1st half.

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AB: Welcome to the first Poet Q and A session exclusively for members of the reddit forum. Chairman and CEO Suresh Venkatesan will be answering questions submitted by investors as Poet continues it progress towards valume production of products based on its optical interposer platform. Suresh thanks for taking the time to be here.

SV [0:29], Thank you so much Adrian and I’m happy to be here to hear from our investors I definitely value their contributions and I especially like that we might be reaching a new audience. I look forward to hearing whats on your mind and to give you information on the really exciting things that we’ve got going in our company and across our offices in North America as well as in Asia.

AB [0:58], My name is Adrian Brijbassi and I am an investor in Poet as well as a journalist who has followed the companies story and now I also help with its communications and content initiatives. I’ll be asking the questions provided by the reddit community. We have dozens of questions and can’t possibly get to them all today with Suresh, so what we’ve done is to combine them where it made sense to do so. And for those questions not included we’ll be providing written answers.

For those who may be new to the Poet tech. story, a little background. The company under Suresh’s guidance has developed a proprietary technology called the Poet optical interposer that merges electronic and optical components on a single semiconductor chip.  Eliminating numerous assembly steps which reduces cost and boosts performance. A suite of products has been built of of the optical interposer and those products will provide greater data density and lower manufacturing costs and data commnications for a range of verticals. Poet has accomplished what companies like Intel have not been able to do and they’ve done it largely from the decades of experience from the senior team led by Suresh. Poet is poised to be a leader in the photonics industry which is an extremely hot high tech sector for investors and is estimated to be a 1.2 trillion dollar industry by 2030. Poet conservatively estimates it will be a billion dollar revenue generating company within 5 to 7 years.

Poet is headquartered in Toronto Ontario with operation offices in Allentown, PA, Singapore, and Shenzhen, China. Last year it launched a joint venture operation with the worlds largest compound semiconductor company, Sanan IC, located in China. That facility is named Super Photonics. And is assembling some products for the global market and some exclusively for the China market. All of this info and more is available on the Poet website and we’ll be discussing the Poet ecosystem during our talk today.

Suresh, first of all, on behalf of all the investors in Poet, thank you for taking the time out of your busy enrollment schedule to address these questions. Poet’s investor base is incredibly devoted and I’m sure appreciate the work you and the team have done. 2021 is winding down. The pandemic, according to many experts, is winding down in the months ahead. How are you feeling as Poet moves into what looks like a momentous 2022?

[SV, 3:20], Oh I sure hope the pandemic is winding down. It doesn’t feel like that when I travel around the world. You know what? I feel confident. The team’s confident. I’ve had a chance now to visit menbers of the team in Singapore, members of the team here in North America as well. Its great how things are coming together. You know we still have challenges ahead of us. You know for me I have seen throughout my career with new technology that the burden of proof is never complete until something is ultimately manufactured. I’ve seen this in Freescale-Motorola,  Global Foundries. You know I’ve introduced several technologies into the market and some go really well and others take a while to gestate. And I’m always aware of that. It’s an outlook that keeps you grounded and it’s the nature of our industry. We keep having to convince all of the skeptics that this is a technology that we believe will ultimately win out and work. It’s still a very conservative industry. Even though you might not think that because it does require innovation to continue to grow. You know innovation is incremental. People have a cost reduction roadmap that is just labor and volume driven rather than innovation driven. Or at least not a dramatic innovation like the one that Poet’s putting out there. So from that standpoint, w have work to do. We’ve got more wins to get. We’re happy to have 4 committed customers that we’re working closely with today. We get into manufacturing, we win more customers. And the process of getting these wins is complex too. But I’m very confident that, as we get more of these parts delivered at the beta and production levels of quality that we’ll be making believers out of a lot of people. So keep building momentum.

[AB, 5:26] Yeah, a key part of that momentum building is team building and as you said you’ve been traveling. You were in Singapore recently. And that was your first time there since the pandemic started. One of our first questions from the reddit audience is about the operations in that country. What is the current state of Poets Singapore facility and how is it evolving?

[SV, 5:46] When I left Singapore it was early 2020. I think we just completed the sale of Denselight in October/November of 2019. We just signed a lease in a new office, there [was] really nothing there. We had a couple of employees. So it was really great to be able to go back after two years. The labs completely built out. We’ve got over 15 people on staff running complete operations for test, characterization, and reliability. So we’ve got a clean room set up. And that’s what the Singapore operation does for us. You know we manufacture the interposers at Silterra, and those interposers get shipped to Singapore and we do all of our characterization and test there before it goes to Super Photonics for assembly. We’ve grown to over 15 people, we run two shift operations 7 days a week. It’s a fair bit of productivity out of that small group of people. You know I was actually touched in many ways with the sacrifices that that team has had to go through these past couple of years. Here in the US I’ve largely been working out of the house. There’s not a requirement to go into the office. But for the team in Singapore the story is different. They need to be at work. They need to be at the offices. They need to be at the labs. Without them being able to do that we could not have made the progress that we did. These folks traveling to work, this was pre-vaccination, traveling trains, buses.. They take a lot of risk. And that kind of commitment and sacrifice from the team is something I’m really immensely grateful for, because we would not be where we are today without that kind of sacrifice. And they do it because they believe that we are onto something great. They want to be part of a great story. It’s just great to have such a committed team. So the volume of activity in Singapore continues to grow. We’ve got so many new projects. We’ve added new products to our roadmap that we are executing on. You know we’ve got a ramp at Silterra we’re managing. We’ve got a ramp at Super Photonics we’re managing at the same time. So transferring that knowledge and bringing up a new team.. It’s just a buzzing place. In addition to that we’ve signed an agreement with the National University of Singapore and we’re a founding member of a hybrid integration assembly center there. We’ve partially co-invested in that facility, but we’ve been able to leverage the university as well as the government to set up a state-of-the-art hybrid integration assembly site in Singapore that we’re going to be commissioning in January. It’s a hybrid optical electronic center that is going to be a critical piece of our prototyping plans next year for products that are not directly applicable to our JV in Super Photonics like remote lasers, light bars for the AI market etc. So we’re happy to have that capability funded by others, but used by Poet in Singapore. And we’re really looking forward to having that come up in Q1 of next year.

{AB, 9:20] … We have a few questions related to SPX (Super Photonics)  the investors essentially want to know what the production schedule is for the joint venture and how is the operation there growing?

[SV, 9:40] Things are going well. Obviously the firstand second branches of investment are in. We’re committed with our partners to invest over 25 million dollars in CAPEX over the next couple of years. Much of that investment comes from our partners. We average a couple of calls a day with the team. There’s a lot of collaboration. There’s a lot of commitment from both sides. A lot of growing pains too, so… especially when you can’t travel. You just can’t travel into China and that has been a challenge that we are working through. But of course the Super Photonics team adds a lot of experience and engineering talent themselves. Sales as well. We expect production for the 100G, 200G CWDM4 to begin in Q3 2022. So beta samples by the end of the year [2021], early Q1 [2022]. You know I know there’s been some noise about “Oh you’re moving schedules around”, and the reality is we put schedules, we project schedules based on expected lead times and you know they don’t always pan out. They are not technical challenges, but they are challenges… and just getting everything completed and in the hands of the customers. We’ve added a whole new product family to our roadmap, which is the entire LR4. They all hav eto come together on a common mask set in the foundry. We just don’t have the ability to just focus on one or the other, there own independent roadmaps and timelines, because ultimately they do have to come together for productivity reasons. But we are largely on track so we will be in production in Super Photonics in Q2. We’ve got committed customers. They are expecting parts. We’re starting to make our projections on wafer starts and volume. Super Photonics has placed additional POs [purchase orders] for new tools to expand capacity. We’re about 25 people now in Super Photonics. The lab’s fully equipped. Just recently they’ve demonstrated and transferred the entire assembly capability: lasers plus photodetectors, plus the test, plus the fiber attach. So I think thing s are coming together. We’re working a plan with them. I can’t be more proud of the team. Can’t be more proud of our global team, including our operations in Shenzhen that have been very critical to bringing Super Photonics up as well.

[AB, 12:40] ... the question relates to not only Super Photonics but maybe globally, the operations…How many samples does Poet have in customers hands right now? These would be alpha and beta samples. For how long have those customers had those samples? How much longer before these customers have seen what Poet samples can do and are ready to move forward with POs?

[SV 13:08] We have a list of customers, about 10 of them, that have our alpha samples. And then we’ve got a whole list of customers that will be getting betas because some customers would rather do that evaluation once rather than multiple times. The story is different for different products. So 100G CWDM, most of these customers have a path, so what we’re providing is a cost reduction, parallel path. For them, they are going to keep doing what they are doing until such time as they believe there’s value in conversion [to Poet]. So they’re not going to take multiple samples at multiple steps along the way. So for those customers its primarily beta samples that we’re delivering. We’ve got another group of customers and they don’t have a path. They want to adopt the Poet path as their primary path. Fibertop is one of them and we’ve been obviously working with them very closely. They’ve got a bunch of sample as well. I think the design win equation is different for different products, different for different customers and different depending on their maturity. It’s not as straight forward as you give them a sample and then they sign on the dotted line the next day. In many cases that first sample is proof that this thing can work. There’s ramp capabilities that beta brings, and so we do expect that we are going to convert some wins. The first wins we’ve got are largely people that almost sight unseen decided that this was the path that they wanted to take and made their commitments.  For others it’s a conversion. You’re going to convert them from one way of doing business to a different way of doing business. Whether that traction occurs at 100G, 200G… we are still feeling things out. Now that we have something the conversations elevate to the roadmap. The conversations elevate to capacity. You know all of those things have to come together. I’m hopeful that we’re going to be able to get other customers engaged and validated in our platform. We haven’t changed our plans relative to what we want to do with Super Photonics. We’ve added our product portfolio on the roadmap with LR4 that we would probably talk about a bit later. The process can be either immediate or can take some time. And it's very difficult to predict. Based on my experience, Vivek’s experience, we cannot put a trajectory of how we believe these conversion can occur. But it is unpredictable especially with the holidays upon us. That’s kind of where we are. I mean the samples are performing relative to expectations really well. We finished our DVTs [design validation testing]. We operate at about 30% lower power than competing solutions. We have eye margins that are best in class. It’s not a technical issue at this point and we do believe we will get to beta by the end of the year. We will be sampling that in early Q1. Definitely production is on schedule because we do have the committed customers you’ve got to deliver to. I think as that capacity is put in and as the confidence builds this new team can actually delivery everything that they promise, then the conversation can change.  At every given step, our bar keeps getting raised. Now it is “hey this works great technically, can you build this at some scale?” So we are working our way there. I am fairly confident we’ll get there. The process is different for different customers.

[AB 17:28] Lets get into LR4. LR4 means long-reach, I think it refers to connections of 10km. Explain where LR4 is used and why you believe that Poet has an advantage in the market for LR4 devices.

[SV, 17:42] Long reach is 10 km. LR4 is primarily used in the telecom side as opposed to datacom. Or with inter-data centers, not inside data centers. So the volumes are less, but it’s a growing market primarily because of the 400G to 100G breakouts that are requires in the networks. We believe we have an advantage because in the CWDM space, there are competing technologies from an integration perspective. They may not be as cute and effective as what Poet does, but Intel does have 100G CWDM using silicon photonics, people have done parallel communications, etc. LR is still being done the conventional way. Lasers and sub-mounts and lenses and isolators and active alignment and so on. Ther has been really no push in the LR space to be integrated. So cost reductions in the LR space has trailed considerably what is typically on CWDM. We believe the interposer platform is equally effective at LR as opposed to CWDM the cost structure doesn’t change. And so we think we can garner higher margins, while still providing a significant benefit to the customers. Its an exciting market only because there is no precedence of competition that we see at least today. And we are well poised to be able to deliver these unique combinations of transceiver engines in that space for the telecom guys.

[AB 19:56] … even if you can never discuss the names of your customers, will we ever get to hear a revenue projection before those revenues hit the books?

[SV 20:03] Depending on how our business grows, I wouldn’t say “never” discuss the names of customers. Nevertheless, it is not customary for public companies to give long term forecasts so we will not be doing that. We have identified and quantified systematically what the revenue trajectory would be. We have disclosed that for SPX because its their revenue, it’s the JVs revenue. But on the Poet side as well, we’re putting the business plan associated with [what] Poet’s revenue is going to be in the markets that Poet would serve independent of the market that the Super Photonics JV would serve. Its really critical that we kind of level-set a bit on what the JV is.. the purpose for establishing it. First, people don’t engage until you have a certain amount of scale, so the JV gives us a ticket to play, effectively. So it allows us to get in the doors of people because we’ve got the capacity to be ablr to service them. But I think more importantly it’s teaming up with a company that has the reputation of this manufacturing scale which we did with Sanan IC. We set it up in China, because, especially for the low end, 100G 200G, and even in the initial phases of 400G, the market’s all in China. That’s where, predominantly, the customers are. The high-end customers, so 400 FR4, 800, co-packaged optics. They’re more global. But in the low end it’s primarily China. Establishing that JV to access that market was really important for us. So how does the revenue situation play out? So SPX gets a revenue and obviously Poet benefits immensely from that. First of all as they ramp volume, our technology and market acceptance is validated and the ability to scale manufacturing is demonstrated. That opens the door across the board, for other products as well. Poet plans to sell 400G, 800G, co-packaged optics and other remote lasing sources that are not really part of the JV so that forms Poets revenue stream… as well as some non-recurring expenses that we can garner as consequence of working with customers. But the value of Super Photonics is cash. It generates cash from operations that would be dividends out to the company. But even more importantly, valuations in China are immense. 10 to 20X revenue. So as SPX starts generating revenue, the value of SPX grows immensely and Poet would own half the JV. So its really important to note that our share of the JV and the value of that increases dramatically as SPX starts hitting its revenue targets. So we think that there is going to be a time when SPX will go public on the STAR exchange in China [Shanghai] at very good valuations, and that just directly translates to benefit to Poet. We’ve already been approached by folks who see the potential of that, the potential IPO I would say, to buy out some of our shares and equity shares in the company. SPX is very strategic for a number of reasons. One is proliferating our technology and ensuring that there’s market acceptance for it. It is access to the China market which otherwise we would not have been able to access. Its providing a non-dilutive value to the company because of the very nature of the valuation structures in China. And our ability to potentially to liquidate some of our equity stake to promote the kind of growth that we want to do on the Poet side. I know it’s a complex story, but strategically it makes a lot of sense for us. We are really happy that we are at the point we are at with the JV, and the revenue trajectory associated with that as well as the trajectory that we can engender on the Poet side.