Terranet AB

Hi and welcome to Redeye. My name is Erik Rolander and I will be moderating this presentation. We have with us Lars Lindell, CEO of Terranet, who will hold a presentation of the company's third quarter that came here early this morning. We will start with a presentation and then we will do some questions and answers. You can send your questions to the form on the website. We have already received a lot of questions that we will try to keep up with afterwards, but please continue to send them during Lars' presentation so we can see what we can do. And with that I hand over to you Lars.

Thank you Erik. As I said, my name is Lars Lindell and I have been the CEO of Terranet since March this year. We are going to do an introduction of the company here and since it is the first time I think we actually present Terranet on Redice and go through what we do. And then a little about the Q3 report and then Q&As. OMOS is a Lunda company. We are 26 employees and consultants. The company was founded in 2007 and came to Nasdaq First North in 2017. What I'm going to talk about here is next-generation anti-collision technology, because that's what we're developing. Just some data from the World Health Organization. Every year, about 1.2 million people die in traffic all over the world. And more than somewhere between 20 and 50 million people are injured. So it's very big numbers and it's at a cost to society of about 8 billion dollars per day, which is terrible numbers, I have to say. And more than 50 percent of those who are injured or die are what we call vulnerable road users. That is, people who are not sitting in the car, like the guy on the car driving a skateboard or a scooter. The reason for this is that our technology aims to make traffic safer for vulnerable road users. Why doesn't the system of today always work? Why don't they work the way they should? First of all, things happen very quickly. They are not reaction fast enough. They are disturbed by light conditions. Just as people can be blinded by sunlight, so can the camera system. Traffic situations can be very complex and complex so that the computer cannot interpret what is happening. Then there are system limitations and of course they are not fast enough. Then there are false interventions. False interventions are what we call ghost brakes. Some people are irritated by these ghost brakes. brakes that happen without actually being needed. What they do then is that they turn off their ADAS system and when they are off, they naturally do not work at all. The car industry is driven by laws and regulations, but also recommendations. We are an active member of an organization called Verdas, which makes test cases and recommendations for Euro NCAP. Right now we have a project called Vardas 2, which makes recommendations for Euro NCAP 2026. Then Vardas 3 will come and work with Euro NCAP 2029. Vardas is sponsored by Vinnova. We collaborate with many car manufacturers such as Volvo and Toyota, but also insurance companies that are popular with me. The way we contribute is to be engineers and help to calculate things. What is it that you aim for when you do this job? It is exactly what does not work so well in ADAS today. to protect vulnerable road users. You want to reduce the reaction time. You want to have better performance in tough climate conditions. And you want to be able to cope with more and more complex traffic situations. That's what you're working on in Vardas and hopefully it will come into Euro NCAP. With stricter rules, hopefully the number of accidents will decrease. What are we developing? First of all, we aim for our system to be able to react ten times faster than today's system or up to ten times faster. We have a laser scanner that scans in front of the car. There we develop both hardware and software. Then what bounces comes back to what is called an event-based camera. I will tell you a little more about what is special about them. We have two of them. We buy the cameras, but we make software for them. Then we also make software that we call our perception stack. This is where the analysis itself takes place and we assume that it will be on the car's own data system. So what makes us unique? First of all, we work with short distances because in urban environments, cars should not drive so fast. We work up to 70 km per hour and with that we only need to scan 35 meters in front of the car. One of the advantages is that since we do not scan longer, we reduce the information. This means that you can process the data faster. Then we work with these event-oriented cameras and what is unique about them is that they do not take photographs, but the idea is that they should act as an eye, which means that as soon as a contrast change occurs, it is sent to our system in real time and is always asynchronous. This means that we get much smaller data and it goes much faster. By limiting the amount of data and having a system that reacts immediately, we know that we can react much faster. These two chambers put together their two images in one to reduce the noise and then classify which object it is. Is it something you should stop for or not? Is it a child coming out on stage? When we have analyzed, we have a picture in 3D where we know what the object is, but we also know in what direction it goes and we know with what speed. At the same time, we know how fast the car drives and we know in what direction the car drives. Then we can recommend to the car to do something and it can be to brake. What we are working with is sensor technology. The first application that we have built a evaluation kit for is for the car industry. But as a sensor technology, it can of course be used for many different things. We will work with other industries and other use cases than just the car industry. We see it as a very good sensor technology and we want to find applications where it can be added. A little about the Q3 report. We have built something we call an MVP, Minimum Variable Product, and it is an evaluation kit. When this is well integrated into a car, it will not be a box on the roof as shown in the picture. It will be integrated into the car. But this is a valuation equipment that we want the customers to evaluate. In the quarter, we carried out our first evaluation with an industrial partner. It was the most important thing during the quarter. Right now, we participate a lot in different types of industry events. We are trying to transition the organization to be much more forward-looking. and work much more with business development. In the end, we now have an MVP where we can prove the technology. Now it's about commercializing it. We have been at Auto AI in Berlin, we have been at Traffic Safety Days in Gothenburg, we have been at Mobility X Lab and recently we were at XCAMP in Gothenburg, which is Volvo AB's innovation hub. We have signed several valuation agreements and we are now trying to sign as many as possible. When we have an agreement signed, it is then about planning where to send the equipment, the engineers who will help and then the customer must also plan to accept this and be able to evaluate it. We also work a lot with patenting our technology. We have done that since the change of year and after the end of the quarter we have gotten more patents. Now that we have put hardware design on the MVP, it is a very good time for us to patent the unique things we have invented. We have also published a plan for 2026. The reason we do this is that last year we published a plan for 2025 that the shareholders have been able to follow. Since we did it last year, we did not want to break the pattern. But 2026 will be very much about business development and valuations. Write valuation agreements and carry out valuations. In the end, we believe that the way to commercialize the product It will not happen if a customer has not been evaluated. We will continue to look at building solutions for other industries. This is something we have talked about for a while but have not really come to terms with due to the focus on our MVP. And then of course we will continue to make patents and protect our technology. A little about our financial figures. We are a pre-revenue company, so we have no income. We made a loss of about 9.5 million SEK and we had a negative cash flow of 9.3 million SEK. At the end of the quarter, we had about 10 million SEK in cash. Relatively predictable figures. Det var faktiskt sista sliden så Q&A Erik.

Thank you so much for that Lars. Very exciting to have you here for the first time. You were on our Autotech in Gothenburg a few weeks ago, so for those who haven't seen it, I recommend you go in and take a look. You talked a little more about the industry and I also had a couple of colleagues with you there who talked about the whole thing. But I think we'll start by going through a lot of questions that I had here and then a lot of them have come in from the web as well. But if we talk a little about the fact that you have now launched the MVP, what you mentioned about the evaluation agreements, which will then give some feedback, so to speak, and the first feedback that has come, if you can just explain the steps that are actually all the way from having signed an evaluation agreement to potentially in the future when you are in cars on the road, what are the different steps there?

The first step is of course that the customer should like our technology. Then we have to sit down with them and discuss how we integrate this into a vehicle. It can be a car, but it can also be a truck or something else. Hopefully, a contract is written where they are involved in sponsoring the company in building the solution they want and integrating it into their vehicles. So the starting price for all of this is naturally the MVP and the evaluation. And then you have to see where that takes us.

How many iterations, feedback and technical adjustments are needed? It sounds like a joint R&D project where you get paid for development.

That's how it works in the car industry. When they have made a decision, you get what is called a design win. When you have a design win, you start together and integrate into the vehicle.

But when you have sat and talked to these evaluation counterparts, so to speak, what should you still think about? Because everyone is very curious about it. Is it three months, six months before you get the first feedback that you have to make any adjustments to?

Or if you can give any feeling for what time we are talking about. No, but it's the way we actually plan. But it can vary a lot between customers. It takes about a week to send an MVP to them. They get it two to four weeks to evaluate and it takes about a week for us to get the stuff back. Then of course there will be a discussion, do you like it and how do we take it on? But we don't think they need this much more than two to four weeks.

So you can reach out to quite a few counterparts in a fairly short time and they can work on their side during the time?

We have two limitations. First of all, we have built five of these. Two of them will always be in our lab so that they can ask us questions so we can replicate things in our lab. Which means that we have three that we can send around. So that's one limitation. The second limitation is that our engineers should be able to support the customers in their evaluation. With these limitations, we want to do as much evaluation as we can.

How easy is it to choose who you want to hire? I guess it's also a bit of a chase, but to place one customer against another and set timelines that you have to try it first and then it's your turn.

It is something that is discussed, but my comment internally is that it is a positive problem to have. It is not a negative problem to have and often it is quite obviously how to prioritize and who comes first. It's also about looking at what the possible business is and so on. Not very difficult, but it is discussed a lot of course.

And if you think about the feedback you will get later and the iterations that will be there, how easy is it for you to take it on to other use cases and other dialogues and other evaluations? Because now it is still pretty much the same type of application area as you have several evaluations.

Exactly, the MVP is quite narrowly focused on the car industry. For good reasons. If you look at the numbers I showed you, there are enormous benefits for society if you can improve these systems. And we know that we can. Besides, it is a relatively large market with many units, so the car industry was quite obvious to start with, I think. But after that, I think it's relatively There are customers in our pipeline who will take the one that is made for the car industry, but evaluate it for other industries. They just want to see the sensor technology. What can the sensor technology deliver? And then maybe the next step will be to do an evaluation that is more focused on their application.

And if you think about it there, how do you see, in the extent you can say, you said that you have been to fairs and met many actors, what does some kind of pipeline look like? That's something you like to talk about here. How many potential do you see in front of you that you can reach before you, I'm not going to say jump into bed, but before you reach someone one step further, quite simply?

It is very difficult to say, but as I said, the limitation in the end is to carry out evaluations now in equipment plus staff. If you just calculate that each evaluation takes From start to finish, two months and we have three of them. Then it will be 18 in a year. You can do it if everything goes well. So that's what we're going to try.

And will they be announced communicatively or will it be more of a wrap-up every quarter?

No, communicatively so far we have actually announced each. Not necessarily that we will continue to do so, but all three. that we have done on the short side, we thought we were so unique that there were all reasons to announce them. But it can also be that we bump up a couple in a press conference.

You can guess that those who evaluate your product also evaluate a lot of other solutions and maybe even have some kind of existing, not really as good technology today. How do you see the competition? You talked a little product-specific about what you are good at. If you still try from now on at these fairs to determine the competition landscape and what you see a little forward here.

First of all, we don't see anyone doing the same as us. We have received feedback from many that what we do is unique. Our competition is with other technologies, such as Lidar and Radar. We see our technology as complementary. We don't do 300 meters, but we do these 35 meters and act very quickly in urban environments. If customers want technologies that can also do 300 meters, then they can use such as LiDAR and radar or camera systems. So we can complete them and help them with what they are not so good at today, which is that in urban environments we can help them to become faster.

And if you look at how colleagues and competitors in the industry, your previous employer Aconer and also Gapwave, who we follow closely on Redeye, they also work with a tier 1 between themselves and end customers. Do you see the same go-to-market strategy when it comes to that?

I don't think so. that we will sell directly to a car manufacturer without any integrator between us and the end customer. Because it is not trivial to integrate things into a car and we do not necessarily have that expertise. So some kind of gap between us and the end customer. We market ourselves a lot towards the end customers. It is always good to market yourself to the customer's customer. So they go to the terrorists and say, this is what we want.

To create a pull effect from them, I understand. And as you talked about, it will probably be a combination of several types of sensors to get a unity for self-driving cars in the future. It sounds more like a possibility for you to come in, but they also work a lot in platform thinking, these car manufacturers in the end. You have to be quite early in a platform to be designed in, so to speak. How far would it be in that case? Say that these evaluations you have today fall out well, you end a cooperation agreement with a Tiretta that then builds in, so to speak, or gets its product in a platform. When is such a car on the road?

Did you dare to make a guess? A car development takes 3-4 years, we know that. I have worked in a company that is in cars today. But it does not mean that you can not get paid earlier than that. Because often it is so that they can be with and sponsor and pay long before it really is in the car.

That was a question that came in from the web. The valuations are not estimated to generate any income, but then when they come back a few steps later and want to make some kind of joint development, then it is per definition that you often have to pay as an actor.

Definitely, that's what we aim for. It is to find partners who can also help to pay for the development so that it is not only our shareholders who do it.

If we go back to the technology, which you say is unique to what no one else does. Do you have competitive applications or solutions for the same problem? Because you still need to detect something that is 35 meters in front of the car.

But today's systems can. And even self-driving cars can. What we're saying is that we can do it much faster in certain special environments. It's not that this functionality doesn't exist today, it's just that it can be done better.

And the focus now was on automotive as you said. You showed a little picture that showed other possibilities as well. How much is your focus now? Is it 90-10 or even 100-0?

In the future, you have been 99 on the MWP and the car industry and we will change that. It would have been a shame not to get the MVP as soon as possible so that we could start evaluating together with customers and drive wide but not be done with anything. So we thought, and especially when I became the CEO, let's put everything on to get this MVP, let's start the commercial journey. Then of course we have to work with other verticals, but that had to be another priority.

A question that came up here about the defense industry, which many think is a blooming industry now, unfortunately, you had a picture of a helicopter that looked a little military.

Can you just tell us what you look at there? Of course, the defense industry is very interesting and it is very easy to understand that if you can react The faster you act, the faster you can shoot out the others. There are many who want to test our MVP to see how you can detect and follow drones. It is something we will look at, it is very topical today.

And that could be something that you communicate a little specifically and that you have gotten a first evaluation within a new vertical, if you want to call it that.

Yes.

Exciting. There have been a lot of questions about, and you mentioned it yourself, the cash flow in the quarter and the cash position. You have made an emission earlier this spring and have a coverage option related to that. I know it's not entirely up to you, but many are still wondering about the financing in the company. What are the different possibilities? What is important to have both as an investor and from you?

What is quite obvious is that the company needs more financing. The board is of course looking at this. When it comes to those issues, The rule is that the day a decision is made, we must inform it to all shareholders at the same time. So you just have to wait for it to be published.

But no doors are closed. We talked a little about partnerships that some other colleagues in the industry have done successfully before.

There are a number of different tools in that box. We talk very broadly.

Great. We're going to take some questions that have come in from the web as well. Part of it was just to clarify how many partnerships you have now, so to speak, with MVP testing and other things, if you just want.

We have signed three evaluation agreements. We have previously announced two different types of partnerships, but it is so that even those who are partners, if they want to evaluate our MVP, they will need to sign an evaluation agreement. The evaluation agreement is important because it protects our technology. They are not allowed to copy and a lot of things like that. The second is that it handles liabilities. If they do something with this equipment and people get hurt, it is not our fault. Even if they are existing partners, they have to sign the contract.

One of the questions you mentioned earlier, which I don't think was mentioned in the report, was about the mining industry.

We are still discussing with them or planning when we should do it. So we haven't really reached the goal yet, but it's definitely on the agenda.

Then there was a more technical question that I thought you explained in the presentation. Is it a matter of detecting? Can you do a remote manoeuvre if you see something that you are trying to get into?

Or is it that you send the signal? Today it is very much focused on automatic braking, but of course the data that we generate can be used for the car to make decisions about an undermanoeuvre. So we generate data for the car and then what the car does, it's up to the car manufacturer, but of course we think that the difficult thing about undermanoeuvres is that you have to see where you want to undermanoeuvre. But of course, the data we give out can be used not only to brake, but for other things.

And there it will be important that the computer itself is in the car's computer so that all these sensors and systems can talk to each other, even if you know some things.

Our delivery of data can either be a brake decision or a brake recommendation, but we can also deliver what we call the point goal. And of course, the car manufacturers use their own perception stack where they have more technologies than ours. So it becomes a sensor fusion and they use several different sensors to find the optimal decision. We deliver the point models to them and then they can build their perception stack. And we believe that if you take the car industry, most of them will not want to use our perception stack, but they will have their own. Because they have this audacity in their cars.

Exactly. I thought one important thing you talked about in the presentation was to go towards more business-oriented development, so to speak. And that you go from a history of being a pure development company to, in the end, a commercialization phase. Can you tell us a little bit, since you stepped in, so to speak, what concrete steps you have taken to move the company there?

First and foremost, it has been our focus. Now we are very much out and meeting customers and we are close to evaluation agreements. I also believe that it will affect our organization. We need to be more forward-looking. More people out there meeting customers and trying to convince them about evaluation agreements. And a little less development, but a more forward-looking organization.

What do you hope you have achieved without giving too clear forecasts?

We of course hope for an agreement with a player who partly finances the company. That must be the goal.

It will be very exciting to follow and there have been a lot of other questions about specific characters, so I think we have to try to find a way to follow up on them. And then we will certainly have you here again in the future, Lars.

Thank you for all the questions.