Then, we are doing it in English this time. Welcome everyone to this presentation with LumenRadio. As usual, except we do it in English now, but as usual, we will start with a presentation and then have a Q&A. I think with the setup we have now, it means that you might not be able to ask questions verbally. Let us see if you can maybe later, but otherwise you should be able to write in the chat if you have any questions. With that said, I will leave the floor over to you.
Thank you, Erik. On behalf of the company, I also want to wish everybody very welcome to this investor call. My name is Sanna Svensson, and with me I have our CEO, Hans Larsson. Today's agenda is, let us see how we click onwards here.
Go up a little bit.
Do you know how we click onwards? Okay, sorry about the technicalities here. Today's agenda, introduction to LumenRadio. We start with a short introduction, so those of you who have not followed us so much get also at least a basic knowledge about what value we deliver. Then we continue with Q1 update and a short-term outlook, and then we finalize with some Q&As. I hand over to Hans so he can start the introduction.
Thank you very much, Sanna. Let's start with what we actually do. We, LumenRadio, deliver ultra-reliable wireless connectivity with superior range for applications where communication failure is not an option. As you might have seen recently, we have launched new financial goals. Our long-term financial goals for the company is now to reach more than SEK 500 million by 2030. Our profitability goal is actually unchanged from earlier, this is to deliver more than 20% EBITDA on average over a business cycle. Sanna, how are we doing?
Yes, on this side we have tried to gather information that in short tells quite much of the company, and all figures are last 12 months figures, so they give you a feeling how our annual figures look like. We have the last 12 months delivered almost SEK 250,000,000 net sales, and we also have 70% of our business is recurring like business. We call it design win. A design win is when a customer decides to use LumenRadio's tech in its own products. Moving on, if they are successful, it require continuous purchase of radio modules or software from us. We also have the last 12 months, over 60% gross margin and around 18% EBITDA margin. We are actually growing adult this year. We are becoming 18 years old, and we are located with sales offices in five different countries.
Thank you, Sanna. How are we organized then? We are split in two business areas. The first one we call Lighting Control. Here we cover our important Entertainment Lighting business, and we're working with architectural lighting and indoor and outdoor lighting for commercial buildings and such. The other business area is Building Automation. Here we have the biggest chunk of business within Smart Metering , but we're also working with Building Control and industrial automation, where Building Control is where we have launched a lot of new products the last couple of years within Modbus, BACnet, etc . We typically in all quarters try to show a customer case just to get a little bit of flavor. What we see on this picture here is a multi-family residential building in New Jersey. They have a fantastic view over Manhattan. That's not the most interesting part.
The interesting part here is that our customer in this case is a company delivering energy savings. This is the company Parity HVAC. Their business concept is to connect and automate the ventilation system in the building and actually cash in on the energy saving. Here they use our Wireless BACnet products to connect rooftop units to the Building Automation system and generate a saving of 30%. That's how they also charge their customer by parts of the savings. Interesting, we talk a lot about energy savings being a driver for our business, and this is maybe one of the more tangible examples where that is really true. Let's move into quarter one.
Yes.
I will start with a slide here where we do a few highlights. Q1 is a period where we have a lot of exhibitions, and a highlight is always the ISE exhibition in Barcelona. This is professional lighting or Entertainment Lighting highlight for us. It is the biggest event in Europe every year. All our large OEM customers are there, so that is where we meet them. We can talk about plans for the year and confirming the, let us say, state of affairs in the Entertainment Lighting business. Very exciting. Next highlight I would like to mention is an actuator from Gruner. Gruner is a large producer of actuators, a German company, and in connection to Light + Building, they launched a new product which has integrated Wireless Modbus.
For those of you who have followed us for a while, you know that about a year ago, we talked about this Wireless Modbus ecosystem. We launched the concept of the ecosystem, and to create an ecosystem, we need a certain amount of products. We need room controllers, sensors, but we also need actuators, which is actually what then actuates a valve in the ventilation system. This has been a missing piece, and we are super happy that there is now an actuator with Wireless Modbus in this ecosystem. That is good for our system integrators. At the same exhibition, S+S Regeltechnik, a large customer of ours who has previously built in Wireless Modbus in their sensors and room controllers, they also added now Wireless BACnet. BACnet is especially important for the North American market, but it is also increasingly important in Europe.
We are quite happy that our existing customers add new technology from LumenRadio into their product range. Moving on to that, and more on the BACnet theme, one of the big exhibitions we do in Q1 is AHR in Las Vegas. This is really an HVAC exhibition, HVAC, heating, ventilation, air conditioning, also refrigeration is in there. This is the largest event in North America. We typically promote our BACnet solutions. We also promote some sub-metering solutions at that exhibition. There we also had a new design win. The company Mayta Tech showed a room controller with integrated Wireless BACnet. Why is that important? It is important because our integrators, they can actually commission projects at a lower cost when they have products with integrated Wireless BACnet instead of buying our end-user products for everything needed to be integrated.
This is a good step forward, and we had a very positive response at the exhibition. If we move for more of exhibitions and these events, at the end of March, we updated our financial targets. As we already mentioned, our new targets are to reach more than SEK 500 million revenue by 2030. We should do that with more than 20% EBITDA in average. Following the announcement or the press release of the new targets, we also hosted a Capital Markets Day on March 20. This was the first Capital Markets Day, so the first time we really did a thorough update of LumenRadio today since our IPO three years ago. For those of you who might have missed it is also available as a recording on our investor relation webpage.
Then we move a little bit more into Lighting Control, some key takeaways. In Lighting Control, the quarter we generated SEK 39.1 million . It is a little bit shy of last year, but there are reasons for that. The decrease is 10.1%, but we still have this headwind on the currencies, so the organic decrease is 6%. This is anyway a good quarter. We had some deviations last year where, if you recall, the tariffs were implemented 1st of April. We had quite a lot of early deliveries in the end of March to the U.S. market, which boosted the revenues. You will see that a little bit later when Sanna goes through the figures. We are actually quite happy, and this is according to plan.
We are actually a little bit above our own budget, even if it is always. We always like to show a positive number on the growth, but this is not bad. It is actually quite good. What we also note in the quarter is this increased interest from Chinese OEM customers in the Entertainment Lighting segment. It was very clear at ISE in Barcelona that there are a lot of Chinese producers who want to export, and if you want to export your lighting fixtures, you basically need to have our CRMX technology built in. There is a big interest, and we have also, as you know, established ourselves in China with our own sales team one and a half year ago. We have a good way of working with local designers, local OEMs, and that really starts to pay off.
Finally, I want to touch our DALI, t hat's our newest product range on the market. It has been out now for almost two years. Here, for those of you who follow us on social media, you see we publish a lot of new impressive installations where we use Wireless DALI. This is very important that we keep on doing new projects. We learn a lot about the market, the market learn about Wireless DALI, and this also creates interest from potential OEM customers. As you know, we always want to have a mix in our business where some part is end user products going through distribution, but the biggest chunk is usually the OEM business. That is not where we start. We always start with the end user products, but this interest from OEMs on the Wireless DALI side is promising for the future.
Still from small numbers, so we do not expect this to bounce the figures away in a positive way day one, but it is good for the future. Then we move to Building Automation. Here, we had a fantastic start of the year. We did SEK 19.1 million compared to SEK 12.4 million last year. This is an increase of 54%, and organically, it is actually 76%. It is a very strong number. This is strong even despite we lose a little bit on the top line. We addressed in the Q4 presentation that we have a product mix change. We have a long-standing customer, still a customer, but they change from a custom product with higher selling price than the standard product they use now.
This affects the quarter negatively, about SEK 2.5 million on the top line, even though our gross profit remains more or less the same. We are very happy with it. The driver here is really the Smart Metering. Radiocrafts, for those who have followed us a long time, that is the acquisition where we got Smart Metering business. We had a very weak spring with the Smart Metering last year, and now we are not only back to normal, but we actually have a very strong quarter for Smart Metering. That puts us back on track here, and that adds up. We have a nice growth in the quarter in total.
Finally, we talk a lot about OEM customers. We attended MCE Mostra in Milano, also an HVAC exhibition, ventilation, air conditioning, in Europe this time, and this was really an exhibition where a lot of our potential OEM customer exhibit. We had a good interest. We need to close design wins. We know that design win does not mean revenue directly. We are always depending on these customers launching their products, and then if they are successful in the market, it generates good revenues for us. Closing that, I think on Building Automation. Now we will dive in a bit more to the figures.
Yes.
Sanna?
Thank you. On the right side, we have two diagrams. The upper diagram shows the net sales in value the last two years per quarter. We have colored all first quarters to increase the comparability between the years. We see that the first quarter has developed from SEK 46 million to SEK 56 million and now SEK 58 million. The lower diagram shows our EBITDA in value and percentage the same period. Here we can see now that we are also developed from the past SEK 4.7 million, last year SEK 5.8 million, and now we have SEK 10.5 million. The table on left side gives from the profit and loss, the most important parts compared with last year. We see that our profitability has grown quite good compared with one year ago. Also our cash balance has improved.
Not visible here is that our balance sheet is in good shape in general, and with healthy stock levels and receivables and payables paid on time, we are quite content with the first quarter's figures. Let us move on and dig a little bit deeper. In this picture, we can see how Lighting Control has developed in sales and gross margin the last three years. Also here we have colored in different color the first quarter to ease the comparison. The business area has recovered after the dip two years ago, though, as Hans mentioned, this year's quarter is compared with an unusually strong first quarter last year, as we had extra deliveries in front of the tariff turbulence. Historically, actually, the second quarter has always been stronger than the first quarter, but last year, they switched places.
Gross margin is really strong throughout the period, and we believe this shows that our customer is willing to pay for our product. Moving on to Building Automation, also here we see that the first quarter is colored in different color to ease the comparison. We all know that the big difference towards last year is that Smart Metering is back in business, so to say. As Hans mentioned, the SEK 19 milllion is even better than it looks like when we take into account that last year in the SEK 12 million, there was still this long-term customer that now takes the comparison down with SEK 2.5 million as we change the product mix.
Strong momentum and gross margin is trending upwards, and this is also partly due to the change in product mix we are experiencing with one of the biggest customers. Here we pull all the figures together so we can see both net sales in total and divided by Lighting Control in light green and Building Automation in dark green. On top of all that, we have the group gross margin. The volatility in the margin mirrors the share of wallet and has always been stronger when Lighting Control has dominated the share of wallet. Moving onwards, we believe that the volatility will actually shrink as the difference in the margin between the business areas is diminishing.
Finally, and this is my last slide, it is about operating expenses. Over time, actually, they are quite stable but slightly growing. We continue to invest in organization and development to secure future business opportunities. Of course, we aim to keep the pace on the level that we can also deliver on our profitability target over time. I hand over to Hans so he can give a short-term outlook before we move on to questions and answers.
Thank you, Sanna. Let us move directly into the next slide. A lot of text, sorry for that, but I will talk about it a bit. In general, there is a lot of turbulence in the world around us. What is happening right now in the Middle East has not affected us very much so far. We have very limited direct exposure to the region. The risk we see is, of course, that we could get higher cost of components due to energy prices. We have still not seen it materialize. For us, there is more stability this year than last year when the tariffs were really playing havoc with our business. Let us see how that develops. We keep our fingers crossed for not too much commotion there.
In Lighting Control, we believe we have good traction in the market in our important Entertainment Lighting segment. Despite the first quarter coming in a bit lower than last year, we believe we are well-positioned. The market is not as strong as it was a couple of years ago. When we talk to our customers about the market, our perception is that there is a bit more optimistic views than it was a year ago. We stay quite optimistic. We see also that our efforts in China, in the local market, is starting to pay off. We have more and more design win there, and we start to create a name more also with the local OEMs and working with the local markets. That should pay off as well. We are, I would say, optimistic about the year.
There is also this strong interest in Wireless DALI at the trade shows. Here, of course, we work from small numbers, but we start to get traction. Of course, the next step would be to try to add OEM customers into Wireless DALI as well. On the Building Automation side, for those of you who follow us, you know that we got a record order of $5.7 million in Q4. That order is for delivery from Q2 this year to Q1 next year. We haven't started eating from it yet, but we are doing that now, and that gives us a good stability. Last year when we had this quite challenging spring in the Smart Metering business, now we can see more stability during this year.
Here, as mentioned before, we keep working on expanding our customer base and also finding new customers within the sub-metering space. Lastly, a few words on the Building Control segment. Here, we keep expanding our Wireless Modbus ecosystem. We have new design win, as we mentioned, and we have also started to add OEM customers for Wireless BACnet. This is not a quick process. We add the OEMs and they ramp up. We think this area is moving, and we have some pivotal points getting actuators in, getting customers like S+S moving, adding BACnet. These are important indicators for us that the interest in the market is growing. With that said, I think we should open up for some questions.
Yes. Thank you. Then I close the presentation and maybe make us visible again.
Yeah. Perfect.
Yes.
Thank you for that. Let's open up for Q&A. I think you should be able to send the questions in the chat. I am not sure if you can raise your hand and ask it verbally, as I said. We are trying a bit of a different format here, so hopefully you can ask your question somehow, but let's see. I will start nonetheless. I wanted to begin on lighting, and you mentioned that you were down 6% organically, but if I understood it was in line or even above your own budget, right? How would you describe the outcome versus the expectations?
Yeah. That is correct. We are actually slightly ahead of our own budget because we knew we had some events in Q1 last year which would not repeat this year, and also this product mix effect. Obviously, now we talk organically, but we also have this currency headwind still. So we were a little bit cautious budgeting. We are ahead of where we thought we would be, and of course it would have been great if we were also had the actual numbers in the lighting side of things. But still, we are where we are supposed to be or a little bit better, I think.
How do you think about Q2 for lighting because that is usually a seasonally strong quarter as well. Are there any signs that tell otherwise, or how should we think about it?
No, I think with all things said, you never know what happens. But it looks to be more back to normal this year. Last year, what happened in Q2 was, of course, partially we had early deliveries in Q1, but you might recall as well that the tariffs were up to 145% between China and U.S. And basically, the factories in China stopped for a couple of weeks. We had a terrible Q2 last year, and hopefully we will have a normal Q2 this year. That is our expectation at least, and then we have to see how it plays out.
Then I just wanted to ask how the film and TV industry is doing, or I guess maybe you could say entertainment. But we have previously discussed tax incentives coming in, going back a year or two, maybe these studios were focusing more on costs. But how is that playing out now today, would you say?
Yeah. It is hard to put hard date on, but you can see that there are investments in new studios in the U.S. and that there are also investments in the L.A. region. The incentives will play a role here and we start to see these investments. Then, of course, we are a little bit later in the chain. You build studios, you start productions, then you rent equipment from rental companies, and they need to restock and buy equipment for us.
We think it is positive. Of course, we had this fantastic period during COVID when the content production was all-time high, and we are not back to that yet. And I think when we talk to our customers, our OEM customers, no one thinks we are coming back to that very fast b ut I think compared to a year ago when many of our customers were cautiously negative, they are more cautiously positive now. We are on a new normal, and we need to grow from there.
I know it's a difficult question, but with the inventory adjustments, etc. , that's been a thing over the last few years. We're seeing generally some pre-buying or inventory build-up in some sectors, at least so far this quarter, broadly speaking. Have you seen any suggestions that some of your customers or somewhere in the value chain there would be some inventory build-up, or?
I don't think so. We have not seen any or heard any specific inventory build-up among our customers.
All right. Then for China, I think it was interesting. You sound positive and I've asked about it before, but maybe if we can expand on how the development is in China. I know you've secured some design win. You have local presence. So how are you tracking your progress? What key metrics are you looking at? Because I guess only sales might be not showing the full picture.
No, you're right. The activities we do in China is to try to grasp the producers who produce for the local market. There are large producers who produce for the international brands. They are already our customers. But then they also produce local brands for the local market where our Wireless DMX or CRMX has not been commonly used. So that's what we try to penetrate. It starts, of course, with building trust, being local, having Chinese-speaking people. We started with sales. We added technical support. We have application engineering in place now. So when someone wants to design in our technology, you can get local language support on the technical matters as well.
So the KPIs we have internally here is, of course, the design wins. So when someone decides to design in our technology, we follow that closely. That should, of course, generate revenues hopefully faster in China than in other parts of the world as typically China moves faster. We measure design wins, and then we follow up these customers as well to see how the business is growing. I think that's it. It's a confidence-building thing that now it seems like it's spreading more and more that we are present in China and we get, let's say, more and more attention.
We also attended, talking about shows, the spring is very hectic. In April now, directly after Easter, we attended the GETshow, which is the biggest show in China. We have actually never attended ourselves. We have attended through our partners, through distributors. This year we attended ourselves with our OEM offering and got a very good response. We have good hopes. We know that if we do the right things there, it will also pay off.
I think the first design win was a few years ago. When do you think we could see volumes picking up? Is there some type of inflection point approaching, or is it still maybe a year out or so? If you can share your thoughts at least, I understand it's difficult-
Yeah.
....to answer, but-
Yeah. I think I cannot share it. We are always depending on customers, how they ramp up. With customers, we do not publicly share how much the revenues are with local Chinese and the export market there. I can probably not comment too much on that.
But for these different trade shows, et c., not just in China. The examples you give, it seems you are mostly meeting with potential OEM partners. Is that the objective or is it more brand awareness in general, distributors, installation people or?
Yeah. We meet with both OEMs and we meet with system integrators and distributors. Maybe I highlighted the OEMs more than normal at this presentation. But we meet with them all. Our objective is, of course, we are still a small player in the world, and this is a good way to create awareness about our solutions, who we are. That is, of course, different when we go to GETshow or we go to ISE in the entertainment world or the professional lighting world, as we sometimes call it, we are well-known, and we are a de facto standard.
But in all the other areas, we need to be there to make people aware that we exist. Nowadays, in all the Building Control and also in the, let us say, DALI space for indoor outdoor lighting, we have more and more people coming back. They know us, they have done a few projects, and they want to grow with us. But still, it is important for us for awareness to be visible at all these exhibitions.
I haven't seen any questions in the chat or any hands raised. I hope that's because everyone is shy and not because it's not possible. I'm not sure about the settings, but hopefully people are just shy. I'll move on, and maybe we can talk a bit about the building. Because it looked strong and reading between the lines, it sounds like you are maybe a bit above your budget too. Q1 numbers or?
Yeah. I think we are a little bit ahead of budget. Here, of course, we had higher expectations as this business is, especially the Smart Metering business we have more frame contracts, longer visibility. So here we are actually a bit above our own expectation as well, but here we had a higher expectation. So that's good. What we would like to see, of course, more of is the growth in the Building Control side, where it's a lot about OEMs into the ecosystems and make sure we build a long-term strong position with our technologies.
These 2.5 million in mix effects, is that fair to assume in the coming quarters b ecause you flagged this and is that a good level or?
I think what we talked about in Q4 was an annual effect
SEK 16 million
Yeah.
Or something
Yeah, I think we were in the somewhere between SEK 15 million and SEK 20 million on an annual effect. We have, of course, higher and lower in the quarters. We will try to guide during this year approximately that effect as it is important to guide. We will come back quarter by quarter this year, and then after this year we are back to normal comparison, hopefully.
Yeah. It is still the fact that on the gross profit level, this is more or less the same level from this customer, right?
To simplify it, we have done a custom product with a high selling price but a low margin. Now we are at standard product, which is completely according our strategy. So we deliver a standard product with a normal margin, so to say.
Yeah. Because the margin looked pretty good in building 60%, right? I think. So I guess the question, which I understand is also difficult and depending on the mix, but I guess we could see more quarters where this gross margin is around 60% for building, right?
Yeah. This is mathematically when we reduce the top line a bit, but with more or less unchanged gross profit, we will see stronger gross margins for sure. This will be a permanent change. Then of course there are other things happening as well. So margins can go a little up and down. But we should have lower volatility because we have had a big volatility depending on the customer mix. That is a big business which has had a significantly lower margin earlier.
Yeah. For this large order that we have talked a couple of times about from December and metering, it is still too early. Q1 had no deliveries of that, right? It is still ahead of us.
It is still ahead of us. We start to deliver on that order in April. It is an existing customer, it is existing business, so it is not on top of the normal business. This is a continuation of the business. With that said, we are working hard on securing more business in that area. I hope we will have a good trend of the year. If anyone thinks you can put that on top of what we are doing now, then it is wrong. It is a continuation of a long-term relation with an important customer.
Yeah. For the rest of building, what do you see driving ahead? I guess sub-metering sounds like it is still a bit in an early phase, trying to diversify the metering business. What about the other parts of building? Which ones are doing the best, do you think?
I think our industrial automation is trotting along. That is an area where we have long-term customers, and we continue to deliver on those. Where we expect growth is in the Building Control side, and here, of course, we push brand use of products a lot. You saw the example today with this building in the U.S. where our BACnet products plays a role. The bigger change will, of course, come when our OEM start to scale the business. Here, it is a lot of work on pushing our W-Modbus, W-BACnet concepts, getting more products into the ecosystems, and making sure that integrators can feel familiar with this and can use it. There is, of course, a good push from our OEM customers. As soon as we have something designed in, they are marketing their products, which gives then a push into the ecosystem thinking as well.
It is a cooperation. Like us, we are a supplier and we have an OEM customer. We are in a kind of symbiosis where we are depending on each other, and we try to help each other and push each other as good as we can. There we hope to see good development over. Here, I have to mention, over the coming years. This is not something which will explode from a quarter to another. This is a long-term building a strong position and, in one way, revolutionizing a way of working in Building Automation where we really want to move from cables to wireless setups.
If we take the use case of the New Jersey building, are there any, I do not know if you say ripple effects. But if someone is using Lumen technology in that use case, whether it is an integrator or distributor or what have you, does that have effects on the rest of that customer's or partner's projects, or is it more dependent on the specific project? I am thinking if one of these bigger projects could have some type of snowball effect for those trying the Lumen technology the first time.
I think the effect is that when you get the company in, if it is an integrator or, in this case, let us say a supplier of energy savings. When they start working with our technology and provided that they see the benefits and they are happy with the solution, which is quite common, we see repeat buys. They scale within their own business that we can go from being, you try first because maybe we come in as a problem solver.
It is very difficult to pull a cable, and then you just try the wireless, and then you see it works, and then you start to scale it because you simplify the installations, you save on the installation cost, and you get that benefit. I think the scalability is more like getting these installers on board, trust the technology, and start using it in more of their projects. That is what we see.
How do you think you are going forward? How forward-leaning will you be? I noticed that headcount was down a bit from last quarter. I am not sure if that was something temporary. How are you thinking about the rest of the year? Will you be forward-leaning, or are you a bit more cautiously optimistic?
No, we are cautiously optimistic. I hope that comes through here as well, that we are optimistic. If you look at the headcount, of course, last year we were also optimistic, and then we had this very big impact from tariffs, and we had to pull the handbrakes a bit, and there you can see that we have reduced the headcount. We have reduced our OpEx too, without doing big layoffs, but still kept good cost control. Now we are optimistic. We hope we can invest a little bit more in the business without jeopardizing good profitability, which is also part of the new financial targets our board has decided.
I want to add that for our people, obviously, every company has some leaves and some comes, but sometimes we also adjust with consultants, and those we do not calculate in the average people number. So there is always some volatility in the figures, and we are not decreasing people here, even if the figure was a little bit down from the year-end.
We still have a lot of great ideas what we want to develop for the future. So there is no lack of initiatives here. So when we can, we will add people to make sure we build on the products we have, also develop new stuff as well as investing in sales and marketing.
I have asked all my questions. I cannot see any on the chat, but is it anything you think we should have talked about that we forgot that you want to mention or any final remarks, maybe?
Probably not. I think we tried to say what we really wanted to say in the presentation side. They are good questions. It is always great to have the questions because we do not think of everything. I think we are happy, or what do you say, Sanna?
Yes, we are happy. Thank you very much for hosting this also.
Yeah. Thanks for presenting and everyone attending. I guess thank you and see you around.