Good morning. I'm Lars Boyleason, CEO of Napatech. I'm pleased to welcome you all to the Napatech presentation for the first quarter of twenty twenty five. Joining me today is our Chief Financial Officer, Heine Torskor. Our first quarter twenty twenty five report was released earlier this morning on the Oslo Stock Exchange and is also available on Napatech website. For your information, a recording of this webcast will be available later today. Slide two, please. There will be a question and answer session following the presentation. During and after these prepared remarks, you may submit your questions via text on the webcast page or we can take your questions on the phone. If you would like to ask a question, please follow the instruction on this slide. Slide three, please. Please note that this presentation contains forward looking statements that are subject to risks and uncertainties. Our actual results may differ from those discussed in forward looking statements. Slide four, please. Today's agenda will cover four areas. First, we will provide a business status for the first quarter of twenty twenty five with focus on the major news items that show promising signs of progress by Napatech towards achieving our goals to transform our business.

Next, we'll provide a market update that shares information about the opportunity ahead of Napatech. Will then shine a spotlight on some of our most recently announced wins and how those will positively impact our business in the future. We will then provide detailed summary of our first quarter financial results, Finally, we will conclude with a question and answer session open to the attendees of today's call. Slide five, please. We have made considerable strides in an important milepost of our strategic plan that strengthen our position as an earlier leader in the new and evolving mass market for advanced NICs. This includes both improving our core business and making measurable progress towards our design win goals that underpins our growth aspirations. This has gone according to plan and in some areas ahead of our expectations. As we compare our position to just one year ago, and today, find ourselves in a much stronger position with new transformational design wins. Slide six, please. To begin today's presentation, I would like to provide a summary status of our business, sharing a few notable items and highlights. We will go into each of these items in more details in the financial update later in the presentation.

Our first quarter results include revenue of $3,000,000 an increase of 8% over the first quarter of twenty twenty four with a healthy gross margin of 70.3%, as expected and within our guidance. Also have visibility into Q2 and we are pleased to see that it's trending toward an increase of 40% to 50% over Q2 twenty twenty four. One year ago, we announced that SignWin with Intel Altera and a Tier one server OEM to build a next generation solution to their specification for high volume use cases. As well as the general markets. I'm glad to report we consistently met the hardware milepost ahead of plan and exceeded the expectations. The final product has been delivered and accepted by the client. We are very involved in the next stage of their process, which includes development and integrations of key software to meet their requirements. We are excited that our efforts today have resulted in expanding our cooperation into six use cases and opportunities across the tier one manufacturer. All of which represent potentially transformational unit volumes to Napatech. We are equally excited today to share more information about our latest high volume design win with dMATRIX, a leader in artificial intelligence inferencing for hyperscale cloud, Next Wave cloud, and enterprise data centers.

Our Intel Altera programmable NIC provides the AI infrastructure that enables d metrics to deliver efficient ultra low latency distributed inferencing to many servers. Their customer get the benefit of deploying an industry standard Ethernet based scale out solution to take advantage of D metrics blazing fast in fairness, speeds, all at massive scale. We have also recently disclosed other winning solution across an array of applications and services by leading companies in their respective vertical markets. Including a cybersecurity solution with Broadcom Symantec. A network and server infrastructure solution with IDETICOM, an artificial intelligence solution with Celera for ultra low latency transition in financial service markets. These are all examples of Napatech expanding its business to large or high growth segments that require our programmable mix. And finally, we are inspired by these early successes that are far ahead of the pace we could have envisioned one year ago. Additionally, new companies with application and use cases are emerging regularly expanding our pipeline of opportunities. Our partnership with Intel Alteria continues to exceed our expectations. And play a critical role in our strategy and success going forward. Slide seven, please. In this next section, I would like to share an update on our market and how it is positively being impacted by artificial intelligence.

Artificial intelligence is not just the boss in the present, it is the future. And it is the majority of the future. AI begins inside of one processor in one server but it only achieves its goal while working among an array of processes together across a neural network. Connecting at very high speed over secure links with ultra low latency that are highly dynamic and able to evolve quickly. In other words, networks that think. You will come to see in the next section why we believe Napatech's advanced networking cards co created with market maker Intel Altera are the leading solution to power these new networks. Slide eight, please. There is a generational change happening in the way networks are built. And it's happening now. As shown in the center of the slide, it is a data center or racks of servers rows upon rows of these racks makes up the massive data centers that exist many of them the size of football pitches. Over a long twenty five year evolution, these standard servers with basic network cars provided best effort access to services like websites, email, and remote storage of files. These things were measured in speeds of one to 10 gigabits and the world was relatively static.

And now what was a twenty five year evolution? Has given way to a near daily revolution with the network required to deliver time services. New artificial intelligence applications along with cloud services and five gs mobile access had caused these networks to change daily to support billions of users and devices. In real time blistering speeds without delay. And Napatech sits in the eye of storm of chains that is happening right now. Slide nine, please. At the center of this revolution, are the servers and the network that connects them together. The basic networking costs are now obsolete These are three core problems with the previous architecture. First, the processor used to deliver new AI, cloud, mobile, and other services have stalled. They are suffocated with networking and security tasks greatly reducing the CPU capacity that needed to provide the new services. Further, CPUs are now deliver decreasing generational improvement Each upgrade cycle deliver less improvements to help solve these problems. Second, the basic network costs are now obsolete. They were never designed to evolve and adapt on a daily basis. Or handle the complicated requirements of modern network designs. Third, these issues have combined to cripple the data centers They create unavoidable escalating costs and constraints related to space, power, cooling and overall scalability.

The largest data center operators who have launched these new services have already encountered the problems we just described. Research from Google and Facebook has shown that up to 80% of the server capacity is wasted. Basic network cards cannot fulfill the AI vision, and a new solution is needed to build modern data centers focused on AI cloud and mobile services. Slide 10, please. The solution is to replace the basic server network card with an advanced network card. This innovation has many names ranging from SmartNIC, IntelligentNIC, [indiscernible] data processing unit, infrastructure processing unit, and more. But despite many names, they have one thing in common, They are designed to replace the basic NIC and fix the processing networking, and scalability issues. Advanced NICs being three important improvements to the data center and servers. First, they fix the server CPU processing problem by offloading and accelerating the networking security storage and other burdensome task from the CPU the advanced NIC. This significantly increases the performance of the server and those tasks. While at the same time returning the CPU resources to the core function of AI, cloud, and mobile services. Second, the advanced NIC is fully programmable, enabling the data center to reconfigure itself on a daily basis to respond to changes in technologies, new application, new services, unforeseen problems and new cybersecurity threats.

Third, the increased networking performance, improved CPU capacity creates significant better service performance and dramatically reduce power, space and cooling requirements. And enabling the data center to expand as needed to meet the new demands. Slide 11, please. Advanced network cards are widely used today by the largest data center operators known as hyperscaler cloud operators. They were the first to deploy AI cloud and other advanced services and ran into these issues. Lacking a merchant solution they deployed massive software and hardware engineering resources to build their own advanced NICs and deployed more than 12,000,000 unit last year. It is important to note that Intel Altera helped to make this market and is deployed in seven of the eight large data centers globally, as a semiconductor partner on the Hartmeyer site. To these hyperscalers. Today, as last enterprise telco operators and Tier two retinal cloud providers accelerate the adoption of AI workloads and cloud native infrastructure, they are facing the same networking challenges as the top eight hyperscaler cloud operators. Unfortunately, these next wave users must solve the same problem without having hyperscalers level hardware and software engineering resources. This create the urgent demand for merchant based programmable hyper performance advanced network cars to bridge the gap.

As the primary provider of an engineering solution to hyperscaler operators via component sales, Intel Altera has partnered with Napatech deliver solution for the mass market. Based on Intel, Altera's proven winning hardware and software design that is widely deployed in large early adopters hyperscale networks, Napatech is uniquely positioned to deliver the turnkey production grade complete solution to the IT buyers in the mass market. Slide 12, please. As demand for more AI, cloud and mobile services continues to grow, an increasing number of servers are in demand with more than 20,000,000 a year being deployed by 2029. These servers require connectivity from network interface cards. And it's clear that advanced network cards are the future for data centers of all sizes. The hyperscale cloud networks have all moved on from basic NICs and consequently they consume more than 12,000,000 advanced NICs last year. They will continue to do so and their demand will grow to a nearly $11,000,000,000 in the next five years. Equally important, as the next wave of data centers races to deploy similar AI, cloud, security, mobile, and other services this mass market opens up for merchant providers like Napatech and Intel Altera. This greenfield growth is anticipated to approach $6,000,000,000 by 2029 and follow the same growth that fueled the hyperscale market.

In earlier years. Further, now with the merchant solution available for advanced NICs, some some hyperscale demand will shift to a merchant solution versus custom component design. The transition window is opening now for advanced NICs for merchant suppliers to be the next wave data centers that make up the mass market. They are expected to be the fast growing segment of the network interface card market over the next five years. Slide 13, please. There is no shortage of application and services within the mass market data centers driving their demands for advanced NICs. They include high volume designs for cloud and artificial intelligence, It also include business critical applications like cybersecurity, and financial service. And it also include advanced network infrastructure like five gs mobile infrastructure. Slide 14, please. These megatrends create the opportunity for Napatech as shown in this inside the box view of a server Napatech's advanced NICs plays a crucial role in modern data centers server designs. Our product provides the access from the outside world to the CPU and GPU resources that deliver the AI cloud, mobile, security, financial and other critical services. Our advanced NICS ensure that these servers can deliver those services at the optimal mix of price performance space and power for the data center operator.

Slide 15, please. A unique aspect behind Napatech business model is an innovative go to market model that lowers our operating expenses and increases the scalability of our business. Napatech and Intel Altera have partnered to deliver advanced NICs to the mass market, this partnership brings four valuable points to Napatech. The first is increased volume. While Napatech have been building advanced NIC for nearly twenty years, our solution have historical target critical but smaller niche application with lower growth. This resulted in a stable business that drove 5,000 cars per year. The Intel Altera hardware and software designed for hyperscalers is now also addressing the mass market. The application and services addressable by their enhanced design now enable Napatech to target a new set of customers and use cases that are transformational in scale for Napatech. Oftentimes requiring 6,000, 10,000, 25,000, or even 50,000 cards plus cards per data center per year. Next, we can scale our reach beyond what we could have done on our own limited by size, geographic and cost. As a part of our partnership, IntelliTerra does significant portion of the sales, marketing, market creation and business development, bringing Napatech into many opportunities have already embraced the solution are looking to Napatech to fulfill their demands.

Further, as a consequence of Intel Altera desire to strategically develop the mass market based on their hyperscale success, they have granted Napatech access to the latest CPU and FPGA technologies, creating an incredible first mover advantage ahead of other companies looking to enter this rapidly emerging market. And finally, the partnership requires frequent engineering collaboration throughout the joint product developments. We gain high confidence technical guidance from Intel Altera's proven hardware and software solution. That significantly derisk our product road map and engineering designs. Slide 16, please. While this unique partnership with Intel Altera has been two years in the making, the products and solution have largely only been in development over the past year. In this next section, I would like to share with you both updates and news related to just a few examples of the success and the potential we see from our new solutions. Slide 17, please. The first is an update on the work with the global Tier one server manufacturer. The design is anchored in an innovative hardware platform that includes a 400 gigabit advanced NIC, This is branded as a smart NIC with the name N3070x. It includes the ability to add an optional CPU, turning it onto an infrastructure processing unit or IPU, We offer the IPU in two configurations optimized for servers of different sizes.

These hardware programs we develop at an incredible pace amid each critical milepost ahead of schedule exceeding expectation of all parties. As the hardware projects mature towards the end of the year, the teams began the parallel work on many of the key software requirement around network storage and security offload and and acceleration. This will allow development of the customer solution for their use cases to begin on the hardware throughout 2025 and beyond. During these successful stages, we were pleased to expand opportunities from one initial project to include six total opportunities [indiscernible] spanning use cases including AI, cloud storage, data content reduction, cloud tenant services, five gs mobile infrastructure and more. All across six business units within the tier one server manufacturer. Company. Slide 18, please. This week, we were excited to disclose the details of a design win with dMatrix, the creator of Coursera. The world's most efficient artificial intelligence computing platform used inferencing in data centers. Inferencing is the cornerstone of artificial intelligence It transforms the knowledge from trained models to create prediction, decisions and insights that are practical and beneficial in real world applications. There are several things that underpin our excitement about this design.

It is in a very hot space of of artificial intelligence, It is a strong validation of everything we are doing in our partnership with Intel Altera. And it is an advanced next solution for AI infrastructure in the AI data center back end network And as such, it is an extremely high volume deployment with the potential for 25,000 or more units per year once in peak production. The product D metric selected is the same product Napatech built for the Tier one server manufacturers shown on the previous slides. This particular design included a master supply agreement with five years of product availability, volume commitment and an NIE fee for the work related to the software to power the solution. It's fair to say that Diemetric has spent a long period researching the market of programmable smart NICs before they finally selected Napatech as their preferred solution for the future smart NIC. We have included several public quotes from leading industry experts to highlight the significance of this news. Slide 19, please. We also recently announced a new solution for data loss prevention, an application from Broadcom Cymatic that is used for cybersecurity, regulator, and compliance. The new design elevates data loss prevention, DLP, to new levels in enterprise and cloud data center networks.

This innovative solution empowers businesses with robust defenses, greater insight and faster recovery ensuring the integrity of critical data remains uncompromised. The software application runs on a standard server. It scales to a limited range of performance when a basic NIC is used, but it's too overcharged to five performance when the basic NIC is replaced [indiscernible] Slide 20, please. We also introduced a new solution for critical infrastructure with IDETICOM. Their data center solution powered by Napatech are available to cloud, enterprise, telecom customers in the general mass market. And are being used in a joint collaboration one of the opportunities at a tier one server manufacturer. IDETICOM is a pioneer in scalable and high performance software for compute intensive infrastructure workloads in emission critical networks, with specialization in cryptographic acceleration and transparent compression. Both technologies are important ingredients in modern data center designs. Slide 21, please. In one last example from recent news, we announced another design win with Celera. Their artificial intelligence solution targets the financial services industry high frequency trading environments. Finance institution increasingly rely on AI and machine learning models to analyze vast data sets and execute traits. However, traditional server architecture often introduce latency and throughput bottlenecks that hinder real time decision making.

In high stakes trading, even nanoseconds can translate to significant financial gains or losses. By combining Celera's leading software with Napatech, financial trading desk can significantly reduce AI inferencing latency. Slide 22, please. Our recent design wins begin to show the potential transformational impact on our business in terms of unit volumes. While design win takes time to ramp, and reach peak production volumes, and there is always risk these early results exceed our expectation from a year ago and give us confidence our strategy is aimed in the right direction. With this quarter's latest design wins, we are adding 10,000 to 20,000 units. Bringing the accumulated number up to 70,000 to 80,000 units in annual volume on the peak production. Slide 23, please. Based on our design win pipeline and initial wins we gain additional confidence in our financial outlook. DMetric is expected to drive volumes already in 2026, as a consequence of this and other wins, this will help us to double unit sales in 2026. And even further significant growth in 2027. We expect to maintain strong margins and high volume going forward We also see that we have delivered ahead of time to Altera and their Tier one server manufacturer.

Also expect to keep OpEx in the coming years at the same level as 2025, This is due to the fact that we already have delivered the 400 gig product to Intel Altera. And the tier one server manufacturer. And in addition, we are going to deliver to d metrics with the existing organization. Finally, we expect to reduce our net working capital due to new model taking orders before incurring expenses. We will go more into this in the next session. And now I'd like to to the financial section. I would like to give the word to our CFO, Heine Torskol. Thank you, Lars. Slide 25, please. Revenue in Q1 in DKK was up 11% compared Q1 twenty twenty four.

And amounted to SEK 23,800,000.0. Q1 revenue was in line with our expectations, And with the significant pickup in activities we've seen so far in Q2, we believe that we are now seeing the signs of improvement in the market we've been waiting for. The gross margin in Q1 was 70.3%, also well placed within our normal range and in line with our expectations. Our staff costs and other external costs in Q1 amounted to NOK48.9 million compared to NOK40.6 million in Q1 of twenty twenty four. Increase is the result of our strategic R and D investments and follows the plans we've communicated. EBITDA in Q1 amounted to negative twenty nine point one million and EBIT amounted to a negative SEK 35,500,000.0 And next slide, please. Net cash flows from operating activities in Q1 amounted to negative million and net cash used in investing activities in Q1 amounted to 3,700,000.0 Free cash flows in Q1 amounted to negative DKK 29,400,000.0 compared to negative SEK5.4 million in Q1 last year. At the end of Q1, our cash and cash equivalents amounted to DKK 34,600,000.0 compared to DKK 27,500,000.0 at the end Q1 twenty twenty four. Next slide, please. As illustrated in the bar charts to the right of this slide, our net working capital has had an unfortunate development over the past five quarters.

This has been a significant focus point of ours, and we've been actively working on strategies to address it. The development primarily occurred due to sourcing decisions we took in 2022 when our supply chain was still impacted by the effects of the COVID days and we sourced components to meet sales that didn't materialize in 2023 and 2024. The result of this is very clear in our inventories, and it's the reason why I owned it working capital. It's too high at the moment. And for the same reason, we've planned and implemented several improvement and initiatives aimed at reducing our net working capital over the coming quarters. Looking ahead, most of our anticipated new growth business will be based on large volume customers where products are produced to order. In our historical base business, on the other hand, we've been building to stock based on forecast and on our own estimates. This shift from forecast based to order based manufacturing will help us manage our inventory more efficiently going forward and reduce our stock levels. Significantly. Additionally, we are working with key partners and suppliers to optimize payment terms for components and manufacturing. This, in addition with optimized payment terms from our customers will help us manage our net working capital more efficiently.

We believe we'll be able to increase our unit volumes significantly and at the same time bring down our net working capital. And with this, I'll turn presentation back to you, Lars.

Thank you, Heine. This concludes today's prepared materials. We will now open up the call for any questions that may exist from our attendees.

Thank you, Lars. We will now begin the question and answer session. You. While we wait for the questions to be registered, I will hand over to Lars.

Thank you. Yeah. Before we stop the q and a, just want to let the audience know that we have announced a capital increase this morning of minimum 150,000,000 NOK hundred And, we also announced that we have precommitment above that amount. So so I just want to make sure that everyone on the call is aware of that. That was not part of our presentation this morning.

Thank you. And our first question comes from Christopher B. Johnson with DNB.

Yes. Hi. Good morning, and thanks for letting me on. So just wondering on the volume outlook you had there on Slide 20. Three. Can you maybe help us unpack a bit how much of that is coming from the matrix and how much is coming from other opportunities? Because our sense is that [indiscernible] they could cover that twenty six percent and twenty seven outlook [indiscernible] Right? So just try to think about the upside from those numbers as well as some of these other big opportunities materialize? I guess?

Yes. So obviously, what's really interesting with d metrics, if you start with them, is that they are providing inferencing back end network for AI, and this is relevant for particularly particularly players in the AI AI AI space. Which have huge networks. So the volume on AI inferencing is is very, very big. So it's very hard for us to estimate what it'll be. But if you look at the 26, then, obviously, the majority of that is coming from [indiscernible] going live in '26. Why is the number like it is? It's it's very hard for us to estimate. So we have tried to be conservative on d metrics there. And we have when it comes to other the tier server one manufacturer, we also try to be conservative. So we have only included development units for qualification, etcetera. So so that's the reason for that number in in in in in '27, then we are in peak production on several accounts, and that's why the number there is is higher. It's very hard to estimate. We are very much you know, we very much have a big market in front of us. And we just try to be relatively conservative on on the forecast we get from our clients.

And that's what we put in.

Great. Thanks. And then just a quick follow-up on the working capital commentary. So you noted that you'll move to more like manufacturer to orders or what you call it, Can you just help us understand the lead times there from when you get an order when you can deliver? That will be helpful.

Yeah. So so these products, they they are already if we get an order, we we can manufacture that in very quickly in in one to two months. And, so if you get longer credit days, then you can ship everything before you have to pay. And the suppliers. And there's also opportunities to get consignment from some of the biggest biggest supplier we have.

All right. Thanks. That's all.

Thank you. And our next question comes from [indiscernible] Good morning. A questions from me as well. So starting on the Slide 22, where you talk about the design win pipeline there. You you say, the growth business, as you call it, 10% to 20 ks new design wins in 2025. Is that only the ones that you have won so far? Or does that include additional design wins this year? The reason I'm asking is, it seems a bit low if you expect more design wins this year given the potential with the matrix alone?

It's very related to dMatrix. And like the questions before from Christopher, then just try to be relatively conservative in estimating this. There are other things in there, but we have we have been very conservative on on on, for example, the tier one server manufacturing in '25.

And '26. I see.

And this is a and these these are peak production volume. Remember that?

Yeah.

Of course, of course. And in terms of the 27,000 tonnes of 32,000 units, to what degree does that include volumes from the server manufacturer given what you yourself expect that to contribute more long term?

That that includes good numbers from the tier one server manufacturer. Probably not peak production. But but good numbers from them. And and also significant numbers from d metrics. And then we have not included so much other other clients now. What's interesting is we're still working we're still working towards a market which is just evolving. So we try to only estimate clients which we have announced. We do have a very interesting pipeline. And many of them will hopefully contribute in 2027 for sure. But we are not included in those.

Very clear. Thank you. And on the in your presentation, you stated that you expect OpEx to remain at the same level as in 2025. But on the slide, you're guiding for it to decrease somewhat from 25% level into 26%, '27 Could you please just clarify clarify around that?

Sure. So we had some very big deliverables in '25. We have now completed and and our deliverable to the tier one server manufacturer has been accepted and this is a product that will be our flagship product for a long time. And as you can see on the slide with the Tier one server manufacturer, you can see we have we have a SmartNIC, we have an IPU, and we also have a sandwich model. So so most of our pipeline now are basically testing that product. Demetrix is a very good example. They selected the SmartNIC version of the deliverable to the tier tier one server manufacturer. So we see that obviously, we still have very ambitious road map We have people working on that. But we do not have we we we we have delivered on time, and we see that we can deliver most of it. With the existing organization. So we do not have the same number of consultants in the company as we had two months ago. And this is the reason for it. If we suddenly get new projects, most likely, we will get paid for that. For in in a rework, etcetera, then we will we will add on OPEX again through consultants.

But right now, we we estimate that we we have we have sufficient resources to deliver things we have on our road map and and clients we see because most of them are are basically testing with our latest product launch to the tier server one manufacturer. And and and you as you could see that the metrics they selected Napatech among lots of competitors. And the product we already delivered, we have in the market, has been accepted by the tier one server manufacturer that is the leading product in the market now. So we do not foresee that we have to increase OpEx. It's also something to do with the world class engineering organization we have in Copenhagen. We simply we're not a start up. We have twenty years experience in hardware and software building the most advanced SmartNICs products in the market. And we have done that over the last twenty years with a small organization that we have today, so we are well equipped for for for new for new features, etcetera, which the existing organizations. We don't expect OpEx to dramatically increase.

Perfect. Thank you very much.

And as we have no further questions, on the phone lines, I will hand back over for the webcast questions.

Basic question, here for you, Heine, if you can answer that. Could you please elaborate your net cash position eventually? Credit facilities going forward?

Yes, of course, thank you. So as commented, our our our cash and cash equivalents at the end of Q1 was at at 34,600,000.0 And and I we going forward, the the way we are structured with our credit facilities as we we have some facilities, with our bank in Denmark and with a bank in in The US It's I [indiscernible] credit facilities that some part of it has been been guaranteed by a public investment fund in in Denmark. And and and due to some legal changes with relations to that fund, going forward from later this in this year? This guarantee credit facility is terminated as [indiscernible] would be in violation with the EU regulations. So going forward, some of our credit facilities will be adjusted downwards in in the range of, like, [indiscernible] But the other facilities we have with the Danish bank and the U. S. Bank will remain unchanged and we are continuously in dialogue with our bank to optimize our facility going forward. I think that would answer the question, hopefully. Otherwise, please reach out to me, and I'll be happy to to give additional details. Back to you, Lars.

Yeah. I think there is no further questions. On on the webcast.

And just as a reminder, please star one to ask a question on the phone lines. We currently have no questions in the queue. So I hand back over to you Lars for any final comments.

Yeah. So so I think just to sum up, Stefan, is that with the estimates, which discussed now on the call and the answer from from Heine and with this upcoming capital increase. We we hopefully, we we expect this to be our last capital increased in in the future of the company.

Thank you everyone. This concludes today's call. You may now disconnect.