Canatu Oyj A Ord

Good afternoon and welcome to the webcast on Kanatus' financial results for 2024, both here at Sanomatalo and online. My name is Mari Makkonen and I'm in charge of investor relations. Today we have two speakers, CEO Juha Kokkonen and CFO Mikko Westerinen. First Juha will cover the highlights of the year, then Mikko will present the financial results and long-term financial targets, after which Juha will discuss 25 outlook and strategy, and at the end we'll have a Q&A session, and you are welcome to type in the questions already during the presentations via the event chat. But without further ado, Juha, please go ahead.

Thank you, Mari. Good afternoon, everyone. And welcome to this first of its kind here, Kanatu's session. So, as a repeat, Kanatu is a rapidly growing deep tech company. We are the high tech material company, designing and manufacturing advanced carbon nanotubes. that are really advanced instead of like the bulk products. And we are focusing on industry transforming products where we are enjoying like high cross margins and where real industry disruptions are happening. Founded over 20 years ago, listed in Nasdaq first note growth market in September last year. Having this differentiated IPR protective technology, our own dry deposition technology making these advanced carbon nanotubes. We have been in mass production since 2015 for automotive domain and since 21 for semiconductor domain. Our customers are global leaders, both in blue chips companies on semiconductor side, as well as the global technology leaders, EV companies on automotive side. We have been growing heavily also in terms of the employees, having right now like 137 employees, very international team, as well as having high degree, something like roughly 20% of our employees are having a PhD or soon to kind of be in PhD. So highly qualified employees. You see there our presence in the world in the slides. Current high growth markets are undergoing transformation. So firstly semiconductor industry where we do see tremendous growth that is especially driven by artificial intelligence. Industry is talking like earlier they were talking about chips everywhere. Now we are talking about AI chips everywhere. They are in productivity, medical, automotive, robotics, everywhere. And that is driving strongly advanced chipset development and the growth. You may have noticed Nvidia's kind of the revenue was growing almost 100%. And you have seen that, for example, TSMC invested or make a promise to invest in USA further 100 billion building three advanced chipset factories. So very, very high growth is continuing here. And we are operating as a Kanatu in this domain, enabling these very advanced smaller than seven nanometer chips to be implemented based on this EUV extreme ultraviolet technology. And that is in our revenue perspective that was dominating our revenue in 2024. Automotive industry is now seems to start kind of the further building its kind of the growth as well in terms of the advanced and assisted driving. And we do see now that there starts to be demand for ADAS level 3. that enables independent driving in highways, as an example, as well as we do see now robot taxis, for example, in the USA, like cities of San Francisco, Phoenix, and also in a kind of limited area in China. So now it seems that this autonomous driving is truly starting to kick off to the next level. Still our revenue last year there was very stable and out of our revenue it was like 10%. Medical diagnostic is seeing significant transformation as well. Where what is driving that one is the demand for point of care, rapid diagnosis, affordable diagnosis, and with high sensitivity. And this is the domain where we don't have yet revenue, but we are investing and developing this domain to be the future third business segment for Kanato. Repeating on our business models here. So first of all, this Kanatus asset light business model enables scalability. We have two business models. One is CNT product sales, where we are selling sensors for the automotive domain as well as membranes and sophisticated filters for semiconductor domain. And for Automotive domain, we have now delivered over 1.1 million sensors and with zero field returns, so with high quality. So this continues, we have existing customer base and growing. Then the other business model that was very new for us starting last year was this CNT reactor sales. where we have two major different revenue elements there. One is non-recurring revenue, where we're actually selling those reactors, tools that you can make this CNT pellicle. And then we have recurring revenue elements, where we have elements like selling consumables, as well as getting royalties when these CNT pellicles are manufactured by our customer. And these first shipments were done last year. Now I think that I'm spending a little bit time with this one, because this is pretty important to understand. So in the process of making the final CNT pellicle product, there are eight steps what we do see. First of all, there's a purchase order to Kanatu. Then there's reactor design and manufacturing here in Finland. Then we assemble that one and we do factory acceptance testing here in Finland in our factory. Then we deassemble that one and we ship it to the final location, to the final customer. Then we do installation there and when we do integration to the kind of the factory setup or foundry setup there and you get the acceptance from the customer at customer premises and integrated to day systems. And then on top of that, because it's not only our membrane that is needed there, there are actually four different process steps. There has to be the CNT synthesis that you make the CNT membrane done with our reactor. Then you need to do some post-processing for the CNT membrane that you get, for example, low deflection there. Third element is that then you need to do capping layer that prevents in this high hydrogen environment that hydrogen does not etch carbon. So that has to be in place. And then finally, you need to have inspection and mounting to the mask itself. These are combined together. So now, then our customers do have to have this full process, these four steps in place. And after that one starts pilot and risk mask production, and then finally high volume production. At this stage seven, the pilot and risk mask production, the volumes of the pellicles are not like 100%, they are like a couple of tens of the processes there. So that's kind of the way how this process works. And like we have been publicly telling, we have been shipping our reactors to our customers. With one customer, we have received SAT approval for the reactor. We are still waiting for the final approval for the post-processing system that is for the pilot purposes for that customer. And for the another customer installation is as small as ready and it starts to move to the kind of the approval phase in that customer case as well. So that's the kind of status where we are at and one of the Let's say the fundamental thing that is like we have like one time costs associated to these first reactors. There are three major elements what has been there. So one has been, first of all, when you are getting the new tools, new processes into these factories or foundries, you need to get safety approval. All the CASs, all the processes, what needs to be done. And this has been a very significant process step to get, for example, something like SEMI S2, that is the certification that your tools are meeting this high safety demand. So that has been one significant step that has been done. Secondly, what needs to be done after the factory acceptance testing in Finland is that you need to integrate your system to the customer factory IT system. So you need to have interfaces from your reactors to their systems. And thirdly, where we are operating in our factory, like with semi-automated system at customer locations, they are totally automated. So you need to integrate your system to the totally automated robotic systems that will carry without human interface in there. So with very low particle level. So that has been the kind of the key steps where we have been now recently working with the customer. customer locations and this process is now ongoing and this is very important element when we are looking to future outlook that you have to get total acceptance at the customer premises before they are kind of giving you the next orders. All right, so highlights of the year 24. So we were publicly listed to the NASDAQ. We have sustaining very strong top line growth. Mikko is going to tell more about that one soon. We have been shipping these first two reactors. Then we have been keeping leadership position in inspection membranes. That is also very important part of our business for these EUV mask inspection equipments. We have been advancing our IPR and R&D and making the investments to our automation line as well as to the ISO 3 level of very high clean level clean rooms. And what has been very beneficial, especially now after listing and having this now very strong balance sheet, has been that we have been managing to even further attract really top talents. And you will hear some news about that one later in this presentation as well. So those are like the key highlights. And now I will hand over to Mikko, who has been actually today nominated as Kanatus permanent CFO. So welcome and great to have you here.

Thank you Juha. It's very good to be here. Very excited about this change and this event. So I will now talk about our financial results last year. And like Juha said, we sustained very strong revenue growth. the last year revenue amounted to 22 million euros in total on pro forma basis and that's maybe one thing which I want to highlight here that all the numbers we are now presenting here are on pro forma basis because the statutory figures don't really give that good picture of the last year due to this D-SPAC transaction but strong growth continued as said In total, year-on-year basis, revenue growth was over 60%. That was driven, as said, by the strong development in semiconductor business and the shipping of these two first reactors. Our gross profit grew over 40% due to 13.8 million in total. And gross margin was 62.5. The cross margin was on a good level, we think, although it declined compared to 2023. But that was driven by the shipping of these first reactors and how they timed and how the revenue recognition happened last year. And like Juha said, It's good to note that these are the first two ones and we are quite positive that going forward there have been lots of learnings both for us and for the customers so that the follow on orders are expected to be more efficient, let's say so. Adjust the EBIT margin, which is one of these key metrics for what we are following. declined to minus 21.9. It's still of course like impacted by the phase of the development where we are right now as well as then also the changes in the product mix last year and then we had a quite high amount of government grants in 2023, which then were not as high level last year, so that also impacted there. Capital expenditure remained stable. five million in total last year and that went to patents and machinery and equipment so like continued as has been for the for a couple of years now and then we want to highlight that this capex last year did not include any R&D capitalization so last year our total R&D expenditure amounted to 4.3 million and that was all in our P&L, not capitalized. All in all, at the end of the year, we had like over 200 patents and applications, and our FTE, full-time equivalent employee count, grew to 223. Then if we dig deeper on the top line development, what happened there, So again there as already said the semiconductor business grew very well and that was the driver there it almost amounted to 20 million euros last year 19.7 to be exact and that was driven by this like reactor shipments as well as steady development in this inspection filter membrane business. Automotive revenue went, remained stable. There was a slight decline, but that was due to by destocking one of the main customers there. But otherwise, it went, like, proceeded forward in that as well. And in the medical side, that had non-material contributions till last year, as we have been indicating that we We do not expect that that will be a major revenue contribution here in the near term. Then Juha will talk about the 2025 outlook in more detail shortly. But we see the long-term potential intact in the markets and with our customers as well. So we reiterate what we've been saying there also previously. So by 2027, we aim to reach 100 million over 100 million in top line in total and our adjusted EBIT margin target is over 30 percentage by that time. Semiconductor will remain or we expect that to remain as the largest revenue contributor automotive medium and medical diagnostic will be limited still by 27 that's what we expect. Capital expenditure on average five to six million per year, what we've been saying. It's good to note that that will be on average also. Not every year will be like the same, but over all the periods. and then we do need good people to make this all happen so we aim to hire like 25 to 35 full-time equivalent employees each year also on average so that might be like some year more some year a bit less And then we want to also reiterate or highlight that these targets, what we said back in 24, when Kanatu went public, they are based on the existing offering or the offering which is currently under development, mostly on the existing customerships. or relationships and then on the cross-margin potential, what we see in these businesses, what we have as of today. CAPEX and headcount growth I already commented and then one additional point which is good to remember is that there are upsides to these scenarios depending on the how the EUV pellicle penetration will develop in the market but now we are or have been building these scenarios on the assumption that they will be adapted mostly in the 500 watt and above EUV scanners. I think that's what I had here about the last year and the long-term targets and now I will hand over back to Juha to talk about the near-term outlook.