InCoax Networks AB (publ)

Incoax has also closed its books for the first quarter of 2024, and next to me is Jörgen Ekengren, who is the CEO. Welcome.

Thank you very much.

This quarter's results are disappointing. You reported a turnover of 30.8 million kronor, which is equivalent to last year's first quarter of 12.9 million kronor. You have somewhat decreased gross margin than last year, but still black figures. EBIT 4.3 million kronor. How do you look at the quarter, Jörgen?

No, of course we are very happy that we have been able to get this result in the first quarter. For me, it also shows where we have to be in order to be able to make money sustainably. Then of course, we are still in a phase where we are building up the customer base. Right now we are very dependent on one customer, Google Fiber, who on the other hand is doing very well and we have a very close collaboration with. With good transparency and all the components that make it possible to develop the business in a very good way. And that is reflected in Q1 sales now.

Yes, Google Fiber. The sales were primarily driven by that particular customer. You received an order of about 21 million kronor. Is this a volume that we can expect to continue from that particular customer in the future?

We have seen a continuous increase in sales with Google Fiber. And as I said, we have a close collaboration. We have very good transparency. in a good way towards what their demand looks like. We have continual follow-ups. So now we'll see. Everything depends on how the operators, and in this case Google Fibers, roll out if you really sell it through in the range that you have planned for. So far, it has looked very good. If that continues, then I see a a good, increasing trend forward.

And are we talking volume or are we talking pace? Can we see more orders with smaller orders or roughly the same size?

We don't announce all orders either, but there should be a certain dignity to it. What I've said is that we continually take orders from this operator. We also take orders from other operators that are in an earlier phase, which I really hope that we will get into a more continuous rolling out phase with larger and larger orders over time.

As I said at the beginning, this is a bit of a deviant quarter. You mentioned it yourself in the beginning that you know roughly where you're going to be in the long run. You're building a customer base. How does that work?

It's going well and we're running pilot installations right now with a couple of operators both in Europe and in the USA. So it's an early phase and if everyone is satisfied with that phase, I expect us to get into a expansion phase and a more regular rollout.

Can you give us any kind of advice on how diversified you want your customer base to be?

We are focusing on addressing customer segments that are in the more volume-driven and higher segments. because it scales better. But at this stage, we also take orders from smaller operators and there is a phase where we want to create more and more reference objects that we can also use in the continued sales to, for example, larger even for larger operators. But primarily, we have developed our entire system to be able to be relevant to a significantly higher demand image, which then exists in these volume-driven higher segments on the operator market.

And the MoU that you drew together with Nokia in Q4, is that in the background of trying to broaden your customer base, or why did you start with that?

Primarily, number one, we have a solution that is very relevant for the type of operators that Nokia in this case works with, i.e. in the right segment. And then it's about being able to offer a solution that is very integrated. That is, an operator wants to be able to control and monitor their networks from one point and in one system. We implement this with our integrated solution towards the management system that Nokia sells on the market, called Altiplano. So an operator can get a seamless system solution, including our part solution, which is integrated and which can be controlled in a very effective way.

And how are the negotiations going today? Can we expect an increase in trade agreements already during the first half of the year here in 2020?

Yes, we are working now, as I have also said in the comments, to complete this negotiation. It is very much about shaping details about what we agreed on already at the MoU stage. So it's a lot about shaping up details about those agreements that we have already made. In parallel with that, a lot of work is being done on both sides with this system integration.

During the quarter, you were also able to report the fall in the forecasted emissions that you have now carried out. It was overwritten. You have 58.6 million kronor for emissions costs. In the balance sheet Q1, you have 48.4 million kronor in the cash register. How will the money be spent?

First of all, I want to say that I am very happy that we got such a good outcome on this emission and that we were able to implement it in a pretty tough market. And also with, as I see it, very low emission costs. So a lot of good outcome and we are very grateful that there are so many who believe in us and the company.

Do you reckon that these money will be enough for the new car?

If we look at the figures, we can see that we are somewhere around a sales level where we also generate a positive cash flow. And with the expansion plan we have and the balancing of costs, I expect that we can successfully get to a point where we can finance this with our own power. Then in the case of ourselves, there are other sources of funding, which is normal for a company. So I expect that when we get to a point where we have a larger order stack and furthermore a strong track record of how we expand, that we can also find different financing opportunities over time. And in that case, then it takes more funding if you expand. We are looking at this continuously.

You have chosen to come out with new financial goals here during the first half of 2024. There are not many months left. Can you tell us in the timeline if it is still stuck?

It is stuck, so we intend to come out with guidance and financial goals during the first half of the year.

And the remaining part of 2024, what can shareholders expect?

We continue our plan for expansion. Then there are fluctuations over time. As we can broaden the customer base, we should be able to even out the fluctuation that may occur between quarters, with a larger customer base and a sales that is distributed over more. But the long-term trend is Jörgen Egengren, CEO of Incoax.

Thank you for answering our questions.