Tobii AB (publ)

Good morning and a warm welcome to the presentation of Tobii's Q2 2024 results. My name is Karolina Strömlid and I'm Head of Investor Relations at Tobii. Our CEO Anand Srivatsa and CFO Magdalena Rodell Andersson will, as usual, take you through the highlights and the financial development of the quarter. After the presentation, there will be a Q&A session, so please feel free to start posting the questions in the chat at any time. And for those of you who have registered to ask questions live, simply raise your hand to participate. With that, I hand over the word to you, Anand.

Thank you very much, Carolina, and thank you everyone for joining us today. We entered the second quarter of 2024 as quite a different company after the completion of our significant and transformative acquisition of Photonation. That acquisition firmly establishes Tobii as the number three player in the automotive interior sensing software market. That acquisition also, of course, means that as a company, we have a much larger set of resources than we have ever had before. And we also face a situation where demand for our other businesses are weaker. With these two realities in mind, we had two major focus areas for this quarter. The first was around cost reduction, and the second was around ensuring a successful integration of AutoSense. On the first front, I'm happy that we have initiated a comprehensive cost reduction program to ensure that we can meet our free cash flow and profitability goals while operating under our existing cash resources. Magdalena will share more details about this cost reduction program later in the presentation. The second focus area, equally critical of course, is to ensure that we have a successful integration of AutoSense to build our long-term position as a leader in automotive interior sensing. I'm happy that in the quarter we have made progress on building a joint and comprehensive interior sensing roadmap, that we have started the work to build a unified team with a shared sense of culture, and that we have harmonized our approach towards our joint customers. The work on the customer front has already started to yield more RFQ and RFI requests to Tobii, and we expect that this increased activity will mean more design wins in the second half of the year. Now shifting over to the business results. For the quarter, we did see an increase in overall net sales, an 8% increase, but our organic business continued to decline, primarily with continued weakness in the products and solutions segment. Magdalena will walk you through the details on a per segment basis as part of our financial update in this presentation. Now, beyond the acquisition, the cost reduction programs, the business execution, of course, I'm also quite happy that in the quarter we released three new software products that are intended to strengthen our products and solutions and integrations product portfolio. On the products and solutions side, we launched two new cloud-based SaaS solutions, Glasses Explore and UX Reveal, which help customers get insights easier with attention computing studies. On the integration side, we launched a software called Tobii Nexus, which allows a broader set of customers to enable attention computing into their solutions by only requiring a webcam as hardware to go and enable the power of Tobii technologies. Now, before I shift to Magdalena sharing the financial results, I wanted to remind all of you about the new Tobii organization. We are now organized into three business segments. The first is products and solutions, which delivers vertical solutions to a range of customers, thousands of them, from universities that are looking to push the boundaries of science, to enterprises that are looking to get insight into their customer or employee behavior, and to even end gamers who are trying to get a more immersive experience. The products and solutions business is the largest business in Tobii today, and as of Q2 2024, represents 61% of our revenue so far this year. The integration business segment addresses customers who want to take Tobii technologies into their own products. Typical customers in this space include AR and VR headset makers, medical device manufacturers, and PC OEMs. This business represents 35% of Tobii's net sales for 2024. Finally, the AutoSense business segment is our new business segment where we deliver software solutions to automotive OEMs and tier ones that are intending to deliver driver monitoring and occupancy monitoring solutions in their offerings. This segment is still in its early stages of maturity and represents 4% of Tobii's net sales so far this year. Our intention with these three segments is to share with investors on a quarterly basis, the net sales, the gross margins, as well as the EBIT levels of the different segments. So our investors can better understand where we are on a segment basis and judge their maturity. These three segments of course, are in different phases of maturity already today. And our expectation is that the products and solutions segment and the integration segment will reach profitability in the near term, while Autosense continues to be in an investment phase for the next couple of years. With that, I'd like to hand it over to Magdalena to discuss our financial results in more detail. Magdalena? Thanks.

Yes, thanks, Anand. So, Tobii's net sales grew with 8% in the quarter, very much thanks to the acquisition, which contributed with 25% to the overall growth, while the organic growth was minus 16%. EBIT in the quarter was minus 66 million SEK and contained 10 million SEK or one of costs related to redundancies, without which the EBIT would have been 56 million SEK. With the 8% growth in the quarter, the net sales totaled 201 million SEK compared to 185 million last year. This is the first quarter where the acquisition of Photonation was part of Tobii during the whole quarter. The acquisition closed on the 31st of January, so in Q1 we only had February and March consolidated. total net sales for January to June grew 3% and was 362 million second total compared to 353 million last year. The organic growth in the quarter was minus 16%, stemming from both segments, products and solutions and integrations. And the organic growth for the first half year was minus 12%, mainly stemming from the products and solutions segment. The acquisition contributed with 25% growth in the quarter and with 17% for the first half year. The majority of the net sales from the acquisition in the quarter was attributed to the integration segment. This is a pattern that will continue during the fall, but when going into 2025, the integration net sales from the acquisition will decline. The gross margin was 79% compared to 77% last year, when the product mix effect drove the margin upwards. The EBIT in the quarter was minus 66 million SEK compared to minus 48 million last year. Now, given the reality of both a larger organization through the acquisition with possibilities for synergies and the weaker demand, we are now concentrating on significantly reducing our cost base. That is in order to secure that we are operating within our available cash resources going forward. The current cost measures are projected to reduce cash-related operational expenses by approximately 200 million SEK over the next four quarters. These actions are of highest priority for us, and I will get back to the topic also later in the presentation. As a result of these cost reduction actions, we have taken extraordinary cost related to redundancy in the quarter of around 10 million SEK, without which the EBIT would have been minus 56 million SEK. The EBIT year to date was minus 140 million SEK or minus 130 million SEK when adjusting for the runoff costs. And that is compared to minus 101 million SEK last year. And so going over to the segments. Products and solutions. Today, the largest segment within Tobii with 54% of net sales had another week quarter with an organic growth of minus 15%. We saw continued weaker demand in Asia, but the negative development in this quarter should also be viewed in the context of an exceptionally strong quarter last year with 31% growth. Year to date, the organic growth was the same as for the quarter, and that is minus 50%. The gross margin in the quarter was 66% compared to 71% last year. The combination of product mix and negative scale effect from lower volumes drove the margin down. The margin year to date was 65% compared to 70% last year with the same low DIC for the deviation. The EBIT for products and solutions was minus 26 million SEK in this quarter and year to date the EBIT was minus 49 million SEK. Of course this is not an acceptable EBIT level in this more mature segment and therefore we continue to take cost actions. The integration segment, which stood for 42% of Tobit's net sales in the quarter, had a total growth of 52%. The organic growth was minus 16%, affected by quarterly variations, and the acquisition contributed with 68%. As mentioned before, the majority of the net sales from the acquisition in this quarter was attributed to the integration segment. The level of these additional sales will go down when going into 2025. Year-to-date the net sales grew with 48% of which organic minus 3 and from the acquisition plus 51%. The gross margin was 96% compared to 92% last year both in the quarter and year-to-date. The outcome was a result of higher share of software and services. The EBIT in the quarter was a positive 21 million SEK and with that also the year-to-date EBIT was a positive 7 million SEK. So the auto sales segment, which is still in an investment phase, had a net sales in the quarter of 9 million SEK, mainly stemming from the acquisition. Year to date, the net sales was 15 million SEK. The gross margin was 91% in the quarter, somewhat lower compared to last year's 97%. And then with the numerator and the denominator still being very low, percentage points change quickly when you add a bit of cost of goods sold and services, as we did this quarter. Year to date, the gross margin was 95% compared to 94% last year. The high gross margin reflects the high level of software and services in this segment. The EBIT was minus 60 million SEK in the quarter and minus 99 million SEK year to date. and then looking at the balance and cash flow. The free cash flow of the continuous investments was minus 125 million SEK in the quarter and minus 251 million SEK year to date, compared to minus 67 million in the quarter last year and minus 22 year to date, where last year's Q1 was positively affected by 63 million in temporary COVID-related tax reliefs. In the quarter, a rights issue was completed with a net of 267 million SEK. The cash position in the end of the quarter was 244 million SEK and in addition we have an unutilized revolving credit facility of 50 million SEK. Of course, we cannot continue to consume cash at this pace going forward as we have done these two quarters and we certainly do not intend to do so either. And that conclusion is a suitable bridge into my next slide around costs and operational efficiency. When we acquired Fotonation, we were very much aware that we would start out with high costs and low net sales from this new segment, and we plan to work our way forwards from that. In addition to these already known facts for this spring, we have also underperformed during the first half year in our products and solutions segment. So what are we doing? Well, besides driving business development to secure higher net sales, we have an expanded cost reduction program going on, which we are executing on to secure that we continue to operate within the existing cash resources. We are breaking the cost reduction program down in three buckets. The first bucket is our product investments, which sums up to the research and development expenses in the P&L and CapEx. Here we are prioritizing hard on what products to cut development in, what products to only maintain, and what products to exit. The second bucket is the rest of the organization, which sums up to the sales and marketing and administrative expenses in the P&L. Here we have done reorganizations and new prioritizations, while at the same time securing the efficiency effects from working more streamlined globally and with a higher degree of low touch sales. And then the third bucket, that is where the realization of synergies from the acquisition is sorted. As I mentioned earlier, for this bucket we already had plans for how to proceed after closing of the acquisition and now we are executing on these plans. The effect from this work will also be seen in the research and development expenses and CAPEX. All in all, the work we are doing in these three buckets will reduce the cash related operational expenses with approximately 200 million SEK the coming four quarters using Q2 2024 as the baseline. And when we talk about cash related expenses, we mean expenses without depreciation, but including capex. And we use this term since it's closer to cash, which is what we are focusing on here. In practice, this means that the expenses that will be seen in the P&L going forward will not be reduced as much as the cash related expenses will. And that is for two reasons. One, because when we reduce the engineering development expenses, they are normally capitalized and that's not seen in the P&L directly. The second reason is that going forward, depreciation will increase once different parts of the products within the AutoSend segments are ready and we start to get licensed revenue from the sign-ins. We will also start depreciation of these products. And so. In addition to this short-term profitability and cash improvement focus, we are of course very much committed to our long-term financial goals, which we introduced earlier this year and for which the short-term development improvement builds the foundation. We are thus working to secure a positive free cash flow for 2026, for the full year of 2026, and an EBIT margin of around 10% for the full year of 2026, and then an EBIT margin of around 20% for the full year of 2028. And with that, over to you, Anna.