, up 50% year-over-year.
• EBITDA: NOK 12.7 million, a significant increase from NOK 0.5 million.
• Cash Position: NOK 54.8 million.
• Operating expenses increased by only 8.6%.

Market Reaction

Elliptic Labs' stock price rose by 1.69% following the earnings report, closing at NOK 8.54. The company's stock is performing within its 52-week range, with a high of NOK 14.44 and a low of NOK 7.8, reflecting investor confidence in its growth trajectory.

Outlook & Guidance

Looking ahead, Elliptic Labs is targeting double-digit revenue growth for the full year, contingent on Q4 shipment volumes. The company is also exploring new market segments, such as smart glasses, and reassessing midterm revenue targets. Strategic reviews of commercial opportunities are ongoing.

Executive Commentary

CEO Ola Sandstad emphasized the importance of the AI Virtual Smart Sensor Platform, stating, "Our platform represents a strong value proposition towards a number of use cases." CFO Mattias Nordru highlighted efforts to optimize working capital, saying, "We will focus on trying to build and agree upon good contracts that will help us reduce the working capital over time."

Risks and Challenges

• Supply chain disruptions could impact product launches and revenue.
• Market saturation in the smartphone industry may affect growth.
• Dependence on shipment volumes for revenue targets poses a risk.
• Macroeconomic pressures could influence consumer spending.

Q&A

During the earnings call, analysts inquired about working capital management and revenue recognition complexities. The leadership transition was also addressed, with executives emphasizing continued operational stability.

Full transcript - Elliptic Laboratories AS (ELABS) Q3 2025:

Ola Sandstad, CEO, Elliptic Labs: Good morning, everyone, and thank you for joining us. Welcome to Elliptic Labs' third quarter 2025 results presentation. My name is Ola Sandstad, CEO of Elliptic Labs, and with me is Mattias Nordru, our CFO. It is our pleasure to present the quarterly results for the first time. With that, let's dive right in. Looking at the highlights from the quarter, we see that revenue from customers increased by 50% year over year to NOK 42.3 million. The main driver was milestone revenue from the two major laptop contracts we announced in Q3. Around 65% of the minimum commitments under those agreements were recognized in Q3. Pay-as-you-go revenues were softer. This reflects our contract mix, where most of the units shipping today are still counted toward minimum committed volumes.

However, we see high shipment volumes across both smartphones and laptops, and once the minimum commitments have been fulfilled, these volumes will start generating pay-as-you-go revenue. Moving to profitability, EBITDA came in at NOK 12.7 million, up from NOK 0.5 million last year, reflecting the higher revenue contribution and a relatively stable cost base. Our cash position ended the quarter at NOK 54.8 million, and cash flow was supported by high shipment volumes. Looking ahead, achieving double-digit revenue growth for the full year will depend on shipment volumes in the fourth quarter and the outcome and timing of ongoing contract discussions. Finally, we are initiating a broader strategic review of our commercial opportunities and priorities as part of the leadership transition. During this process, we will also reassess our midterm revenue targets, and we look forward to sharing an updated assessment once this work is complete.

Before we move into our own smartphone activity, it's useful to look at the broader market backdrop. On the left, we show the global smartphone shipments of the last 12 months. The market has continued its gradual recovery, with shipment up just over 2% year on year. While the growth is modest, it is the continuation of a positive trend we've seen over the past few quarters. On the right, we've broken out the year-on-year shipment developments for the top five OEMs. Within this group, our customer OEMs continue to perform well, and combined recorded a year-on-year volume increase of just above 5%. Overall, the smartphone market is showing steady improvements, and the OEMs we work with most closely are performing well within that environment. Looking at the volume shipping to the market containing Elliptic Labs' AI Virtual Smart Sensors, we also see a clearly positive development.

These charts show customer shipments indexed Q3 two years ago. Using that baseline, we can clearly see how volumes have developed over time. While quarterly fluctuations are natural, the overall trajectories are steadily moving upward. If we compare Q3 this year with Q3 last year, customer shipments for both laptops and smartphones with our sensors have grown very meaningfully, reflecting that a larger number of models in the market feature our technology. These shipped volumes are important because they form the basis for future pay-as-you-go revenue once minimum commitments are fulfilled, and they show that adoption rates continue to build. It's also important to note that several of these laptop models on the left-hand side include two products. That is, two AI Virtual Smart Sensors which drive up the price point per model.

We've shown versions of this before to try to help you understand the relationship between milestone revenue for minimum committed volume and pay-as-you-go revenue. Now we've also added the cash flow profile. The chart we're looking at is showing actual revenue and cash generation for the laptop contract we announced in the third quarter of 2022, which is now nearing end of life. What this illustration shows is that even with high initial shipment activity, units shipped within the minimum committed volumes do not generate pay-as-you-go revenue. At the same time, these shipped units were invoiced on a running basis. You can see this reflected in the light blue cumulative cash curve. Cash builds steadily as devices ship, regardless of whether those units are above or below the minimum commitment.

Applying the key takeaway on this, the majority of the volumes shipping in Q3 2025 are still below minimum committed volumes and have therefore not yet started generating pay-as-you-go revenues. Another important indicator for our business is the number of models launched with Elliptic Labs' AI Virtual Smart Sensors. This chart shows the cumulative number of smartphone and laptop models brought to market with our technology since 2016. What stands out is the acceleration over the past few years. So far in 2025, 25 models have launched containing a total of 34 of our AI Virtual Smart Sensors. For comparison, last year, we had 15 laptop models with 16 sensors for the full year. The level of activity in laptop has clearly increased. On the smartphone side, 58 models have already launched this year. Coincidentally, the same number has accumulated a number of laptops so far.

The key takeaway is that every model launched expands our install base in the market. This growing footprint is a key driver of long-term revenue potential. Since 2016, a total of 220 smartphone models have launched with Elliptic Labs' AI Virtual Smart Sensors, driven by long-term relationships with repeated launches, as well as new customers such as TCL, which was recently announced. The examples on the right illustrate the breadth of devices we support, from flagship models to high-volume mid-range devices across global OEMs. Our position in the smartphone market remains strong because our performance is proven through many generations of devices. Existing customers can adopt new models quickly without additional proof-of-concept testing. Overall, this level of deployment highlights the depth of our footprint in smartphones and the continued trust from the leading OEMs as they roll out their portfolios.

Now, I'm pleased to hand the word over to Mattias for some financial perspectives.

Mattias Nordru, CFO, Elliptic Labs: Thank you for that, Ola. Good morning. As I step into the CFO role, my focus today is to give you a clear and transparent view of our financial performance this quarter. Let me start by putting some color on our revenue development. As Ola said, we report revenue of NOK 42.3 million for the third quarter isolated, up 50% from the third quarter last year. The graph on the left-hand side shows the cumulated revenue for the first nine months of NOK 93 million, up from NOK 84 million in the same period last year. As we have already touched upon, this reflects a mix of recognized milestone revenues and pay-as-you-go revenues. We only split revenue by verticals on an annual basis.

As you can see on the right-hand side, both smartphones and laptops have grown over the years, with the 2024 revenue of NOK 132 million split between close to 60% smartphones and a little over 40% laptops. This slide looks at our performance on a last 12-month basis. Total revenue for the last 12 months amounted to NOK 142 million, which is also up 50% year on year from NOK 95 million in the 12 months leading up to Q3 2024. At the same time, our operating expenses increased only by 8.6% over the same period. This means we have maintained cost control while scaling the business, which supports profitability and gives us operating leverage as volumes build. That continues to be a key focus going forward as well.

Turning to the quarterly P&L, revenue from contracts with customers came in at NOK 42.3 million, which, as mentioned, represents 50% year-on-year growth. This was mainly driven by milestone revenue from laptop contracts announced in Q3, supported by pay-as-you-go revenue from smartphones and laptops on volumes that exceeded the minimum commitments in those contracts. Total operating expenses ended at NOK 29.9 million, broadly in line with the third quarter last year. Employee benefits expenses were stable at NOK 23.1 million, and other operating expenses were NOK 6.8 million. The increase here is mainly related to a NOK 1.5 million increase in the expected credit loss provision on trade receivables. EBITDA from the quarter was NOK 12.7 million, up from NOK 0.5 million last year, reflecting both the revenue uplift and stable cost base.

Moving to the cash flow, we ended the quarter with a cash balance of NOK 54.8 million compared to NOK 57 million at the end of Q2. Operating cash flow was positive at NOK 6.5 million, mainly driven by NOK 5.5 million in profit before tax and a positive NOK 5.5 million impact from changes in other current assets and liabilities, including a NOK 4.8 million Scotland Tax Credit refund. This, again, was offset by a NOK 10.7 million increase in receivables related to milestone revenues recognized in this quarter. Investing cash flow was minus NOK 6.5 million, reflecting stable R&D investments into our AI Virtual Smart Sensor Platform. Financing cash flow was minus NOK 2.1 million, reflecting lease repayments and interest payments on those lease liabilities. Note that all current borrowings have now been repaid. Overall, the cash position was relatively stable through the quarter.

Lastly, we continue to remind you that our cash flow is exposed to exchange rate fluctuation. Okay, let me spend a moment on receivables because this is an area where our contract structure plays a significant role. Trade receivables increased to NOK 104 million in Q3. The main increase from the previous quarter is the laptop contracts announced in Q3. When a contract includes milestone revenue, we recognize that committed revenue upfront at a point in time, but the cash is collected gradually as units are shipped. That means receivables naturally increase at the point of contract signature. Because of this, the contract mix in any given quarter impacts our receivables. As volumes start to ship and we are seeing strong shipment activity now, those milestone-related receivables are reduced and converted into cash.

The same high volumes that currently fall within minimum commitments, as Ola described earlier, are also what support cash generation. You can also see from the graph here the impact of contract mix in our day's sales outstanding, or DSO. DSO fluctuates from quarter to quarter, but this is not a reflection of slower payments or changes in customer behavior. It is simply driven by the timing of contracts. As such, the composition of receivables reflects our contract structure. The majority is represented by milestone revenues. Pay-as-you-go revenues recognized in the quarter will be received as cash in Q4, and we also have a smaller share of fixed price contracts, which follow agreed payment schedules. Finally, let's take a look at the balance sheet. As previously mentioned, cash ended at NOK 54.8 million, slightly down from Q2.

Current assets increased by NOK 5.4 million, mainly due to a NOK 10.7 million increase in trade receivables and a NOK 5.3 million decrease in other receivables, which relates to the Scotland Tax Credit refund mentioned on the previous slide. Current liabilities decreased by NOK 3.6 million, mainly from the lower trade payables and lease liabilities. Our equity ratio improved to 92%, up from 91%, reflecting a strong balance sheet. I now give the word back to you, Ola, for the road ahead and closing remarks. Thank you, Mattias. Let me turn to the road ahead and outline our priorities for the coming period. Let's move into our outlook. As mentioned, achieving double-digit revenue growth for the full year will depend on shipment volumes in the fourth quarter and the outcome and timing of ongoing contract discussions.

Revenues in Q4 will be driven by three elements: milestone revenues from the laptop contracts we announced in Q3, pay-as-you-go revenues, and revenue recognition of anticipated new agreements. Further, I have initiated a strategic review. We will explore, develop, and validate our commercial opportunities across new and existing customers. As part of this process, we're also going to reassess our midterm revenue target. Our priorities remain on fully monetizing existing contracts, expanding with current customers, launching more models across more verticals, and increasing the number of AI Virtual Smart Sensors per device. At the same time, we are exploring new opportunities, such as smart glasses, where our platform can add meaningful value. As we look ahead, it's important to step back and consider the broader opportunity our technology is positioned to address.

Our AI Virtual Smart Sensor Platform represents a strong value proposition towards a number of use cases, and our focus remains on continuing to execute along the three areas where Elliptic Labs already has a strong and proven value. First, replacing hardware sensors with software, an area where we build a solid commercial footprint through our AI Virtual Proximity and Human Presence Sensors. This offering continues to be a core driver of adoption because it reduces costs, saves power, and simplifies device design. Second, enabling device interoperability. Features like Tap-to-Connect are successfully deployed in the market, and we see continued interest from OEMs for solutions that strengthen ease of use and help to build a secure device ecosystem. Third, developing contextual-aware AI-driven features. This includes Tap-to-Transfer and other Custom Sensor Agents that adopt a real-world environment and user behavior.

This is an area where we see significant potential, particularly as devices become more intelligent. These three verticals form the foundation of the company today, and they will remain our primary areas of execution and growth near term. At the same time, we continue to innovate and evaluate new opportunities where our platform can add value. One example is smart glasses, where our combination of AI and sensor fusion can bring clear value and enable completely new user experiences. This is still an emerging space, but it's one we're actively exploring. The opportunity in front of us is broad, but our approach is disciplined. Continue delivering in the areas where we are strong today while evaluating new avenues that can expand the reach of our platform over time. We'll now move over to the Q&A.

We'll take a couple of minutes and review the questions, and then we'll kick things off. Thank you.

Ola Sandstad, CEO, Elliptic Labs: Oh, then we're ready.

Mattias Nordru, CFO, Elliptic Labs: Okay.

Ola Sandstad, CEO, Elliptic Labs: Back for some Q&A. We have received a lot of questions now. We have them in front of us. I will try to walk you through most of them and try to compact them a bit.

Mattias Nordru, CFO, Elliptic Labs: Yeah, thank you for all the questions.

Ola Sandstad, CEO, Elliptic Labs: Absolutely.

Mattias Nordru, CFO, Elliptic Labs: It's a lot of them, so that's great.

Ola Sandstad, CEO, Elliptic Labs: Yeah. We really value the commitment and the engagement from our shareholders. Also, moving forward, we really want to emphasize the importance of having an open dialogue between us and the markets. Let's start off. Working capital is a topic that is part of the questions, Mattias.

Mattias Nordru, CFO, Elliptic Labs: Yeah, we received a question on the working capital. It's still 70% of revenues. How will you get that down? Is one question here. Yeah, that's a good question. Working capital is something that we have very much focused on in the past and also something that we will keep focusing on going forward. As we've touched upon already in this presentation, the contract mix plays a big role in determining the actual size of the account receivables each quarter. We will focus on trying to build and agree upon good contracts that will help us reduce the working capital over time. That's something that we will also get more into in our strategic review.

Ola Sandstad, CEO, Elliptic Labs: Yeah, absolutely.

Mattias Nordru, CFO, Elliptic Labs: For the end of the year.

Ola Sandstad, CEO, Elliptic Labs: How the flow is on this is, of course, built up by the contracts, the milestone revenues, the recurring revenues, new projects, redelivery of existing products. The continuous mix of that is going to develop. This topic is something we are indeed talking with our customers about, how we structure this when we do deliveries for the smartphone and the laptop markets. As pointed out, it's a key topic in our strategic review, which I have started now. Let's move on. When it comes to Q4 and quantifying and clarifying what Q4 will involve. In terms of splitting, what types of revenue is pay-as-you-grow? What is milestone? That's something we don't detail in these reports. When it comes to smartphone versus laptop, normally we have gone through that on a yearly basis.

Knowing that there are fluctuations through the quarters and avoiding that the market is reading too much into each quarter, that's something we present on the full-year basis. That's currently the process, and we'll continue doing that.

Mattias Nordru, CFO, Elliptic Labs: Yes, I'll give you another question, Ola, on the agreements going forward and contracts. One question here from an investor. Since the Lenovo agreements announced over the summer, no other new contracts have been disclosed so far in H2. Can you comment on the current contract pipeline, both for smartphones and laptops?

Ola Sandstad, CEO, Elliptic Labs: Okay, it's a good question, and it's a very relevant question. For those of you who have been following Elliptic Labs for some time now, you kind of learned the rhythm of the smartphone market and the laptop market, how their cycles are. The only thing I can comment on that is basically that the health and the operation of Elliptic Labs is fully intact when it comes to our relationship to our customers and how we go from contract into contract renewal. There's nothing really that has changed on that. Based on that, you could be able to estimate roughly what's ahead. We don't talk about contracts until we actually announce them due to, of course, NDAs and whatnot with our customer base.

Looking into Q4, it's a quarter we're now in the midst of and really focused on closing in a nice way as well. Thank you. Let's say, so we're looking at a question regarding smartphone model launches and the question how this impacts year-on-year revenue growth. That apparently it appears weaker in 2025 versus 2024. Looking at that, it's important again that we went through in the presentation to look at the minimum commitments that we get when we sign contract with customers and the corresponding pay-as-you-grow. The distance between when the pay-as-you-grow starts versus the size of the minimum commit is always going to be some variation in that. The underlying shipping volumes that we see and that we deliver on are increasing as we showed in the presentation.

That's kind of the main thing to focus on, how the underlying business is in terms of our deliveries and our contracts, which involves customers, models, and how many products we are delivering to each of those models. Yeah.

Mattias Nordru, CFO, Elliptic Labs: Just to add to that, Ola, as we also touched upon in the presentation, there will be variations and fluctuations in the royalty revenues from quarter to quarter depending on the contract mix and what was touched upon already in the presentation. That is also the reason why we, some of the reason why we tend to get back to the allocation or between the verticals at the end of the year because we need to have a bit of a longer view on the figures. Only the quarter-by-quarter is too much noise, fluctuation in those numbers, you could say. It is a better way of tracking and really measuring the performance over time. We will get back to those figures at the end of the year in Q4.

Ola Sandstad, CEO, Elliptic Labs: Yeah, good. There's a mix of questions that ties into the calculation of what Q3 contains and kind of the underlying run rate, et cetera. Just want to remind people that we are also in a mix of USD versus NOK. There are timing aspects here. Doing the finer math on the finer numbers, keep that in mind when you do this, right? Some of these factors are outside our control. In general, this quarter and the upcoming quarters will carry on roughly with the same type of mix.

Mattias Nordru, CFO, Elliptic Labs: I can take this one for you as well.

Ola Sandstad, CEO, Elliptic Labs: Please.

Mattias Nordru, CFO, Elliptic Labs: You announced a strategic review of product and customer roadmaps. What specific areas are under review? Does this process include revisiting the current business model, cost structure, or contract terms with key customers?

Ola Sandstad, CEO, Elliptic Labs: That's a good, it's a wide question. I think the answer to that could be half an hour in itself. What's the strategic review? Basically, what we are looking at, have started looking at, and will continue focusing on for the remainder of this year at least, is, as pointed out, the products that we sell to the current customers and the business structure. We touch upon things like working capital. We touch upon things like where is a software company delivering AI Virtual Smart Sensors to, let's say, the hardware business, hardware-driven market, the laptop and the smartphones. A lot of the things we're deploying today, today follow, let's say, the rules of the cycles of a device that's being manufactured.

Being an innovative smart software company, we really want to try to help our customers move into more of a software thinking in terms of giving their customers an incentive to add more features even after the product has been deployed. That type of discussions are really interesting to have with the customers. Also looking at, for instance, ways to get products to market even after it's been shipped. Take the example of Nespresso when they sold coffee capsules. That was really nothing new, but it was an innovative business model to sell the machine at low cost and then sell the pods at a recurring high volume. These are the type of things that we also are looking at. It's not just about technology innovation, but really also about business model innovation. The full team in Elliptic Labs is a part of this.

Strategic review also, of course, means the typical standard account management going through and getting the real numbers out on what we believe in and where we will put our effort moving forwards. Continuing a bit on that, I did touch upon in the presentation, for instance, smart glasses. We are in the market where we are delivering our technology and our features to smartphone vendors. If you do your research, you'll see that a lot of these vendors are now stepping in or have already stepped into other verticals or other device categories, smart glasses being one of them. That is a really exciting position for us knowing that Elliptic Labs is fully integrated with the likes of Qualcomm, MediaTek, Intel, AMD, and Nvidia, these type of companies that form the basis of the devices that go to markets.

That position, a Norwegian tech company living inside the inner parts of these chipsets, is a great position to do even more innovation. I'm really happy to look into the future on the things we'll talk about on the capabilities with our existing customers, but maybe new products. Let's see.

Mattias Nordru, CFO, Elliptic Labs: Good.

Ola Sandstad, CEO, Elliptic Labs: Going further down the line, have you found a question?

Mattias Nordru, CFO, Elliptic Labs: Yeah, we have more questions regarding the Q4 and the revenue mix. I think we already touched upon that once, so that's okay. I had one question regarding the ECL in the other operating expenses. We did a provision on ECL on trade receivables, and that's only a calculative calculation relating to IFRS standards that we do. We need to calculate based on a set of inputs and metrics. It's no contract, not related to any specific contract, it's only like a calculation and adjustments to the baseline.

Ola Sandstad, CEO, Elliptic Labs: Yeah. We also have some questions, of course, about the recent changes in the organization, especially on the leadership side. The thing I want to really focus on there is that the team of Elliptic Labs consists of people in a lot of different time zones. It's a one-team effort, even though we have spanned the global locations. What we are doing now is continuing delivering as we have been doing up till now. I've been a part of this company since 2021. Lars Holmøy, our former CFO, and I started one week apart. I'll let you ask him who started first. We've been working together on this journey that we've had now, the growth journey that we've had.

We are fully established on the topics of the products, the markets, the commercial aspects, the leadership, and the teams, having hired a lot of really skilled people during the last four or five years as well. It is a really interesting journey that we are going to continue on. The underlying operational business, the activities, they remain fully intact. There are no changes to that whatsoever. That is what we are going to build on now moving forward. Having also employed people, let's say, three years ago that are now, they came in with a lot of energy and a lot of fresh thinking, and we immediately saw the fruits of that. Being able then to take those aspects into products, into the market, is something that really makes this job and this position an interesting one and an energizing one.

In addition to these type of quarterly reports that we, of course, do, we will start looking into doing more market activities so we also get information between the quarterly reports in such a way that you're a part of this innovative journey that we're on. Good.

Mattias Nordru, CFO, Elliptic Labs: Yes. I think we've covered most of the questions now, actually. There's some questions regarding the share price as well, and of course, we can't comment on that. It's not up to us to comment on that, so we'll leave it at that. Any other questions you would like to raise before we end?

Ola Sandstad, CEO, Elliptic Labs: No, I think we more or less covered some of them came in.

Mattias Nordru, CFO, Elliptic Labs: During the talk here.

Ola Sandstad, CEO, Elliptic Labs: During the talk as well. When it comes to what are the biggest obstacles in securing new deliveries and new product launches, I would say that the markets that we operate in have been impacted by different aspects. You can go all the way back to COVID and how things are changing. We've seen a positive development as we've shown in the smartphone shipment numbers. That's a good thing. It does something with the mindset also of our customers. That also applies to the laptop type of customers, right? Their willingness and their need to do investments in innovation. They're in a critical phase now on that. That's the type of conversations we had with our customers.

Again, going back to this hardware versus software, getting them on board on the benefit of deploying a software solution, which is much quicker and more efficient instead of implementing on the PCB and the hardware design. More about that later. Good. We're done. Again, we are doing an assessment, a strategic review. We will come back with, let's say, metrics and things that we want to put in front of you so you're able to follow the development of Elliptic Labs. That's absolutely something we want. We want to be even more transparent in terms of our development, the wins and also the losses, so that we get closer and can help each other move this forward to a successful journey also in 2026. Yeah. Good. I think we'll leave it at that then.

Mattias Nordru, CFO, Elliptic Labs: Perfect.

Ola Sandstad, CEO, Elliptic Labs: Thank you so much for all the questions and taking the time to look at our presentation. We will see you soon.

Mattias Nordru, CFO, Elliptic Labs: Thank you.

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