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?