Welcome to the conference call. For the first part of the conference call, the participants will be in listen only mode. During the questions and answers session, participants are able to ask questions by dialing *5 on their telephone keypad.

Now I will hand the conference over to the speakers. Please go ahead. Good morning, everyone, and welcome to Acconeer 2025 Q3 Earnings Call.

I'm Ted Hanson, CEO of Acconeer. We're using a new distribution solution for our earnings call today. I hope everyone has managed to connect and that you can hear me clearly.

The agenda for today is a business update, followed by Q3 earnings walkthrough, and we will finish off with a Q&A session. And there is a possibility to raise your questions using the telephone system as well as using text. But let me first start with a brief summary of the third quarter.

We saw revenue of 16.5 million Swedish crown, which is an all-time high and a 30% year-over-year growth. As you know, the US dollar has been trending down to the Swedish crown and we are trading in US dollar.

With constant currency, we saw a 24% revenue increase year-over-year. I'm very happy to report Acconeer's first positive EBIT quarter of 220,000 Swiss Crown and a gross margin for product sales of 57%. We noted 13 product launches and shipped 285,000 sensors during the quarter.

Sales within the level sensing and cargo tracking grew significantly in the quarter. And we announced new design wins in automotive, including the first interior detection with A121 sensor. Our new radar sensor, the A212, entered the final phase of development and the launch customer has now started regulatory certification.

I will now go to the operational update and first I will give a brief introduction to Acconeer for any new listener. So Acconeer is a Swedish semiconductor company. We are fabulous.

We develop and sell advanced low power and cost effective millimeter wave radar solutions. We have headquarter in Malmö. We are around 50 people in the company.

We have been listed on Nasdaq First North since 2017. Our products are built on a unique technology that is based on an innovation from Lund University, which offers a unique combination of accuracy and power efficiency. We have more than 200 end products in the market and have sold more than 3.5

million sensors. Radar sensors are used in lots of different applications. As part of the focus strategy that was implemented last year, we now focus our development and sales efforts on four product areas where we see high market potential and strong match with our technology.

These product areas are cargo tracking, as you can see on the top left part, where our sensor is used to monitor fill level in containers and trucks. The sensor can also be used to monitor door opening, detect human presence, to combat human trafficking, and measure goods that moves around or vibrate during transport. In presence, we target advanced applications requiring detection of micromovements or direction or distance.

Our new multichannel radar product A212 will expand the addressable market Within presence significantly, we are adding capabilities such as tracking, counting, and classifying objects. Level sensing is the largest segment for us in 2025. We have a very strong correlation between the core advantages of our technology and the requirements in level sensing.

Then we have automotive, where we have a close collaboration with our partner Alps Alpine, who is a leading Japanese Tier 1 company. Finally, we have the Industry and Automation product area. This is a massive potential business for us.

Within this, we have proximity sensors, vibration and distance measurement. At the same time, the development and product cycles are very long in the industrial and automation segments. So we're still waiting for the big commercial breakthrough there.

But as I said, there is a lot of potential in this market. We are finalizing the development of A212, our new advanced multi-channel radar, which will enable new high-value applications in automotive and presence. We also see great opportunities in vital sign monitoring, elderly care monitoring, and robotics.

I will now go through some of the development in our product areas. First we look at the automotive area. During the quarter we announced two new design wins and both these design wins are with two different new and different Japanese premium car manufacturers including the first A121 Interior Detection Design Win.

And this is a big and significant milestone to Acconeer. We have stated for some time that we believe that child presence is going to be a basic feature in most cars going forward. And now we have designed WIMs using A111, A121, and A212, all three sensor generations within interior detection.

OEMs, they have different requirements when it comes to placement, when it comes to functions, features, and cost structure. And in order to be a significant supplier to this business, it is important to have a broad and competitive offering. And us winning new customer at this point in time when there are multiple competitors also promoting millimeter wave radar sensors for interior detection, I think it's a strong testimony, strong evidence that we have a very strong and competitive offering for interior detection.

Our launching customer of A212 has started a regulatory certification and we are now in the final stage of the development. The business bounced back, recovered a bit during the third quarter. I want to stress that the growth is mainly coming from non-automotive in the third quarter that there was a recovery in the automotive business.

This was triggered by an order from a new end customer, and we have a very positive outlook on the revenue and business going forward within automotive. In level sensing, we also saw progress. We had four new product launches.

We are now very quickly approaching 100 end products in the market within Level Sensing. We have spent effort, continuous effort to improve our offering. We have been working on addressing larger tanks, different materials, improving accuracy, improving power consumption, working closer with customers, and so on.

We now see clear evidence results of this effort. During the quarter, we started new projects that are targeting slightly different applications within Level Sensing with both new and existing customers. And this is very exciting for us.

It's a great way to scale the business within Level Sensing. We also saw record module sales within the quarter. So in the third quarter of this year, we not only had a record revenue, we also saw a record module sales within the quarter.

In cargo tracking, there is also continued progress. We received a volume order from a new customer who is a very high potential and well-known player in the cargo segment. Also here we've been working to improve our offering.

We have added a new monitoring requirement which is now received by our customers and they are using it and integrated into their products. We have also improved our reference application and tested it on real containers to enable faster integration and go-to-market for our customers. Looking at A2, so the A2 project is still the main activity within the development part of Acconeer.

The first product that will come out of the A2 project is called A212. A212 is the sensor name of the product that is coming out. It's an advanced multi-channel radar.

And as I said, we're now in the final stage of development where regulatory certification has been started by the launch customers. During the quarter, we also engaged with several new customers. That are evaluating A212 for different presence applications.

And here we are talking about tracking, about classification, as well as vital sign and fall detection applications. And as I've said before, we target to announce the first design win for A212 outside automotive during the 2025. And we are now in deep discussions with many companies that are evaluating our technology.

And when we talk to these customers, in general, we'll get very positive feedback. A212 offers a very competitive range, very competitive accuracy. It also has a very high integration level with an MCU included where you can run the application for the radar sensor, as well as a very competitive cost structure.

And the market that we are approaching, we are going after larger customers, as I've said many times. These customers typically already have multi-channel radar in their product portfolio. They already have products out in the market.

And we come in as a new player in the multi-channel segment. For me, this is a perfect time to enter. We are coming to a market that has started, that has already been created, that is about to boom, and we come with a very competitive solution.

At the same time, our customers are not fully satisfied with their current suppliers. There are complaints about performance, complaints about support, complaints about and entering now is a very good time to come and grab this market. So that is something that we are putting a lot of effort now to convert these evaluations into the sign wins.

I will move on now and talk a bit about the Q3 earnings. First we look at the profit and loss. As I mentioned initially, we had a record revenue in the quarter.

As you know, the US dollar which we trade in has weakened significantly. Year over year, we had 13% growth or 24% with constant currency. Quarter over quarter, the growth was 57% or 59% with constant currency.

We deliver on the first of our communicated financial objectives, an EBIT positive quarter. As you can see in the graph on the right side, we had significant improvement of EBIT as a result of increased top line and decreased cost. Now let's look at some of the key metrics and highlights.

First, I would like to look at the OPEX, the operating expenses. As you can see in the graph down left, We managed to take out 3.3 million OPEX, million sec OPEX compared to the same period last year.

And this is a result of the tough decisions that we have implemented in the cost reduction program. And it's really happy to see that it's now paying off and that we managed to reach a positive EBIT. On the right hand side, you see the CapEx.

CopeX, there are two parts, the intangible and tangible assets. For the intangible, it is mainly the A2 development that you can see there. There is a small portion of it that relates to patents as well.

But as you can see, the A2 investments in the second quarter continued with some 8 million Swedish crown. But there is a trend that is going to go down. And of course, as A2 is going to the market and we enter the maintenance phase, this amount will trend down further.

Looking at the top right, you see the inventory. I have said now, this is the fifth quarter I'm reporting for Acconeer. I've said that we have a too high inventory value.

That is still true, but it is going down significantly. We have taken out 10 million. In the last four quarters, more than 3 million in the last quarter.

So there is a positive development of the inventory situation. Then looking at the cash and the cash position, we also report for the first time in the company history a positive cash flow from operating activities of 1 million Swedish crown. As you can see in the bottom left graph, this is a significant improvement compared to previous quarter and also compared to year over year.

The cash flow for the period was minus 14.1 million Swedish Krona, a significant improvement to the minus 35.7 the same period last year.

Out of this 14.1 million negative cash flow, I showed you around 10 million on the previous page is related to investments in A2 and production tools and production equipment. And a large part of the remaining Delta is related to accounts receivable.

So as the business grow, it is natural that we will invoice more and we typically invoice with 30 days payment term. And by the end of the third quarter, the accounts receivable was at 9.7 million Swedish crown.

Which is 4.4 million above the average we have seen the last four quarters. I want to stress that this is not due to having problem getting paid.

We don't have any customer payment outstanding. It is simply because the business is scaling up. The cash position at the end of the quarter was 55.5

million Swedish Krona. With that, I would like to finish with a brief summary and the financial objectives. So for the third quarter, we saw a strong revenue growth.

The costs are turning down. We reported new design wins and a recovery in the automotive industry. We see products in all our, we see progress in all our product areas.

And we have now managed to reach the final development phase of A212, where the first customer is now doing the regulatory certification. We managed to reach the first of our communicated financial objectives, the EBIT objective. We reiterate our financial objectives.

The next one is a cash flow positive quarter, in 2026, followed by a revenue of 300 million Swedish crown in 2027 and a long-term EBIT margin of at least 25%. With that, I would like to close the presentation part and move to the Q&A session. If you wish to ask a question, please dial *5 on your telephone keypad to enter the queue.

If you wish to withdraw your question, please dial *5 again on your telephone keypad. Okay, so now we are in the Q&A session. And I will try to go through a few of the questions that we have received.

I'm very happy to see there is a lot of interest and there is a huge amount of questions here. So I do apologize if we cannot cover all of the questions. So the first question is A212 went out to about 10 customers.

How many could still be converted to design win? So A212 is now being actively evaluated with at least 10 customers, probably a few more. And for me, it's not really about the quantity to convert to design win. We are looking for quality here.

We are looking for larger customers that could have a significant impact on our revenue and on our business going forward. These type of customers are typically larger companies. They already have products in the market with multi-channel radars.

And in order to reach the design win, you really need to reach a relatively high maturity level. So it takes some time to convert from evaluation to a design win. But as I said, initially the feedback we are getting is in general very positive.

And we have strong confidence to start to convert design evaluations into projects during the fourth quarter. Let's see how many of them that will be converted. For me, as I said, it's not about the number.

We want to convert a few. We want to convert a few that has potential to have a real impact on our business going forward. Okay, the next question.

It has been communicated that Alps Alpine holds exclusivity within automotive. How do they receive royalties or any other form of compensation when supporting businesses outside the automotive segment? Okay, so this has actually been communicated in a press release when the A2 project was started. So it's true there is an exclusivity within automotive four Alps Alpine and 8212.

So it's an A2 exclusivity. And they are buying the sensors from Acconeer at the market price. So we are getting paid and we will make a profit on the units that we sell to Alps Alpine.

They do not receive any form of compensation for other segments outside automotive. Okay, the next question. At the Red-Eye event you mentioned a sensor for sliding doors in cars.

Can we expect a design win on this in the near future? I expect we will see design wins both for frunks and sliding doors with the A121. In the future. That's basically what I can comment on this one.

I think that we have a great product. It is very mature. It is used by many customers now.

And I expect it will be used both for frunks and sliding doors, yes. Next one. Can you elaborate on why Acconeer only provides kick sensors to three of the five largest car manufacturers? Why not any interior sensing for those yet? So, in the quarter, we did announce a new design win for interior detection with a new customer.

So we are expanding or Alps Alpine are expanding their interior detection business now and we managed to win a new car OEM during the quarter. And from my perspective, of course, this question maybe should be raised to Alps Alpine, but the KICK sensor was the first product that was developed and it's now quite mature. It's a standard product in their offering.

It's offered to basically all customers. Interior detection is not on the same maturity level and it's natural for me that it takes some time before it's widely promoted and widely adopted by many customers. So we are looking positively on the future and we expect Acconeer will continue to win more interior detection customers going forward.

Now there's a question in Swedish, so I read it in Swedish. All right, so I will try to translate to English. The question is basically, do you see any opportunity to work with Alps Alpine outside automotive? And the answer to that is we are doing that.

They are doing logistics tracking product with our sensor. And they have announced in their public presentation that they see millimeter wave as a strategic product within Absalpine and that they see that there are many applications for millimeter wave radar sensors besides the automotive. So definitely that is an area where we have already launched products and we expect there will be continued work on that and that we will address more segments together.

The next question is let's see the very similar question here. Maybe we should take a question that is slightly different. Okay, when the A2 is finalized, will Acconeer receive any milestone payment for Alps Alpine in connection with that event? So, when the A2 project was started, there was a press release made that explained the exclusivity for Alps Alpine.

It also explained the NRE that Alps Alpine is paying Acconeer. To co-develop this product. And there is still milestones that are not paid, that will be paid when we are finished with the project.

So the answer to that one is yes, there will be more payments. Next question. Based on your current outlook, which do you expect to be your three largest product areas in 2025? And 2027 respectively.

I think this is a very interesting question. In 2026, the three largest product areas in my view will be automotive, level sensing and presence. And I think it will be the same in 2027.

And that is partly because presence has such a potential to grow when we get the A2 product out and we can start shipping it in volume. Because there's a lot of high value applications to go after. There's a lot of customer demand for A2 and two within presence applications.

Next question. In cases where we already have an existing customer relationship for the kick sensor, in your view or Alps Alpine, does that increase the likelihood of selling their child presence detection into future car models with the same manufacturer? Of course, when we deliver a product with great performance and great quality, you get an advantage. And one of those advantages is, of course, that you will have an opportunity to sell more.

So as long as we are delivering a very good QIC sensor experience to the customer, I'm of course confident that that will help us to also win the child presence detection of the same manufacturer. Let's see, do we have more questions here? You have more than 229 customer product releases now. How many of them is driving the majority of the revenue? We have, you know, most companies have a few large customers and of course Acconeer is in the same position.

But I do believe we have a relatively good spread when it comes to product segments, also when it comes to the product that they use, meaning the sensor they use, but also the geographic spread. And that is a strength for us because of cycles in the economy hit different sectors at different times. We have different trade barriers and so on.

So that gives us a solid base to have that. I guess we have more than, I don't want, it's more than 10 customers that makes up the top, I don't know, 60% of our revenue and probably many more to get to a higher number. So it's not reliant on only a few customers.

There are so many questions here. Let's see if we can move to another person maybe. Okay.

Let's see. How many A2 will there be in a car for a child presence detection? This is up to the car manufacturer. It depends on what they want to measure.

We will see cars where there is one basically for each seat that you want to monitor. We will see cars where there is one per row. It depends on how much supplementary information in terms of posture, size that you would like to get.

So I expect we will see between two and four basically in different models. In general for A2. We saw a significant increase in modules during the quarter.

Can you tell us more about which segments they went to and was it a specific customer? Yeah, I think I did mention that in the presentation. I said when it came to level sensing, we saw a record in module sales. And we are selling a few different modules.

And actually all those modules, the sales went up in the third quarter. So it is more than one customer and it's more than one module. There is a general increase in the demand from level sensing, including the module business.

Okay, let's see if we can wrap up here with last couple of questions here. It says, how do you plan to finance the A2 inventory that is needed for the ramp up? Okay, so that is a good question. I guess we are not planning on building any A2 inventory.

I want to stress that. But of course we need to invest in ramping up the production of A2. We have of course already wafers running in the foundry to support the launch during 2026.

So we are not going to, we are trying to minimize the amount of capital that we look up in A2, the working capital. We're trying to minimize that. We're doing that by collaborating with the foundry when it comes to payment terms and when we pay.

We are working on ordering the right quantity, meaning we are demanding binding forecast, binding orders from customers at an early stage to make sure that we build the right quantity. So those are the main strategies we are applying now to keep the working capital down. Okay, let's maybe do the last question here.

Do you see any potential in consumer electronics going forward when releasing A2? Yes, definitely. I have mentioned that before. A2 will be a very competitive product in many areas.

We see interest for different presence applications and here we are talking about air conditioners, TVs, speakers, smart displays, different kind of control panels and so on. We also see a lot of interest when it comes to monitoring babies and elderly people. They want to do the fall detection, they want to measure vital signs such as breathing and heart rate.

We also see there is a general increase in or general demand for improved tracking capabilities of presence applications to understand how many people are in a room or in a space. And how are they moving and classify is it people, is it pets, are they children, are they adults? So many of those things will go into different kind of consumer electronics. And that is also, of course, where there is a lot of the volume, right, in consumer electronics.

So that is a prioritized area for us. All right, with that, I think we are going to close the Q&A session. I do apologize if we could not answer all the questions and once again, thanks for all the questions and all the interests.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. Okay, so before closing, I just would like to repeat that we are very happy with the third quarter with decreasing cost, we have increased revenue and we are making good progress in automotive and all the other product areas. We enter the fourth quarter feeling very optimistic and look forward to continue to create shareholder and customer value.

Thank you for your interest in Acconeer and thank you for joining our earnings call today. Bye bye.