Gapwaves AB (publ) ($GAPWB)

Good morning, and welcome to today's webcast from Gapwaves. With us today is CEO, Jonas Ehinger, and he will present the numbers from the first quarter 2026. We'll open up for a Q&A after the presentation [Operator Instructions]. And with that, I leave the audience over to you, Jonas.

Thank you, Fredrik and Finwire. It's great to be here this morning and presenting our Q1 report that was released earlier this morning. And also, thank you to everyone who's joining online for this presentation. As Fredrik said, we'll make sure that there is enough time after the initial presentation to answer questions and discuss additional topics from the audience. So, I'll start with a short summary for those who are new to Gapwaves or have not heard the background about the company before. So Gapwaves is a Swedish tech company based in Gothenburg, originating from Chalmers and extensive research on waveguide antenna technology. So today, we're on our way to become a fully-fledged and strategic supplier of antenna products for our customers. Right now, our main focus is high-performance antenna solutions, mainly for radar applications and mainly within the automotive market. But we also have other market segments that can draw value from our technologies and Gapwaves' know-how. We've also seen some increased interest in some of those areas. I will discuss that a bit later in the presentation. In automotive, we are a -- what is referred to as a Tier 2 supplier. So we provide the antenna product to our customers, the Tier 1s, who build radar products, including our antenna and then supply those radar sensors to automotive manufacturers with the names that you recognize, and these are just some examples. Now Gapwaves is on a very exciting journey, and that started already some time ago with some major partnerships and contracts with leading automotive suppliers, world-leading automotive suppliers in the area of ADAS and radar sensors systems for cars. So, we're in a market where there is strong market potential and the market is driven by regulation and legal requirements. So fundamentally, we see very strong and promising market potential for the company and our technology going forward. We're unique in our technology. It's well protected by patents, and we see takers from all major regions in the industry. And also importantly, for investors and for customers is that this is not a theoretical technology that works in the lab and then has challenges in large-scale production. We've already started that several years back, with our partners and high-volume production commenced in Q1 2024, more than 2 years ago, and it's still ramping up quickly. And for those who follow us, you can see that the numbers are quickly growing and the numbers of antennas that are being produced based on Gapwaves technology is reaching very high numbers, now already more than 1.5 million antennas produced using our technology, and that's a rapid growth also. Our business model, which I'll come back to later, is also attractive because it's an asset-light model. We rely on very qualified and competent production partners in the volume phase of our supply to customers. So we contract these production capacities to different parties in different parts of the world. I'll go more into detail in a bit. But, I know that you're interested in our Q1, probably you've been able to read it quickly. So, the purpose here is to summarize the material that was published in the report, and then we can go into the discussion after the presentation. So main message for Gapwaves is that our industrialization journey continues rapidly. We're in a launch of a large-scale production in China. So it has started, and it will -- it's in a launch phase, and it will continue throughout the second quarter this year. But importantly, it has started, and this has been accelerated together with our customer, which is Valeo in this case. And as I already mentioned, the volume of antennas that are being produced utilizing Gapwaves technology is rapidly increasing now. In the first quarter, it was already more than 0.5 million antennas. And I also want to clarify that the majority of this volume is based on Hella's production, licensed production of our antennas together with Frencken, but it's basically a license agreement, and it was started already in Q1 2024 and Hella is earlier -- they progressed further in their ramp-up than Valeo has, and we're doing the production for Valeo. So in the case of Valeo, we're selling the -- producing and selling the antennas to Valeo. And we're -- we've said it several times in previous calls and presentations that we're in a scale-up journey. And we're building this capacity, this production capacity together with our customers and our partners in phases. And it has to align with customers' needs. And in the case of Valeo, we've seen since the start of production here in Gothenburg last year, an accelerating need from Valeo and Valeo's customers for more volumes earlier than planned in the contract. So it's been a very big and fundamentally positive challenge for Gapwaves to meet these requirements, which we have been able to, but it also drives a lot of extraordinary activities to secure material and capacity, et cetera, at the right time to accomplish this, which we fundamentally see as an investment in the relationship with Valeo and allowing Valeo to gain market share, which will fundamentally build our potential for the future in this contract and for future opportunities together with Valeo. So -- sorry, I went the wrong way in the presentation. Som in terms of numbers, we -- our sales were almost SEK 19 million. It's a bit lower than last year. And the main difference is, of course, project revenue is not as high as previous years. On the other side -- on the other hand, product revenues are increasing, but there is a shift in time before they can balance each other. And that's also another reason why it's very important that we can accelerate the ramp-up to reach higher volumes sooner. In terms of the EBITDA, we're at minus SEK 7 million, just over minus -- just below minus SEK 7 and that's a decline versus last year. But again, the background is really the revenue mix, whereas products and product sales, especially in the early phase of the ramp-up have lower margins than project revenue, which we've been having previous years, and that's also a change in the market because the market climate for new projects and new investments is a bit softer than previous years. And in terms of cash flow, of course, we're investing in the production capacity, but also to meet the demand from Valeo and also in the early phase of the ramp-up, it requires more activities from our side to ensure that we can deliver these volumes sooner. So in summary, the general climate, we can see that Valeo is progressing well. We have others that expressed interest for new products with Gapwaves also. But generally speaking, the macroeconomic and global factors are impacting the market climate for Gapwaves and especially Gapwaves customers. But the underlying market trends that we have mentioned before and in previous presentations are fundamentally strong and have not changed. So, I've already explained our sales numbers, which we see some effects, but the main effect comes from this transition that we see in the first quarter, and we will see it during the year as well, where we transition from a large dependency on project revenue, and we changed to product sales and high-volume production. Combined with this, we're also changing in the organizational and our cost structure, so we can balance, to the extent possible, changing from a project company to a product and production company and a full supplier to our customers. Looking forward, the industrialization for Gapwaves will continue throughout the year. We're in a very important phase with the large volume production launch in China, which now has started. Sorry, I went wrong slide again. So '26, like I said, it's a transitional year, and we're continuing this transition from research and project-based company to product sales and large volume production. We're scaling up, and it's very important to continue this investment for Gapwaves to scale up volumes so we can see this business and high-volume supply reach a steady state with the right margins and the right revenues. Of course, it's natural that in high-volume production, the unit price is lower. On the other hand, the volumes are much higher, so they compensate; but you have to reach those volumes first. So our focus this year is concerning 3 main areas, and that's continue to scale up production and continue our volume growth to build a very strong fundament long term for Gapwaves that will allow us to have continued growth, but also profitability. We're -- as you know, probably from previous communication, we're exploring new segments, new market segments outside the traditional automotive industry. And we have made some progress there. But of course, the general market climate is impacting these areas also. But we have some very clear areas identified that we are targeting and these areas also have very promising business opportunities and have revenue potential as well as margin potential for us. And combined with that, we are working on efficiency improvement in Gapwaves' cost structure. So as we change from a project-oriented company and technology company to a production company, we're adapting our cost structure accordingly. I want to spend a short time on our business model and the strategy going forward. As we have explained before, our business model is really to develop custom products for our customers; products that fit their specification and their needs. We don't develop products on speculation, and it's not standardized products. Our products are for -- are specific for specific customers. So, typically, there is a Phase 1, which is really development of prototypes and testing, et cetera. And then as we have reached milestones in accordance to customer agreements, we go into an industrialization phase or Phase 2, as you see in this slide, where we do, of course, discuss volumes, capacities, geographies where production should happen, et cetera. And then we start to finalize the serial version of the product, and this is called industrialization. And then we enter into the production start-up phase, the launch phase where we are right now with Valeo in China, for instance. And then, of course, the final phase where we have large volumes being produced over a number of years is, of course, the [indiscernible] attractive phase where we want to be, but it takes time to get there. In the first phases, 1 and 2, we typically can generate nonrecurring engineering type of revenues with high margins. But they are limited in size, and they continue just during those phases. So -- and then we have a switch during the launch of the production and the ramp-up to get to the target volumes, which then will be sustainable for a number of years. And we've tried to illustrate these processes and our business model in this slide also. And remember that in Gapwaves, we don't build factories and buy land and get permits and build factories, employer factories, but we contract this with our partners, which we preselect and prequalify based on customers' needs and in terms of geography and location, et cetera. So we have a very flexible model where we can bring in more partners to scale up. We can also add production in other geographies if there are trade tariffs, et cetera, that make customers require certain geographies for production, for instance. And we also have our own prototype and pilot line facility here in Gothenburg, which allows us to start production and commence production. That very first phase of production much, much, much quicker than doing it with external parties, exactly as we have done successfully with Valeo. And that has been a key to be very fast and agile together with our customers. Looking at the market, as we have discussed before, the market drivers are there. They have not changed in spite of the recent global events and the crisis, et cetera. They're there. In fact, there are new regulations coming into play in the market in the coming years that will strengthen the demand for active safety features requiring radar sensors. And of course, it's a certain performance level that is required and a certain frequency band, high-frequency millimeter wave frequency band that will be utilized even more than today. And this creates a perfect opportunity and a perfect combination for Gapwaves and our gapwaveguide antenna technology for our customers. And that's what we have seen clearly in the past few years as we have large interest from leading automotive Tier 1 suppliers. And the market will have more and more cars with more and more radar sensors and more and more active safety features. So we're in a very attractive and good position looking a few years down the road in terms of market growth and market size. Going forward, as an investor, I think you should keep your eyes open in the news flow from Gapwaves when it comes to new customers. We have a pipeline with customer discussions that have not stalled or stopped. They are ongoing, and there are projects in our pipeline that we hope to be able to conclude. And there are also focused efforts going on for targeting new segments outside automotive, so we can balance the trends and the changes in the automotive market. And as a result, we, of course, expect to close new contracts, both for projects, but also for supply and high-volume supply of antenna products that we design and produce. In terms of volume production, I know that a lot of investors are asking for financial forecasts, which we cannot provide at this point. It's still too early because of, yes, certain volatility. But keep your eyes on our volume -- growing volume production. It is a clear indication of where Gapwaves is heading and also the robustness of our technology that it holds up in a real world, real production setting with very, very high quality requirements and cost effectiveness, which is required by the automotive industry, for instance. As I mentioned, a majority right now of these 1.5 million antennas and more are being produced under a license agreement by Frencken for Hella using our technology and an antenna that Gapwaves is designed for Hella. But for other customers, we're, of course, a full producer. So we do everything from design to industrialization and production and supplying antennas to our customers. And another very frequent question that I get many times is what cars do have your antennas? And we're not allowed to disclose details about our customers' customers and configurations, et cetera. But there are a number of leading and well-known car brands and car manufacturers that now have radar sensors, they utilize radar sensors with our antennas inside. As soon as we are able to, we will communicate specific car models. Right now, we have good visibility on which manufacturers that buy the radar sensors with our antennas inside, but we don't have a similar detailed information on specific car models and also which markets they are available in. We announced last fall, of course, that we're present in the Mercedes-Benz CLA EQ Technology model that was launched and started to be delivered to the Swedish market last year. But rest assured, we will, of course, communicate this as soon as it's possible. And it's a topic that we bring up with our customers quite frequently as it is an interest from our investors. So, again, to summarize, Gapwaves is in a very strong, fundamentally growing market. And this trend, this market development will continue for the foreseeable future for the rest of the decade and beyond that. We have a very unique technology. We have a strong competitive edge in our technology. And I think the production numbers clearly display this, that we are offering value to our customers and their customers. And like I said, this is real world. This is happening now, and this scale-up is not something that we're just talking about. It's ongoing now. And it takes time. It's a very complex chain in the automotive production to -- for all the suppliers and all parts and components involved. But we are accelerating this and Gapwaves is not the limiting factor when it comes to our customers and their ramp-up. And I mentioned also that we are asset-light and we don't tie up capital in buildings, et cetera, constructing them and factory staff that are not fully utilized in -- during the ramp-up, for instance. So we're an attractive -- we have an attractive business model in a capital -- working capital aspect also. Now, I'm finishing the presentation, and we will go over to the Q&A part. I also would like to highlight that next week, there will be a video interview with the Redeye analysts. And if you have any questions that you want him to address with me next week, please contact Rasmus Jacobsson at Redeye. You can see the information here in the slide. Thank you.

Thank you, Jonas, for the presentation. We are going directly to the questions. You reported Q1 net sales of SEK 18.8 million this quarter, down 17% year-on-year and also some 25% below analyst estimates from Redeye. What is the big picture all the analysts missing here? Any calendar effects?

No, there are no direct calendar effects. I think there -- from our understanding, they're missing the time, the ramp-up takes and how their revenue mix effects are due to that. So in fact, we had a ramp -- start of production last year, but we also have another start of production for the same customer this year with Valeo. And of course, softer or weaker project revenue. So I think they've underestimated the effects going through these start of production processes and the initial phases of that.

Okay. It seems like you produced 500,000 units in Q1. What should we expect in terms of volume as Frencken assume production responsibility? When do the company benefit from the revenue also?

As mentioned in the presentation, a large portion of these -- of the current volumes are, of course, done via the licensing agreement with Hella and their production partner, Frencken, which is also our production partner. But you should expect continued ramp-up and higher volumes, much higher volumes in absolute numbers this year. And we're just -- since very recently, this current quarter, we've commenced the launch phase of the production start in China together with Frencken. So once that leaves the starting block, which is ongoing now, like I said, we will see much higher volumes going forward. And of course, the pricing of those volumes will be lower in the beginning, but we also supply right now due to the high demand from our flex line in Gothenburg. So there is a lag effect in terms of the revenues. But right now, it's important to achieve the volumes, the high volumes as fast as possible. So that's what the main focus is for this year.

Can you elaborate on the cooperation with Desay a little bit?

Yes, it's according to plan. We entered into that contract early in the quarter. And as I mentioned in the presentation, this phase is about developing antenna design and prototypes and samples that Desay will use for testing and to showcase and demonstrate to their customers. And that is ongoing now, and we're well in accordance with that plan, and deliveries of these prototypes will happen during this quarter to Desay. And then, of course, Desay's plan is to be awarded contracts from their customers, so production can start later this year. But that assumes, of course, that Desay win those contracts. But Gapwaves is fulfilling -- we're actually slightly ahead of plan when it comes to the development phase with Desay.

Okay. About the Valeo contract, when can we expect that production for Valeo is contributing to profit?

It's already contributing to profits. But now we're going into a second start of production with Valeo in China, which is the high-volume line capable of supplying around 10 -- at maximum capacity, around 10 million units per year. So, of course, we will see the effects of that once that launch phase is finished and once the ramp-up continues together with Valeo in China -- in our China-based production.

When can we expect more car models with Gapwaves antenna inside at the roads?

We already have -- we already know that we -- our antennas are in more car brands and with more car manufacturers than just Mercedes. But we don't have the same visibility in terms of which specific models and which markets those models are being delivered to. As mentioned in my presentation or during my presentation, we are prohibited due to nondisclosure agreements with our customers to disclose these details too early, but we are pushing to be able to disclose that. So, it's ongoing work. And like I mentioned, as soon as we have information, rest assured that we will communicate it as soon as we can. And it's in our interest to do so, of course.

You recently took in capital through the rights submission, and the message was then that the new clients basically knocked on the door. Can you give us an update of any new clients reaching out to Gapwaves at the moment?

Yes, there are new clients reaching out. So we see positive interest for Gapwaves. Of course, with all the changes going on in the global perspective, and uncertainty. Of course, things tend to take longer. It's natural for our customers. But we're confident that quite a few of these ongoing customer dialogues will result in contracts. It's hard to say specifically when, but they are moving in the right directions, and we haven't really seen any ones that disappear since we had the rights issue last fall. We having entered into the Desay contract, that's a result of that, but also our collaboration and development project together with Gotmic in Gothenburg for a completely different application area and market segment are also results of that. So we're working very, very hard to make this happen sooner rather than later.

Can you elaborate on the current status of the delays for Sensrad? Have there been any major volume deliveries during the first quarter?

They have delivered to their customers. And importantly, their military and defense customer in the U.S. is quite active. But Sensrad has seen a somewhat softer market or delayed market decisions among their customer projects as we have also during the first quarter.

When will the antennas for Magna be produced? And is their production line qualified for volume productions?

They're in the process of securing that capability, production capability right now. As you may know, Magna has taken over the license agreement that was entered into with Veoneer as they now own Veoneer or that part of Veoneer. And from what we understand from Magna or Veoneer and also some production sites that Magna is in the market for setting up production of antennas. We don't have any other information than communicated before on the timeline.

Okay. clear. How is the volumes to Smartmicro? The volume order of SEK 90 million, did you start to deliver that?

We have started that. But again, it's intended to be produced and delivered over several years. So -- but we are starting that delivery. So those deliveries will start this year, and we will see some revenue also from that coming into Gapwaves during the year.

All right. What is the current market share of waveguide antennas compared to patch antennas in 77 gigahertz automotive radar sensors?

Right now, on cars that are driving in roads, we think it might be around 10% or so. So it's -- we're in a very early stage right now. If we expand that window a bit and look at plans for new radars that are coming -- hitting the market in the coming 2 to 3 years, that is rapidly growing. And I've seen independent market research reports that indicate that waveguide antennas will, in a few years, make up more than 50 -- more than 50% of the radars in the cars. But that takes a few years. There is quite a few cars that are being produced using products that were developed and launched several years ago, and that's how automotive works. So it takes time for these to be introduced in the market, and it needs to coincide with new car platforms and new car models also.

All right. What are the key revenue drivers for the company in this quarter? And what is the outlook for the rest of the year?

I've already described the outlook. It's a continued ramp-up, continued production increases together with Valeo, but also we'll see that with the license production that Hella is conducting based on our antennas. And so the drivers is, of course, those volume increases and accomplishing the SOP during this quarter will be key to that. Certainly, as mentioned also in my presentation and in a previous question, we're targeting new customers in the automotive segment. We're also targeting new customers in new segments. And typically, project revenues, those contracts, development contracts, they can be entered into much quicker. So it's our ambition to see some of these coming in also during the rest of the year.

If your production plan holds -- forecast holds this year, how is the possibilities to show some [ black ] numbers before the year is over?

It depends on the types of contracts that we can enter into. A very important revenue stream in that case would be new project type of revenue. But we're already well into the year. So I think the time window to really close new -- substantial new projects that we are not aware of today already are -- that time window is closing. So I think we have good opportunities. But as an investor, you should consider a longer midterm perspective and also the ramp-up with Valeo. It's only until we reach those high million units or more per year for -- in terms of supplying our products that we can have the opportunity to see exact numbers.

Okay. The planned SOP with Desay in Q4, will that be with Frencken as well in China?

That will be with Frencken in China. This is a Chinese Tier 1, and they're targeting not only Chinese car manufacturers, but also European and North American. But that production will be handled with our partner, Frencken in China.

Is it also high-resolution antennas?

It's higher resolution antennas. I wouldn't call it the highest resolution or imaging, for instance.

Yes. Now a question about the margins, Valeo versus Hella. How -- can you elaborate on the -- are there different margins on those 2?

Absolutely. Since with Hella and Hella's production or specifically Hella's production, we get a royalty per produced and sold antenna and the gross margin of such royalties are very high, of course. But in absolute numbers, that royalty is much, much, much lower than the product price that we get for a complete antenna product that we produce and supply to a customer like Valeo, for instance. But the margins for that antenna product that we supply, especially in the early phase of the volume production is much lower compared to a pure royalty or license per unit type of fee.

Okay. For last couple of years, automotive has been the big thing and every Tier 1 producer wanted Gapwaves. Is this evidence that automotive still -- is this evidence that automotive can provide Gapwaves with expected income? Or do we need to look for new possibilities?

We -- automotive will be very important for us going forward. It's a big opportunity, high potential and growing market that will grow regardless of global factors, because of safety regulations and also competitive offerings among car manufacturers. So -- but we want to balance that because as everybody knows, the automotive -- European or Western automotive industry is under pressure due to certain factors, not least Chinese, much, much, much stronger competition. So we want to balance that with other market segments. And so it becomes a healthier or less risk dependency on just 1 market segment. And that is part of our strategy going forward.

All right. And we are down to the last question. Earlier, you got talking about a facility possibility in U.S. Is this still an option?

It's absolutely an option. And it's -- there are discussions ongoing with potential partners for that. And it also -- it's something we do in very, very close collaboration with our customers, the Tier 1s when it comes to automotive. And given the last year or 15 months turmoil in terms of trade tariffs and geographies and a very weekly changing message from the political system in the major markets, then our customers are definitely securing optionality or requiring suppliers and partners like us to have a readiness to engage or commence production in different regions. And this is one of the very good things with our business model that we have a very good or high flexibility to accomplish that on very short time lines. And that's why we try to stay ahead of the curve and have engaged with potential partners also in the U.S. and then North America or essentially the U.S. together with European, where we're pretty much ready to go, if that is required. And then we already have the existing production capacities available in China. We're also looking at adding production capability in Asia, but outside of China because some customers are requesting that. So those plans are also progressing.

Thank you, Jonas, for this presentation and this Q&A session. Now I leave you and the company for some closing remarks.

Again, thank you very much for the time spent and don't hesitate to contact us with questions, especially for next week's interview with the Redeye analyst, Rasmus. And also, I think I've emphasized the important things with our scale-up and industrialization ramp-up phase that we are right now. So we will keep you in the loop in terms of our development. And importantly, it's very well understood by the company that we should try to extract information and communicate information about the car models and car producers that are utilizing radar sensors with our antenna technology. Stay tuned. We will be able to communicate that as soon as we are allowed by our customers.