Maven Wireless Sweden AB (Publ)

Hi, and welcome to this live broadcast of the Maven Wireless Q2 report. For those of you who don't know me, my name is Hugo Lysjö. I work as an analyst and follow Maven Wireless. But with us to tell you about the development during Q2, we have the CEO and co-founder Fredrik Ekström. Welcome, Fredrik. Thank you, Hugo. Fredrik, you will start with an overview of the quarter, and then we will conclude with some questions. With that, I hand over the picture and words to you, Fredrik.

Thank you very much. I'm going to start by to give an introduction to Maven Wireless for those of you who don't know us very well, and then come in on quarter two figures and talk a little about what is happening on the market and what is happening for Maven Wireless and our investments. So first and foremost, Maven Wireless, we are a product company. We develop and sell products for indoor and tunnel coverage. For mobile telephony, all standards, everything from 2G up to 5G. But we also have a parallel product structure for what I usually call blue light radio. That is, radio systems for police, fire and rescue services. Vi har också en del specialprodukter för täckning på tåg och fartyg, alltså sådant som rör på sig. We created this company in 2016 with the ambition to develop world-leading products, the best digitalized, more software-based products on the market and take market share and grow to become the largest company on the market. And that is the journey we are on right now. We have started with eating our way into Europe. We have established ourselves in the Middle East, out in Asia. And the latest investment is a daughter company in America with a local office in Los Angeles. We are now building another organization to enter the North American market, which is actually the largest shareholder market in the world. In principle, we find a third of the global market in North America. It is basically Canada, USA and Mexico, where the USA is the absolute largest shareholder, of course. The entire world market in 2023, the so-called day market for indoor and tunnel coverage, was 10 billion US dollars. With our products, we can address about a third of it. It is Mayweather Wireless, part of the addressable market. As I mentioned, we develop cellular systems 2G to 5G. We make these blue light radio systems, products for trains and vehicles. We also have in our products, all our products are then broadband, we cover the full bandwidth. This means that in the same products we can then regenerate the spectrum of all operators, so we cover the full bandwidth. With 5G, for example, we cover the entire C-band, so all operators get coverage through the same product. What we have also done here with our 5G products is that we can cover what is called private 5G networks. The spectrum that is allocated in different countries for private actors to run local networks in their offices, in their factories. This means that you can install a Maven Wireless product to get public 5G at the same time as your own private 5G network. That is also important. Here we see the overarching palette of our product portfolios. We have a simpler system called repeaters. It is units that are standalone. You pick up a radio signal from the macro network outside, leads into this repeater, filters, amplifies and sends in radio coverage inside the house in inside-house antennas. And one desk can cover a smaller office, a smaller place than a business building and so on. There we also find these train repeaters that sit one unit per car typically. Then we have the fiber feeders where you can connect hundreds, even thousands of such radio remote units in a fiber network. As I mentioned earlier, we have digitized this. So it's digital fiber links, high-speed links that connect up to a central unit that you see down to the right in the picture, a central master unit where radio signals are connected from the different operators. Already there we digitize all these operator signals in this master unit. Then we can distribute these digital coverage signals Simply on these high-speed fiber networks. Out in the coverage area. We can route them in different ways flexibly. Out in this airport, out in the gallery, out in the tunnel system or wherever it may be. Here we have a palette of some projects we have done in the near future. Here we see typical projects, tunnel projects, road tunnels, train tunnels, here also tunnel system. We also see some pictures of different types of trains, where we have these train repeaters. We also have some new interesting verticals on this picture, including the mining industry, where we sell with partners who then install for mining. Among other things here in Sweden, we have LKAB Sweden, where we work with a Swedish partner. It is actually Saab that has a division that installs technology in mines. where we then install our equipment for radio coverage in the Kiruna mine, which is a very interesting project where you then move the entire Kiruna city to further prospect in the mine. Cool project, really. Then we also see a data center where we continue now, where we are certified to be installed in Microsoft Data Center. And there we continue. It is like a crane that we have opened. Microsoft has over 200 data centers. We have probably done almost 10% of them. So that journey continues and we are now also looking at other types of data centers. The hospital area continues as well. We have brought home more orders for hospital coverage where we have a unique product where we can actually mix both public and mobile telephony together with this blue light radio, Rakel as it is called in Sweden. Combine it in a unique product that does not take up so much space and that is important at the hospital. Here you need all the space for your own business. Here we can offer a product for both mobile phone and rescue service. And that's the key here in the vertical. Nimbus. I have talked about it before. It is our new strategic product for 5G high-speed indoor heating. This is what it looks like. We started this launch last quarter. This launch continues. Here we have variants so that we can address the entire world market for 5G indoor heating. It is primarily this C-band that exists in principle in the whole world in a few different versions. We can of course also build in these older technologies such as 4G, for example. But what we can do in this, we can then build what is called 4x4 MIMO 5G coverage. That is, overlay the 5G signals four times to maximize the bandwidth for each operator. And that makes us unique. I will also say what has happened here during the quarter is that we have received a very good reception of this product. Customers discover that it is unique, it is superior in many ways. We have received two first test orders, I should say, from India and from Switzerland on this product. So that's a good sign that we have done the right thing. I will return to Nimbus, but first I want to show this picture. Ericsson released its Mobility Report here during the month of June. Here is an excerpt from it. Here we see these red stacks, which represent data amounts quarter by quarter on the market. Here we see data from 2017 to 2024, quarter one. Here we see a huge increase. If we go back even further, even more historically, there will be very small stacks. And then we will think that it was even further back when we started building 4G. And that is what is still going on in many countries. Now we get 5G on the macro network. 5G is going to start being built indoors with Nimbus type of systems. And this is the problem that needs to be solved. This is an enormous amount of data consumption that we have here and now. And that's not enough to just operate 4G networks. You can't meet this amount of data. We have a great need for 5G out in the countries. And Nimbus is the solution for indoor coverage. Here it gets a little more technical. What I want to say with this picture is that the Nimbus product is optimal for meeting this amount of data. It is unique, no one can distribute as much data as this product. If you look down to the left, you can see different impressions. This is how the radio modulates the radio channel. And if you have a good radio channel, you can have a higher type of modulation, as we see here. To the left, a low type of modulation. To the right, a very high 10-24 QAM. That's where we have the Nimbus. And if you look at competing systems, they are roughly in the middle of this scale. And what is missing in such a modeling degree? It has a direct bearing on the data speed. which you see above, so if you are in the middle, you are theoretically at a maximum of 877 megabytes. And where we are with Nimbus, we have almost double the amount of data transfer in the air. Unique. We have also built in, we continue to dominate fiber, data speed over fiber. We have three times the data speed over fiber, so we don't limit the amount of data in the air, so we have a limiting part of the fiber network. Also unique. The third important aspect is what I'm talking about. 4x4 MIMO for 5G. To be able to build it built-in in the same unit is also unique. And that's what we've also received feedback from the market. This is an optimal product to be able to do in one product. That's what we get very good feedback on. That's how we're going to get into the market. This product is again optimized for indoor 5G coverage, offices of course, airports, galleries, we have resorts, casinos, hotels. But we also do design together with customers here and now, where we combine our products for tunnel coverage, our Stratus product family. where we have it in many places in trains and road tunnels together with the Nimbus in the railways for platform coverage. And it is actually on the platforms in the railways that most data is consumed. When you step on the train and the train goes into the tunnels, then it is a maximum consumption of those who get space on the train. But on the platforms where you stand and wait, there can be people who are going on several trains, that is, much more people than maximum capacity in a train. Therefore, you need more capacity on platforms in the tunnels. So a perfect combination, our Stratos high-effect for tunnel coverage, Nimbus for platforms in the tunnels. Okay, that was the introduction. We are going to look at the figures that we have done during quarter two. We see here on the left, here we have revenue of approximately 53 million, isolated under Q2. We also see a gross margin of 41 percent units. And as I always say about these figures, you should not stare blindly exactly at that quarter. On both figures, actually, because the gross margin, we always have effects on certain quarters, it shoots something over these 44-45% that we talked about. Last quarter we had 47%, it is now called 41%. We will look at maybe a little more than a quarter. So we are where we are supposed to be. Year to date we are at 44% and that is where we should be. If we look at order intake and order book, we have order intake at 39 million, which is 14% higher than the previous quarter. We have an order book at the end of the quarter of 58 million. What we see on the order side is that some slightly larger projects have slightly a little extra time to make decisions. There are some restrictions on the market, so there are some longer time to make decisions here and now, especially for larger projects. The split on the turnover we have, we see to the left, it's about as we see backwards as well. We start our sales in the north, spread to Europe and then we have two shelves for the Middle East and APAC. So this is roughly as expected. Again, here it is slightly over the quarter, so it is a little better to measure this over several quarters. But this is what the previous quarter looked like. If we look at the EBITDA-EBITDA margin, we have an EBITDA of 2.8 million and a margin of 5%. And here I would also like to specifically mention that we are doing a lot of extraordinary investments here and now. We have a lot of one-off investments, we have a lot of costs we take. We pay off these type approvals for the American products. that we have behind us, which is very good, which opens more doors now on the American market. We have invested quite a lot in Q2 on the Nimbus launch and the construction of demo systems for Nimbus. We build up the entire central rack with Orion's helix units and Nimbus products so that we can easily bring the whole system out to the customer, put them on a tunnel platform, easily pull out Nimbus platforms, run system tests, actually for several days if necessary. Det har vi satsat på här. Det här är en effekt av de satsningar vi gör för att växa vidare in i framtiden. Det är viktiga satsningar vi gör. Highlights during the quarter. There are a lot of business and breakthroughs that I especially want to highlight that we have carried out during the quarter. I want to start by talking about Silvertown Tunnel in London, which we have communicated earlier, but what is the last status is that the picture you see here to the right are our actual units that are installed in the tunnel under Thames in London. Here we connect the operators in the UK, O2, Vodafone, EE. And this is the first cellular project we do in the UK, which is the largest market in Europe. Super important reference for a stepping stone on this market. Very important to get this established. And I am very pleased that this has now happened, that we have this isolated on this share market. Only Great Britain is worth about 490 million euros during this year for today's system. Very important market. Further, if we go a little north, we have done a similar maneuver in Ireland, where we have now sold together with Neutra Host and installed at Dundrum Town Center, the picture on the right. It's 140,000 square meters with our Maven system, and it's a unique system. We have then mixed the old FDD technology for 4G coverage with the slightly more modern TDD technology in the same remoteness, which none of the suppliers who normally have sold in Ireland can do. This has been our breakthrough on this market. This is also now installed and running during the quarter. Also very important to enter this market with three Vodafone and EIR as the main operators. A third breakthrough during the quarter is that we have received our first ever order from Italy. Italy is one of the top five countries in terms of market, tunnel and indoor housing. There are many tunnels, especially in northern Italy. And this is now a system that we have been ordered to deliver to a tunnel in the Bolzano district. It is a train tunnel between Bolzano and Mall. This will be delivered during Q3. Vi har fler offertar på fler tunnelprojekt i den här regionen ute som vi arbetar på. Det är en väldigt intressant marknad, återigen eftersom det finns så mycket tunneltäckning och behov på den här marknaden. Then I want to talk a little more about India as well. We have a strategic investment there, we have a local representation, we have a seller in an office in Delhi. Also, in addition to this Nimbus order that I mentioned, we have taken another order together with a neutral host in India for a 5G system that will then be installed and tested in India. And this Neutral Host Partner that we have here, it's their picture on the right of the Indian map. They have already secured a number of airports and metros, tunnel system. They have 21 airports and if you look at the whole of India, there are 137 public airports. All these airports need to be upgraded with at least upgraded 5G coverage. India is one of the countries in the world that consumes most 5G here and now. So this is a need here and now. So this is a very interesting breakthrough. It is very interesting to get this in place. A test system for 5G to move on to, for example, with this partner, airports and railways. We have the Maven stock here, and I'll leave it for others to comment on. That's it.

Brilliant. Thank you for a good presentation by both Maven and Kvartalet. I still have a few more questions. Let's just think a little more generally on Q2. How do you feel about the development? Are you satisfied with your performance here during Q2?

Jag är väldigt nöjd med vad vi har åstadkommit, speciellt med de här highlightsen som jag nämner. Vi gör ju då också som vi såg på EBITDA-siffrorna, vi gör satsningar, vilket behövs nu för att vi ska kunna växa vidare. Vi satsar väldigt hårt nu på cellulära sidan, som ni också såg på mina genombrottsslides, det är det som är viktigt. And as I have talked about earlier, we have been overweight on blue light radio. More than half of our sales have been on blue light systems where the market looks different. It is only 17% of the world market that is blue light. So we have a lot more to do on cell phones. And that's what we're now taking part of the profits and investing in. And that's what we're starting to see more and more breakthroughs in. So I'm really happy that this is starting to take off now on these investments. It's very important for the further expansion.

As we have said before, when you have a good and high turnover, you can scale this business. As you say, you are now using some profit to invest in continuous growth. We will focus on continuous growth and how you think about it in the future. And an important part of this is to see that the annual income is coming along. And we have talked about that it has been down and down and that it is now going to turn up again. How do you feel about this annual income level as it is now? Compared to last year, it grew by 14 percent. Compared to last quarter, it was flat down by something, plus minus. How do you feel about this annual income level and how do you think about the future?

Yes, we are going to increase the order entry in the future, of course. But then we also have to have a little respect for how the market works. Our market does not map so well to a quarter market. And what do I mean by that? Of course, we have smaller businesses that can come with shorter decision times, smaller cranes that are screwed on, and that comes in quarter after quarter. But if we look at it now, when we step up and aim for bigger and bigger projects, the decision times are much longer. We usually talk about megadeals and for us it is businesses that are at least 10 million per year. And the decision to put such an order is typically one year and maybe even longer if it is even larger. A tunnel is typically several years of decision making. So I'm not very nervous about numbers isolated on a quarter. On the other hand, it is important that during a longer period we have the trends pointing in the right direction. And at the same time, when we now break in, as I'm talking about, towards mobile telephony, to get in on that side, there is another resistance that we handle. That is to get approval and an okay from the respective operator that it is okay to use the equipment of this new supplier. So we put a lot of energy into getting come to the respective operators and show that we actually have the best product on the market. And as you saw here in my presentation, more and more icons and brands from more and more mobile operators pop up that actually connect to our systems. And that's the key. If we have a reference, then we have something to build on. So everything goes completely right according to plan.

Exciting. If we zoom out a little bit and look at how the industry looks and the differences in the different geographies. You showed the geographical distribution of the revenues. Among other things, we saw that Asia was back. How do you feel about... The demand varies on the different geographies. Is there a trend you see or how does the general market feel?

Yes, there are some differences in different parts of the world. If we start far out in the west where we have just started with the first orders. I would say that North America has been most affected by interest rates, where we have seen that large projects have been shot down in time and investments have been shot down because of the high interest rates in the United States. I think North America has been most affected by the interest rate. On the other hand, our strategy is to go to these third-party operators, Neutra Host, on slightly smaller projects. And they probably live their own little lives anyway. So we haven't had any major impact for our break-in, I would say. What else can we see here and now? If we take Europe, we actually have a small effect that we have seen. Here in Europe, we want to secure up our telecom and not use Chinese technology that simply has a security hole in it. So here, many countries have exchanged equipment from Huawei, for example, both core networks and base stations. We have a large framework agreement in Norway, among other things, And the Norwegians, as well as Telenor, have worked for a long time to replace all their Huawei equipment. They have had a lot. And it will be done this year. So what we see in that framework is that those people have been quite busy with other activities. So it may not have been in the same scope as we had thought. But on the other hand, this job will be done this year. We are basically past that problem. And that's good, it's done in general. It's in our hands that there is a resistance to use Chinese technology. That's good for us. We are a Western company. We manufacture in Europe. We develop in Europe. So that's good for us.

And what looked a little worse compared to previous years was the turnover. It was down quite clearly. What would you say this is due to? And if we then look forward, what is the most important thing for you to get back to growth?

Yes, the most important thing for us is once again the strategic investments we make, that we get more into the cellular part. Because also, as I said, that is the larger part of the market. 83% is that market. So that's an important aspect. But also important that I didn't mention is that typically the project sizes are larger there. So that is very important. It is like a part of our expansion to win more and more operators, markets, just as I showed here on my highlights during the quarter. So there we are on the right track, we do the right thing. It is also about getting this Nimbus platform out. We probably have a few months delay in the introduction of Nimbus in the factory, in production. Vi hade en grundplan att ha den produktionssatt under Q2. Nu kommer det hända i Q3 istället. Så vi har en liten fördröjning i produktionssättningen av den plattformen. Så det har en viss påverkan kvartal till kvartal för omsättning av den produktvarianten.

And if we continue with Nimbus, which is one of the growth drivers here in the future. You have said that you have made some test installations now. How important is it that you do these test installations in order to be able to sell on a larger scale later?

Yes, that's important. And it's not just Nimbus, we have test installations. The order we have from India on 5G systems is actually on our existing Orion Stratus platform. It is very important, especially when you are breaking in on a new market or towards new operators, then the way forward is to either do field tests or even do lab tests together with these operators. So these are things we have to do, especially when we go into completely new telecom operators. When we get more and more on the map and Vodafone, for example, we have done a lot with in Holland, for example, both tunnels and galleries and other indoor projects. Then it might be easier to do Vodafone projects in the UK, Ireland and other countries. So it's a journey, but we have to plan for such types of field tests, lab tests for new operators, new markets. And it's also part of the investment. And it's part of the investment too. We buy in such systems to be able to have out in the regions. And that's just right to do. Take part of our profit, purchase such test systems so we can go out and win more customers.

And you were talking about it, and it's an interesting market, it's India. I think it's a very exciting market, there are a lot of people, it's an economy that is growing rapidly. A lot is happening in India. You said that you have a partner there. Is it a partner that you can also grow with? As far as I understand, you can grow in both airports and railways and such. It's a partner. Are there more partners to do the same journey with, or do you stick to one to start with?

No, we have several partners already in India. This was one example and I think it's a good example because that partner has both airports and railway systems. It is a very good partner, but there are more. The partner we have actually installed, System for Indian Railways, is a completely different partner. I have a link to them. They are focused on these railway tunnels. And that's how it looks on the market. The ones we work with, if it's a neutral host, they are typically very focused on airports, metro, that type of cellular coverage. Then there are other players who may be very focused on tunnel coverage. It's the same here in Sweden, for example. We have at least a handful of different partners that we work with, with different specialist competencies. We have one partner here in Sweden, who in principle is very focused on road and train tunnels. We have another partner who has mentioned Saab for mining. We have another one who works with our hospital prisons and so on. So it's not strange that you have many and we need many to cover different verticals. That's how it looks.

USA is the other important market. How is the start going there? You have two or three sellers now.

Exactly, we actually have another seller who has been employed for about a month now, who is now in Atlanta. So we have three full-time employees in Maven Wireless Inc. And then we have, in addition to that, we have our sales rep network, which we have also spread over various states in the United States, in order to have a complete coverage over the entire United States. The United States is a fairly large country. So that's our solution here and now. And that's good. We have many more projects that we work with. And again, most of it is focused on these neutral hosts, third party operators, as it is called in American. It's more porous, it's a faster way to business. So that's what we're working on, to tear down more orders in the USA.

Sounds like a pipeline that is about to close. And if we then move on to, in the introduction, you also mention the NIS 2 regulation. That you may then switch from the unsafe Wi-Fi system to your, simply, DAS system. Is there a greater cost difference between day systems and Wi-Fi and how do you see this effect? How big can it be and when will it come in time?

If we start there, the time starts here and now, because it is now that the local laws should be in place. Here in Sweden it should be ready for the change of year. And it looks similar in the other member states as well. NIS 2 is a European thing for the EU. Which became local laws in all member states. So it's moving here and now. And I mentioned that our Nimbus, for example, addresses such 5G private networks. And it may be in many places that it is 5G private networks that will replace a part of these Wi-Fi networks. And of course, if we look at the cost of a Nimbus remote compared to a Wi-Fi access point, I think you can buy a Wi-Fi access point for a little less money. However, as I said, Nimbus contains more things, not only the replacement for Wi-Fi, but on the purchase you get complete public coverage for all operators here in Sweden. So it's not possible to compare exactly, it's a bit like a pear and an apple, you get a lot more with our product. Then I would also like to say that it may not be the access point cost and the remote cost that in the end is the big part of the cost. These networks should also be drifted, someone should monitor and drift them. In a couple of years, that might be the big post in the whole investment. So it's about investing in the right technology, future-proofing, having flexibility, being able to connect all operators in parallel in the same boxes. We see that this is what is valuable for the end customer.

Let's shift the focus a bit. The lower margin also affects the cash flow, plus that you made a division here under Q2. So the cash looks a bit pressured. How do you feel about the cash situation?

I am completely calm about our cash situation and our cash flow. Precisely as you say, we have made a lot of bigger payments during the quarter, division among other things. We have paid out all sales bonuses for the whole of 2023, which has also gone out during Q2. We have also done, as I mentioned, which affects the cash flow, these strategic investments, purchases of test systems and so on. We have also had extra many R&D consultants to accelerate the final Nimbus to get it into production. So a lot of important investments and a lot of big one-time effects on it all. In addition, we have also talked about how it affects the cash flow, specifically on the Swedish frame rate, where we deliver products, we get paid for 30 days. Then we pay the factory for 60 days, but specifically and uniquely for this turnover is that for the big projects we get paid 80% of the delivery. Then there is 20% of payment that we get after tests carried out locally on the entire system. So that means that it affects our cash. Right now there is about 12 million kronor left in Switzerland. That post is decreasing now during the year because we have delivered many large systems and the tests are being removed now. So then it is added to the cash and it continues now. And another thing that affects the cash flow is that we have approximately 22 million in the balance sheet for components and modules for production. And that will be used in the production flow in the future as well. So I suspect that part of that will also fall into the form of money in the cash when it balances out. So, I'm not at all worried about that. If so, we actually have Hängslen and Livrem as well. We also have an extra check credit that we can use at a cost of 15 million. So, I'm not at all nervous about that situation.

That's good. Then we don't have to invest in worry that it will be an emission. Out of that reason here in the near future. And finally then. We want to talk about a bigger contract, where you focus more on the tele-network and the cellular. Should 2022 be seen as a mid-year before growth takes off in 2025, when Nimbus is in place and you have arrived in the US? Or how should investors think during the rest of the year?

Yes, it depends on which parameters you optimize and look at. Of course, as I have mentioned, these investments in larger projects take a little time and are longer decision paths. However, we have quotations on orders on test systems, we have installations with more and more operators, so we are on the right track. I think they are very important signals, that we establish ourselves in more countries, on more telecom operators, that is absolutely the most important thing. That the order entry looks in a certain way one quarter or another quarter. I think you should look at a longer horizon. So I think the most important thing for growth, and that's what we're in. We have proven ourselves that the model works, we make a profit. Now we take profit and invest in further strategic investments in the long term. So I am more focused on creating growth from a longer perspective.

There is one more question. To invest in the coming quarter, will you continue to use the profit to reinvest in growth? Or how will you think about the margin?

Yes, we will continue to use at least parts of the profit for strategic investments. Because it is clear that if we are to grow into more countries and more regions and more markets, then it takes capital. We have to invest in order to win. Yes, I think it's completely right. If we don't invest, we can't expect to win new things. We have no ambition to flatline this and just sit and harvest what we have. We will go out and grow and take new markets and therefore we will also invest.

Great. Thank you very much for coming and telling us about Q2 and your thoughts on the future. Thank you, Hugo. Thank you very much to everyone who has watched. And if you have any more questions, you are welcome to contact me at hugo.lijo at kanegi.se. Thank you, Fredrik, and thank you for watching.