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.

Thank you Mikko. Let's move to 2025 outlook. So we are not going to give any numeric guidance for 2025. And at this point in time, and what do we do see there? Like Mikko mentioned, we keep our long term target. What do we have for 2027? It remains the same. So targeting over 100 million euro revenue and having EBIT margin over 30%. And then also from the business perspective, the same kind of the business focus areas are there, semiconductor, automotive and the medical diagnostic. Then what I explained there about the timing of these pellicles and recurring revenue elements and the new reactors there, that is something that it is, like I mentioned there, it is now depending very much on the customer timeline, how they will have their full EUV political solution ready firstly for the low volume production and then for high volume production as well as then what is our timeline of getting the final site acceptance testing. So depending on that timing that will now show our this has an impact of our this year revenue And we do expect that this revenue for 2025 will be weighted towards the second half of the year, mostly. So that's kind of one thing. Then we have some volatilities there and the revenue visibilities that we do see that we have kind of the volatility of the revenue development, particularly on the semiconductor domain, also somewhat on the automotive, on the ADAS domain. So these are the reasons why we don't want to give right now the numeric guidance for 2025. We may, however, assess the possibility of issuing such a guidance or outlook later during 2025. So when we look at this one, we do see that we expect that we can sustain our position as a leading supplier for inspection membranes used in the pattern mask inspection equipments. But what I mentioned there regarding now these new reactor orders, from the existing customers. Those will be now dependent on the timing of the customer's final approval for our equipment on their premises and their launch of the final pellicle products. that is not totally dependent on us, but the customers will have these process steps like CNT post processing, capping layer, and then the final inspection step. So when they have completed that one, we do expect then that the further orders will start to happen. So that's kind of the situation why we don't want to give guidance right now for the 2025. However, we do expect that the semiconductor domain will be still the largest contributor for the group's revenue in fiscal year 2025. On automotive side, we saw one major ramp-up delay last year because of the certain customer processes. But now we expect that these new, especially the ADAS camera mass production ramp-ups will commence in 2025. Last year we added like one new mass production customer on this domain. At the same time, we are advancing our cooperation and we are working together with our partner to develop future solar cells. And if we are successful in these efforts, this will have a positive impact even to our revenue in 2025. Not yet like mass production revenue, but more like significant development revenue there. On medical diagnostic side, what we are now doing is that we have been developing these products and technologies for some time. And now we are working to refine the application and the go-to-market strategy. for this business domain and to really to have a clear focus domains for the certain application domains. And we expect that this new strategy will be launched second half of 25 and we are expecting to kind of further investing in this one and accelerating our developments for this domain. Then if I'm going to Canada's strategy for next three years time, so our vision is to create the most advanced carbon nanotubes for these industry transforming products. And clear focus areas, what we do have here is of course the semiconductor domain and automotive domain from the business perspective. And we want to become a leader for EUV pellicle membranes, inspection membranes. Now also as a new thing, optical filters inside of these EUV machines. and related CNT manufacturing equipment for this CNT technology. So having the leading position in that domain and sustaining it. Then also becoming a leading manufacturer of these advanced film-based ADAS camera heaters. and working to develop the future solar cell, way more efficient solar cells that are available today in collaboration with the strategic partner. Then on the medical diagnostic side, we become the leader in highly sensitive, this point of care diagnostic sensors and with getting really fast results. and to be developed to the targeted applications. And this is exactly the strategy work, what I was referring to, to still define what are those clear strategic applications, because the opportunities are really wide here. Then I'm going to cover this in a little bit more, but now we will also start developing new high profit CNT applications. So we have this application focus today like semiconductor, automotive, medical diagnostic, but this CNT is like silicon. It can be used for the various applications and now After this listing and getting further assets, now we start to have a specific team to start investing for the new applications for these nanomaterials. And there was this announcement about the significant funding by Business Finland also regarding this topic two days ago. Key enables to do this one is that we are now organizing our operations for rapid scaling and increase the role of these business units so that we will have clear automotive, semiconductor, medical diagnostic business units because the customers are different, business models are different, partners are partially different, so that we have really focused efforts for all of these businesses. making the sizeable capital and the headcount investments now this year primarily focusing on the semiconductor business and expanding that one. And then the kind of the, we have developed and we have collected a lot of data during the 20 years of time of developing the CNT technology, being the leader there. What we are now making the effort of really organizing this data in a kind of structured manner and not only organizing but in the future utilizing that one for for improving and and our competitiveness over to competition so that we can utilize the modern modelings as well as artificial intelligence in our development work as well as in our our manufacturing and there long-term target for this strategic period for 2027 is to have over 100 million revenue and EBIT margin to be over 30 percent. From the market sizing perspective we don't see Changes here, so the semiconductor domain driven very much by artificial intelligence, cloud computing, personal computing, mobile computing is driving this EUV technology and high-end advanced chips demand there. Huge investments done to kind of defer to increase the capacity here. For inspection membranes, we do see that the addressable market for these pattern mask inspection membranes are unchanged, €60 million. And then for the full market, when we are going, and I mentioned to you about optical filters as the next step, going beyond pattern mask inspection and going beyond debris filters, we do see that this market opportunity there is totally for these new domains between 120 and 300 million. Then when it comes to this EUV pellicles, CNT pellicles, here again, no changes to the market estimations. So we have here two numbers for the full pellicles. They are like one billion when we are talking about only these high-end, high-power products and mainly for logic chips. And in case it will be wider adapted also for the lower end or lower power equipment as well as more towards memory manufacturing as well, then the market opportunity is up to 2 billion. Currently, as I explained to you earlier, we are operating with the business model where we are manufacturing reactors, selling those, as well as having there these recurring revenue elements. So in that case, we do see, and our estimation remains the same, that we are talking about hundreds of millions of euros, which this revenue could be in 2030. Then moving on automotive side, these ADAS camera heaters, the market estimation remains the same. And for these advanced camera heaters there, being the kind of the market opportunity, roughly like 150 million euro. There are a lot of discussions, partnerships that where we are asked to expand our business, not only be in windshield camera heaters, but going beyond that one to kind of to heat the full windshield or even any windows there. If we would go there, the market opportunity there is way larger. It is like 600 million. This will require significant investments and capex investments. We have not yet done this decision to go there, but this is something that what we are considering based on our development efforts, based on our partner discussions in this year. The medical diagnostic, we are here in the development phase. Great technological developments done here in this domain. And like said, this will provide fast, rapid testing at point of care with affordable pricing and with high sensitivity. So the kind of value proposition is very strong here. We are doing right now our strategy work to really select our strategy for the application domains, as well as to what is our go-to-market strategy and what is the Canada's role in this market. And we are going to inform this one in further time. Then Kanatu launched Carbonaze program, for which it received 10 million euro funding granted by Business Finland for Kanatu itself, as well as there is up to 20 million for ecosystem partners. And here you see our current business scope with these pellicles, ADAS heaters, inspection membranes. We are in development phase with these biosensors or medical diagnostics. We have started to develop optical filters. We have started to develop next generation solar cells. But we don't see that this market stops here. This carbon nanomaterial is like silicon. It can be used for many, many applications. Here you already do see that in certain applications we are replacing silicon, like in pellicles or solar cell type of applications. And we do see that that is going to continue heading forward. And now here are two key points with this activity and establishing a separate organization like CTO team organization inside of Kanatu is to start addressing these new application domains as well as try to develop here in Finland ecosystem around Kanatu's most advanced CNT technology. As you know, currently we are almost 100% working with the partners outside of Finland. And now here we also would like to contribute and make so that we can build ecosystem also in Finland. Of course, we will work also with the leading partners outside of Finland. But this is clearly the investing in future and future application domains so that we can further develop this advanced carbon nanotube technology being the true platform company and enabling also ecosystem partners to develop new applications on top of our technology. In 2025, we continue making very significant investments and to support our existing product portfolio, but also developing new businesses. And one of the key investments, what we are doing, so we have currently our CNT 100 semi-reactor. But the world goes on. So there will be new generations of the ASML scanners. There will be new requirements from the customers. We have noticed how we can further develop our reactors there. So we are putting now massive investments to develop next generation CNT semi-reactors to be competitive and keeping this very strong competitive position in the future as well. We have decided to start developing these optical filters and to do these optical filters we have to develop capability of coating CNT that can be used both in inspection membranes but also in pellicle. So now we have decided to start making the investments to this coating technology and firstly to address optical filters and to be decided later will we also address the pellicle domain with this one. Then we accelerate in this medical diagnostic development, already mentioned a couple of times. We are finalizing our second fully automated production line for automotive and medical diagnostic. This new line will increase the productivity compared to first automation line by 50%, so it will be significantly more productive and of course that will provide us better pricing competitiveness and also like the margin competitiveness. competitiveness there. We are advancing solar cell technology with the partners to achieve potentially significantly higher efficiency for those one that can be used in kind of the small domain like on car roofs as an example. And like I said, establishing the CTO team to address these future application domains with our advanced CNT. We are also making the changes in our leadership team. We already mentioned about Mikko being nominated now as our permanent CFO. Thank you, Mikko, for accepting that position. The second change what we are doing right now is that we are establishing one operational organization covering all activities from the manufacturing, supply chain, facilities, quality and so on. So they will be under one thing as targeting going from the let's say from the 20 million euro company to the 100 million euro company. We need to make the significant steps there. And I'm happy to inform that Tapani Salminen from Vaisala has accepted this position, having their roles in supply chain, overseeing the production, as well as leading the quality there. So we are very happy to have Tapani also part of our leadership team. Then as growing and going towards our target level, it also means you need to have more manufacturing capacity. It means you need to have more office space. And therefore, we have decided to rent a new factory the same size as we have currently. And those who have been in our factory there knows that it is already full. So now we are starting to kind of expand. It is actually other side of the parking lot. very nearby and we get their significant benefits that we don't need to have a lot of redundancy in work efforts, in the leadership, maintenance and so on, and as well as what is very important that engineering teams and the manufacturing teams are working closely together. So this is an excellent location for us. And also when we were considering other options, for example, having it further away from, let's say, Ring 3, where we are right now, we thought that it's kind of so important to keep close proximity and saving time that it's better to have it here rather than maybe a little bit further and getting a slightly more affordable place. Also, we were considering going outside Finland, but we do believe that we have been in a position of getting really good employees, operators in Finland. One key element for us is that these reactors are really hot and we need a lot of energy. So in Finland, the cost of energy is one of the lowest in Europe. And therefore, this is a good location for us, kind of the very established environment here. And then why it is important to have a second factory is that our customers are asking that, hey, what happens? You have only one factory. You need to have a redundancy there. So it's also from the redundancy and risk management perspective, very important step for us. So this is the kind of the status we will inform later states, what kind of investments, what kind of the operations we are going to build. into this new factory and but we do see that this is kind of the great move to kind of defer to expand our operations. So as a summary here, we are now moving full speed ahead. We have sustained our strong top line growth and profitability in 24. Artificial intelligence drives demand for these advanced chips. We are well positioned to support this transformation for EUV pellicles, for EUV membranes for inspection market. we have now made like the first very solid investments towards kind of our target of 27 and to that growth strategy but we have actually gone even beyond with our aspiration of building this carbonates and nano carbon valley in Finland here and We do see this journey not being like the one quarter sprint. This our most advanced technology allows us to be a really big platform company for the various technologies. So we do see this being more like a marathon than a sprint. Thank you.

And now it's time for questions. Let's take questions from the audience here at Sanomatavla first. Atte, please go ahead.

Hi, it's Atte Riikola from Indres. First question about your outlook. You mentioned that the revenue will be weighted towards the H2 of this year, but can you still say that you're expecting to grow your revenues this year or is it still uncertain?

Yeah, I think we are not giving any like the numeric numbers or growth numbers here. So yes, it will be second half skewed and we do expect that this, especially this reactor part, the new deals from the existing customers, but also we have a lot of negotiation going on with the new customers, will actually contribute more on the second half than the first half of the year.

Next question is actually about the reactor business and the sales pipeline. Can you say anything about how many negotiations you have going on or how many reactors you could possibly deliver, for example, this year?

Like I said, we have various discussions going on with the existing customers, of course. but also with more than one customer who are not our existing customers. So that is actually showing our strong position in this EUV pellicle market that is not limited to our current customers, but there are also new customers where we have a significant negotiation going on.

I know you might not answer this question, but I'm just trying to get the the idea that how many reactors one of those, or you have now two of those customers who have delivered the reactor. So what's the potential, how many reactors they could buy from you in the coming years?

Yeah, I think that there's a kind of significant market for, like, so there that kind of the total market for these EU pellicles and CNT-based EU pellicles can be between one billion and two billion. And you know that Basically, the cost of these pellicles are like tens of thousands of euros, so you can make some own calculations there, like the long-term potential, what is there, but I think that we are not commenting like exact numbers of the reactors we do expect to sell this year, next year, year after.

And you mentioned that you're developing the next generation reactor. So how long project this is and can that affect like your current negotiations and customers are waiting for the next reactor?

For this year, like the reactors, they are based on our current reactor generation.

All right and then the product facility expansion is that investment included in your annual five to six million capex plan or is it extra on top of that?

It's part of that is included there we can say that but then like what kind of like expansions and then like additions there will be on top of that we will then like separate a little about those so. But like I said it's this five to six million is average over time so even that might like vary between the years.

And can you say anything about the net sales split last year like for example how much of those two reactors were from the semiconductor sales and what was the amount of those inspection membranes and that kind of stuff?

I think that's a very good question, but at this point, we will not yet disclose that because there's like only two reactors that we have shipped and from our perspective, it's sensitive information of how we price those and so forth. But both are significant. Yeah.

All right. And last question about the gross margin development. I think during the SPAC listing, you were saying that you're expecting maintain let's say the 70% gross margin or are you still targeting that kind of levels in the long run?

Yeah, I think that like Mikko mentioned that we do believe that we can be more efficient in the coming reactors. What I mentioned to you there was that now when we have done these first reactors, there has been like one time development costs like integration to the customer IT system, integration to the customer automation system, getting this semiconductor safety certifications and so on that are now done and then are not needed to be done in token when you are doing the next next step so we do expect that the next reactor deliveries will be more effective in terms of the of the margins

Hi, Valtteri Rossi from Danske Bank. You touched this a little bit just now, but can you say about the inspection membrane sales last year, did they grow?

We haven't for a reason opened that too much, but we have said that it developed steadily.

All right. Fair enough. Thank you. Then about the reactors. Are you expecting to sell at least one reactor to all of the major chip manufacturers or their suppliers, let's say, until 27? Is that your internal expectation?

I think that The market is different. You have different players. There are some players, some chipset manufacturers who want to do these pellicles themselves. And then you have players who are doing pellicles as part of their main business. So I don't see that every six EUV pellicle manufacturers manufacturing foundry will start doing this pellicle themselves, but there will be the companies, like we have a company who is then doing these pellicles and selling fur to their customers there. So it's not that they will be sold directly to these six different foundries.

But what is the amount of these pellicle suppliers that these six foundries have in the market?

Say it again.

Like how many pellicle suppliers is there in the market operating? I'm just trying to figure out that, you know, potential amount of reactors to be sold over the next few years.

So, If you think about DUV market, that is like you have this EUV that is currently making this most advanced chips. Then you have a DUV market that is not making these very advanced chips. So in this DUV market, actually you have four different companies who are making pellicles there. So I do expect that maybe With EUV, there might be room for roughly similar number of the companies who can make these EUV pellicles.

All right, thank you. That's helpful. Then about this year, you said that the semiconductor reactor orders and deliveries are more geared towards H2. So in case you would receive these orders in H2, can you comment on the kind of delivery time? What is the delivery time and would you have time to recognize that those orders as sales still this year?

Maybe I can answer this. So it depends on how the actual order would time. But we will recognize revenue from those projects as they, in a way, proceed in terms of physical readiness. So probably something, but it depends on when we get the names on the paper.

All right. My understanding currently is that the delivery time would be, let's say, three to six months. Is that a fair assumption?

I think we are not giving exact timings on those ones, but like with one of our customer revenue recognitions, partially it happened last year and partially this year. You can think that the revenue recognition will typically happen during two years time.

All right. Thank you. Then, if I heard correctly, you said that of the two already existing customers, One has actually done the site acceptance tests. So that would mean that you would start to generate some consumable sales from that account already this year. Is it so or should we rather assume that the consumable sales is pretty much non-meaningful this year?

So with this another customer, we have a site acceptance test approval for our reactor. And now the remaining will, like I showed that after our site acceptance, the customer has to have also these other process steps in place. And assuming that they have all these other process steps in place and they have the customer approval, that is possible.

All right, one last question, then I'll let someone else ask. After the company starts to use your reactor, would you say, let's say 12 to 18 months is a good estimate on how long it will take until they move into high volume production? That's a timeline I've read from ASML regarding EUV machines.

I expect this happening very fast.

All right. Thank you for now.

Do we have any more questions from here? Then we have plenty of questions here on the chat. So let's go first on this one. So when do you expect CNT pellicles to be used since current EUV light power is still in the level where the CNT is not necessary when the revenue starts to kick in?

Yeah, I think that that's kind of a great question. And there are like two elements what we have mentioned in our value proposition. One element is that when it is necessary, need it. So when you get to this high power level. And the second question is that, second point there is that we have significant productivity issues. kind of the benefit there. So this productivity benefit for utilizing these ASML scanners can be up to 8 to 15% higher with CNT pellicle when your transmission is so much better there. So we don't necessarily need to wait for high power equipment because there's also benefit for having CNT-based pellicles against this kind of the metal silicide pellicles because of the higher productivity there. So those are the two elements. However, what we do see right now is that customers are first kind of the rolling out the CNT pellicles for these high power pellicles.

Thank you. Then why don't you capitalize development costs?

That's a good question. I think it's It's a twofold thing. One is that we most likely will capitalize something during this year. And that has required a bit of internal work from us that we can do so. But second thing which is important to remember that when we receive these government subsidies, grants, they are usually against R&D type of expenses and then we can't like capitalize those. So going forward most likely we'll capitalize something but still something will flow through our P&L.

Thank you. Then question about the competitive positioning. So your goal is to become a leader in CNT pellicle membranes. At what position are you right now? What is it that the competitors are making the CNT membranes via wet dispersion method?

Yeah, I think that firstly, if you think about this inspection market, according to our knowledge, We are the only one providing CNT based membranes, inspection membranes for inspection machines. So that shows like really strong position in the market. For the pellicle side, I'm not aware. I'm not aware. that our competitors would have been selling their tools to the customers in this domain, and whereas we have been in a position of doing those two deals, two shipments already so far, so that would talk us having a very strong position. Also that there are In addition to this, to our existing customers, there are new customers who are interested in having our tools to start also doing CNT-based EUV pellicles. I think that these kind of market indications, what we do have, are talking about kind of having very competitive market position.

Then question regarding business model. So if you would provide EUV pellicles directly to chip makers, your revenue and margin would grow faster than compared to selling CNT-100 reactors. So is there any reason why you sell reactors instead of ready-made pellicles?

Yeah, I think here's quite a long history of this one. So we have been developing this CNT pellicles firstly with IMEC and an ASML already we started seven years ago. And then we made like the first pellicle reactor kind of the agreements with our customers like many, many years back, like three, four years back. And at that time, we were not in the position from our competence perspective or understanding the market and understanding the products that we could have done these pellicles ourselves. And at the same time, we were like a tiny couple of million euro player, like the Mickey Mouse player. So we were not like credible player for this one. Now heading forward, this is one of our clear considerations, what we are considering, especially as there will be some disruption points heading into forward where that might mean, for example, double-sized pellicles or there are some kind of changes where at those disruption points we may decide to go towards that direction. Additionally, what I already mentioned there is that we have now started to make investments on R&D investments, developing investments on coating CNT and now firstly for the optical filters. But of course, that is adding our competencies also to do capping layer on top of CNT for pellicles.

Thank you. And then question about product prices. So is there a difference between 6-inch pellicle or 12-inch pellicle?

Let's put it that way that 12-inch pellicle doesn't exist yet. I was in a SPEAR conference in end of February, where this was discussed with the industry players. This requires very significant changes, especially to all these equipment manufacturers, because you have to fit the bigger size pellicle there. It means very significant investments to the market. The question is still there that who is going to pay that development cost. So there is no decision yet that this will happen, but there are There are very powerful companies in this industry who are driving this one, because they do see that this way, making the future, especially high NA machines, making their very small node chipsets will be more efficient as well as the quality will be higher. there's no price yet for bigger size pellicle.

Thank you.

But for sure it will be higher.

Then can you comment on the use of cash receipt from SPAC? So have you already grown from that source to fund R&D or other investments?

Yeah, I think that if you look at today what we presented here, we are making very significant investments to the future and future development. One is, of course, now this new factory. One element is that we are investing heavily to the next generation reactors. We are investing in these optical filters. We will make the decisions regarding medical diagnostics. We have continued heavy investments to the headcount and developing the growth there. And so on and so on. So I think that, and also now these investments to our CTO team to develop this future application domain. So I think that the funds and the balance sheet, what we have currently coming through Lifeline SPAC and this being the part of now Nasdaq, I think that it has been extremely positive for us and it has enabled us to make their future investments for the future growth.

What about the ability to attract the new talents? Do you see any issues or risks in that respect? Do you hire only to Finland or also other locations? And are you primarily planning to locate all the new hires here in Finland?

Firstly, I think that we have been, based on our current reputation in Finland, where this being the part of the Nasdaq, all the publicity, what we have received, of course, very strong top line growth, the balance sheet what we have today, I think that it has been helping us and actually making it reasonably easy for attract top talents in all levels. And now also on the leadership level as well. Will we be only part of Finland? Okay, we already have people in Asia, we have people in the USA. I do believe that one of the, of course, the consideration, especially this medical diagnostic business is happening mostly in USA. So that is the kind of the one consideration. Of course, the core team is here, core kind of the synthesis biochemical team is here, but that might be kind of the one opportunity where we look at the kind of expanding beyond Finland.

Thank you. Can you comment a bit between product sales and reactor sales? Is there a cross-marting difference between these two?

I think what we can say is that like, that this industry also follows kind of a very general dynamics that there is a certain difference but how much that we haven't been disclosing and I think we keep that like that because it's also quite sensitive for us.

And then maybe final questions from the chat regarding competitive landscape. Referring, for example, to TSMC's huge investment plans in the States, can you grab a lot of revenue from that endeavor, or will your competitors in the US get that space?

Of course, if we have what we have been talking about, having very strong position in this inspection membrane market for EUV and similarly for the pellicles, all these investments to this EUV domain, these advanced chips like this DSM is doing there, those are absolutely positive for us. And of course, we have to be competitive in the future as well. This is a big business and no one is going to give it that without fight for Kanatu only. So therefore, we are putting these investments, for example, to develop our next generation reactor there to stay competitive in the future as well. And that's important. But yes, that is extremely good news for us.

Thank you. And do we have any final questions from the audience? Thank you.

Still a couple of questions about the new facility expansion. Is it actually potentially linked to your own ambition to move towards direct pellicle sales from the reactor sales? I mean, looking at your own estimates, the market would be bigger and also the revenue development would probably be more stable. So is that a sign actually of you moving potentially in the near future towards that business model?

No, I'm not commenting. I don't necessarily see those totally linked to each other. And we will in the future inform you what are the kind of key investments, domain and focus areas in the new factory.

All right, fair enough. Still a few questions on automotive. Automotive sales declined last year. So I'm assuming that Ada's related products were not yet sold. Is that a correct assumption?

One of the major kind of the rollout, what we were supposed to have end of last year was postponed to this year.

Okay. Do you expect automotive sales to grow this year?

I think we reiterate what we said, that we don't like comment on that level. But like, of course, in a long term perspective, we do see that that area will grow as well because it's part of our 27 targets.

and thank you and last one just to remind me maybe you've said this before but do you expect to sell reactors also in the automotive segment or only direct product sales or what's the business model there with our ADAS camera heaters the business model there is we are doing these CNT films and sensors by ourselves

Then when we are talking about full windshield or when we are talking about large area solar panels, we are talking about potentially millions of square meters of CNT film. So in that case, going forward, we do believe that our business model will be more like selling selling reactors and licenses and royalties related to that one, rather than being the company who has huge factories in all continents next to windshield companies. So in that case, more likely our business model will be the same as with pellicles today. All right. Thank you. Hey, thank you for all the questions. There will be events happening in the near future. So our Canada's annual general meeting will happen on May 15th. We will publish our annual report in week 16. And our first half report will be published on August 29th. So thank you for watching this event. Thank you for active and live discussion and questions. And thank you for your interest for the company. Have a nice weekend.