Smart Eye AB (publ)

Good day and a warm welcome to SmartEyes Q3 2025 earnings call hosted by RedEye. My name is Jacob Benon, I'm an equity analyst here at RedEye and we will start off today as usual with a company presentation and thereafter we will follow up with a Q&A session. And I would like to remind all the viewers online to start submitting your questions in the chat box and we will have management answer them in the Q&A session afterwards. And with us today we have SmartEyes CEO Martin Krantz and the CFO Mats Benaminsson. So without further ado I'll leave the floor over to you Martin.

Thank you. I'm happy to announce the third quarter of 2025. It's an amazing quarter for SmartEye. It is the best quarterly report that we have ever. submitted in terms of the results but of course we are in the beginning of ramp up so we expect many more quarterly results to be in the near future to be better than this. Anyway We had 99 million in net sales. Organic growth, excluding FX, was 33%. We're very happy with that growth rate. EBITDA, 11.5 million SEC. We're also very content with that. We had 1 million last quarter, which was the first quarter with positive EBITDA in ages or in 10 years. But Now we're going in the right direction. Automotive is growing with 61%. But I think the most interesting part of that growth is the license growth. It's growing not quite 200% but well above 150% is the license revenue growth. we that comes from that we have 105 car models in production compared to 90 car models end of last quarter and these 15 new car models are starting to ramp but also the whatever came into production during q2 q1 and q4 is still in a ramp up phase so we have a lot of car models now building up these these volumes 15 OEMs in production, three more this quarter. And we expect both these numbers, the number of car models and number of OEMs to grow during the coming quarters. Behavioral research is growing with 18%. Finally, I should say, it's been a challenging year for behavioral research. Let's say that the rest of the world outside of the United States has been okay, but the US North American market has been challenging throughout the year until now. We completed the savings program in Q2 and we were laying flat on the OPEX level in Q3. There was a vacation salary effect that decreased the costs a little bit but basically was a flat line if you look below behind that. So we have 15% reduction compared to last year. We're happy with that. This is an interesting picture. You can see that back in 2016, 17, 18, we had a few customers, BMW mainly and some other premium OEMs. BMW went into production in 2018 we started to have our first license revenue back then and we were supposed to get several other premium OEMs in Europe to go into production and start ramping in 2019-2020 that got delayed a bit due to covid and semiconductors and whatnot And then, you see, we have a quite big ramp up, a big rise in, let's say, 2019 to 2020. We go from 50 design wins to 100 design wins. Those are the design wins that should have gone in production in 2023. So the ramp up that we see right now in 2025, it's approximately two years delayed compared to the original And you can see also that there's a huge increase in the design wins in 2023 and 2024. That's what's going into production now, this year, coming year and also in 2027. So that's the sort of logic behind that we expect such big increase in the license revenue over the coming quarters and years. Of the 105 design wins they are divided like this. 24 car models in North America with one OEM. A very big OEM from Detroit of course. We have nine OEMs now in production in Europe. Many are still small in volumes, many are still ramping up. 36 car models in Europe has entered production. And in Asia we have five OEMs entered production and 45 car models out of the 95 are in production in Asia. Up until Q3 we have 30 car models that went into production for this year. We expect to be 40 to 50 more car models in Q4. We have a lot of planned SOPs. Hopefully, we will reach that level. Of course, it could spill over into Q1, possibly. It's not the first time you would see a delay if that happened. But still, most of the, let's say, revenue ramp up comes from the car models that already has entered production, the 105 car models. Whatever happens here in terms of exactly when the SOP is being launched, we see a very strong momentum in our license revenues. Looking at the total DMS market we are very happy with the 11.5 EBDA with the 105 car models in production and whatnot. Let's not forget this picture here. So the gray line It's the take rate, the solid line, not the bars, but the solid line. And you can see that we expect to have a take rate globally of 10% this year. going to above 20 percent next year and going to go close to 30 let's say 27 28 percent in 2027 The biggest driver of this enormous increase of global take rate is the 16 million cars in Europe. So you have a full 100% take rate in 2027. And the second half of 2026 will also have a 100% take rate in Europe. And the first half of 2026 will have a fairly high take rate in Europe. So this is the underlying industry logic behind why we are growing so fast. With that, I leave over to you, Mats.

Thank you, Martin. Hello, everyone. So let's look into the financial development in the quarter. We have had a good growth, 25% coming up to 99 million. And we have an impact on FX in the quarter as well. So that is negative minus 6 million. But you can see here in the graphs that automotive growing with 18 million and behavioral research, 8 million. Talking a little bit about the gross margin. The gross margin is going down from 89% to 87%. And that is due to that we have had both of course good growth in license revenue but also the product sales have increased. So the balance there is that we are a little bit more hardware in the quarter. For automotive we have growth of 50% and if we take out the FX effect and also that adjustment that we did in Q4 last year then we came up to organic growth of 61%. The growth for the rolling 12 is also very high, 28% and then we have excluding FX 32%. There is a good drive in the car production ramp up both from the Asian OEMs but especially also from the European OEMs and also the North American OEMs. It's also good to see that we have three more OEMs coming in with car volumes in this quarter. Also, not forget to mention the AIS product. We have said before in the press release that we had a good order intake in the quarter and we have started to deliver on that. And also to other OEMs programs that we have for these products. So the AIS revenue is also increasing very well. So it's well above 200%. But it's starting from small amounts, but it's picking up quite well. The project revenue is slightly lower this quarter compared to last year and that is due to that we have finalized and are close to finalize a number of customer projects. Behavior Research also very good growth 8% and then if we take out the FX effect of 4.6 million it's up 18%. And iMotion is with their multi-model software platform. They are selling really well in the quarter and there is the background for this growth. The other portfolio referring to research instrument and media analytics, if we take out the FX effect, they have reporting almost the same revenue compared to the last year. We improve our profitability in all levels. The EBITDA is up 29 million. And of course we have a good sales and then we have a good gross profit. That's adding on 16 million. And then we keep the cost base as low as possible and good cost control and everything around that. So the OPEX is down 13 million. On the operational results, we improve even more, 32 million, and that is due to less depreciation and also amortization of intangible assets in the quarter compared to last year. The earnings before tax improving also but not as much but still 28 million. And of course we have some financial expenses that increasing in the quarter compared to last year. Referring to the balance sheet, looking into the cash ending balance, we increased that to 25 million in Q3. We haven't utilized our bank overdraft facilities. And we had additional 50 million in additional credit facility. So in total, that ending up to available cash ending balance of 107 million. We have a debt now that have increased with 50 million in the quarter. So we have a total debt of 150 million. And then looking into the free cash flow, the total cash flow improved with 13 million. And then the cash flow from the operational activities also improving with 11 million. But the cash flow is negative for the change in the working capital. The reason for that is that we have had a quarter now with less incoming payments. This is mainly referring to our customer projects and how they are invoiced and how they are paid. In Q4 we expect to have more incoming payments. And the investments we have done in the quarter ending up to 25 million. And it's less compared to last quarter. And it's usually in this area, around 23-25 million. So in total we have 107 million in available cash and in balance and we have free cash flow 37 million but we see that and expect that the free cash flow will improve quarter by quarter And this is due to the ramp up that is now ongoing for our customers. And the 107 million will be enough for us to secure the cash until we are cash flow positive. And we have previously said that we will become cash flow positive around two to three quarters after we have gone breakeven on EBITDA. So that was all from our financial performance in this quarter. Thank you very much.