Smart Eye AB (publ)

Good day and a warm welcome to this earnings call with SmartEye following the Q2 2025 report and as usual it's hosted here at the RedEyes headquarters in Stockholm. We will as usual start with the company presentation followed by a Q&A session and we remind all investors watching online to keep submitting your questions and we will take them up at the end of the Q&A. And with us today we have SmartEyes CEO Martin Krantz and SmartEyes CFO Mats Benaminsson. And without further ado I'll leave the floor over to you guys. Thank you.

It's good to be here again after the summer and talking about the second quarter. It was in July postponed with two weeks the quarterly report because we were in the middle of executing a share program for the staff so we didn't want to create any insider effects so that's why it was delayed with two weeks. But now we're here presenting it. And it's a very good quarter, I would say. It's the best quarter in the history of SmartEye. We have had net sales increasing 12%. At the same end, net sales is at 92 million. And this is something which we did in, we had FX headwinds. So the decrease of the dollar and the euro compared to Swedish krona has worked against us. But even though we have this effect, we are at EBITDA plus 1 million SEK. for the first time in 10 years. Last time we had positive EBITDA was in 2015 and we had just gotten the first important orders for design with BMW and Audi and that was we were starting to ramp up and even ever since then we've been had having red numbers but now It's moving quickly in the right direction. The automotive organic growth is 42%. It consists mostly of growth in license revenue. Other types of revenue in automotive decreases slightly, but licenses are rising quickly. Behavioral research, the business unit for that is decreasing with 1% organically. Of course we were not planning for this. We were planning for a small modest growth. But the market has been challenging and we believe strongly we have increased our market share. Even though we were decreasing slightly. We are now at 90 car models that have reached production with 12 OEMs and automotive licenses are growing with well beyond 100%. And last but not least, our savings program has been finalized really by the end of Q1. So we had full effect from that in Q2 and the OPEX has been reduced with 21% compared to one year ago compared to Q2 2024. And that's of course a little bit helped by FXFX as well. but if you think talking about both opex and top line we have one million sec in profit very good we are very content with that this is just to remind that we have had unparalleled success on the dms market we have more car models we have more OEMs. We have the biggest OEMs in the world. It's 365 car models. They are estimated to be worth close to 9 billion Swedish crowns once all the cars under these contracts have been produced and ramped up and ramped down. Of course, that takes more than a decade before that has happened. close to 9 billion during a very long time. But there's also upsell potential in these existing contracts with the big OEMs. We have upsell potential for more than 5 billion. So we expect more design wins to come in, more deals to come through just with existing customers. 12 of these 23 OEMs have entered production and many of the remaining 11 OEMs are actually gonna enter into production this year, second half of this year. So we see a lot of European car models or car models destined to be exported to Europe to go into production now. And even more so during next year. So there will be a quick ramp up from where we are right now to the second half of 2026 when the European legislation is mandatory and all European cars need to have this. It's going to be probably close to 16 million cars yearly, which is 4 million cars per quarter. That's the level of European... deliveries second half of next year. This is what it looks like in global terms. One North American OEM out of three have entered production but they have done so in earnest with 24 car models being produced right now so we receive volumes from that. In Europe we have 13 OEMs, only 6 OEMs are in production with 24 design wins. And in Asia we have 7 OEMs of which 5 are in production, 42 design wins. So you can see there's a lot of growth to be expected in Asia, in Europe and North America during the next 12 months. This is what it looks like. We have said that our estimates are that we will have 70 to 80 car models in production in 2025. 15 of those are in production after Q2. So that's 55 to 65 car models that we expect to go into production second half of this year. that's a quick acceleration at least according to me but what will the car market look like in 26 27 and 28 this is our estimated yeah estimation of that or it's like a top down i mean our our short-term forecasts for for our own deliveries that's what we make those bottom up but this is looking at the entire market top down we say that the total addressable market is 91 million vehicles that was the deliveries in 24 of these vehicles 15 million are delivered in europe 16 of the entire market The new regulation GSR is going to produce 100% take rate from the second half of 26 and full year 2027. So 15 million cars or thereabout in Europe in 2027. And also in 2027 we believe that the rest of world there will be 14% take rate. Or rather 14% of the global, let's say, global number of cars will be delivered in the rest of the world. So total market estimation of 30% in 2027. And SmartEye's clearly stated ambition is to have 40% of this or more.

Yes, let's continue to look into the financial summary. Net sales is, as Martin stated, 92 million in the quarter. It's a growth of 3%, but if we consider the FX effect of 8 million negative in the quarter, you can see that we have good underlying growth. And that is driven by automotive. For behavioral research, there is almost the same amount of net sales compared to last year. The ruling 12 for net sales amounting to 361 million. So we have a growth of 5% there. And we have stable gross margin. So we improve our gross profit with 1.8 million. For automotive and we ended up with 42 million in net sales for the quarter and this is a growth of 26%. This is a very strong growth I think but at the same time we need to consider the NRE adjustment that we did last year in Q4. and also the FX effect. So the underlying growth for automotive is 42%. And of course that is driven by the license revenue that Martin talked about earlier and the ramp up of our car programs that is ongoing at our customers. The AIS product have also picked up and have some higher sales in the quarter compared to last year. Offset we have the project revenue that is decreasing in the quarter compared For behavioral research, we have a negative growth of 5% and adjusted for FX hits minus one. So it's amounting to 51 million in the quarter. And the ruling 12 is 5% negative. And iMotion and research instruments have actually reported the same level of revenue if we exclude the FX effect compared to last year. Then looking into the profitability, the EBITDA is now positive. So it's a really good improvement of 24 million. And this improvement is, of course, driven by the license revenue. And that we performed downsizing in the US and Swedish operation during the winter. And then we have also managed to do additional savings in Q2. So OPEX amounting to 82 million and it's down with 21%. The operational result EBIT is also improving with 24 million. But if we look into the earnings before tax, we can see that we have an impact referring to our increase of financial expenses. Finally, looking into the balance sheet, we have 12 million in cash and in balance. We have utilized 100 million of the credit facilities, but we still have 50 million left and also our bank facility. So the available cash and in balance amounting to 93.4 million. The cash flow is positive in the quarter. If we take out the financing net of 41 million, the free cash flow is minus 38 million. And this is an improvement compared to the previous quarter. And we will see that that will continue. We have some one-time payments in the quarter and this refers to the downsizing that we did in the winter. Investments is higher, a little bit higher here this quarter. 32 million, 1 million is referring to Tangible and the remaining part is referring to capitalization of development expenses. And finally, the operational result have a negative impact of minus six million. So in total, that was all from us. Thank you very much.