Sivers-Semiconductors – Q4 25 – Interview — Transcript

Hej och välkomna till dagens rapportintervju med Sivers Semiconductors. Sivers VD Vikram Vathulya talar engelska, så jag kommer nog gå över till engelska.

Vikram, very welcome to DNB Carnegie Studio.

Thanks, Örjan, happy to be here.

My pleasure. You reported Q4 today, how would you conclude Q4 and the full year in your own words?

We achieved a lot, it was a tremendous year and a quarter, both were records for us, record Q4, record fiscal 25.

And especially when you kind of put it against the backdrop of a weakening dollar versus the Swedish Kroner and also the US government shutdown in Q4.

It makes our results that much more impressive because on a constant FX, we grew our business by 33%.

At the higher end of our long-term composite aggregate growth rate.

So, fantastic year, a lot we have accomplished.

And in addition to the revenue growth, we grew our lead indicator, which is our opportunity pipeline by 64%.

That was a major accomplishment by the team because that feeds the fuel for future revenue growth.

Thank you.

How would you describe the demand situation in general in Q4 in your two business areas?

So if you look at our demand situation, the US government shutdown definitely had an impact.

Because the government took longer for their decision-making, budgets pausing, thinking and then moving into Q1.

So absolutely that had some impact on the wireless side.

On the photonics side, we actually have a base business of small and medium business customers, we call them our foundry customers.

Where we have served them a long time in the past and they came in to take more product in Q4 as well.

So that allowed us to kind of balance some of the issues we had to face in wireless with the US government shutdown.

So that was the demand situation in Q4.

But looking into 26, a lot of good things have happened for us on the wireless side with the Tachyon Networks production order coming in.

We are going to be able to announce the US Chips Act coming forwards, et cetera.

So think of it as some sort of a little push in the wireless side, but also some opportunistic business that came in through our foundry customers with photonics also.

Okay, thank you.

In your CEO letters, you highlight a lot of customer interactions and your opportunity pipeline as you just mentioned.

If you highlight the most important engagements, can you elaborate on these, you know, highlighting key trends and what you expect?

Got it.

So I talked about the opportunity pipeline and the stages.

And as I've always maintained, wireless is in a more advanced stage of developing the pipeline.

And photonics is coming behind it.

So when you look at our wireless business, a lot of things progressed through the pipeline.

Not only do we have Allspace in production, but now we have Tachyon Networks in production on the fixed wireless access side.

Additionally, our top Tier 1 telecom customer, they're working on getting their first and second generation products out by the end of this year.

And their third generation project is also going well in development.

Right?

Satcom, we also had Iris Squared, which I've maintained is the biggest European deployment.

Last time we talked, a lot of the terminal vendors were wanting to work with Sivers technology.

And we have been notified that three of them have moved to the RFP stage and now have to build prototypes with our technology to show as the next step.

So those are all extremely exciting things that are happening.

Where with Satcom, we're going full steam ahead to add to the customer mix.

With fixed wireless access, we are again being careful and coordinated, so we now have Tachyon also coming into the fold in addition to the Tier 1.

And defense again, we are expanding beyond the Chips Act also, as I announced a contract with a defense contractor.

So that's happening on the wireless side, so a lot of movement from left to right happening, more customers coming closer or into production.

On the photonics side, we are now gestating, right?

So we are preparing for the future.

And last time I said we are also expanding our serviceable market in data centers to pluggables.

So what we say there is there's a lot of excitement with customers who are now sampling our lasers for pluggables.

While at the same time, our customers in the co-packaged optics side are making progress.

We expect to talk about more of those at the optical show in March.

And more interestingly, some of the big household brand names now are looking to engage with us in early discussions on our technology.

So it's very heartening to see we've made a lot of progress with the smaller innovative customers and now the bigger brand names want to start talking to us.

But of course, the highlight of our photonics was the LiDAR customer saying, hey, we're going to ramp in Q4.

It's material revenues for us, it's a great revenue feed into our opportunity pipeline and future revenues.

So that was very exciting for us on the LiDAR side as well.

And that is in the automotive industry, right?

Yeah, so we are across all their product platforms.

And they are winning in both automotive and industrial LiDAR.

So in both those areas, but automotive is also driving a lot of that pipeline potential.

Okay, thank you.

The US Chips Act, as you talked about.

What outcome do you expect from this funding beyond the pure financial impact for your firm?

So the way I always think about the US Chips Act is it's all about taking the most promising technologies that are in the lab.

And accelerating customers in the ecosystem to put out products based on them to solve essential challenges.

The Chips Act money, a lot of it is also now going into modernizing defense and warfare.

That's a huge part of the US strategy as well.

And that's where you see we are expecting to announce that EW program.

But at the core of it, what the US Chips Act wants to do is take those promising technologies and how quickly can you get it into the realm of build products with it?

So that's really what our aim is.

Our aim is not necessarily just get Chips Act money, but to work with the partners to then start putting products to support our becoming a products business.

So that's why we are very excited with this expecting to announce for the second year.

Our partners are now very purposefully looking for products to make with our technology after our year one progress.

So that's really my eye on the ball with US Chips Act.

It's not so much about getting the Chips Act money, but then how can I motivate our partners to go and build products with it by showing them we got the right technology?

So that's my end game with US Chips Act.

Sounds like an exciting prospect for for that.

If we go to some detailed questions, as you said, wireless had a bit of softer sales performance.

At least relative to Q4 last year and the recent trend.

You mentioned the the US shutdown had some effect, was there any other extraordinary events or do you feel that the revenue base in in in wireless is still stable as we have accustomed to be?

Absolutely, I mean, wireless definitely had an impact from our government shutdown.

As you see, decisions we expected in Q4 are now being finalized.

We are in February in Q1.

So that's why I call that a temporary push of the things that needed to happen.

But we are not losing anything.

And so we expect wireless to come back after it digests this US government shutdown basically.

Okay, thank you.

And photonics, as you said, had a very strong strong quarter.

Revenues going product revenues go from 7 to 18 million, which is quite impressive growth.

You talked a little bit about these foundry customers, can you elaborate a little bit more on that?

What this business line could could actually give for the future?

So the big opportunities in photonics is of course the LiDAR ramp as well as our AI data centers.

That's what is preparing us for on the pipeline side for the big growth.

But our foundry customers are a good underlying source of revenue.

And they are also looking at more patterns in their business and they're wanting to come here and take product as well.

Because they also know that we are preparing for some bigger growth opportunities in other areas.

So these are small medium enterprises across a variety of industries.

And they're looking at this saying, I also need to get my products to make sure I'm able to service my markets.

While you guys are of course focusing on the big growth markets.

So we're kind of using that to blend in our business in photonics as we are getting ready for the bigger opportunities.

So it's creating some kind of short-term recurring revenues.

Wait, while while we wait for the big for the big elephants to to join the channel.

Exactly.

So we are leveraging that element also.

Thank you.

A few questions on on cost and cash flow and and cash.

How did you manage your cost base during the quarter?

What was challenging, what went well?

For a company like us where we are enabling a strong transformation and it's not for the faint of heart to go from engineering services.

Which can be very comfortable to become a meaningful product company.

So the challenge is always, hey, I need to continue to improve profits for the company, but at the same time, I got to invest in my core technologies.

I got to stay relevant with this customer base, these giants in these big markets, right?

So that's always the trick on a relentless focus on prioritization.

Of the opportunities that we have.

So that's always the give and take.

And so it's it's every quarter we are very disciplined on.

If there's a project that doesn't have a good line of sight to products in the future.

It gets less priority.

The ones that have firmer connections, they're going to get more priority.

As I mentioned, standard products will accelerate our conversion to revenues.

So those we want to make sure have to be fed to get those products out quick.

So it's that type of a balancing scenario that I always have to work with my team and my CFO.

To make sure we're moving the needle in the right places.

Okay.

And then there were a lot of one-offs in the quarter.

Could you just briefly elaborate on what that was?

Right, we actually broke it down in the report as well.

So we had some restructuring costs.

You know, things like CFO changing, et cetera.

So that was one element of it.

We talked about the breach, so we want to make sure as we mentioned.

We are putting in very strong cyber upgrades, infrastructure upgrades, et cetera.

So there's an element of a comprehensive review of what happened and how we bolster as we grow up.

Again, in this growing up, we want to bolster all parts of the company.

Not just our product portfolio.

And similarly, strategic projects are all about getting better rigor, processes, all that stuff set up in the company, right?

Because we don't want to arrive as a products company and not have the infrastructure that supports it.

So once again, that's also part of disciplined capital allocation, but on the necessary items.

So it's not like we ran the lead horse and the other things are behind.

So it's that type of one-off cost, but we believe it's the right time to start putting that in place.

Especially as I'm bringing in very seasoned leadership to get me up to world class in operations, production, et cetera.

Okay, thank you.

After a quarter ended, you landed a financing package.

How would you describe your financial position given that this package is in place?

It's a fantastic outcome for us.

Bootstrap Europe is highly respected.

And they also understand the needs of a growing small company.

To make that breakthrough, get to break even and beyond.

So that's why you see it's a long-term partnership.

And we also took enough capital to pay off all our loans, but also extend our runway with the partnership.

So we tried to make sure we're very strategic about this financing.

We also have a partner who's willing to come to the table, it's not just a, here's your money and then just make your payments.

This is a person who actually will sit with us, will talk about our business and so they're very supportive in making sure we're able to get to those important inflection points.

So that's how I would describe this partnership.

Excellent.

Let's move over to the future.

So which are your key priorities in 2026?

So three things we want to make sure happen this year.

Number one, as you know, we have hired our new CRO and his his entire life is about.

Continuing to grow the opportunity pipeline.

As I said, every year we will always continue to grow this very strongly.

So that is an important thing to drive the opportunity pipeline.

And we have many exciting opportunities that are in our funnel that are starting to slowly move to qualified opportunities.

Which then starts getting quantified, right?

So big deal to continue to grow the opportunity pipeline.

The second thing is there are many important product ramps that are anticipated in the second half of this year.

You know, customers like Allspace, our Tier 1s need Tier 1 infrastructure, vendor needs to get their product out the door.

Enabling our LiDAR customer for a successful ramp.

So a bunch of product ramps and they are so crucial because that is going to be another pivot pivotal moment for us to grow product revenues and sustain the momentum.

And third.

This is the year where we want to release standard products as well.

So do less of the custom one-to-one, but standard products where we know the specifications and they can feed multiple customers and also accelerate time to revenue.

Right, so making sure our standard products are available and our products are getting qualified for ramps in 27 onwards.

So that's really our focus.

And if we look back at the end of 2026 and we have done justice to those three.

Now we have put 2025 strong growth, we have executed well in 26.

And again, setting ourselves up for 27.

While you mentioned 27.

High level thoughts on 27, what would you expect us to see from Sivers there?

Um, as we mentioned, if you look at our break even model, we basically said it's about two years from now.

So exiting 2027, in our ideal scenario, that's when we are saying, hey, we reached that middle milestone in our financial model.

We got enough products selling, we got the margins at that break even model.

We now are able to sustain ourselves going forward with cash flow.

So that's kind of like the marker we're putting and working towards that.

So the success outcome would be exiting 2027 where we're saying, hey, we've grown the scale to break even and beyond.

Now, is it a quarter earlier, quarter behind, we'll just have to watch as the market moves.

But that's the line in the sand we're putting and saying, let's continue single-minded.

Go, go work on that.

And additionally, with the success in the markets we are in, we are looking for the market to then show that as recognition in our value as well as a company.

As I said, there's a zone of valuation today, but our trajectory is firmly to the zone of execution.

And we want that to start translating.

Vikram.

Thank you very much for joining us on this earnings call.

Absolutely.

Thanks, Örjan.

Thank you.

Yeah.

Tack ni som tittade, det är avslutat dagens rapportintervju med Sivers Semiconductors.