Acconeer AB (publ)

Hello and welcome to Aconeer Q2 2026 earnings call. I'm Ted Hansson. I'm CEO of Aconeer. Today with me, I have Anna Ahlerid, Head of Communications. She will be joining for the Q&A session. As you might see, we have a slightly new format today. We have made two changes. First, we are premiering our new template when it comes to graphic design today. And secondly, we have decided to add video to these earnings calls. So as usual, I will go through a presentation that will be followed by a Q&A session. Please feel free to submit your questions. With that, I will start the presentation. We today report record revenue for the fourth consecutive quarter. We saw a revenue of 21.4 million Swedish crown during the first quarter. This is a 103% year-over-year increase. We also saw a margin improvement with three percentage points compared to the last quarter. As I've said before, we have been running activities to improve the gross margin, and it's nice to see the first results of those activities. The work continues, and we're still striving to improve the margin further. We have two types of revenue. We have NRE and services and product sales. And if you look at product sales, which is the bread and butter for the company, we had a 154% year-over-year increase in US dollar. So a very strong increase. It's worth mentioning that the growth that we see now is almost entirely made up on sales from our A111 and A121 products and the modules from those products. We are in mass production with our new sensor A212. We have received firm orders of and communicated firm orders valued 1.3 million US dollars. but we have only shipped a fraction of that. So it's a safe assumption to say that the A212 will add additional growth in the coming quarters. Today, I can also confirm that A212 is a part of the interior detection solution in the new Volvo EX60. I will talk a little bit more about that in the coming slides. Before going into the update and the financials, I would like to take the opportunity to briefly introduce Acuneer. We are a Swedish fabless semiconductor company headquartered in Malmö. We develop and sell low-power millimeter wave radar sensors globally. Our products are based on a unique technology that we innovated. It's called PCR, pulse-coherent radar. This technology gives us a unique combination of high accuracy combined with low power consumption. There are several companies doing millimeter wave radars in the world, but we are the only one with the unique properties of PCR. We are proud to be a trusted supplier to the automotive industry. This is an industry with high requirements when it comes to product performance, product quality, supply chain management, and so on. And us being able to be a significant supplier to companies such as Toyota and Volvo is a real testimony to the quality of the company. Many of our customers are using our products to drive positive environmental and social change, which we are proud of. Examples are that our sensors are used in smart buildings to reduce energy consumption, energy waste. They're used in level sensing to optimize logistics flows. They're used to save lives in vital sign monitoring, fall detection, and so on. We have sold more than 4.5 million sensors. There are more than 200 end products in the market with our technology. And we have sold sensors to more than 50 countries. Our company is listed in Nasdaq First North since 2017. The market cap yesterday was around 1.3 billion SEK. We have 8,000 plus shareholders. And during the quarter, I'm happy to note that Rubor Fondok actually took a stake in Aconeer, invested in Aconeer, and we added them as an institutional owner. Radars are used in a wide range of applications, and many of these are growing. We have decided to focus on five areas. The first one is level measurement. This is by far the largest business for us in 2025. And here we see that PCR is uniquely well suited for level measurement. We have the ability to measure accurately, also close to the sensor with lower power consumption than anyone else. We see a strong growth in level measurement and we continue to push for continued growth. In automotive, we are partnering with Alps Alpine, which is a global tier one supplier to the automotive industry. We are working with two use cases. We have access control and we have interior detection. In presence, we focus on advanced applications requiring true presence with challenging environmental integration aspects. and requiring low power consumption. These are still large markets, tens of millions of units, and we see that our new sensor, A212, which adds multichannel capability, will have a strong play and presence where we can add new capabilities such as counting and classifying objects in a room and tracking objects in a room. We work with cargo tracking. Here, our sensors are used to detect the door opening, fill level, presence, vibration, moving goods, and so on. There are millions of containers that are being connected to the cloud, and by adding our radar sensor, you will get access to more valuable data. We see a strong interest from some of the largest cargo tracking companies in the world, and we're working with several of them to bring it in a mass volume. The last segment is industry and automation. There are three things we work with in this area. The first one is proximity measurement. Here we are trying to replace capacitive technology for a part of this massive market. In particular, the reason why we believe there is a good opening for us is that we have the ability to measure proximity also with different kinds of plastic materials that are more and more commonly used in, for example, electric vehicles where capacitive technology does not work. We also work with distance measurement in hydraulic cylinders. We also work with vibration in different industrial applications. Among our product areas, I would say that this is the least mature one and the only one without significant volume business today. But as I said, there is a huge potential in each of these three applications that we're looking into within this segment. Let's look at automotive in a little bit more detail. We have announced 20 customer launches, and we have announced design wins valued 76 million US dollars in the timeframe of 2024 to 2032. During the quarter or during this year, we have seen a strong growth in the business, especially when it comes to A121 access control. A212 is now in mass production. It is in the Volvo EX60. You can verify that by downloading the latest user manual from Volvo webpage and search the FCC ID for the interior detection solution, and you will find our A212 sensor. So we have announced orders of 1.3 million US dollars for A212, and we have only shipped a very small part of that. So as I said initially, we are certain that A212 will add to the growth going forward. Talking about A212, during the quarter, we continued with significant investments in the supply chain. So we're talking about setting up the production line, getting the right quality, getting the right yield and so on. and this has been a larger effort than what we anticipated but it's essential to reach the quality so that we can scale the production now we are in a stage where the mass production is running and we can scale up the volumes this will help us to also launch other customers and with these efforts largely behind us we are able now to increase the number of resources that are working on non-automotive A212 customers and accelerate these customers. So as a person, I'm very impatient. I wish this was faster. There is a lot of customers pushing for A212. We see there is a huge market potential. Now we are being able to add more resources and try to capture this and accelerate these opportunities. We have decided to take additional actions to speed up the deployment of A212 in volume outside automotive. In May, we communicated that we signed an agreement with Excelitas. Excelitas is a world leader in access control solutions. They are the world's largest passive IR solution provider. and they are now selling our sensor to their customers. So during the quarter, we have trained their sales team, their FA teams. We have also announced that we have a joint ambition of creating a fusion product for this market, where we combine the world-leading IR technology from Exelitas and the world-leading 812 millimeter wave radar from Acunir to create a unique offering in the market. We have also decided to put our A212 sensor on DigiKey to broaden the reach to get more customers. Still, it's not a full public release. It's only possible for certain companies in certain sectors to buy it, but it will help us to scale up with more customers. Of course, in addition to the hardware itself, it also means that we have made an SDK release that customers can now start developing their own code based on the A212. Finally, we have signed recently an agreement with a larger third party company that has experience of vital sign monitoring on millimeter wave radar sensors to develop a commercial grade demo with A212. This company also have the capability of supporting the end customer in a real customer project. And in addition, we will get access to their sales channel and they will help to promote A212 within the Vital Sign space. So as you can see, we are now putting more effort, putting, freeing up more resources to work with other customers, and we're doing everything we can to accelerate the progress of A212 and capture a big piece of the market that we see is out there. Looking at the numbers a little bit more in details, as I said, we had a revenue of 21.4 million Swedish kronor. So year over year, it was a 103% growth. Quarter over quarter, 17% growth. Gross margin improved from the previous quarter with three percentage points. That's nice to see, but we still have an ambition of driving it up and the work continues. So if you look on the graph down left, you see that There is a strong positive trend with an increased revenue quarter per quarter now for four consecutive quarters. Looking at the picture to the right, which is the EBIT graph, it might look a bit strange. So I would like to take the opportunity to comment a little bit on this. So we are increasing the revenue. We are running with a similar cost level that we did a year ago. There is no significant change in the cost structure, despite that EBIT is down. There are two main contributing factors to that. The first one is now is amortization of A212. So we have been activating cost for A212 for many years. And after we reached match production, we are now amortizing it. So during the second quarter, there was a 5.9, sorry, 4.9 million SEC amortization of A212, which wasn't there a year ago. That adds to EBIT. It's a non-cash item, but it hits EBIT. The second point is that a year ago, A very large part of the R&D cost was not OPEX. It was put on the balance sheet as a capitalized R&D investment. Now, when A212 is in mass production, a much smaller part of the R&D cost is capitalized, and a larger part becomes OPEX, and that has an impact on the EBIT. There is a third ingredient, which is an increased cost base. As I've said before, we are doing selected investments in sales in R&D to bring A2 to the market and scale this company. That is a minor part. It's much smaller than the other parts. So the main explanation of the EBIT are the two factors of amortization and lower percentage of R&D cost being capitalized. So, in the picture to the left, you see the OPEX. The lighter color is the amortization, which is then significantly higher than previous quarter, as I just explained. If you look in the middle picture, you see the COPEX, and compared to a year ago, it is significantly lower. As I explained, it is because a lower part of the R&D cost is now capitalized. It's also lower than the previous quarter. If you look to the right, you see the inventory level. If you look compared to Q2 last year, it's significantly lower, but it's flattish compared to previous quarter. And you have to remember that now A212 is in mass production. We are receiving wafers. We are doing assembly. There's a lot of material that is now being processed that will go to customer. that the amount of inventory that is A212 is increasing, of course, because it's a new product. Despite that, we managed to keep the total inventory level flattish, which means that the other products inventory level is actually decreasing. After that, I would like to take some time to explain the cash flow. So if you look at the picture to the left, This shows the cash flow for the period adjusted for financing activities. So any money we rose through a rights issue is offset, is removed in that graph. And you can see that we had a very positive trend at the last And then this quarter, you can see that the cash flow is significantly worse than the first quarter. So I would like to take the opportunity to explain this to you because it's maybe not obvious. So first of all, compared to a year ago, the cash flow is significantly better. But compared to previous quarter, it is significantly worse. The cash flow from operating activities, which is the daily work, löpande verksamhet in Swedish, is similar. It's around minus eight million. And despite that, we have a cash flow of almost minus 14 million in the second quarter. What is happening here is that we have a much lower impact of changes in the working capital. So in the first quarter, we had almost 8 million contribution to the cash flow by changes in the working capital. So changes in working capital are short-term liabilities and account receivable and changes in the inventory. That gave a positive effect of almost 8 million in the first quarter. In the second quarter, the same effect is 0.3 million. So there is almost an 8 million difference in the impact of changes in the working capital. And that explains the cash flow of the second quarter this year. We had a cash position of 53.3 million Swedish crown at the end of the second quarter. and account receivable were at 14 million SEK up from previous quarter. I want to point out that we don't have any problem collecting payment from customers. This is a natural consequence of an increasing business. And as in many other semiconductor companies, a large part of the sales within a quarter happens in the last month, and then that is paid in the following month. So with that, I would like to summarize the quarter. Happy to see another quarter with growth. Happy to see that our gross margin is improving. Remember, we managed to do this growth with a very limited contribution from A2. A2 is now in mass production. We have 1.3 million US dollar announced orders that we are delivering towards now. This will accelerate the growth going forward. Also, we are meeting with customers regularly, of course, and during the last several months, we perceive an increased interest from the industry for millimeter wave radar sensors. We are being approached by large distributors, sales reps, different kind of channel partners that wants to get access to our technology because they see there is a growing demand for our technology in the market. We see that our online sales is increasing. That is normally an early indication of what is happening. When customers start production, they may buy online, but as the volumes scale up, they will transfer business model to buy through a distributor or buy directly from ACONIR. So that is another indicator that the business is increasing. Of course, we also have the increased revenue. We also see module partners showing strong interest to work with ACONIR. and we are now in deep discussions with many large end customers in many segments and they're all saying that millimeter wave will have a strong There is a strong need for millimeter wave products going forward. There is an increased need for high accuracy presence detection, classification with low power consumption. So I think we are in a very, very nice position now with an A2 that is in mass production. It delivers great performance. The progress has not been as fast as I wished, but now we are able to put the resources on other customer projects to accelerate the rollout of A2. Finally, before we go into the Q&A, you see our financial objectives. They were announced in early 2024. So, the announced objectives that we have is an EBIT positive quarter in 2025, which was achieved. We have a cash flow positive quarter target this year. We have a revenue target of 300 million SEK during 2027, and a long-term EBIT margin of 25%. With that, I will invite Anna and we open up for the Q&A sessions.

Thank you, Ted, and thank you for the presentation. We had quite a lot of good questions today. I'm going to start with a couple about the financials and the sales. There's a couple of questions asking how big part of the orders and the sales comes from announced orders compared to smaller orders that we typically don't make a press release about.

I didn't count exactly. I think you can do that. Because every time we make a press release, we try to include the timing when it's supposed to be delivered. But I don't have a percentage. But if I would guess, I would say half, maybe.

Okay. There's also a question about when we report results, we always compare year over year. But since there's almost no sales seasonality patterns in our company, how can we compare year over year?

Well, the main reason for that, I mean, it's kind of industry standard to start with, but it's also so that the cost has a seasonality. So the second quarter is typically the quarter with the highest cost for us. That's when we pay sales incentive, we pay short-term incentives, we pay the salary increase retroactively for the year. There are different fees to board and to other things. So there are some seasonality in the cost. That makes it easier to compare year over year rather than quarter over quarter. But some KPIs like gross margin, I think it's more relevant to compare with the previous quarter to see how we are trending. So we are trying to, I'm trying to present the numbers that makes most sense for each case.

Great. There's also a lot of questions about A2 and the sine winds outside automotive. We'll start with the one about the 15 big actors that we have talked about previously that have been testing and evaluating the sensor. Is there any of those that have said no, thank you, that can be considered lost?

Yes, there are. Among the customers that we have been working with with A2, and there are several that have progressed that have built their own PCB their own hardware with our sensor they've started to do software development they're integrated into their prototype products so many are progressing in in a good way there are also cases where we have lost the opportunity maybe not the customer but a specific opportunity and some examples are that maybe there is a small battery and they have a certain expectation and the battery the power consumption was not in line with their requirement having said that we are still in the early phase of A2 deployment we are not near where we will be a year from now when it comes to power consumption there's a lot of improvements but typically With the maturity we have today, and that is not only for Aconeer, I think it's for everyone who is doing multichannel radar systems, there is a challenge to meet the battery power requirements. So some of those opportunities may have been lost. Typically, they have been lost to no one. Because no one could meet the requirement. But that is a natural part. We need to go through a lot of different opportunities to find the ones where we have a good match between our offering and the requirement. And as I said, we are learning from this. And as of today, I would say current consumption is something where we see there is a room to improve and to be more unique in the market. There is a lot of need for that. So that's something that we will be focusing more on going forward.

Yes, thank you. Now you did it already a little bit, but could you give some more details regarding the customers evaluating A2 and where in the process we are? When can we expect something tangible outcome?

Yeah, so as I said, there are several customers that have built their own prototypes. So typically when the customer journey starts, they will get access to our evaluation kit, which is a larger board that you can connect to a PC. You can verify the performance on a PC with our demo tools. Then after that, normally they would like to get hold of our sensor. They would integrate the sensor on their PCB. So they will do the electrical design and then they will connect it to an MCU and they will start to run a system like the end product. So several of the customers are in that stage now where they have prototypes with A212 running and they're developing code. Normally you call that design-in phase, maybe you can call it. So that's where some of the customers are. Other customers are evaluating corner case and still using evaluation kit. They have done the basic valuation. It's okay. Now they want us to meet the performance requirements for corner case as well. So there are customers with different stages and with different speed.

There's a couple of persons asking if the certification of A2 is a factor in that it's taking longer than we first aimed for to get the design real.

I think that in general, I would say no. I don't think that's a big factor. There could be some exceptions that the regulatory update in Japan for 60 gigahertz has been taking longer time than anticipated. So there is an uncertainty about how much power you're allowed to emit in Japan. And that is kind of a wet blanket on many customers in Japan. Nothing specific for Aconeer, it's for everyone doing 60 gigahertz radars. There is this, and there could also be some customers who wants to do truly global products. who doesn't want to have different SKUs for Japan or India, where the regulation is still not finalized. But except that, I don't think there is an additional obstacle for A2 compared to A1 because of the certification. It's more that A2 is a very advanced system. We need to develop application level features that the customer can evaluate. They are not radar experts. They want to evaluate on a use case base. There is an abstraction level that we need to get to that one. And we have been forced to prioritize finishing the development, getting the quality, getting the production line up. And that has, as I said now already a couple of times, been a bigger effort than what we anticipated earlier on. And I think that It's all in our hands to accelerate the customers. There are many customers that want to work with us, that are working with us, and we need to accelerate and push them forward by being able to put our resources working with them and push them forward. So it's in our hands.

One more A2 question. Last year you mentioned that A212 outside automotive will start production during 2026. Is this still valid?

This is still my strong hope, yes.

Great. And then finally some questions about the financial goals that we have communicated. A lot of people asking What's the roadmap for how will we reach 300 million in 2027?

So I tried to elaborate a bit on that during the last earnings call, the Q1 earnings call. And also I spoke about it at the AGM. And I think what I said then is still valid. The growth that we see today, remember, product sales is 150% growth year-over-year. It comes from only our established A111 and A121 products. We anticipate these products will keep growing in 2027. We have now four consecutive quarters of growth and we expect that will continue. In addition to that, It's a fact that we have received orders for A2. It's a fact that it is now in mass production. It will add to the growth. That is another important factor. And then the third ingredient is us winning significant business with A212 outside automotive. And that is something that we are now able to put more resources on and we want to accelerate it. I understand that it's a huge increase in revenue from this year to next year. And of course, we need to execute well. We need to win these customers. We need to deliver that. But this is what we're working on every day. And our financial goals, they were communicated 2024, and they are valid. We haven't communicated any other goals.

Great. That was actually all questions. Thank you, Ted. And thank you everyone for submitting great questions.

Thanks for your interest. And I'll see you soon. Thank you. Bye bye.