Gapwaves AB (publ)

Hello and welcome to today's webcast with Gapways, where CEO Jonas Edinger will present a report for the second quarter of 2025. After the presentation, there will be a Q&A, so if you have any questions for Jonas here, you can send them in via the form to the right. And with that said, I hand over the word to you, Jonas.

Thank you and it's great to be here and thank you for joining us as I present our second quarter report that was released earlier this morning. I'm really happy to be able to publish this report together with our team at GetWaves. show some and discuss some highlights and a short recap of some of the most important fundamentals when it comes to gap waves currently but we want to ensure that there is enough time for questions there's been several questions submitted already and i think there will be more questions sent in during the presentation so please send in any questions we've prepared to to answer them real time after this short presentation. So Gapwaves is well positioned for profitable growth. And I think that the second quarter report that we published this morning really shows this. The market potential is very strong for Gapwaves due to safety regulation, legal requirements and customer needs. And although the market is uncertain in general, the fundamentals have not changed and it's important to remember that, that legal and technical requirements for higher performance radar sensors are still there. GapWaves has transformed into a strategic partner for customers so we can solve the entire antenna topic and antennas are a very efficient way to improve performance and cost effectiveness of radar sensors that are required for car manufacturers for instance. And in a few years, for those of you who have followed Gapwaves, we've added and created a very strong customer list with several long term and strong contracts. And GapWaves is now also a partner for our customers in terms of full scale production, even for automotive, where we're talking about millions of units of specific antennas for specific customers each year. Looking at the second quarter report, we have very strong sales. We had sales during the quarter of 24.1 million kronas, which is very strong growth compared to last year. And last year was also a strong year for Gapwave. So we're looking at 66% growth year on year, compared to the same period last year. And also our result, the EBITDA improved strongly. 56% versus second quarter last year. So in summary, our strong growth momentum is sustained. It's driven, of course, by increasing number of development projects with increasing number of customers and also the sale of production equipment. Production equipment is being needed to produce the antennas that we have developed for our customers. So it's a natural result of our development contracts with customers. And improving the profitability is of course a result of increasing sales and growth combined with not adding Cost to the same extent. So we have fairly strict cost control. It's not only about control. It's also due to our business model, which I'll come back to a bit later in this presentation. Cash flow, importantly, improved quite a bit during the quarter. And of course, as we grow rapidly, we see an increase in working capital from account receivables, meaning customers and customer invoices awaiting payment. I also want to comment on the market climate, especially in automotive. It's of course challenging and I think it's challenging for all industries currently. However, as I mentioned earlier, the underlying market requirements for improved safety, active safety in cars requiring radar sensors with So waveguide antenna technology has not changed. So it's still there and it will still be there. So fundamentally, we're looking at a quite positive market growth in the coming years for our type of technology. Importantly, during the quarter, we commenced start of production for Valeo. This happened during June and the first serial delivery for Valeo and the antennas that we have developed for Valeo since the beginning of 2024. sorry, since the beginning of 2023, commenced on July 1st. And this was done, the production has started in our in-house pilot line facility in Gothenburg that was inaugurated and set up late last year. We also note and want to highlight that it seems like Valeo is gaining market share in the ADAS segment in the automotive market. Fundamentally that is positive for us as we expect increasing volumes for Valeo in our production due to Valeo winning contracts with car manufacturers. If we look at the customer side, we continue to add new customers to our customer list. We want to highlight especially in Asia and in the Chinese market. As I think most people know, the Chinese automotive market is very important and it's gaining in size compared to other regions. And it's very important to be present in the Chinese market. And we're very happy to see that during the quarter we could add a leading automotive tier one from China, Desai SV. And they have a very ambitious agenda and target for their market share growth in terms of ADAS radar sensors. So we are very happy to be able to communicate and start up this partnership with DECIDE. Also for SenStrad we see a very positive development in the second quarter and during this year. So the product was launched late last year during the fall and we now see commercial traction and a very strong momentum for SenStrad. The interesting to note is also that the largest customer this year so far is within the defense industry for autonomous military vehicles, transport vehicles, and that together with the Chinese customer within the ITS and transport traffic regulation sector makes up a very good uh based for for censored in terms of revenue and sales growth Coming back to our business model, I think in today's world it's very important to highlight Gapwave's business model. It's different than what our competition can offer. So in addition to our technology, our strong technology advantages, we also have an advantage in terms of the business model, which I'll describe shortly. This slide shows the result of that business model. In just a few years, we've been able to add quite a few very prominent customers. We work with a majority of the world's leading automotive tier ones in terms of providing antenna solutions for their upcoming radar sensors. And we've done this in a very few years, which is very fast in the automotive industry. So typically, as you probably already know and have heard me describe before, the development with a customer starts with a development contract for new antennas targeting or intended for new radar sensors. And there's a development phase. And then as the development gets finished, we move into preparations for startup production. And then the most important date here is the startup production. And that gives some guidance also when we can expect higher product sales and higher product volumes in terms of revenue. And then it's being followed by a fairly long cycle of high volume production for our customers. And as you can see in the pink bars, we've entered into production as planned and even faster in the case of Aleo. according to customers' needs. So we're in production with quite a few antenna products that we have developed for customers. But we have more coming up, as you can see from the chart. There's quite a few customers in the development phase. And this is some customers that we have wanted to highlight, but there's also other customers that we're working with, obviously. In terms of our business model, I mentioned that this is a very important aspect of Gapwaves and the case and the positioning that we can offer to our customers. We contract with and select and qualify external production facilities or companies. We call them partners. and they can be located in various parts of the world. They already have the infrastructure, meaning factories, staff, uh and personnel and competence they are also already qualified as production units for for and within the automotive industry so that means that we can bypass all those investments we have a very capex light model so we don't have to buy land build factories and and get all the permits etc that's already in place so we qualify these partners and we started in china with chinese-based production because that's what our customers required uh there's now already indications for europe so we have prepared a european production and supply chain And now we're targeting the US in a similar setup. So we're screening for suitable US based partners to localize production there. And in today's geopolitical and trade political world, This will be a very important competitive advantage for gap waves compared to competitors that are essentially factory companies that are located and restricted, limited to their factories and wherever they may be located. So in addition to that, we have our own pilot line facility in Gothenburg, as I mentioned, where we can serve customers with lower volume needs than passenger cars or the automotive industry for passenger cars. So we can serve customers outside the automotive segment with full-scale production in our own facility in Gothenburg. Where we of course also manufacture all the prototypes and concepts etc. for new customers coming in. And this was a key element for Valeo that we could initiate production very early for Valeo in Gothenburg in our existing facility. And without a pilot line, we would not have been able to meet the required timelines of Valeo and their customers. In terms of the market potential, I've already indicated that the market is driven by the needs for active safety requiring sensors and radar sensors in cars. I've described this many times before, so just a short summary. So essentially legislation, but now also customer needs and competitive pressure among car manufacturers require better and more advanced driver assistance functions. This results in higher requirements on sensors. such as higher resolution and longer range detection and it has to operate in higher frequency bands and this makes gap waves very well positioned in terms of technology advantages over traditional antennas but also competition. And we see an increasing growth and need for radar sensors in cars, at least at 25% annual growth for the rest of the decade. And as I also described before, just one tier customer represents very big volumes in the automotive market. And you can see examples here ranging from 100 to 150 million antennas during a lifecycle of a product for one customer, just one antenna variant for one customer. And for more advanced imaging radar sensors, the volumes may be 5 to 10 million, so a lot lower. But the pricing, because of the complexity and a much more advanced product, is also much higher for those types of antennas and radar sensors. So all in all, Gapwaves is now very well and continues to be very well positioned for profitable growth and continue its growth journey and scale up journey going forward. So we have all the fundamentals in place. There's a very strong market for us going forward. driven by legal requirements, legal and technical requirements, and now also consumer needs and competitiveness among car manufacturers. Gapways can now solve the entire problem for its customers. We have a unique, very well performing antenna technology And we can design antennas in a very short time for our customers and we can also put them to production. So we can do everything from the inception of new radar sensors and the antenna needs to full scale production for automotive industry volumes. And we can see the interest from our customers so that in a very few years, Gapwaves had added a majority of the top five or top six automotive tier ones as customers. And we have also more undisclosed customers in development and in discussions right now. And the final element that we have also added is the capacity for high volume production and also securing production processes in our own pilot line facility that we invested in and opened up for production by the end of last year. So that was the short presentation of GapWave's second quarter, but also a short summary of GapWave's positioning going forward. And as I mentioned in the beginning, we wanted to give enough time for questions that have been submitted already before this presentation, but also during the presentation. So with that, I finished my presentation and we now turn over to the Q&A part.

Thank you so much for the presentation here. And as you mentioned, now we'll carry on with the Q&A and we have received a large number of questions, so I think we get straight into it. Sensred's largest customer so far is active in autonomous vehicles for military applications. Are the sales volumes to the Chinese customer Tianyi is smaller than the sales volume to autonomous vehicles for applications? Is the customer data speed?

I cannot disclose the customer so far this year. That military industry customer has been the biggest customer in terms of sales revenue for Sensra this year. But neither we or Sensra can disclose the name of the customer at this point.

Thank you. Will there be a need for deposits to Sensra AB also the second half of 2025?

Sensra is growing rapidly, as I mentioned during my presentation, and the owners will support that growth financially as needed. So yes, we expect Sensra to be needing further financial support. But as you can see in our report, the financial needs for SenseRad is being reduced significantly now as they grow significantly on the top line with their sales to customers.

Thank you. When do you expect revenues from antenna sales and license fees to become the primary source of income, replacing the current reliance on project-based revenues, prototype sales and production equipment?

As we show in our slide with the status of different contracts in terms of startup production, etc. And we have several customers that are now ramping up the production, several automotive tier one customers ramping up their production. So this will become significant as that ramp up phase has passed. And a ramp up phase for automotive is typically around two years. it can vary between different tier ones so definitely by year 2027 we should see a majority coming from product sales instead of development and engineering revenue which we think will remain on the same level as we see today because we have a steady influx of customers but as projects development projects get finished and products are being put into production revenue changes and and with the upscaling in production obviously product sales are are growing in line with a customer's ramp up thank you i still see bosch on your list on the powerpoint here does it mean you still have a relation with them Yes, we still have relations with Bosch and discussions. All the companies, all the automotive tier ones are considering new product generations and increasing needs for improvements, better performance, better cost and pricing, etc. So definitely all the leading tier ones have an inherent interest per definition to discuss with leading technology and product suppliers like Gapwaves.

Thank you. Tesla is still not using radar in their autonomous calming models. Can they go to market despite regulations and safety aspect without radar?

Yes, they can go to market, but they cannot accomplish higher levels of self-driving, we think, and most of the industry think. In fact, there's well over 100 car manufacturers. uh for for passenger cars um in in the world and and we only know of tesla and one more that have so far chosen to be camera only all the others meaning well over a hundred car manufacturers have chosen sensor combinations with cameras radars and lighters And it seems like you need to be able to use other sensor technologies than just camera because requirements will stipulate that sensor systems can operate during nighttime and poor visibility conditions, which would not work for a camera if it's blocked by heavy snowfall or rainfall or dirt on the car, etc. it will not be able to detect a pedestrian or other cars early enough simply. So that's our assessment and I think we're in line with a vast majority of the industry.

Thank you. Hella and Wen SOP for MLW Antenna.

Sorry, can you repeat that question?

Yeah, of course. Hella and when SOP for MLW antenna?

We cannot disclose what type of antenna products we're developing for Hella right now. It's too early. And of course, we'll communicate as things as new products are being put into production.

Thank you. And another question regarding Hella here. I'm curious if you are working on an agreement with Hella for production sales as the next step in collaboration?

Yes, of course, we discuss with our tier ones, Hella included, about production and production scenarios, etc. So that's almost a given with all the tier ones that they benchmark different technologies, they benchmark different production setups, etc.

Thank you. Where do you see the company in five years? What are your priorities regarding regions and where do you see the most money being made?

Obviously, it's no secret that the gapways will scale up within the radar segment where we're active now. High frequency radars like radars used in... in automotive so we continue so within five years it's a realistic expectation to see the automotive and radar segment to be our largest area but we will also see more new segments like wireless communication not necessarily for mobile phones the hand terminals or the phones that we hold in our hands but more like backhaul applications between base stations etc or satellite communication so but in five years the radar segments especially in automotive will be the largest but there's also other radar segments but as as a rough divider the radio segment will be the largest and will the largest revenue will be from production and production product sales obviously given the scale up and ramp up that we're in with our customers right now thank you Valeo's production has started when can we expect to see significant revenues 2027 Valios ramp up started three weeks ago. So they're very early. And as I mentioned before, in my presentation, a ramp up is around two years. So that means that we will see significant revenues from this contract and this production in 27 approximately. But as we have communicated, high volume production line is being put in place locally in China with our partner, Franken, for Valeo already next year. So obviously from now onwards, product sales and revenue with Valeo from antenna production will grow. But they will be in the high volume phase in 2027.

Thank you. 4.5 million antennas produced in 2026. What is the split between your customer projects royalty versus product sales?

We cannot share that information. We have relatively few customers in automotive in production right now. And if we would give the split, it's disclosing too much information between these customers. So we'll have to come back to that later during the ramp up.

Yes, a lot seems to be happening in the robot access segment during the quarter. Waymo increased its operation, including an agreement with Toyota. Tesla launched its robot access in Texas. Sooks opened a new manufacturer facility in the Bay Area. And China operates a large robot access fleet. How is Gapways positioned in this segment?

We're well positioned in that segment. We have ongoing contacts and dialogues with several of the leading Robotaxi companies. Robotaxi as a segment is important for us because it drives the technology development and the requirements on radar sensors. And it also opens up the main market because the performance you need in a sorry, in a robotaxi is very high. And this technology and things that are being developed for robotaxis will then trickle down into the volume segments of passenger cars. So you should remember that volumes for these companies are small. They're in the thousands of units, not millions of units like in the automotive industry. But the technology aspect is very important because they drive the technology development and the performance levels of radar sensors, which then will influence and be implemented also in volume segments within the automotive industry.

Thank you. How long will your cash last? Will there be a need for a rights issue?

We are evaluating different financing needs and options as we go forward. Right now we're focused on the ramp up and as we have discussed before it has been very important to get into production so we can shift from project revenue and engineering revenue to product sales. and we've also made investments to make that happen so right now we're in a stable situation in terms of cash and we're constantly keeping our eyes open and the board is evaluating different options Gapwaves has no loans or no debt today so there's as we see it several options available to us if the need should be there thank you

Can you elaborate on the outlook for the Asian slash Chinese market for Gapways and how Gapways has changed its perspective compared before to regarding risks such as copying, etc., and how the company itself or whether it takes a calculated risk in order not to miss a major opportunity there?

That was a long question, but I'll answer it anyway. We're well positioned in Asia and the Chinese market. We have several dialogues in addition to what we have already communicated. As I mentioned, during the second quarter, we entered into a partnership, which we were able to communicate also and disclose fully with Desai, a leading but also very ambitious tier one targeting the Chinese market. And also in the Chinese market, the requirement and competitive position among OEMs or car manufacturers in terms of ADAS functionality is increasing a lot and rapidly. So it's very important that GapWaves is available and present in that market, which we now are. That also applies to Asia and the other major automotive markets in Asia. So we're well positioned in terms of being copied, etc. We have had a very Not very, but a cautious approach to Chinese companies. And we've had a number of dialogues and contacts, companies in China that have contacted us, but we've felt that they've not offered the right partnership structure for us. And that's why we were very happy to be able to partner with Desai as a first tier one. to show the Chinese market that we are competitive and that we are open for business with Chinese tier ones on the right conditions and that these conditions can be competitive also for Chinese customers and tier ones.

Thank you. Can you comment on Valeo's wins which they have communicated during the quarter? What does it mean for Gapwaves?

Yeah, in short, it's positive for Gapwaves. Obviously, the more ADA contracts they win, it should mean higher volumes for Gapwaves and a stronger customer is always positive because it means opportunities for increasing business with Valeo going forward compared to only six months ago or last fall when we entered into the contract.

Thank you. Are you targeting the defense and military market for detecting drones around the airport, nuclear plants, military infrastructure and so on?

Yeah, I mean, like I said, the radar segment, as I mentioned in my presentation, is a key area for gap waves. And there are some interest from industrial companies producing and developing radar sensors that are also targeting military applications or defense applications. So definitely it's an area for us that has interest. But we sell the antenna solution, not the radar sensor. And these customers typically need a radar sensor. So it's the suppliers of the radar sensors that approach us, not the military itself or governments, etc.

Thank you. Robot lawnmowers with LIDAR have been a lot on the news. Is this an application for gap waves and centrod?

Yes, I think so. And it's similar to the military question that you just asked, meaning that these companies for lawnmowers, they need a radio sensor. So in some cases, we have some dialogues there, but mostly... It comes via providers of radar sensors, such as Sensrad, for instance. And we know and we have also communicated before that Sensrad has customers that are evaluating its radar sensor for within agriculture and farming, including lawnmowers.

Thank you. Moving on to the last question here. Have you noticed any new competition or progress from your competitor Hubber and Sunner?

No, no new additions. We know that there are factories or producers of plastic parts in China that have tried to produce waveguide antennas. So far, they've not been able to succeed in terms of quality and price point. And Huber & Sooner is a public company and to our knowledge they haven't reported any major contracts in the last few years actually. So we haven't seen any new progress or developments in the competitive landscape when it comes to Gapwaves. Gapwaves on the other hand has added quite a few new customers and we've also made significant progress in terms of getting products into production. And obviously within the automotive industry, there are no free launches. So if we were not very competitive and customers see a value in partnering with Gapwaves, they would not have partnered with Gapwaves simply. So we're quite optimistic about our competitive position.

That was all the questions we had. So thank you so much, Jonas, for presenting here today and answering all questions. And thank you all at home. We wish you a pleasant weekend.

Thank you.