InCoax Networks AB (publ)

The last company to report Q2 2024 is Incuax and its CEO Jörgen Ekengren is here next to me. Welcome. Thank you very much. When you open the report and read it, your eyes are drawn quickly to the sales growth that you have been able to report. You have gone from 9.3 million SEK in sales Q2 2023 to 19.4 million SEK Q2 2024. However, the loss is in line, if not higher than last year. Tell us Jörgen, how do you see the quarterly results?

I would say that we follow our plan. Then we also have fluctuations that we have predicted between the quarter. The long-term underlying trend is that we are increasing. And you can see that clearly if you compare half a year last year and this year. We have also built up our resources in several areas, for example sales operations and development, to prepare for this upcoming increase, which is driven a lot by the collaboration and agreement we have with Nokia.

So some seasonal fluctuations, but also of course new investments that drive up costs. But if we focus a little more on sales growth, what is it that primarily drives it?

The underlying need for fiber connections is still huge. And that is of course where our solution plays an important role. We see more and more operators now and I am interested in this solution because it is a quick way to connect more subscribers to their existing networks.

You mentioned the first question, the collaboration with Nokia. It has become an agreement now. Could you describe a little bit about what the agreement looks like?

It is a fairly comprehensive agreement that involves cooperation Both in sales and further development of the system. The big thing here is the integration that we have with Nokia's management system, Altiplano. Which means that we can offer a fully integrated solution to the market in Nokia's channels. So it will be a very strong concept.

Can you tell us a little bit about what customers you have? How big is this market?

It's actually Nokia's entire customer base. And that's counted in hundreds. The operators that Nokia works with globally.

What kind of interest have you noted so far from the collaboration?

A lot of interest. And we have devoted a lot of time now to complete some functionality during the spring. Likewise, Nokia has made developments on its side to get this integration fully out. So there is a great hope and a clear plan for how we will actually get a good sales in Nokia's channel.

And when do you think this collaboration will be able to be reflected in your books?

We will see the effect of it during the second half of the year this year, but primarily I expect that the volumes will come during the next year.

Some other activities that you have carried out during the quarter. You have carried out pilot installations with two Finnish operators and also an Army consul. What was the result of the installations?

It has been very good. These are not very big operators, but we expect during the second half of the year that we will come in in a more regular way with these operators and they will make good references for our solution and also contribute with a volume.

And for your existing customers, those of you who already have the collaboration and orders with for example Google Fiber and the American Tier 1 customer, what does it look like there in the pipeline? Do you continue to expect orders in the same pace?

Google Fiber is a very aggressive player on the American market and they are taking a lot of market right now. So we are definitely counting on being able to be part of that expansion journey. As for the tier 1 customer, the rollout does not go as fast as we had hoped, but it continues, so we will go into discussions there as well about further orders.

This agreement with Nokia, after you signed the agreement, you also came out with new financial goals. It is, among other things, an average revenue growth organically of 50% per year between three to five years. Do you see that Nokia will draw the majority of this growth?

They will at least be a significant part of this sales. Definitely. And that is also according to our plan and that is why we do this collaboration.

Quite natural. And the remaining part of this growth, what will it stand for?

We also work in our own channels. where you don't have this integration with Nokia's altiplano management system. So we expect to be able to increase in those channels as well, with our own efforts.

And you also want to reach profitability by 2025, and it's about a turnover margin of 10% in a positive, operational cash flow. How are you going to achieve that? Are you focusing on the top line here, or are there certain costs that you will have to draw down?

I think that the first quarter gave a good indication of how much we need to sell and how much cost we can have in relation to that sale. Where we actually also managed to have a positive net result. So to get up to those levels successively, quarter by quarter, is actually not a bigger problem. When it comes to costs, as I said, we have made some conscious improvements just to prepare ourselves for this expansion. I expect that the cost side will gradually plan out and that we will be able to have a sustainability within the costume that we are now setting up for ourselves. So that's the idea. And then this will be clearly achievable goals that we have set up now, definitely.

So you don't see anything that you need to cut down on in the near future?

No, right now we are making an effort to really get this sales done. Cool.

Jörgen Eichengren, CEO of Incwax, thank you so much for being here answering our questions.

Thank you very much.