Gapwaves’ performance in Q1 2024 exceeded RRe across all metrics, partially boosted by equipment sales totaling SEK5m. Underlying sales still reached SEK11m, marking a 117% y/y growth. EBITDA, excluding ACI, was -SEK8.8m, better than the RRe forecast of -SEK15.1m. The stronger-than-anticipated results were driven by higher sales, improved gross margins, and lower-than-expected operational expenses (OPEX). However, given the expected volatility in Gapwaves’ earnings before achieving a stable license and product-based income level, these quarterly results should not be extrapolated into future expectations. Adjustments to our forecast have been made due to a misunderstanding in the recognition of royalty revenue and a refined ramp-up forecast.

Hella has initiated the start of production (SOP), which is expected to scale up during 2024 and 2025. Order cadence remains strong for Gapwaves' undisclosed tier-1 customer, which has placed four orders year-to-date for Gapwaves’ Multi-layer Waveguide (MLW) technology. Additionally, Gapwaves’ associate, Sensrad, has completed preparations for the launch of its new sensor that incorporates a Gapwaves antenna. Sensrad has secured four evaluation orders, including one from a global agricultural machinery manufacturer. However, the timing of Sensrad’s scale-up remains challenging, and financing from Gapwaves may weigh on Gapwaves’ share.

Gapwaves has three tier-1 suppliers with supply agreements, of which Hella has reached SOP. We expect Bosch and Veoneer to SOP in 2026e, although there is low visibility regarding Veoneer. We expect Gapwaves sales to accelerate once product-related revenue scales, which is expected in 2026. We revised our fair value range downwards from SEK17-62 with a Base case of SEK44 to SEK11-48 with a base case of SEK34. We expect new Tier-1s or nearing product-related revenue to catalyze the share.