Tobii AB (publ)

Good morning, everybody. This is Fadi Farong, CEO of Tobii. And I'm joined today by Martin Jolson, our Acting CFO, and Henrik Wikström, our Interim Head of Communications. Thank you all for joining our Q3 2026 earnings call. So let's start with the quarter. Net sales were 140 million Swedish krona compared with 158 million last year. This, of course, represents a reported decline of 11% and an organic decline of 12%. However, when adjusted for extraordinary one-off sales in last year's quarter, the sales actually increased by 16%. which is encouraging, but it does not change our assessment that we need higher and more consistent sales. Our operating cost base continued to decline and EBITDA, the operating result before depreciation and write-downs, improved. These developments together show underlying progress. However, the current sales level remains low in relation to our cost and investment base. At this level, free cash flow was negative and cash liquidity is strained. We're acting on both the operating business as well as the balance sheet. The gross margin was 79% compared with 82% last year. And reported EBIT was negative 217 million SEC compared with negative 33 million SEC. Now, this result included a non-cash impairment or a write-down of 180 million SEC in AutoSense. It reduces the reported EBIT but it does not consume cash. I'll explain the reasons for this write-down in more detail later on when I discuss AutoSense. As mentioned, the EBITDA actually improved to 18 million SEC from 11. and that corresponds to a margin of 13%. Now together, the product and solutions and integrations units delivered positive EBIT. And these figures show that the actions we've taken on costs and priorities are having an effect. But we still need to improve our commercial performance. The cash flow from operating activities was positive 22 million. After the investments of 88 million SEK, almost entirely actually related to product development, the free cash flow was negative 6 million SEK. This means that the cash at the end of the quarter ended at 20 million Swedish krona. So again, this is a strained cash position and we are therefore continuing to manage our cash tightly. We prioritize our investments carefully and we work intensively on the financing needed to meet our commitments. Now, let's move on and review the performance of our three business units. Starting with the largest business unit, Product and Solutions, it actually showed an organic growth of 3%. We saw a gradual recovery in China during the quarter because the earlier procurement delays began to ease up. Now the overall developments supported this positive organic growth and they gave us a base to build upon. Our focus now is to convert that progress into sustained growth. During the quarter, I'd like to mention that we also launched a locally installed version of the webcam eye tracking for research, which complements the solution for remote studies that we released back in Q2. Our second largest business unit, Integrations, showed an organic decline of 40%. But keeping in mind that the comparison period included the 30 million sec Dynavox pre-purchase and 7 million sec of non-recurring royalty revenue. So if we adjust for these items, integrations grew by 31%. Now, although product and solutions did not reach positive EBIT, the combined EBIT of these two units, product solutions and integrations, WHICH TOGETHER REPRESENTED 90% OF THE QUARTER'S SALES WAS POSITIVE AT 4 MILLION SEK. LET ME MOVE ON TO AUTOSENSE WHERE WE SEE THAT THE SALES INCREASED WHICH IS OF COURSE MAINLY DRIVEN BY HIGHER LICENSE REVENUE BUT THE REVENUE OF COURSE REMAINS AT AN EARLY STAGE AND THIS DEVELOPMENT IS ENCOURAGING AND IT REFLECTS THE COMMERCIAL RELEVANCE OF OUR TECHNOLOGY. I will take a minute here to put this part of the business in a broader context. The long-term need for driver and occupant monitoring remains clear, and it is supported by regulation and increasingly demanding vehicle safety requirements. In the near term, however, the automotive industry continues to face challenging and uneven conditions. The investment priorities are under pressure. The development cycles are long. And the timing of OEM decisions can shift. Now, AutoSense has established a strong technology position. Among others, we have a major design win with a premium European automotive OEM. And late last year, we signed a technology licensing agreement with a major automotive supplier. These achievements with others validate our technology and they also demonstrate different routes we can take to market. At the same time, our commercial progress has not yet translated into a revenue base of sufficient scale and visibility to support the historical level of cost and investment. This is why we're adapting the business while pursuing the opportunities where we believe Autosense can create value. Now, against this background, we reassessed our development assets and we concluded that they are carrying value is no longer supported by expected future cash flows. Therefore, we recognized a non-cash write-down of 180 million krona. mainly related to older driver monitoring system technology, which was developed by Tobii before the AutoSense acquisition. So the reported EBIT for AutoSense was therefore a negative 222 million krona. AutoSense remains under strategic review because of market uncertainty, insufficient revenue scale, and the need for a more sustainable commercial and financial model. With that, I would like to invite Martin, please, to walk us through the financials.

Thank you, Fadi, and good morning, everyone. My name is Martin Johansen, and I am the acting CFO at Tobii. And today, I will be presenting Tobii's financial results for the third quarter of 2026. To begin, I would like to highlight three key areas. The net sales totaled 140 million SEK, a decrease of 11% compared to prior year. Last year did, however, include a total of 37 million relating to the pre-purchase agreement with Dynavox and one of royalties. Adjusting for these items, net sales grew by 16%. Currency had a positive impact of 1%. Operating profit was minus 217 million SEK compared to minus 33 million SEK in the same period last year. The decrease is primarily attributable to the non-cash related write-down of 180 million SEK within AutoSense. EBIT excluding AutoSense was positive in the quarter. Free cash flow for the quarter was minus 6 million SEK, an improvement compared to minus 29 million SEK last year. And I will return to the financial position in more detail later in this presentation. As previously mentioned, the net sales declined, but adjusted for extraordinary one-off items, the underlying growth was 16%. Gross margin decreased to 79% compared to 82%, reflecting overall lower net sales. During the quarter, we continue to see positive impacts from our cost savings programs Operating expenses, excluding depreciation and including R&D investments, amounted to 121 million SEK, a total reduction of 29 million SEK compared to the same period last year. And with the already announced actions in Q2, we will continue to see the company's cost structure improve going forward. Depreciation, which does not affect cash flow, amounted to 48 million SEK, an increase of 7 million. And I want to once again point out that EBIT for the third quarter was negatively impacted by the aforementioned write-down of 180 million SEK related to the AutoSense business. Looking at the products and solutions business unit, net sales increased to 86 million SEK, an organic growth of 3% compared to 84 million SEK last year. Most of our geographical regions had a stable development, and as Fadi pointed out, we did see a gradual recovery in China, which had seen procurement delays in recent months. The gross margin stands at 70%, an improvement from last year's 68%. Operating profit improved to minus 7 million SEK compared to minus 90 million SEK previous year. For integrations, net sales decreased to 42 million SEK ties back to the Dynavox prepay 30 million SEK and one of royalty payments of 7 million SEK. Adjusted for these items, net sales increased from 32 to 42 million SEK and a growth of 31%. The gross margin remains at the high 93%, which is reflecting the software services and license-based product mix. Operating profit was 11 million SEK compared to 27 million SEK previous year. Again, it should be noted that the last year's pre-purchase agreement had a significant positive impact on margins and profits in Q3 of 2025. The Autosense business unit reported revenues of 12 million SEK compared to 6 million SEK last year. The increase was driven by increased license revenues. EBIT for this business area was negatively impacted by the non-cash related write-down of SEK 180 million. And as Fadi already explained, the write-down already relates to the legacy DMS technology that was developed by Tobii prior to the acquisition of AutoSense. The cost measures announced last quarter will reduce the annual cost base in AutoSense by more than SEK 50 million. Operating profit was minus 222 million SEK compared to minus 42 million SEK previous year. Excluding the write-down, EBIT was minus 42 million SEK, which was in line with last year. I would like to conclude this section with comments on our cash flow and overall financial position. Free cash flow in the third quarter was negative at minus 6 million SEK. Cash flow from operating activities before changes in working capital improved to 16 million SEK compared to 6 million SEK last year. Free cash flow improved from minus 29 to minus 6 million SEK. Our cash balance at the end of the quarter was 29 million SEK and we had utilized 20 out of the 25 million SEK credit facility. As mentioned in the report and earlier during this call, our overall liquidity and cash position is, and we are faced with several upcoming obligations, which Fadi will give more details to in a bit. There remains a risk that Tobii may not have sufficient financing for the next 12 months. And we are of course, fully focused and committed to resolve this situation. And we provide further information whenever material events occur. Back to you Fadi.

Thanks a lot, Martin. So let's address the financing necessity upfront. And let me be clear. Securing our financial platform is the highest immediate priority for the board and the management. Our liquidity is strained and we face several upcoming financial commitments. We have 97 million krona of COVID-related tax deferrals that are due in the quarter of 27. And then we have the first payment under the AutoSense promissory note to Expedia in the second quarter of 2027. And thirdly, a further 40 million SEK of tax deferrals, which is due in the third quarter of next year. and that's why the board the management and our major shareholders are working with external advisor to strengthen the balance sheet and we're actively evaluating different forms of equity and debt financing now the flexibility and the terms of these alternatives demand or depend among other matters on our ongoing negotiations with Xperi which is the company and those negotiations are concerning the remaining payments linked to the acquisition of Autosense. So, as you can deduct from it, this is an active process, but there's no guarantee that it will result in a transaction, a decision, or any other action. As you can appreciate, we cannot comment on individual discussions or indicate which outcome is most likely. before there is a concrete information to disclose. Of course, we will update the market promptly when material developments take place. In parallel to all of this work, we remain focused on the actions within our control, and they are protecting cash, maintaining a disciplined cost base, and working on improving our commercial execution. So, If we look at the strategic review, it has given the product and solutions and integrations a more focused and efficient foundation from which to grow. In fact, since launching our cost reduction program back in Q2 2024, we have fundamentally reshaped our cost structure. and that has led to reducing the quarterly cash operating costs, including R&D investments, by more than half. This shows the scale of the change in our cost base and reinforces the importance of maintaining our financial discipline. Now, our ambition is to make product and solutions a sustainably cash-generative business. And for integrations, the priority is to strengthen the business through more standardized platforms and selected verticals. AutoSense remains under strategic review. The additional cost program, which we announced in Q2, is expected to reduce the annual cost base by more than 50 million SEC. WE'RE ALSO MOVING TOWARDS SHORTER PAYBACK PERIODS, EARLIER MONETIZATION AND LOWER COMMERCIAL RISK. WE CONTINUE TO EVALUATE THE FULL RANGE OF STRATEGIC ALTERNATIVES WITH THE OBJECTIVE OF STRENGTHENING TOBY'S GROUP FINANCIAL POSITION. NOW LOOKING FORWARD, AS I MENTIONED THE WORK COMPLETED SO FAR UNDER THE COST PROGRAMS AND THE STRATEGIC REVIEW HAS GIVEN US A MORE FOCUSED FOUNDATION. We're now moving into the next phase of our strategic work, and that's converting our efforts into profitable growth while keeping the financial discipline that we established. First, we must make financial discipline permanent. That means we will protect cash and working capital and keep structural savings in place as we grow. We will not invest ahead of the market. So future investments will have to follow demonstrated customer demand and visible revenue opportunities and acceptable returns. Second, we will give each business a clearer growth pass. For product and solutions, it should become our cash generative unit. and it should expand beyond research into selected business solutions. So examples, it would include workforce training, quality inspections, safety critical workforce, where we can see that eye tracking can help customers shorten the onboarding, improve consistency, and reduce errors. We see this as important for growth because it broadens our customer base beyond research solutions and links our technology to measurable operational outcomes. For integrations, we will build more standardized offerings and focus on selected verticals once the market demand is proven. In AutoSense, we will continue our work to broaden our commercial model through licensing and partnerships. And the aim is to generate revenue earlier and create a better balance of investment and commercial risk. And thirdly, we will strengthen commercial execution across Toby. this means that we will deepen our customer focus we will use the market insights and evidence of demand to sharpen our product investment decisions and thereby strengthen our commercial performance that's our focus forward so let me now summarize the quarter reported net sales declined 240 million sec and as I mentioned that sales level is not up to our ambitions Adjusted for the pre-purchase and non-recurring revenue in the comparison period, sales increased, though, by 16%. EBITDA improved to 18 million SEC, and product and solutions integrations together reported a positive EBIT. These are early signs of underlying progress, but we need to deliver that progress consistently and ensure positive cash flow. Again, AutoSense remains under review and we're evaluating all alternatives that can strengthen both the business and Tobii's financial position. Our immediate financial position remains strained. The cash at the end of quarter was 29 million SEK and the free cash flow was negative 6 million SEK. Securing a financial platform is therefore the board's and management's highest priority. Our target remains positive operating cash flow for the group during 2027. So while our immediate priorities are clear, the strategic relevance of Tobii's technology remains unchanged. Our vision is to shape how people and technology understand human behavior. WE COMBINE OUR GLOBAL LEADERSHIP IN EYE TRACKING WITH EXPERTISE AND COMPUTER VISION TO REVEAL HOW PEOPLE PERCEIVE, ENGAGE WITH, AND RESPOND TO THE WORLD AROUND THEM. AND WE AIM TO DO SO THROUGH CUSTOMER-LED INNOVATION, DISCIPLINED CAPITAL ALLOCATION, AND SCALABLE GROWTH OPPORTUNITIES. THANK YOU VERY MUCH. AND HENRIK, CAN WE PLEASE NOW OPEN THE QUESTION AND ANSWER SECTION.