Gapwaves AB (publ)

Welcome to Red Eye and this live queue with Gapwaves. Today we have Jonas Ehingo, CEO of Gapwaves, with us to give a brief presentation about the third quarter that was published this morning, followed with a Q&A session. And before the presentation, I also made sure that you are asking all the questions in the chat on the website below the video player. But with that, I hand it over to Jonas to present. The stage is yours.

Thank you. Thank you, Rasmus. And thank you to Redeye for organizing this. So today I will present part of the Q3 report that was published earlier this morning and also provide a background, which I think is useful in the discussion that we'll have after a presentation. So I'm really happy to be here and to share also Gapwave's very positive situation currently. And in this presentation, I'll be going through some of the market background and the market drivers. I think that's really relevant and important to be aware of. Same with our strategic strategy. partnerships where Gapwaves is not only providing technology, but a complete antenna partnering solution for our customers and their needs. I'll also touch on the order and contract, the contracts that we have and the timeline for those and what technology they'll be utilizing. In Gapwaves, last five years since we started to focus on automotive with been successful in recruiting and adding very strong customers to the company. And obviously we'll talk about the production capabilities and also some key elements in how we approach high volume production for our customers. So Gapwaves as a background is a Swedish tech company based in Gothenburg. We have a patented waveguide technology developed at Chalmers and the company was started in 2011 by Professor Per-Sidman Kildal. We have a very strong patent portfolio, which is growing and we pay a lot of focus or attention to our patents, both in monitoring the market, but also developing new patents. And importantly, we focus the IP on the IP when it comes to production, because that gives us a very strong protection. The company is listed on NASDAQ First North since 2016. We now currently focus mainly on radars for automotive and mobility applications, like passenger cars, but also other types of vehicles. We do, however, have a close eye to the development in wireless communication applications, such as mobile phones and satellite communication, et cetera. We are a tier two supplier. So our unique technology and the products we develop for our customers are being integrated in the customer's products. And our customers are tier one suppliers. to car manufacturers that are typically referred to as OEMs in the industry. But let me start with discussing the Q3 report. I'm really happy that we continue the growth this year. We've had strong quarters earlier in the year and Q3 is also another strong quarter continuing for Gapwaves in 2024. So our sales came in at 18.4 million, which is a very strong growth, 160% up versus same period last year. And year to date, our sales are growing at more than 130% compared to the same period last year. And we ended up closing the quarter with a year to date sales of 48.5 million. of course, strong sales should translate into improved results. And we can see that also in the quarter, even if we have a slightly different product mix or product sales mix. So the result was minus 6.7, which is an improvement versus last year, third quarter of 31%. And that improvement is also true for the full year where we're looking at minus 24.3 million in EBITDA for the first nine months on the year. You can see on the right in the graph that we have a number of strong quarters this year consistently compared to previous years since 2020. There are a few quarters that are a bit of a outliers because they contain one-time license payments from Hella and from Bosch. But generally speaking, the growth we see this year is made up from the inflow of new products and scaling up production. Looking at some of the highlights in addition to the revenue growth, we see a continuous strong interest in the automotive industry and also increased interest from new customers. And we'll probably be talking in the Q&A session afterwards about the automotive market status. And we see that the interest from Gapwaves is growing from our tier one customers, regardless of some OEMs having problems, not all OEMs, however, and not in all markets. We're on a scaling up journey in Gapways, as we have discussed before. Really important for us and for our continued growth is to commence production at our pilot line, which is being established in Gothenburg next to our headquarter. And this pilot line will come online in November, in the middle of the month, so in just a few weeks from now. And that is a key step for GapWaves and it will also allow us to fully control the production and production processes and also to accelerate high volume production as we can pilot production lines, we can pilot production processes in our own facility and then relocate that or replicate that in external facilities for high volume production. We are adding more capability and competence to the organization, which is a must in the automotive industry. So we're adding capacity. We're adding organization in terms of supply chain, production, quality management and assurance. which are requirements from the automotive industry. We have also seen in the year so far, and also in the quarter, increasing interest from other sectors outside of automotive, like smart city applications for traffic monitoring or traffic flow management. And another sign of this is also that our associated company, Sensrod, has also been able to close a larger agreement, frame agreement, with TNG, a leading ITS or smart city player in China that are populating cities with ITS solutions using 4D imaging radar sensors from Senstrap. And they, of course, contain GapWaves antennas. It's actually a very unique antenna. It's kind of a world record in terms of capability and performance, given its size. And it has also generated interest from new customers. After the close of the quarter on Sunday, we were able to finally announce the development contract with Valeo. Valeo is the European tier one that we've been working with since the first quarter of 2023. It's a large scale production agreement. So it means that Gapwaves will industrialize the antenna that we have designed and developed for Valeo. And we will also commence high volume production for Valeo. Valeo will buy the antennas from us. I'm also happy to see that we can meet customer requirements and accelerate the start of production from 2026 to 2025. And this is partially due to the antenna technology, the MLW antenna technology that we introduced into the market officially last year. And we see a large interest and a growing interest for the MLW antennas in the automotive industry. It allows us and customers to be faster and commence production faster. And obviously adding yet another leading tier one adds a lot of weight and strength to Gapwave's automotive position or to our position in the automotive market. And obviously with a contract of this size and this term or duration also adds a quite solid business base for our growth going forward. So again, looking at the market as an investor and potential shareholder in GaffWaves, I think it's really important to understand the underlying market fundamentals. And we have talked about this before, but I think it deserves to be repeated and brought up again. In our market, meaning radar sensors for ADAS applications in passenger cars, that's how we define the automotive market. There are legal requirements that are strong drivers. So cars need certain safety functions for them to be allowed to be sold in a specific market like Europe or North America. In addition, there's also technical requirements defining what frequencies that can be used. And since 2017, it has been decided that automotive radar must operate in higher frequency band, the 77 gigahertz frequency. This means that all the tier ones need to upgrade their radar sensors, regardless of the number of cars being sold, because the older sensors will not be allowed to operate in newer versions. So anytime a tier one places a new radar sensor on the market, it needs to operate at 77 gigahertz band. And at these higher frequencies, GapWave's waveguide technology excels. It outperforms traditional antennas. And in addition, it's also a very cost-effective production for our antennas. And we think we have a competitive advantage, both in terms of performance, but also producing the antennas, especially in high volumes. So all in all, these market drivers, they create a very strong market situation for waveguide antennas and for gap waves. So we're looking at 25% or more annual growth in the market for the rest of the decade. And I think that's a very important fundamental fact for shareholders and investors. Coming over to our business model, that's also another fundamental aspect to consider. GapWaves has chosen what we call a hybrid model. It's very flexible. It also means that we can minimize the upfront capex investments in infrastructure, like factories or factory organizations, staffing, and other facilities. So GapWaves partner with external partners that we certify and we qualify. And they already have those facilities, which means that we don't have to invest in those or create those. So we become very fast, but we can also minimize the capex and the investments needed. GapWaves approach is symbolized or illustrated in the graph on the left, in the picture on the left-hand side. But we are a full partner solution for the customers. We do the antenna design and development, of course. We develop prototypes. They are being produced in our own facility, which we call the Gapways Flexline. And then we start the industrialization process for lower volume production. And lower volume production for Gapways is around Our internal capacity is around 500,000 units per year. But automotive typically needs much higher volumes than that annually. And that means that once we enter the high volume phase during the ramp up, we place that production in external facilities with our partners. And Gapways remain the sole interface with the customers. So customers, they contract with us for the development, for the industrialization, but also for the high volume production and supply of antennas. This is one of the most important slides and information in this presentation. This is the pipeline and status of the contracts. Pipeline, meaning the intended start of production for the antennas that we have developed or are developing. Some of these customers and their antennas that we have designed and developed have already commenced production, like for Hedla. It started in Q1 this year, and so far we're well into the ramp-up, which will continue well into 2025. These ramp-ups going from zero to to more than 1 million or multi-million units per year take time. But it's really important when that start of production happens, the process is ongoing and there is not really any question marks about if and when. It's rather gaining speed and gaining capacity while maintaining quality, of course, in the produced units. So far, we've hit around 100,000 antennas just for Hella. And this is typically, this is around four times the number of antennas that Gapwaves as a company has produced during its entire lifetime. It gives an idea of the scale that we're talking about. You can also see Valeo. And as I mentioned, we've passed through all the different stages. And now there is a supply contract. Startup production will happen in 2025. It was earlier planned for 2026, but Valeo and Valeo's customer required an earlier start, which is good news for us and for our shareholders. And thanks to the MLW technology, which is faster to put into production, we were able to meet that requirement. And other tier ones, as you see on this list, our plan for the following years and Gapwaves will continue to grow as a company, as our product deliveries grow with these contracts. Obviously, it's almost that I don't have to say it, but I want to say it anyway, we're adding more customers to this list and we're working to recruit more customers, both in automotive, but also outside of automotive. Finally, before we enter into the discussion, I'd also like to mention again Sensrad, which is a strategic initiative for Gapwaves to assume a different position in the value chain for the market segments outside of automotive. In automotive, we'll be developing and supplying antennas in high volume. In other segments, we want to come closer to the customers and a stronger value chain position by helping to provide complete radar sensors. In this case with Sensrad, it's a very high end. To our knowledge, it's actually the most capable radar sensor in the market right now. And we have a 30% ownership from our investment last year. And Sensorad is gaining momentum now. They've entered into a partnership with a Chinese partner for smart city applications regarding traffic flow and traffic flow management in China, in a number of cities in China. And the first few units have been delivered to this customer. And now there is an expectation on both sides to ramp this up in the coming months and quarters. And Sensrad also has some very interesting customers outside of the ITS segments in terms of industrial type of vehicles that can be automated. So we're very positive when it comes to Sensrad. And they are launching their first commercial product version in this year, before the end of the year. So in summary, GapWaves and we feel in the management and the company and the board that we're very well positioned for profitable growth and strengthening the company going forward. The market is there. It's not a question of if. It's actually an adoption rate topic. And we're seeing that adoption rate increasing. And we have in just a few years, Gapways has only been active in the automotive market for five years. But in those five years, which is really short in the automotive world, we've been able to add a majority of the leading tier ones as customers and in long-term agreements, which will build a very strong base for the future in the company. And these companies also have an inherent interest in Gapwave succeeding in its supplier journey or in its journey towards becoming a full service supplier and partner for these companies. And with our business model and our production set up, we think we have also a competitive advantage Because we don't have to build and construct and design factories. We can rely on very knowledgeable and strong partners for that. I also, before we wrap up the presentation part, want to highlight our update on the investor relation pages on our website, please. Take a look and let us know what you think. You can also contact us directly with any questions or comments there. Thank you very much. I'm looking forward to the discussion and the questions.

All right. Thank you very much for that presentation. And just as a reminder for the people watching online, please make sure that you ask the questions in the box on the website. So we have received a lot of questions and I hope we can manage to get all of them answered today. But to start off, you delivered strong net sales in the quarter. partly driven about the equipment sales that were delivered. If we exclude the equipment sales from the quarter, is it reasonable to expect that the remainder is related to the Hela start of production?

Not only. I mean, it's related to other projects that are ongoing also. As you know, we've had a pretty positive inflow of new projects in the year. And obviously they are being worked on month by month. And we deliver milestones according to those and recognize the revenue accordingly. And I also want to highlight that sales of production equipment doesn't just happen. It's a result of the contracts where we have developed antennas that need to go into production. And this specific production line equipment that we've seen revenue also in previous quarters this year, it's actually a result of the ramp up, which is being done for the Hella antenna. So there is a bit more of granularity in that picture.

All right. Is there any indication you can give us in terms of like product related sales?

Well, if you don't consider our own product equipment as a product, our production equipment as a product, which we do, there are obviously deliveries to, for instance, smart micro, product deliveries to smart micro in the quarter. But also there, we're ramping up and sensored antennas will be provided also in the fourth quarter. So we'll see that starting to impact uh positively the numbers also but in all cases there are uh there are ramp ups and and uh so that will probably take us into 25 to and to become significant in for all these customers all right and if we just stay on the topic of product equipment sales for a moment you have previously announced uh an order from franken about two million euros how much have you delivered on this so far Well, it takes around 15 months and we've been working for nine months. It's not linear because it depends on on what parts of that equipment that are being put in place. It has several. I mean, a production line consists of several different equipments. So the revenue and the sales are related to that. So but around 75 percent.

All right. And you have also previously made a press release about Hella placing a rather significant order of, I think, one and a half million euros or so. How far along the invoicing of this order have you delivered so far?

As we communicated, that order refers to development services for 2024. So, you know, three quarters means around 75%.

Alright, thank you very much. If we go and move on to the automotive tier ones for a little moment. In your slide or in your presentation where you discussed this, you had a section about the phase that the customers are in. Can you just give a brief description of what phase one, two and three actually refers to?

Yeah, phase one is typically very early concepts. There are um, simulations being done, you know, uh, antenna, uh, specifications being developed together with the customer. And then, uh, next step is really developing prototypes and samples of various or increasing maturity until you have a finalized design of the antenna, which the customer is freezing, you know, so it's defined, it will not change after that. And then the third phase will be industrialization or putting that antenna into production, which in automotive means dedicated production line or several production lines that are fully automated and fully customized for that specific antenna because you need high volume. You need to utilize the production line to the maximum extent.

Right, thank you. And if I saw correctly, I think you had on the slide that Bosch was expected to reach start of production in 26 or 27, and I believe it was 2026 before. Can you make any comments on this?

Yeah, there's been a bit of a change, scope change in the antenna. So obviously that takes a bit longer, you know, so it's causing a bit of a small delay, I wouldn't say it's significant. I mean, we're still in the same timeframe. But it's driven by customer and customer demands. It's the size of the antenna. And that means that we have to redesign parts of the antenna. But obviously, this comes from the customers of Bosch. So they are putting requirements on Bosch, and then we have to adopt together with Bosch accordingly.

All right, can we expect like a higher price point or a different form of antenna based on this or it's fundamentally the same thing?

It's fundamentally an antenna for the same application. I cannot share the specifications of the antenna, but it's an imaging radar antenna. So it's addressing the same need and same intended application.

right that's understandable um could you just give us a brief um description of how your different uh technologies how the different technologies differ and uh how the price points um look for the different technology types yeah um so we have um two

Antenna technologies. The antennas, they work according to the same principle. It's the manufacturing and the assembly of antenna and the materials involved that are different. So traditionally, injection molded antennas is something we've had. HELLA's antenna that is now in production is based on that technology. Also, our competition is using injection molded plastic parts for the antenna. They do have traditional waveguide antennas, so they suffer from more expensive production and also more expensive materials, which is a clear disadvantage in very high volume production. Our newer antenna technology was introduced to the market in September last year and has gained a lot of interest. It's made not from plastic. It's very thin metal sheets that are being welded together. That allows for a very thin and compact antenna. It also allows us to be faster into production because it doesn't require very advanced injection molding tools and development. So it saves both time and cost and provides a lower, a smaller footprint of the antenna. And every millimeter counts because integration into the vehicle is challenging it's a very big challenge for both car manufacturers and for the tier ones. So naturally, the automotive industry has been very interested in this newer antenna technology, along with the existing injection molded antennas. So looking into the future, We and the market and our customers think that radar sensors need to be more powerful and to have higher resolution and also detect objects further away at longer ranges. And that means bigger antenna sizes, like for the botch, for instance. And there is a mechanical limit for plastic antennas, because if you make them too big, they tend to warp. And that will ruin the antenna performance and the radar sensor performance. The MLW, the metal antennas, doesn't suffer from this. There is not really any limit that we see coming up in the coming decade. or for building large antennas in MLW technology, such as we're doing for Bosch and for Sensron and other customers. So we use both technologies. So if it's a small standard corner radar sensor, we might as well go with IMW or the plastic antennas. For larger antennas and very high performing antennas, we tend to go with the MLW. But it's also a discussion for the customer, what they prefer, for instance. And also a matter of cost. Cost-wise and price-wise for the customer, they are on par. If we make an antenna similar size, then they will be similar in pricing. We see opportunities in mlw for cost production cost benefits for us going forward as we have more flexibility in the metals or materials that we can choose

All right, thank you for that very detailed answer. We received a question on the topic. So I thought we will add that here. And they ask, when can we expect Hella to move from a royalty deal to a production deal and also include the MLW technology?

Right now, as you know, we've been working on next generation of Hela's radar sensors or antennas for next generation radar sensors from Hela. That's referred to as Gen 7. We started production of the Gen 6 antenna in January this year. We think that Hela might finish the development phase during 2025, but it It depends on the project and their requirements. And that means that it will be natural to discuss supply and production of those antennas at that point in time. However, Hella has a licensing agreement covering the plastic antennas or injection molded antennas. For MLW, they have not started to work on that together with us yet. But there is certain interest in creating more powerful radar sensors, which naturally require a bigger antenna and more complex antenna. And then AMLW would be a natural choice. But we're not there yet, or rather Hella is not there yet.

All right. So perhaps in a future generation, we can expect that. This past Sunday, you announced the agreement with Valeo. And I think you state in the press release a mid-double-digit euro contract value over a 10-year period or so. What determines how much you can make from this agreement in total? Is there anything that can happen to have upside or downside to the value?

Yeah, I mean, these forecasts that we get from Tier 1 in this situation, Valeo, they are based on their own expectations and typically kicks off with the Tier 1 winning one or two or some contract awards from car manufacturers, OEMs. And obviously, the Tier 1 will try to win as many of those contracts as possible. So we see that we and the Tier 1 see upsides to these volume predictions. And there can also be upsides in terms of time. The antenna and the radar sensor will be produced for as long as any cars that have these sensors are being produced. So 10 years is what the expectation is now, but it could also be extended. So it can be extended in time, but also in volume. And so obviously since it's our understanding that Valeo has already won OEM contracts for the upcoming radar sensor, we understand that they're pretty confident about the forecast that they provided.

All right. And like how much visibility do you have into your tier ones and what car models they have won, et cetera?

Officially, it's very limited visibility. We can make educated guesses, but normally they don't share that information. It's very sensitive information for a tier one, especially early on before the product is in the market and being supplied to the OEMs. So we don't really have much visibility.

Alright. You have also an undisclosed Asian Tier 1, which is the first one in Asia. Could you tell us a bit more about this? When can we expect to get a press release like the one we got on Sunday, for example?

Clearly, we're in that first phase that you asked about earlier, and that will go on until the first part of the first half next year. And then, depending on If there needs to be additional developments or if we can move forward into industrialization, that's something that we don't really know right now. So it's still very early. We started work in June this year. So it's only been ongoing for a few months.

All right. um and then if we move on to you how you mentioned it briefly in your discussion about the other vectors and i know previously i've said the other vectors have had a bit of a challenge in time due to like financing and other considerations for the end customers or the companies developing this technology uh could you just give us like an update what do you think about the outlook for the other verticals

Yeah, I think other verticals are developing positively. We've seen some interest, increased interest from newer, from new customers, but also from customers that we've been working with since earlier, since a few years. If you look at it from the outside, some of these companies like Waymo, which is involved in in autonomous drive and robotaxis, they've been very well financed recently. And they are also increasing their rollout. Same is true for Aurora and Wheelride and other similar players in the market. So I think they've been going through their consolidation, if you want, some of their players from a few years ago. are not around anymore, but the ones that are there now seem to be very strong in their rollout and their progression. And then we also see this segment of smart city solutions, which we think is a really big market and they're changing their radar sensors from lower frequencies to higher frequencies. So we expect to see the exact same trend among these companies as we've seen in the automotive industry and that we're enjoying in terms of growth and continued expansion of our customer base.

All right. And then just a quick one on ZenThread, which is an associate company of Gapwaves. And it looks like its profit and loss has decreased significantly compared to the comparison quarter last year. What is this driven by? Let's start there.

Well, Sensra is increasing its sales. They've had, unfortunately, some delays on the technical side. It's a very advanced and complex product and with complex and advanced technologies inside, including GapWaves and Tenna. But now, as they're getting more and more products finished and are able to roll out, they also see increasing sales. And this agreement with T&G is a very good inflection point for that growth in sales going forward in the ITS segment. So essentially it's certain top line revenue, but also exercise of cost control in the company.

All right. And when do you expect to see positive results from Sensrad?

We cannot give you any forecast, the same as for Gapways. We think, however, as we have discussed before, that some of those segments that sensors are active in will be able to exhibit very strong growth and adoption rate. Regulations are less strict in those markets compared to automotive. And typically, development processes and startup production will will be executed factor compared to automotive because of the regulatory network and the regulatory requirements, as well as the quality systems that are very important in automotive, which you don't have in the other vectors, as you call it.

All right. And then could you just give us a bit of a more, could you just help explain, you write in the report that the ramp off of Franken will result in license revenue next year. Can you just explain what that refers to?

Yeah, it's a license agreement with Hella. So essentially as Hella, the Hella antenna is being ramped up in volume. Obviously, that license revenue will become noticeable during next year as the ramp-up progresses. So it's a consequence of the ramp-up from the production of the Helena antenna.

All right, then I understand. I'm going to move on to the viewer submitted questions now. So let's see here. Do the agreement with Bosch and Vallejo include antennas from any corner radar application or is it limited to Hella until their exclusivity has ended?

I cannot share, as I mentioned before, exactly what type of antennas and applications these customers are aiming at because they consider it to be sensitive and competitive information.

All right. We have another one here asking about you have provided estimated order values from Bosch and from Valeo. Can you also do the same thing for the first generation Hela ramp-up?

No, we're not able to indicate that at this point, but I'm sure as Hela commences start-up production, we'll be able to have more visibility on the volumes. But we've been open with the fact that it is a corner antenna, and our general guidance means that a corner antenna

is looking in general is looking at volumes between 50 to 150 million units over a life cycle of such a product all right the first generation of antennas to hella had startup production and radar sensors will be delivered to a german oem does hella have any other customers besides the german oem for this radar sensor

Yes, they do.

Can you expand any further?

No, I can't, Rasmus. But we know that there are other OEM awards for that antenna, but we cannot share any information on who those such OEMs might be, obviously.

Alright, great. And here's another one. How are you going to finance your business until your cash flow positive? Do you expect an equity issuance or debt financing or any other option?

We're actually looking at any option. For us, it's really important to as quickly as possible move into production and supply antennas so we can leverage from the development efforts and that's the most important aspect right now in terms of financing of certain investments etc there are many options or several options in the market aside from new share issue of course that we're looking into it's with these type of supply contracts that we're entering into now I don't really see it being an issue to if we wish to finance part of that equipment in standard ways in the market and with the help of banks and others.

All right. We have another one here. How does a gap wave see the competition in the next years regarding insourcing by the tier ones and Asian players?

We're aware of a potential threat. At the same time, our technology is patented and protected. More so, it seems like it's not trivial to produce these antennas in very high volume and with the right quality. I mean, the quality requirement is very high. We're talking about failure, or failure rates that are in the PPM range. That means that the yield rate must be well over 99%. And we have been approached by plastic producer factories that have tried and they come to us to get help in their production, which is obviously of little or no interest to us. So our main competitor is Huber & Zuner from Switzerland, and they use a different waveguide antenna technology, which has limitations in terms of materials, but also production methods, which drive cost. So that creates a competitive advantage for us. We don't see a big threat coming from third party factories, et cetera, right now. The design, phase is really important. It's not trivial to design these very advanced waveguide antennas. And so far, none of the tier ones really have that capability themselves.

All right. I'm not sure if I misunderstood you a little bit there, but I think you touched upon the production being a competitive edge, but you are also outsourcing the production to a third party. So could you just comment a little bit about that?

Yeah, we do that, but under controlled forms. So it's a very tight agreement and partnership, which ensures that our know-how doesn't leak or end up somewhere else, but rather within this partnership with the production company. So I think it's a better approach than Again, having to build factories on our own, which is expensive, but also very time consuming.

All right. We have another question here. Why does GapWave show copper and brass antennas? What is the difference?

It's not really any practical difference. For MLW, we foresee that we will be working with copper. It's a good material when it comes to etching. Brass is also that, but it's also more expensive and have other properties than copper. I indicated in my presentation that we're also exploring utilizing other materials in our MLW antennas, for instance, aluminum, which would have yet another big cost advantage to copper, for instance.

All right. What projects are in the pipeline for the next year?

I mentioned in my presentation that we're working diligently to add more customers and more projects, as you've seen from the slide regarding the status of the different contracts. The sooner we can add more customers and finish that first development phase, assuming we can put antennas into production and scale up accordingly with the customers.

All right. And you have quite a lot of automotive focus. So here's the question about what sales mix to expect in the future with automotive versus other segments.

I can't give a percentage at this point, but looking at that slide again, where we see antennas for automotive coming into production or various other segments related to automotive, it means that the majority of our revenue will be associated with the automotive market.

All right. Here's another one with what expectations or targets do you have for the next quarter?

Continued growth is the main expectation. Like I said, it's really important for us to also add customers, not only in automotive, that's the main focus, but also outside automotive in the other segments that utilize these radar sensors that need our antennas.

All right. And can you tell us about sensor imaging radars and the outlook for sales in the coming months?

uh not a detailed forecast but we expect sensor to continue the growth that they've seen in the in the year and and uh more importantly to be able to execute on the rollout of uh on their commercial version of the radar sensor

All right. Here's another one which I've partly answered already. But the new deal with Vallejo selling, are you selling whole antennas or license only? And then there is a follow up on what kind of an antenna is it? Corner, radar, something else?

Let's start with a second part of the question. I cannot share what kind of antenna application or radar application it is, whether it's imaging, corner or front. We supply complete antennas just as we communicated in the press release. So Gapwaves is the complete supplier of the antennas to Valeo.

All right. There's another one asking about why there is no license revenue in conjunction with the signing of the agreement with Valeo. Is that something we should expect later or what's going on there?

No, it's always a, it's a good question. It's a relevant question. It's always a discussion with the customer about, you know, how much upfront do they want versus the price per unit and committed volumes, et cetera. So there's a number of parameters in such a contract. And then in this case, we And we assessed that the business case was stronger for us. And same for Valeo, that we added royalties in the part pricing for the antennas as they are being delivered.

All right. It's built into the deliveries in essence. We have another one here about Hella and how that is an exclusive agreement for the corner radars until 2026. Is that only for that specific type of model of an antenna or is that for your whole portfolio?

Hela licensed the patents and the IP that we had at the time of the agreement, June 2021. So it does not include, for instance, a license to the MLW technology or the antennas.

All right. And the person has a follow-up question. If you have any other tier ones that are on queue for a corner radar beyond 2026?

We have definitely contacts and discussions with other tier ones, and I cannot share on the intended timelines or what applications there are, but like I indicated in my presentation, and I want to re-emphasize that here, that it's imperative and it's a very strong focus for us to add more customers to our customer base, including automotive tier ones in all applications, corner, front, or imaging radars.

Alright. And then we have a question about what is the maintenance cap rates related to the pilot line that you are setting up?

I'm not sure I understand. Maintenance?

I think it's just the cap rates needed every year to maintain the line, basically.

It's really not that significant. I mean, we've made most of the investments in that pilot line already, so it's a production line, which is becoming online or active during the month of November. But in terms of service agreements, et cetera, it's not really any significant costs related to that.

All right. And I believe if you look at the reports, your capex has not really changed a lot since you announced this initiative either. So you talked a little bit about increasing the operating expenses, etc., or like operating capacity with scaling up the business. What do you expect in terms of operating expenses going forward?

I think in our development capacity, we're at pace right now. So I don't foresee that we need to do dramatic increases. We can house a number of projects simultaneously, both for larger and smaller customers. We will likely expand on the production and supply chain side as we add more contracts. So it's a natural consequence of expanding capacity. But I want to emphasize that we don't do it on speculation. We do it as we add more contracts, customer contracts and supply agreements.

All right. So if I understood it, it can be done somewhat incrementally as you scale up basically in line with your contracts.

That's correct. That's correct.

All right. Here's another one. How is it going with the two tech giants and under?

We've discussed before, you and I, I think, when it comes to Under, Under has changed their business model. They're not providing radar sensors anymore. They want to provide their chipset solution to primarily automotive customers. Under is, as we see or understand it, quite active in that segment right now. And we're happy to be a partner of Under so they can point directly to gap waves when it comes to the antenna solution. Any customer that wants to produce a sensor, they need a chipset, they need a PCB board, they also need an antenna for waveguide performance, but also to apply the radar sensor for 77 gigahertz. So we have close contact with UNDER, very frequent contact. There is joint discussions with potential new customers together, but fundamentally UNDER is not providing radar sensors. So they are not a key target customer for our antennas, but their customers are also our customers. And that's a fairly good position for us to be in, I think.

Alright, just made sure I understood that Under is not tied into using your antenna specifically, but their customers in turn can choose to use GapWave's antennas.

Yes, and there is not that many options when it comes to WaveGate antennas for automotive use. So I think we have a good solution there and Under can point to us as a ready-made solution and interface to their chipset.

All right. And then we have a question here. For the Valeo contract, what is planned manufacturing split between Gothenburg and other production facilities?

You were breaking up a bit. You said what's the split?

Between manufacturing in Gothenburg and other production facilities.

Well, fundamentally, this is a high volume contract. So in high volume, this production will be with a production partner of Gapwaves. The initial phase of the ramp up, starting the ramp up and starting the production and establishing the the exact production equipment will happen at GetWaves pilot line in Gothenburg. And then it will be replicated with the factory to commence high volume productions in the millions of units per year.

All right. And just going back to the previous questions, question about the tech giants. Could you just give us an update there as well?

Yeah, tech giants. I mean, there is some... some consolidation among projects. I mentioned Waymo, Aurora, et cetera, as examples. But in terms of autonomous vehicles and delivery, last mile delivery vehicles, et cetera, that market has not really picked up yet, but we see some positive signs, as I discussed earlier.

All right. And then for the final question today, are there any news about Magna and Veoneer and the start of production for them?

Not in addition to what we have indicated in the guidance or in our slide regarding the status of the contracts. So we're still looking at 26. But from what I understand, there is a merger between organizations ongoing in Magna and Bioneer. And I think it's taking a lot of their focus and capability. So I think there are other tier ones that are more active in the field than Magna and Bioneer right now. But that's our interpretation of what we hear in the market.

all right and that is all the questions we have here today so i thank you very much for participating and thank you all the viewers who submitted questions and watched live thank you very much rasmus