Gapwaves AB (publ)

Good morning and welcome to today's webcast from Gapwaves. With us today is CEO Jonas Ehinger, and he will present the numbers from the first quarter 2026. We'll open up for a Q&A after presentation, and you can type in your questions using the form located to the right. And with that, I leave the audience over to you, Jonas.

Thank you Fredrik and Finnvair. It's great to be here this morning and presenting our Q1 report that was released earlier this morning. And also thank you to everyone who's joining online for this presentation. As Fredrik said, we'll make sure that there's enough time after the initial presentation to to answer questions and discuss additional topics from the audience. So I'll start with a short summary for those who are new to Gapwaves or have not heard the background about the company before. So Gapwaves is a Swedish tech company based in Gothenburg, originating from Chalmers and extensive research on waveguide antenna technology. So today we're on our way to become a fully fledged and strategic supplier of antenna products for our customers. Right now, our main focus is high performance antenna solutions, mainly for radar applications and mainly within the automotive market. But we also have other market segments that can draw value from our technologies and GapWave's know-how. We've also seen some increased interest in some of those areas. I'll discuss that a bit later in the presentation. In automotive, we are what is referred to as a tier two supplier. So we provide the antenna product to our customers the tier ones who build radar products, including our antenna, and then supply those radar sensors to automotive manufacturers with the names that you recognize. And these are just some examples. Now, Gapwaves is on a very exciting journey and that started already some time ago with some major partnerships and contracts with leading automotive suppliers, world leading automotive suppliers in the area of ADAS and radar sensors systems for cars. So we're in a market where there is strong market potential, and the market is driven by regulation and legal requirements. So fundamentally, we see very strong and promising market potential for the company and our technology going forward. We're unique in our technologies, well protected by patents, and we see takers from all major regions in the industry. And also importantly for investors and for customers is that this is not a theoretical technology that works in the lab and then has challenges in large scale production. We've already started that several years back. with our partners and high volume production commenced in Q1 2024, more than two years ago, and it's still ramping up quickly. And for those who follow us, you can see that the numbers are quickly growing and the numbers of antennas that are being produced based on GapWaves technology is reaching very high numbers. Now already more than 1.5 million antennas produced using our technology. And that's a rapid growth also. Our business model, which I'll come back to later, is also attractive because it's an asset-light model. We rely on very qualified and competent production partners in this volume phase of our supply to customers. So we contract these production capacities to different parties in different parts of the world. I'll go more into detail in a bit. But I know that you're interested in our Q1. Probably you've been able to read it quickly. So the purpose here is to summarize the material that was published in the report, and then we can go into the discussion after the presentation. So main message for Gapwaves is that our industrialization journey continues rapidly. um we're in a launch of a large-scale production in china so it has started and it will it's in a launch phase and it will continue throughout the the second quarter this year but importantly it has started and this has been accelerated together with our customer uh which is valeo in this case and uh as i already mentioned um the volume of antennas that are being produced utilizing GapWave technology is rapidly increasing now. In the first quarter, it was already more than half a million antennas. And I also want to clarify that the majority of this volume is based on Hela's production, licensed production of our antennas together with Franken, but it's basically a license agreement. and it was started already in Q1 2024 and Hela is earlier they progressed further in their ramp up than Valeo has and we're doing the production for Valeo so in the case of Valeo we're selling the producing and selling the antennas to Valeo. And we've said it several times in previous calls and presentations that we're in a scale up journey and we're building this capacity, this production capacity together with our customers and our partners in phases. and and it has to to align with customers needs and in the case of Valeo we see we've seen since the start of production here in Gothenburg last year an accelerating need from Valeo and Valeo's customers for more volumes and and earlier than planned in the contract so it's been very big and fundamentally positive challenge for gap waves to meet these requirements which we have been able to but it also drives a lot of extraordinary activities to secure material and capacity etc at the right time to accomplish this which we fundamentally see as an investment in the relationship with Valeo and allowing Valeo to gain market share, which will fundamentally build our potential for the future in this contract and for future opportunities together with Valeo. Sorry, I went the wrong way in the presentation. So in terms of numbers, our sales were almost 19 million. It's a bit lower than last year. And the main difference is of course, project revenue is not as high as previous years on the other side. On the other hand, product revenues are increasing. But there is a shift in time before they can balance each other. And that's also another reason why it's very important that we can accelerate the ramp up to reach higher volumes sooner. In terms of the EBITDA, we're at just below minus seven. And that's a decline versus last year. But again, the background is really the revenue mix. whereas product and product sales especially in the early phase of the ramp up have lower margins than project revenue which we've been having previous years and that's also a change in the market because the market climate for new projects and new investments is a bit softer than previous years. And in terms of cash flow, of course, we're investing in the production capacity, but also to meet the demand from Baleo. And also in the early phase of the ramp up, it requires more activities from our side to ensure that we can deliver these volumes sooner. So in summary, In the general climate, we can see that Valeo is progressing well. We have others that express interest for new products with Gapwaves also. But generally speaking, the macroeconomic and global factors are impacting the market climate for Gapwaves and especially Gapwaves customers. But the underlying market trends that we have mentioned before and in previous presentations are fundamentally strong and have not changed. So I've already explained our sales numbers, which we see some effects, but the main effect comes from this transition that we see in the first quarter, and we will see it during the year as well, where we transition from a large dependency on project revenue, and we change to product sales and high volume production. uh combined with this we're also changing in the organization and our cost structure so we can balance to the extent possible uh changing from a project company to a product and production company and a full full supplier to to our customers looking forward the industrialization for gap waves will continue and uh throughout the year We're in a very important phase with the large volume production launch in China, which now has started. Sorry, I went wrong slide again. So 26, like I said, is a transitional year. And we're continuing this transition from research and project-based company to product sales and large volume production. We're scaling up and it's very important to continue this investment for get waves to scale up volumes, so we can see this business and high volume supply reaches steady state with the right margins and the right revenues. Of course it's a natural that in high volume production the unit price. is is lower on the other hand the volumes are much higher so they compensate but you have to reach those volumes first so our focus this year is concerning three main areas and that's continued scale of production and continue our volume growth to build a very strong fundament long term for gap waves that will allow us to have continued growth but also profitability We're, as you know, probably from previous communication, we're exploring new segments, new market segments outside the traditional automotive industry. And we have made some progress there. But of course, the general market climate It's impacting these areas also, but we have some very clear areas identified that we are targeting. And these areas also have very promising business opportunities and revenue potential as well as margin potential for us. And combined with that, we are working on efficiency improvements in GapWave's cost structure. So as we change from a project-oriented company and technology company to a production company, we're adapting our cost structure accordingly. I want to spend a short time on our business model and the strategy going forward. As we have explained before, our business model is really to develop custom products for our customers. Products that fit their specification and their needs. We don't develop products on speculation. And it's not standardized products. Our products are specific for specific customers. So typically there is a phase one, which is really a development of prototypes and testing, etc. And then as we have reached milestones in accordance to customer agreements, we go into an industrialization phase or phase two, as you see in this slide. where we do, you know, of course, discuss volumes, capacities, geographies, where production should happen, etc. And then we start to finalize the serial version of the product. And this is called industrialization. And then we enter into the production startup phase, the launch phase, where we are right now with Valeo in China, for instance. And then, of course, the final phase, where we have large volumes being produced over a number of years. is of course the attractive phase where we want to be, but it takes time to get there. In the first phases, one and two, we typically can generate non-recurring engineering type of revenues with high margins, but they are limited in size and they continue just during those phases. And then we have a switch during the launch of the production and a ramp up to get to the target volumes, which then will be sustainable for a number of years. And we've tried to illustrate these processes and our business model in this slide also. And remember that in GapWaves, we don't build factories and buy land and get permits and build factories, employee factories. We contract this. uh with our partners which we pre-select and pre-qualify based on customers' needs and in terms of geography and location, etc. So we have a very flexible model where we can bring in more partners to scale up. We can also add production in other geographies if there are trade tariffs, etc. that make customers require certain geographies for production, for instance. And we also have our own prototype and pilot line facility here in Gothenburg, which allows us to start production and commence production, that very first phase of production, much, much, much quicker than doing it with external parties, exactly as we have done successfully with Valeo. And that has been a key to be very fast and agile together with our customers. Looking at the market, as we have discussed before, the market drivers are there. They have not changed in spite of the recent global events and the crisis, etc. They're there. In fact, there are new regulations coming into play in the market in the coming years that will strengthen the demand for active safety features requiring radar sensors. and of course it's it's a certain performance level that is required and a certain frequency band high frequency millimeter wave frequency band that will be utilized even more than today and this creates a perfect opportunity and a perfect combination for gap waves and our GAP waveguide antenna technology for our customers and that's what we have seen clearly in the past few years as we have a large interest from leading automotive tier one suppliers. And the market will have more and more cars with more and more radar sensors and more and more active safety features. So we're in a very attractive and good position looking a few years down the road in terms of market growth and market size. Going forward as an investor, I think you should keep your eyes open in the news flow from Gapwaves when it comes to new customers. We have a pipeline with customer discussions that have not stalled or stopped. They are ongoing and there are projects in our pipeline that we hope to be able to conclude. And there are also focused efforts going on for targeting new segments outside automotive, so we can balance the trends and changes in the automotive market. And as a result, we of course expect to close new contracts, both for projects, but also for supply and high volume supply of antenna products that we design and produce. In terms of volume production, I know that a lot of investors are asking for financial forecasts, which we cannot provide at this point. It's still too early because of certain volatility. But keep your eyes on our volume, growing volume production. It is a clear indication of where Gapwaves is heading and also the robustness of our technology that it holds up in a real world, real production setting with very, very high quality requirements and cost effectiveness, which is required by the automotive industry, for instance. As I mentioned, a majority right now of these 1.5 million antennas and more are being produced under a license agreement by Frankent for Hella, using our technology and an antenna that Gapwave designed for Hella. But for other customers, We're of course a full producer so we do everything from design to industrialization and production and supplying antennas to our customers. And another very frequent question that I get many times is what cars do have your antennas? We're not allowed to disclose details about our customers and configurations, etc. But there are a number of leading and well-known car brands and car manufacturers that now have radar sensors. They utilize radar sensors with our antennas inside. As soon as we are able to, we will communicate specific car models Right now we have good visibility on which manufacturers that buy the radar sensors with our antennas inside, but we don't have similar detailed information on specific car models and also which markets they're available in. We announced last fall of course that we're present in the Mercedes-Benz CLA EQ technology model that was launched and started to be delivered to the Swedish market last year. But rest assured, we will, of course, communicate this as soon as it's possible. And it's a topic that we bring up with our customers quite frequently as it is an interest from our investors. So again, to summarize, Gapways is in a very strong, fundamentally uh growing market and and this trend this market development will continue for the foreseeable future for the rest of the decade and beyond that we have a very unique technology we have a strong competitive edge in our technology and i think the production numbers clearly display this that we are offering value to our customers and their customers And like I said, this is real world. This is happening now. And this scale up is not something that we're just talking about. It's ongoing now. And it takes time. It's a very complex chain in the automotive production for all the suppliers and all parts and components involved. But we are accelerating this. And gap waves is not the limiting factor when it comes to our customers and their ramp up. And I mentioned also that we are asset light and we don't tie up capital in buildings, et cetera, constructing them and factory staff that are not fully utilized during the ramp up, for instance. So we have an attractive business model in working capital aspect also. Now I'm finishing the presentation and we will go over to the Q&A part. I also would like to highlight that next week there will be a video interview with the RedEye analysts. And if you have any questions that you want him to address with me next week, please contact Rasmus Jakobsson at RedEye. You can see any information here in the slide.

Thank you, Jonas. Thank you, Jonas, for the presentation. We are going directly to the questions. You reported Q1 net sales of 18.8 million SEC this quarter, down 17% year on year, and also some 25% below analyst estimates from RedEye. What in the big picture are the analysts missing here? Any calendar effects?