Sivers Semiconductors AB (SIVE) Q1 2026 Earnings Call Transcript

Hello and welcome to today's report interview with CVS Semiconductors. I'm going to go over to English. Well, welcome to this report interview with CVS Semiconductors. Today we have Mr. Vikram Atulja, the CEO of the company online from the US, just back from China. Is that correct, Vikram? Well, correct. Hey, Arjen, good to see you again. My pleasure. Let's get started with the Q1 report. Can you give an overall summary of the quarter?

Yeah, so Q1 was one of those quarters where we executed well on all the factors we could control, and we had impact from a couple of factors that we couldn't, one of them being the foreign exchange and the other one being the U.S. government shutdown in Q4. So overall, we came in lighter than our own targets driven by these two areas.

Thank you. Can you describe which products and verticals have done better and which ones have not performed so well in the quarter?

So let's take a little bit of a step back. Make sure we again remember wireless is the growth vector last year coming in this year. And Photonics, as we said, is getting ready to start contributing from 27 onwards. right? So in that sense, wireless versus photonics, if you look at it, wireless has been the area that has had impact from the U.S. government shutdown. Photonics will have its up and down quarters because right now we are servicing our small and medium business customers as we get the business ready for the ramps in 27 and beyond. So that's how you should look at performance in Q1 and how 26 and 27 are set up.

Okay, thank you. Can you describe a little bit more in detail how the U.S. government shutdown impacted you since the government shutdown actually took place in last year?

Right. Remember in our Q4 webinar, we talked about the U.S. government shutdown in Q4. Now, while the government shutdown happens in Q4, a couple of things happen, right? They are getting ready for budget approvals for the following year, and that normally happens in Q4. As an example, even the CHIPS Act, when we finish one year of a project, we expect to hear from the government in Q4 of a given year for the next year's funding, right? So when the government goes into shutdown in Q4, some of these approvals get delayed. And then when the government opens up, they have a backlog of things to clear, and they go through them in a certain sequence. And so while we may wish that our things get approved the first, we don't have much control over the sequence in which the U.S. government approves things. So that then has a ripple effect into when do they approve the defense spends for us and even for our customers, right? So that then has ripple effects into Q1 and Q2, and that's what I indicated in our Q1 report.

Okay, thank you. What's your take right now on customer sentiment and priorities? Is it price, is it delivery, capacitor, or something else?

In our wireless business, it's really, you know, continuing to help them ramp. We don't have a capacity issue per se. Certain materials are short even in the RF industry, so we work proactively with our vendors to make sure there's enough supply. But it is nothing similar to photonics industry, which is facing a much different type of capacity and shortage issue. So in the wireless business, it's really about making sure we are giving them competitive products, helping them ramp. And then in the photonics business, of course, it's about getting ready for 2027.

Okay, thank you. How do you manage your cost base in the quarter? Has the preparation for this potential Lewis Lewis listing been driving costs?

The way we should think about where we are spending money is we are investing deliberately in sales and operations capabilities. Especially as our pipeline grows, we need more people in the field, etc. So we are building up our sales and field applications engineers. because we don't want to keep distracting the design teams every time customer support is needed. So we need support in the field. On top of that, we are investing in stronger financial controls and listing readiness, right? We also brought in some senior leaders in Q4 and Q1, both on the sales side and operations side, with many years of industry experience, right? So that is also to strengthen the organization for the next phase. When there's a software revenue quarter, and I've maintained that we are in a building mode. So quarter to quarter, our numbers can move around. We're looking at, you know, annually delivering to our own plans and long term delivering the growth we talk about. But in a softer quarter, this gets more visible on the P&L. But it reflects the cost increases reflect capability building and preparation rather than drifting from where our R&D costs are, etc. So those we are maintaining in line with what we have planned. We're just investing in capability and, you know, to support pipeline conversion, execution quality and future growth.

Okay. Thank you. You mentioned your pipeline and the growth in the pipeline. Can you elaborate on the pipeline, its reliability as a lead indicator for sales and what's actually required for an opportunity to enter the pipeline?

Yeah. So this is very standard in the industry. I've been in the industry for 27 years now. If you don't have an opportunity pipeline, you have no indicator, number one. So you are actively cultivating opportunities. And the opportunity pipeline has different stages. And it is true that as opportunities migrate from the left to the right, their ability to contribute, the confidence and the probabilities of converting to revenue increase, which is why we look at our opportunity pipeline in stages and talk about how much of it is in what stage, right? So opportunity pipeline is a reliable indicator of growth potential and revenue potential. How it converts depends on where things are in the opportunity pipeline. Some of them might be in early stage, so they contribute a little later in time. Some of them are in a later stage, so they may contribute earlier in time. But it also depends on when the customer is going to wrap. So that combination is why we believe Opportunity Pipeline is the most relevant lead indicator for future revenues.

Okay, thanks. Can you elaborate on the pipeline growth you mentioned, which was very strong in the quarter? Where does the growth come from? And what could be the timing in terms of potential revenue from these new opportunities that you have landed in the quarter?

Yeah. Yeah. So two things to remember, Aryan. When we talk about opportunity pipeline, I give the time window of contribution potential to revenue. So that's 2026 to 2030 is the window we're looking at. So some of these opportunities may start in 28. Some of them may start in 27. Some of them may even start in 29. And therefore, when we talk about revenue potential, we're still looking at potential of those within those five years right so an opportunity that starts later will have fewer years it shows in the potential that's because not because it's a smaller opportunity necessarily but within the window it gets lesser years of contribution it might still be a seven eight year revenue but five years are outside of this window right so as we look at our pipeline the growth. In Q4, the pipeline that we had still had a tremendous amount of wireless to it. In the last four or five months, and the pipeline I showed is at the end of May, we've gotten a lot of photonics opportunities that have also come in. To the level where, as I mentioned in my earnings webinar, both the businesses are kind of healthily challenging and competing each other for how much of the pipeline they occupy.

Okay, thank you. Okay, let's leave the Q1, and let's move over to a few other topics. The first one is the annual report. You made some restatements in that one. How would you describe the current accounting quality in your accounts relative to what you reported previously?

I'd put it this way. The reporting standard is clearly stronger today, and that upgrade has been driven by our preparations for the potential U.S. dual listing and that need for compliance with PCAOB, okay? That means stronger focus on documentation, control, and finance processes. So, we're using this to really make the company more robust in these areas as well. It's a nice driving force for us, right? The PCAOB standard plays a significant emphasis on external audit evidence, okay? And so, in some cases, that can drive different revenue recognition practices. For example, longer projects that have subcontractors, etc. So the important point is, it's about moving to a more rigorous reporting standard than any change in the underlying business economics. So it's really, you're using this as an opportunity to also strengthen our financial processes, controls, and systems.

Thank you. Okay, let's move over to the potential use listing. Where do you see the main benefits and where do you see the drawbacks of this exercise?

So again, stepping back, the main potential benefit is you get access to a broader specialist investor base and stronger strategic visibility in the markets where our technology story resonates very strongly because of the budget spent. It can also help the company position more clearly along relevant U.S. peer companies because there's a lot more peer companies in the U.S. than we would face either in Sweden or even broader Europe. And that can potentially also improve longer term access to capital if the business continues to grow in the right way. So these are all upsides and the benefits of the U.S. listing. The tradeoff is that it comes with meaningfully higher compliance requirements, as I mentioned to you. More management bandwidth, because now we've got to service both the exchanges, and higher cost, right? Because we need stronger reporting processes and governance, right? So for us, this whole thing makes sense as long as it supports the long-term value creation and strategic relevance, not just a branding exercise.

Thank you. You have recently landed a directed rights issue. You touched upon it, but just to repeat, how and when do you expect to spend the cash from this capital raise?

So, Heine, my CFO has also mentioned we target raises around inflection parts. So, this raise that we did was a pretty strategic raise for us. We wanted to support execution on a variety of fronts, right? So, commercial scaling, the product ramps that I've talked about in the webinar that are coming up at the end of the year going into the next year, stronger finance and governance, and flexibility as larger opportunities develop if we need to accelerate some of our products to market, et cetera. So we invest now at this stage of inflection on where the greatest and clearest links to conversion to revenue are, because we're in a scale-up mode, right? And the company's ability to then execute at a higher level. So that's where the costs from the capital raise are going to get deployed, the monies. So it's really about finding the next stage of readiness and growth in a measured way, right? And the timing will depend on how the customer programs and the larger opportunities progress. So it's not like spend and wait, but spend in line with the opportunity.

Thank you. And the final question here is the outlook. In which verticals and products do you see the best prospects currently?

So, if you remember, in each of our businesses, we have the 80% focused markets that I've talked about in the past. So, for Photonics, it continues to be our AI data centers, but Automotive is providing a nice leading ramp into 2027 as we get the Photonics ready for AI data centers, right? So, it's kind of a Automotive leads the early piece of building the revenue, and then we are getting the lasers and optical amplifiers ready for data centers also. So that continues to be our focus. In wireless, already you see production orders from our fixed wireless access customers. So this year is about delivering those products. But as we get ready, the focus continues to be space and sat-com, where we're going to have a lot of momentum going into 2027. Defense, we will continue to work towards commercialization, but defense is the next level. So right now, it's really accelerate space and SATCOM and fixed wireless access and keep preparing for difference.

Okay. And final question here, what are you working with? What are your key priorities and what do you want to drive going forward?

So as I mentioned in the webinar, I view what's happening towards the end of 26 going into 27 as a layer kick, right? Because multiple layers we are now putting in to make 27 a product-heavy year. Multiple ramps are coming up, production readiness. So from an operational execution perspective, absolutely super focused on getting our customers across our focus markets. At the same time, we want to make sure we are disciplined with rigor to continue to get ready for a potential U.S. dual listing. So that's another thing that we want to make sure we're making timely progress, steady progress, working with all the different partners, and then see about timing and the dual listing itself. So these things are on our mind, but really about making 2027 that year where multiple products are ramping or in production. That continues to be our focus.

Thank you, Vikram, for this interview.

Thanks a lot, Jorgen. Really happy to talk again with you.

Okay, my pleasure. Thank you.