Smart Eye AB (publ)

Good day everybody and a warm welcome to SmartEyes Q1 2025 earnings call hosted by RedEye. My name is Jacob Benon and I will be your host today and we will do as usual to start with the company presentation and thereafter we will follow up with the Q&A session with the company representatives. And with us today we have Martin Krantz, which is CEO of SmartEye and CFO Mats Benaminsson. So without further ado, I will leave the word over to Martin and Mats. So kick it off.

Thank you, Jacob. Let's jump right into the presentation. Here are the highlights. The savings program is on track and we are delivering on a yearly basis 40 million SEK, i.e. 10 million per quarter. And that will be completely in line with that goal in Q2. And already in Q1, we have come a long way towards that goal. We have increased the number of car models. It used to be 75 at the end of last quarter. Now it's 85. So 10 new car models. Very great. We have two new OEMs that went into production. So now 12 out of the 23 OEMs are in production. Some of them are like in early days ramp up, not very high volumes, but some of them are actually quite good in volume. Their license revenues are growing well above 100% in line with our expectations of course. So all in all automotive is growing with 27% organically. We are, unfortunately, we have had seen some, let's call it North American or US effect on behavioral research. So we have seen several delays in procurements for research equipment in different labs and universities and research institutes, primarily in North America. The other regions went reasonably okay. So there we have a pullback of 5%. The EBITDA is improving to minus 18 from minus 25 before. We go to the next slide. This is just to show how our number of design wins have been growing over time all the way from 2016 when we just had one BMW X5 up until today when we have 365 car models or design wins as we call them under contract. When you have a car model and it goes into production then you are You have it for a very, very long time. So this graph is sort of, you see that it starts expanding end of 2021. It starts expanding very, very fast after I say the COVID effect was over. Those cars, a lot of those cars are not yet in production. So that big acceleration is what is going to go into production this year and next year primarily. And that's what's going to give us the big boost on license revenues. And you can say also we had already in 2016 we got the first design from BMW. We are still this quarter actually a bit surprisingly producing a few BMW cars like not high volumes but they are still in production. So that's how long the production cycles are in automotive. Next slide. This is just to show you where are the assignments, where are they distributed and the regions here should be read as the regions where the headquarter of the OEM is. So if you look at the North American OEMs, three of them, we have a total of 126 car models. And one of them have entered production with 23 car models. So a lot of car models to be launched in the next few years in North America. In Europe we have 13 OEMs. That's where we have the most OEMs. But only six of them are in production and only 21 car models. So we are also in Europe still waiting for the big boost in terms of car models and OEMs. And in Asia that's where we have developed the most. We have 94 car models under contract up until now with seven OEMs. Five of them have gone into production and almost half of the cars have gone into production. So we are a bit more developed in Asia than in the rest of the regions. And this is just to show how the development up until 2022, 20 car models went into production. And I think 12 or 13 of them were BMWs. Now 20 more went into production in 2023 that year alone. 35 more car models in 2024. And this year already in the first quarter 10 car models. So you can see a clear acceleration. Our estimation is that 70 to 80 car models goes into production during the rest of the year. So it's an accelerating pace for sure. And of course, the first half of 2026 might be even better, but we haven't really talked a lot about that. the DMS market you have 91 million cars and trucks and buses and light vehicles and so on sold in 2024 and we see that there is a clear risk now with the tariffs and we have to watch out how that development goes but there is a risk that you will have a pullback in the automotive market It was growing with 1.5% last year. It might well shrink a little bit this year, the total car market. But then again, if you look at the lower curve there, our success is not so much hinged on the total number of cars. It's more about the take rate, the adoption rate of DMS in cars, which we see will grow rapidly with the next coming years. And financial summary, net sales 90 million. It's up from a year ago. 7% organically, 5% unorganically. You can see clearly how the EBDA is evolving. It's going better and better. And Mats will talk a little bit more about that soon. We can take the next slide. This is automotive. We have basically services or non-license revenue is flat or even shrinking. But licenses is what's growing. So that whole growth from 2023 until now, I would say, is to a very large extent driven by licenses. And they will continue to grow. behavioral research 5% back this quarter and I believe that I have not been sort of seeing that we have really lost deals because of the turbulence in the US. It's more about postponing deals. These deals are still alive but they have taken longer to secure and get the purchase order executed and so on. And

Then I continue with the operational performance, looking into adjusted EBITDA and then we have excluded the one-time items. We have a minor decline between the years, minus 14.4, slightly lower than last year. Of course we have had a good revenue development referring to license revenue for automotive and also good sales for iMotion in Q1. But offset we have done some investments in sales and marketing so therefore we're declining a little bit. Our cost-saving program, as Martin mentioned before, 40 million on a yearly savings, a little bit better than we maybe expected from the beginning. We have done a downsizing of employees and contractors with 9%. And we finalized that in Q1, so we will have a full effect from Q2. And this will have effect of course both on expenses and OPEX in Q2. In Q3 we also have the summer and the vacation and that seasonal effect that we used to see in the third quarter. So we expect the OPEX and spending be a little bit lower in Q3. We also give some guidance there referring to OPEX and expenses before capitalization in Q2. So when do we become EBITDA positive? We are very close to become EBITDA positive in Q2. Maybe there is a 50-50% chance that it will be slightly above or slightly lower. But we see that the car production ramping up, more cars coming into production, and that will boost the license revenue. And of course, together with the seasonal effect on the OPEC side, we see a solid positive margin on EBITDA in Q3. And of course, that will continue to grow in Q4. Referring to cash flow development, we have a possibility to become cash flow break-even in this year. But we see the strong development in cash flow the coming year. And then finally, let's look into the balance sheet and some KPIs. We have done an investment in Iris Technology. 23 million was the first payment, and that has been settled via a set-off issue. We have 10 million in cash ending balance, and we have a total debt of 61 million. So together with our additional credit facilities, we have total available cash on 131 million. During the quarter, we have terminated one of the credit facilities of 50 million. We don't see that we need to renew it. If we had done so, it would have been some more spending, referring to that. So we think that 131 million will be fine until we become cash flow positive. And if there should be a case, of course, we have the possibility to take an additional credit facility if needed. Talking a little bit about the cash flow development, it nets with minus 13 million. We have added on 35 million in financing in Q1. And the free cash flow is minus 48 million. Half of that have been used to investment, and half of it is referring to operational activities, whereof 5 million is referring to one-time payments. That was all. Thank you very much. Over to you, Jacob.