Smart Eye AB (publ)

Good day and warm welcome to this earnings call for SmartEye Q2 2026 hosted by RedEye. We are here at SmartEye's headquarters in Gothenburg broadcasting live and we will usually start with a company presentation followed by a Q&A session and I will remind you already now to start submitting your questions in the chat form and I will ask it to management after the presentation. And with us today, we have SmartEye CEO Martin Krantz and CFO Mats Benaminsson, who will take us through the report. So without further ado, I will leave over to you guys. Welcome, Martin.

Thank you, Jacob. All right, let's get started. These are the highlights of SmartEyes second quarter 2026. Automotive royalty is what is driving the growth and we are still fighting in a bit of a headwind with regards to behavioral research. And the effect that has been against us for over a year is starting to fade. This results in organic, net organic growth of 54%. We have 141 million sec in top line, which is the best quarter so far for SmartEye. EBITDA has improved a bit to 27 million SEK so we are on steady ground when it comes to EBITDA at least. The automotive organic growth is 128%. It's up from last quarter. I know that the market was expecting even quicker organic growth but I think in the long run we will see that we are really transforming the company now from having small license revenues to significant license revenues and that's the... main takeaway, I should say. The automotive licenses, they grow also just like last quarter with more than 200% year on year. The core models continue to go into production. Last quarter, we had 155. Now it's 175. And 20 of the 24 OEMs that we have under contract are in production now. So it's really going well. Behavioral research is backing 7%. I will talk a little bit more about that later. OPEX is minus 17 million and the free cash flow is minus 24 million, which is a big improvement from last year. Let's start with automotive and license revenues. We have since our first BMW models in 2018, we have signed contracts with, we call them design wins. One design win is one car model with 379 car models. Some of these core models, including the BMWs and a few others, are out of production now, ramped down. That's the number 15 at the bottom of this graph. 175 is the number that have reached production, that has gone into production at one point in time. which means that the net effect here is 160 car models that are generating license revenue for us right now, as we speak. That's a big jump from last quarter, additional 20 car models, and we are very happy about that. That is exactly according to plan. Not all of those 20 car models have ramped entirely yet, so we are still, for several of the 160 car models, we are still in the ramp-up phase. And of course, we are heading with some speed, I should say, towards the 379 car models. Some of these are far out. Let's say a few of those car models are even in the 2030s, but the vast majority of the 379 car models are going into production in this decade, I should say, between now and 2029. And that's of course what's going to continue to drive growth for us. We are keeping the same guidance as we had last quarter. We are now reaching 175 car models and we expect to be above 200 at the end of the year, but below 250. Of course, we have estimates from our customers telling us when the different car models are going into production. But historically, several of those estimates were delayed for some reason or another. So that's why we're keeping that range rather wide. Seen on the global market, most of the... The car OEMs and the car models that went into production this quarter was in Europe. So Europe, the European legislation, general safety regulations, that's what's driving the growth more than anything else. The other regions are also growing. So we do sell more. in Asia, also both for the internal Asian market and for export vehicles exported to Europe. But of course, nothing can compare to the really strong regulation-driven growth in Europe in Q2. We have made estimations of the order values, all these 379 car models. I mean, what went into production and what ramped up during Q2 are car models that were signed and contracted between 2020 and 2023. So that's the kind of lead time we're talking about. Now they go into production. Now they start generating income for many years to come. If you do the same calculation over all the 379 car models and subtracted BMWs and a few others that are auto production, our estimation is 7.6 billion. We are not changing that number this quarter or the calculation basis for calculation this quarter. The FX effects are so small since one quarter ago. So we just keep it as it is.

Good morning. Yeah, let's continue with the financial summary for Q2 2026. Net sales up to 141 million and that is a growth of 23% and organic 54%. And then we adjust for the acquisition of Sciatic that has been done and FX effect in the quarter. The ruling 12 net sales amounting to almost 490 million, so it's an organic growth of 43%. So really good to see that net sales is coming closer to 500 million in ruling 12. We have a good gross profit improving with 44 million and we keep our gross margin on 90%. Automotive, you have heard Martin talked about it, the organic growth 128% and this is of course driven by the royalty revenue. And then we have also just for 1.6 million referring to the FX effect. But the project revenues, the NRE revenue is also on a high level. We have a good progress in the company and in our OEM programs. So we have a slightly increase there as well. The AIS portfolio also delivers more volumes and also have a good growth in the quarter. Behavioral research is down 6%, and also when we do the adjustment for the organic growth, it's negative 7% in the quarter. But we have Scitic as a new business coming in. improving the net sales with 2.5 million in the quarter. And also, if we adjust the FX effect for iMotion, referring to the sales of multimodal software platform and the media analytic tool used for ad testing, they actually report a really good organic growth in the quarter, 7%. So applied AI revenue that is declined in the quarter. Looking into the OPEX development, we have increased the OPEX compared to Q2 last year with 24 million. And this is driven by the acquisition of Sciatic and also that we have higher personal expenses. We have the salary review in Q2 that affecting the OPEX and we also have slightly more resources in the company. And then we have higher amortization in the quarter. And this is referring to investments in IT, referring to financial leasing. And also that we have increased amortization referring to our acquisition, referring to surplus value like goodwill, etc. If we compare OPEC's development between Q1 and Q2, we're also increasing with almost 16 million. And this is driven by the amortization and acquisition and the salary review. And then we also have some one-time items in Q2. The effect on our profitability levels, EBITDA improving with 26 million, so we are now up on 27. And here we can see the one-time items affecting the EBITDA with 3.6 million. We also have a positive effect referring to FX 2.3. But if we take out the one-time items effect here, the adjusted EBITDA is up to 31 million. So we're still having good development on the EBITDA development compared to Q1. We have more amortization but we still have a good improvement on EBIT level with 20 million. And then of course we have more financing expenses and this is referring to the issuing of the bond in December 2025. And also that we have some more expenses referring to the financial leasing investments. So the earnings before tax improved 14 million. Checking in on the balance sheet, we can see that the trade receivables increasing in the quarter with 21 million. So it's now up to 24 million. And here I would like to say that referring to the royalty revenue and the payments, the royalty revenue that we reported in Q1 had not fully been paid in Q2. So these have a consequence, an effect on the cash flow. So we can say that around one third of the royalty revenue for Q1 have been paid early in Q3. The cash ending balance amounting to 180 million. The free cash flow still improving, 14 million if you compare to the same quarter last year, and also improving compared to Q1. The free cash flow now amounting to 24 million. Investment, we have reported 33 million in Q2, and this is in line with last year and last quarter. Here I would like to point out that we have done a reclassification of one item of 10 million between the non-cash items and the other current liabilities, and this referring to the cash flow January to June. Finally, let's summarize the Q2 development. So we have reported stronger royalty revenue that drives our growth. This is supported by new business from SciTech acquisition and also good organic growth from iMotion. So we have a very good profitability and cash flow development all in all. What can we say about the autumn? We see that we continue to ramp up royalty revenue in Q3 and in Q4. We see that we have more design wins that will enter in production. And those design wins that enter production in Q2 will report, we expect to have higher volumes in Q3 and Q4. We have a year-end effect for the behavioral research that we expect to happen in Q4. We have seen it before previous years that behavioral research report higher net sales in Q4. So we expect that to happen this year as well. OPEX will decrease in Q3 referring to the seasonal vacation debt effect and that will also improve EBITDA in Q3. Referring to the cash flow, we have tax items that is referring to the incentive program 2023 that has been issued during Q2. These tax items will be paid in Q3, so that will have a negative effect. And then referring to the payment schedules for our NRE programs, that will also have an effect, a small positive contribution in Q3 and a high positive contribution in Q4. So all in all, we see that Q4 is the best option to see that we will become cash flow positive. That was all from us. Thank you.