Gapwaves AB (publ)

Hello, and welcome to today's presentation with Gapwaves, where we have CEO Jonas Ehinger, who will present the Q1 report for 2025. If you have any questions, please use the form located to the right, and I will take that up during the Q&A. And with that said, please go ahead, Jonas, with your presentation.

Thank you, Martin, and thank you for hosting us in our presentation for the first quarter 2025. I'll keep this relatively short. The report was published a few hours ago this morning. I'll summarize some highlights, but we also want to make time for questions at the end. Starting off, GapWaves is in a very exciting situation right now. been on a growth path for quite some time and we're happy to continue this also in the first quarter of 2025. The first quarter is a strong start. Gapwaves is acting and promoting its technology and products in a growth market and this growth market has very strong market drivers. I will describe those shortly in the presentation. GapWaves has also moved its position and transformed as a company. So we're now a complete partner for our customer for their entire antenna need or waveguide need. So we can design products, but also set up production processes and manage high volume production for our customers. So the complete solution for our customers. In a few years, especially in automotive, we've established customer relationships with a majority of the leading automotive tier one companies. And that's a very short time in the automotive industry. So we're very happy to see that this is continuing also in the first quarter of 2025 with new customers coming on board. And we're also happy to emphasize our production capability as a company and provider to our customers. One step was announced last year with a flex line or pilot line here in Gothenburg. But this year will be very transformative as we also start up a high volume production for one of our customers. Looking at the Gapwaves as a company, we are a tech company based in Gothenburg, origin from Chalmers Technical University, based upon the research of Professor Per Simon Kildahl. And we have a unique waveguide technology, which is well patented, but also well documented in technical and research papers since many years, several decades. What we mostly do is to transform this technology into antenna products for our customers. And these antennas are very high performance antennas, but they also offer very cost effective, high volume production opportunity, which means a lot of benefits for our customers. Our main markets are really right now the automotive market, meaning radar sensors for advanced driver assistance systems, But we also keep a very close eye to other markets and future market segments, such as telecom and satellite communication and other industrial applications for our waveguide technology. GapWaves is today what is called in especially automotive a tier two supplier. So we provide a key component. the antenna to our customers. Our customers take the antennas and build them into their products, such as radar sensors, which they provide to car manufacturers. Car manufacturers are referred to as OEMs, and our customers are the tier one suppliers of products to the customers or car manufacturers. So coming over to the news of the morning, which are, of course, the content of our Q1 report. So first quarter, as I already indicated, meant strong growth for gap waves. So our sales were at almost 23 million kronas, which is a very strong growth year on year, 46% up versus the same quarter last year. We also strengthened our result significantly. So our adjusted EBITDA was minus 2.5 million, which is a 71% improvement versus the same quarter last year. We've also, as I indicated, added quite a few new exciting orders from existing as well as new tier one customers. So we feel that we have a strong growth momentum ongoing in the company. It's driven by the increase in order intake and new projects being started up, paid for by our customers. And obviously, the increased sales result in improved profitability. And we can see this continuing the solid revenue growth that we also saw throughout 2024. And, of course, our sales has different types of revenue. It's project revenue or engineering services, but it's also sales of products such as prototypes and now also more and more finished products. And we also design and sell production equipment for our customers. But if we exclude everything except production equipment, we're looking at still a very high growth of 70%. Our cash flow... is also developing positively. So it was a negative of 5.3 million, which is a strengthening compared to previous year and previous quarters. But we also had a very high account receivable number, 30 million by the end of quarter due to the strong sales growth. So we're looking at a very positive cash flow situation going forward. And also, we want to highlight, in addition to all the information you'll find in the report, the announced collaboration between our associated company, Sensrad, and their collaboration with Sensact, a subsidiary of Volvo, which is very exciting. And I think they can have very positive effects for Sensrad and thereby gap waves in the future. Coming over to some background information also on gap waves, but also how the future look and also the status and some of the ongoing projects as well as the production status. So this slide is very important. It shows our pipeline. It also shows the process typically with our customers and where I would like to emphasize that we're generating revenue in every step from first concept designs throughout the entire process until the start of production and obviously after start of production as we produce products and sell to our customers. So with Forvia and Hella, The production was commenced in Q1 2024 and the ramp up is ongoing and that will continue throughout this year and into next year. Also with Sensra, the production was started for that product last year. Same with the smart micro projects that we have been engaged in for several years. With Valeo, which is really a high focus for the company right now, we're planning to start production during this year. And that's a very intense period for us right now related to Valeo and the startup production. Also, with a newly announced customer, Desai, which is a tier one from China, we're We're starting development now and production start is planned for 2026. And as we have communicated before, we've recently added also other tier ones in Asia, but also in North America. So all in all, we're on track and we're seeing the timelines being maintained as per planning when we start projects. And that's very important, gives also predictability. So we're confident about this roadmap for the future. Due to our business model where we develop designs and we develop production processes and production equipment in gap waves and then for high volume customers like the automotive, we outsource and contract external factories that already have all the factory infrastructure in place. we have a very flexible approach that allows us to set up production in the regions where customers need it to be. For Chinese customers, we can do it in China. For European customers, we can do it in Europe. And we're well on track to have a production supply chain set up in Europe. But we can also set it up in other markets like the US. And in today's world, where we see more and more regionalization due to tariffs, etc., this will be a very important factor and a strength for GapWaves going forward to our customers. This approach has been received quite positively by our customers, and I think it's very well timed also given the current discussions between the different strong economical regions. Looking at the market potential, our market is not driven by nice-to-haves. There are very strong market drivers in our market. that will drive our market in a positive way to strong growth, regardless of tariffs. And that's because there are technical regulations on what frequencies that can be used, and higher frequencies require new antenna technology, such as gap waves. Another very strong driver are the legal requirements. on cars and the active safety demands that cars need to fulfill. And they require better sensors, they require radar sensors and also other sensors to comply with these requirements. And these requirements will be there regardless of tariffs and trade politics between countries and regions. So we're confident as well as our customers and their customers about continued growth in this segment. And we still see the growth as predicted in various market surveys of around 25% annually in the number of radar sensors being put into cars. We've shown also this before that we tailor, we design antennas for different types of radar sensors. So we have projects ongoing in all of these segments and this is just an indication of the volumes per customer or per contract that we're talking about. And for a corner radar, such as the Vallejo contract, for instance, we're looking at 100 to 150 million units over a life cycle. And the market pricing for such an antenna in those volumes are typically around one to two euros. On the other end of the spectrum, we have very high-end imaging radar sensors that require very complex antennas as well, and advanced antennas. Volumes are much smaller, 5 to 10 million over a life cycle, but the pricing is also much higher. So it's still a very attractive market segment for gap waves. And in fact, for gap waves... It's a perfect segment because no other antenna technologies can really deliver the antenna designs that are required for this segment, given the performance that you can get with waveguide antennas. So all in all, we think that there is a very strong market situation for gap wave and waveguide antennas. And that market transformation has just started. We're only in the beginning. A large majority of radar sensors in cars today on the roads are legacy sensors. So they use older technology. As you can see from previous slides, more and more customers are switching to waveguide antennas for their future radar sensor generation. So we're very well positioned for continued growth going forward in gap waves. And that finishes my short presentation. Now we would like to have some time for questions from viewers and also questions that have been sent in before. Thank you so much.

Thank you very much, Jonas. And yes, let's open up the Q&A here. We'll start with the first one. How much do you expect the tariffs to impact the gap waves and also your customers?

There will be an impact for everyone, meaning driving up costs. Tariffs is essentially a tax. on products. But when we sell to our customers, they will have to comply with whatever tariffs we will see in the end. But for us, as I mentioned in our presentation, the market drivers, the fundamentals, such as technical regulation and also legal requirements on cars and their safety features, they will be there regardless. So this is a must have in any case, regardless of the tariffs. But of course, if tariffs are causing economical downturn or challenging environment, et cetera, that could cause delays or trying to postpone certain investment decisions. But car manufacturers will regardless have to develop new cars and new models with upgraded features that comply with technical and and legal requirements to be allowed to be driven on the road. So fundamentally, it doesn't really change. But of course, we understand that the economical climate can have a certain impact or making things slower for some of our customers. But I also want to highlight that Gapwaves is active in all regions and with customers in all major regions. essentially the number of cars will likely be the same or slightly growing. So that means other car manufacturers will sell cars if one doesn't do it. And they all have to use the same comply with the same regulations. So I know it's a rather long answer, but short term, there may be some impact on some customers while other customers will have less impact. So we don't see an immediate effect. And long term and fundamentally, this market will need radar sensors using waveguide antennas regardless.

Thank you, Jonas, for that answer. Automotive is exposed to tariffs. How are you mitigating this? Are you looking more actively into other segments? And how about defense?

Yes, we're due to our model where we can contract factories and certify and qualify factories in different countries, different regions. We have an excellent opportunity to mitigate tariffs between regions, for instance. So I think it's, as I mentioned in my presentation, it's a strength actually for gap waves now, in this situation that the world is in, that we have this model, because we're not stuck with one factory or two factories in fixed locations. And we're certainly looking into other segments. I mentioned already communication, but also other industrial applications. Defense has not really shown so far a strong interest in utilizing our technology. Their radar needs are different, but certainly we would be open to discussing that. I think from an antenna perspective, It would probably be our customers that address defense applications. But I suspect that in defense, you would have an interest in autonomous vehicles of different kinds, etc. And that will be an application that will be really interesting also for GapWaves and its customers.

How has the sentiment been in mobility this quarter? Is there any progress?

Yes, there are some very strong players making progress. I think anyone that follows Waymo, for instance, and Wakey from the UK can see that they're making quite rapid progress and they're expanding their rollout pace in terms of autonomous vehicles. So that segment has improved. has continued to develop positively compared to the last few years. And we think that will continue.

Thank you. And you just announced an order from DCSV with a limited order value. How are discussions going around the long-term contract, given the risk that a Chinese company may copy the technique? And how do you ensure that proprietary technology remains secure?

Let's start with the last two questions. With our technology, it's not a problem to kind of copy data. The actual antenna, anyone can buy a car and take it into pieces and take things apart and try to copy things inside, the hardware inside. The design of the antennas is a know-how topic and that's not something you can copy just from looking at the antenna. These antennas are very complex to design. um and and the the it's a unique competence of uh gap waves even if you are used to use designing traditional waveguide antennas you cannot transfer that know-how and approach to gap waves type of waveguide antenna so we're we're feeling quite confident but obviously There is a risk that companies can buy a car or radar sensors and take them apart and try to copy. But the production process is not trivial. And that combined with the complex or very know-how intensive design and the competence that is required, we don't think it's... a risk that would deter us from going to China, for instance, and working with Chinese customers. In terms of this side, And the first part of the question, with Desai, which is a tier one from China, I think they were started in 1984. So it's one of the older companies. They're very well respected also outside China. The start of this project and this collaboration is very similar to what we have seen from other tier ones in Europe, etc. So it's first first few steps in an antenna design with the concept and prototypes etc. So this is exactly how all the other projects have started with the automotive tier one. So we're feeling quite confident that this is the start of a long-term relationship that will result in a large volume production contract also.

Thank you Jonas. Is the production for Hella and Smart Micro on track? And when will we see a significant revenue?

Yes, they are on track. Now Smart Micro is on a very different scale compared to Hella because Hella is for automotive radars, so volumes are going to be very big. But they are both on track and like I mentioned in my presentation, Hella is still in the ramp up phase that will continue until next year. But there will be a very strong growth in terms of volume for the Hella production this year as well. And that's something we're expecting next year as well also. So it's in short on track and it's commencing as planned.

and you opened the FlexLine a few months ago. Is it fully operational and how is the production progressing?

Yes, it's fully operational and we're producing antennas there, both prototypes and serial versions, like for SenseRad and SmartMicro, for instance. Now, the major... The major topic that we have or major priority right now is to commence production in our pilot line for Valeo to start the ramp up and then go into high volume production in China for Valeo next year. So with the pilot line, it's up and running and we're producing antennas there.

We'll take one final question here. Can you comment on the partnership between Valeo Mobileye and Volkswagen. Is Gapwaves included?

We cannot comment directly on exactly what type of products that will be supplied in that relationship. But Valeo is a strategic customer for Gapwaves and Gapwaves is a strategic partner for Valeo. So I think that overall, it's very positive for us that Valeo is strengthening its position in the automotive market. And the start of production and deliveries is in 28. So we have a high expectation that the state-of-the-art radar sensor that Valeo has developed together with GapWaves will be involved in supplies to Volkswagen Group. But once we have the information, we will, of course, confirm that to our market and investors.

That's all we have time for today. Thank you very much, Jonas, for presenting the Q1 report and answering all of our questions. And thank everyone who followed this presentation. Have a great rest of the day. Thank you.