InCoax Networks AB (publ)

Incoax has released a report for the third quarter of 2024 and of course I have with me the CEO Jörgen Ekengren in the studio. Hi Jörgen and welcome. Thank you very much. You have been here for many quarters and told us about the reports, but we have many new viewers on the channel. Could you give us a short history of who Incoax is?

Absolutely. Incoax is a system solution company. In other words, we provide a complete solution to operators that consists of hard and soft materials. We solve a problem for an operator. How do you reach out and how do you connect all apartments in multi-family houses to the fiber network. And then we reuse the network and then we have equipment and software to get access to the fiber network.

Right. And you are on many markets in Europe, but especially in the United States.

Yes, we have a lot of interest in our solution in the USA. We also see a lot of potential in many other markets, for example in Germany, the UK and Finland last week. It is very interesting because it is a window that really opens up there now.

You will get to know more about that very soon. If we start looking at the quarter, you will see a negative turnover result of minus 9 million kronor. What does this have to do with it?

Since we have made this cooperation agreement with Nokia, we have have increased our resources in many areas to prepare us for the expansion that we expect will come when Nokia starts a more active sales in their channels of our system. And with necessity, we have to do a lot of activities to prepare for that, so it will be a little forward-looking for that reason, but I'm not It's more in line with what we have always planned.

In the third quarter, the turnover increases from 14 to 16 million kronor. Not a big increase, but still an increase. But if we look at the whole year from January 1, Q1 and Q2, it has been significantly better. How do you explain this?

No, but we have increased sales with existing customer base plus some new ones that are in an earlier phase where we also calculate that there will be more sales over time. So it follows a normal ramp-up that the operators run from starting to test the system to starting a smaller roll-out to making a more full-scale

If we go to the US, you have Nokia as a major player there, but you also have many other customers and operators. We start with Google Fiber, which you have worked with for a couple of years in this team. How is this business developed?

It's developing well. I follow the plan. Google profiles a lot on premium subscriptions, so we fit well in there because we can also maintain these higher speeds, higher bandwidth with our solution. So it's rolling on, I think.

A news that came from now was also that Google Fiber will also start a collaboration with Nokia. How does this fall out for you who already work with both of them?

It could be positive in the long run, but then it takes time to build a new network. But we have made this decision and the latest technology is 25 gigabits per second. I think it should give us new opportunities in the future, definitely.

Another very interesting customer in the USA, who is not named, but is a so-called Tier 1, which means one of the absolute largest actors, is an operator, where you roll out home network equipment. How is this business developed?

I think it's going well. Of course, I had hoped for orders earlier, but we are now in discussions about further orders there as well. So that track is definitely alive. In addition, this operator has now restarted evaluation of our so-called access solution. So it's a bit exciting. We did a big job with them a few years ago. And then it has dropped a bit during the past year, but now we see that the activity is starting again. So it's a bit exciting.

Another collaboration that has to do with the radio solution is with Tarana Wireless. What can you tell us about this business?

It's very exciting and we gave a little more information this week about this. A case where Tarana is a supplier of the radio network, Radiolänk, and applied our solution to one of their customers, Digital Sea, in Cleveland, Ohio. We made a record-fast installation there. And very appreciated by the operator here, DigitalSea, because with our solution you get very fast revenue on subscribers that you previously did not have. And Tarana now wants to move on with us, because they work in case of many other operators, primarily in the USA, to get our solution in there. So it feels really fun and very positive for the future on that track. And especially in the USA, this is an area that is growing because many cities are smaller and are more spread out. It is not always profitable to draw fiber, but instead you go for radio solutions. That is quite big in USA.

If we go back to Europe, you have had successes in a number of markets. You mentioned Germany and the UK, but now you have also made an interesting entry in Finland. What can you tell us about this?

We gave a bit more information about Finland last week, but I was there myself last week to talk to several operators. What we see now is that a window opens up. housing companies that need to convert from traditional cable TV to something new. And then there are a number of operators now that build fiber networks, in principle all cities in Finland, and they need this solution to get into the multi-family houses. And that is also an extra advantage because then these networks keep very good quality often because you have had cable TV before. So we actually work very well in that type of installation.

Is this something that is market specific for Finland or is it a solution that could be interesting to apply to other markets as well?

We see a trend in general now in many markets where you hand over These solutions that build on the telephone network, different generations of DSL and also for cable TV. it is often Doxy's standard for cable TV based networks. We see a clear trend now that linear TV is becoming less and less interesting for consumers. You do not want to have these channel packages and pay for a lot of channels you may not use and so on. Everything goes towards streaming. And then this doxy-based solution becomes very expensive. So that's where we come in and can replace it and you get a very good service as a consumer with our solution.

The future speaks for you there as well. I think so. If we look at some financial goals, you maintain your previously communicated goals for three to five years with at least 50% annual organic income growth and a positive operating cash flow and EBIT margin of at least 10% from 2025. How confident are you that you will achieve these goals?

Right now I am very confident. There is no reason to change those goals. We came out with them last summer, so that assessment is still there.

I think many shareholders think that it is standing and stamping and now it became a negative result again. What can you say to them? What will change here in the future?

We saw in Q1, when we got a little higher sales, that we actually made around 30 million. So on that level we can generate a positive cash flow. We can even get black numbers on the bottom row. So of course we have to increase our sales, but we are working on all fronts now. Both in the Nokia network, which I really believe in, but also in the other channels that I mentioned earlier. So I think it is clear that we should be able to get up to these levels that are needed to also be profitable.

Great, thanks for that. Up to the proof now. Thanks for your contribution today, Jörgen.

Thank you very much.