Canatu Oyj A Ord

My name is Mari Makkonen and I'm responsible for investor relations. Today, our CEO Juha Kokkonen will start with the first half highlights. Then our CFO Mikko Vesterinen will continue with key financials. And after that, our business unit lead Nedal Safvat will provide an update on medical diagnostics. Finally, Juha will discuss outlook and targets. At the end, we'll have plenty of time for Q&A. You can type in your questions in the event chat at any time. With that, let me hand over to Juha.

Thank you, Mari, and welcome also on my behalf. I will go straight to the key messages. We are envisioning here and seeing very rapid growth in artificial intelligence. And that is demanding, creating demand for advanced chips. In terms of the volumes, but in terms of the performance as well. Performance is needed to make these language modelings faster, as well as making it more cost-efficient manner, as well as making it less energy consuming. This development is a main driver for advanced chips that are all the time more and more advanced. And this is driving also demand for CNT pellicles. And CNT pellicles is a small essential part of this development. From the operational progress perspective, the major milestone during the first half of this year was that our first CNT reactor was customer approved. And it is now ready for mass production of CNT pellicle membranes. In addition to that one, we are negotiating new orders in the semiconductor industry with our existing customers. As you do remember, we have two reactor customers there. And in addition to that one, prospective new customers. and we have a project going on there as well. And this will enable that our position across the existing ecosystem remains strong, but we even say that it has improved compared to time of the listing. Our first half result was a disappointment to me. So our revenue was 7.3 million and that was down by 34%. This was caused by three main reasons. The reason number one is that semiconductor industry has delays in adopting these high power scanners. Secondly, what is more the Canada side as well is that there has been slower than anticipated customer approvals. And thirdly, we do see there are certain general market uncertainties that are related to the tariffs, also whether AI chips can be sold to China or not, or whether they have tariffs or not. However, we are investing heavily for the future growth as well as diversification. We are doubling our premises with new factory and enabling further growth. Secondly, we have done strategic long-term commitment for medical diagnostics. And you will hear today the Neral Safat, who is our new business leader, telling more about our strategy in this domain. Also, we are fostering new business development. aiming for faster time to market of high value application. And as you may remember, most of our applications, what we are selling today, actually the input to those are coming from the customers. And therefore, now we are establishing the team who can really handle those, understand the business opportunities, and provide a faster time to market for those new application domains. So as a top line message, despite of the delayed revenue, we have a competitive position in CNT Pellicle, and that has remained very strong. And I would say that it has been even improved. And the second key message there is that we are accelerating our investments in future growth. Secondly, I will look at some key drivers in this advanced chip business. So these advanced chips can be called also EUV chips that are 7 nanometer and below nodes. are the fastest growing segment in the semiconductor industry. Semiconductor industry in general is growing like 10% annually, forecasted to be $1,000 billion in 2030, and advanced chips are growing like double of that size. Now in this roadmap that you see on this picture, you see there the kind of that development of the ASML scanners to 500 watt to 600 watt and further, and how these nodes related to that one are developed as well. From Kanatu's perspective, the most important development here is that we anticipate, and the industry sources especially anticipate, that advanced chip manufacturing with 600-watt power scanners will start by 2027. And this is expected to be the inflection point for wider usage of CNT pellicles. However, based on our work, what we have already done, we expect that there will be already CNT pellicle usage with 500 watt scanners. And the main reason for this one is what we have been communicating earlier as well is that CNT pellicles are providing higher transmission and therefore productivity gains. Some highlight of our first half progress here is of course what we have been talking a lot is this first reactor customer approval. Reactor being now ready for pellicle membrane mass production. Before pilot and risk production, the first customer who we have there must still secure approval for the complete coated CNT pellicle product. After this is successfully done, as you remember from our business model perspective, Kanaatu will start generating revenue not only from the reactors, but also from consumables and sold CNT pellicles. We look at this picture also when we had our last year results, and what you can see here, the progress with the first customer that has moved from the customer approval process to that it has been completed, and they are right now in the process of getting the approval for the full CNT pellicle product. The second customer has been also moving from the delivery assembly phase to the customer approval phase. So both of these reactor deliveries have made significant progress. On top of this one, what I already mentioned there earlier is that we have ongoing negotiations for new reactor sales, both with our two existing reactor customers, but there has been also significant progress with new customers. We have a project going on there, and this way we anticipate and why we're saying that we have even improved market position in the CNT political domain. We are also investing heavily to the new business development, having the systematic assessment of new high-value applications. So we are accelerating with enhanced resources and dedicated team aiming for faster time to market of high-value applications. This is like the key element, if you think about that, we are delivering most advanced CNT pellicles, and this way we can address not only the current business domains, but also future business domains. Some of the key examples, what we already communicated during the first half, and I start from the right-hand side with this defense industry solution, where we began mass production of sensors protecting advanced electronic devices in the defense industry. This is the example where we are utilizing our existing capabilities and processes where this product is close to the touch sensors, where we have had opportunity to bring new solutions to the market in reasonably short period of time. Then the other type of example is now next generation solar panel applications where we are targeting to have with the new innovative stack involving CNT electrodes almost 40% efficiency increase for solar panels. So achieving up to like 35% efficiency there. So this is the example where CNT and where the development time will be longer and we expect that the revenue here will happen after 27. And now I'm talking like mass production revenue. We have been communicating about the significant development revenues already this year. And now I would like to hand over to Mikko to cover our financial results.

Thank you. Yes, like... Like I said, the first half, financial performance was disappointing. Operationally, the progress was good, and like I said, we see our position as very good. The revenue amounted to 7.3 million, which implied like approximately one-third of decline compared to the same period a year ago. And a cross-profit amounted to 4.9 million and the margin, cross-margin improved to 67.3%. The key drivers behind this revenue development or the first half revenue were good performance in inspection membrane business, the final revenue recognition of this first CNT 100 semi-reactor project and then the new joint development program in automotive business area with Denso. With regards to the margin development, I said that the gross margin improved compared to the first half at 24, and that was driven by the changes in the product mix. A year ago, the first half was revenue was largely influenced by the revenue recognition of the first two reactor projects. And as you remember, we explained in connection with the full year results that as these are the first two projects, there have been many things which we and our customers have learned during the process, and therefore they have had a somewhat lower margin than what we expect going forward. Adjusted EBIT, which is the key earnings metric what we are following in long term, declined obviously as well, driven by the decline in the revenues. And also we've been investing in the future growth and the headcount has been growing as we've been recruiting more people to the teams. Then if we look at the split between the business segments, our revenue continues to build, or the semiconductor continues to be the main revenue source for us. And the drivers there, as just explained, were the good performance in the inspection membrane business and this first reactor being now fully finalized. So 5.7 million of the revenue came from semiconductor, 1.6 million came from automotive and there the key contributor was this new JDA project with Denso. Medical diagnostics did not generate any revenue in the first half, but that's in line with what we've been communicating earlier. It's in the development phase, but we see that there's a good long-term value creation potential, and it is one of our key strategic growth areas going forward. This is where the main message is. Happy to answer then in the Q&A for any questions you may have.