Cavendish Hydrogen ASA

OSE:CAVEN

Earnings Call Transcript

[Robert Borin, executive]

Good day, everyone, and welcome to Cavendish Hydrogen's Q3 presentation. My name is Robert Borin, and I am the CEO of Cavendish Hydrogen. With me today, I also have Marcus Halland, the CFO, to present the numbers later.

On today's agenda, we have Cavendish Hydrogen in a brief. We have the Q3 highlights. We have a commercial update. Marcus will be presenting the financials, and I will round up with a summary. And for the Q&A session, we have scheduled a live session later today, Thursday, 28th of November, 13:00 CET.

Here at Cavendish, in short, we develop and deliver hydrogen fueling solutions in the mobility market, and we have more than 20 years of experience doing so. Since the start, we have sold more than 145 stations worldwide. The distribution of these stations are roughly half and half between our two main markets, North America and Europe, and with an additional 15 stations in South Korea. Most of these stations have been manufactured at our current facilities in Herning, which is one of the world's largest manufacturing facilities for fueling stations.

We have service hubs on three different continents, including key markets in North America, Europe and Korea. These stations have been designed and produced by some of our roughly 250 employees. And last year, we had a revenue of approximately EUR 30 million.

On to the highlights. This quarter, we saw lower equipment deliveries, which resulted in a 19% lower revenue. However, with good cost control, we resulted in an improved EBITDA despite the lower revenues. We saw increased utilization of our stations in combination with improved reliability and customer satisfaction. We did not secure any new equipment orders. However, we signed agreements for Service, installation and commissioning. We continue with a strong focus on the development of the next-generation high-capacity product and to finalize, we ended the quarter with a strong cash position of EUR 46 million.

On to the commercial update. Last quarter, we reported on a record high number of stations handed over to customer. This quarter, we have three stations in commissioning, and we see very good progress on the installations in Germany, and our first installation in Canada. However, the opening of the U.S. stations are delayed due to the hydrogen supply situation, which is outside of Cavendish's control.

Generally, on a positive note, and if we are looking at the dispensed hydrogen volume from equipment supplied by Cavendish, we see a steady increase in dispensed hydrogen from equipment installed in Europe. This is mainly driven by new station installations and higher utilization and reliability of already installed stations. In South Korea, the dispense volume from stations are constant and on high levels. And finally, in the United States, dispensed volumes have been close to 0 since quarter 4 last year due to the hydrogen supply chain situation, which, as just mentioned before, is still unresolved and outside of Cavendish's control.

Looking at the market, we still see good future potential in the market. At the same time, we also see general delays in FID due to insecurity around the funding landscape. All indications continue to point towards a shift from light to medium and heavy-duty vehicle filling. And we do actually already see tenders right now targeting heavy-duty fueling. However, these tenders are not yet related to the Alternative Fuels Infrastructure Regulation or AFIR, which we first expect to see in the first half of 2025 after the submission of the draft deployment plans.

If we look at a quick recap of the time line related to AFIR, in October last year, AFIR went into force. In April this year, the regulation became binding for the EU member states. And the next important date is the end of this year when the EU member states need to submit their draft National Policy Frameworks for station deployment, and we are looking forward to that.

Given the, just mentioned market development from light to medium and heavy-duty fueling, we again confirm our strategic direction of developing equipment for the high-capacity market, and we confirm that this is the right one. And with this development, we are not only offering an alternative, we are actually setting a new standard for the next-generation of heavy-duty vehicle fueling stations.

In the second quarter, we announced our new test site in Denmark, where we plan to build our first pilot station. The development is progressing according to plan, and we are currently in dialogue with a number of potential partners and vehicle OEMs for development testing and the use of the pilot station. With our pilot station in Denmark, we will have one of the first real high-capacity fueling stations in operation in the market.

Now I would like to hand over to Marcus for the presentation of the financials. Marcus?

[Marcus Halland, executive]

Thank you, Robert. Let's look a bit more into the details of the financials this quarter.

We ended with revenues of EUR 5.7 million compared to EUR 7 million in the corresponding quarter. Mainly this is from equipment deliveries that are finalized in our factory, where we have revenue recognition from one less station than in the corresponding quarter. We also have slightly lower projects, installation and commissioning and Service revenue compared to Q3 last year due to lower project activity in Europe and lower service revenue from the U.S. market. Year-to-date, our revenue is at 12.6% higher than last year. So for the financial year 2024, we still have a decent increase in revenue.

Despite the lower revenues, EBITDA improved from the same period last year with 15% due to improved margin levels. The gross margin from station deliveries, projects and lower costs from stations in operations all had a positive impact on the EBITDA. This was partly offset by inventory write-downs incurred this quarter from obsolete slow-moving items in our warehouse. The company maintains good cost control from optimizing the organization since we have fewer headcount compared to previous quarter, and higher costs from being a listed company.

Our order intake was EUR 1.6 million. We had an order backlog of EUR 21 million, and our cash position ended at EUR 46.3 million at the end of the quarter.

If we look at the quarter compared to previous quarter, we see that the lower order intake is affecting the equipment sales, first from the production, and we see the lower revenue from projects, installation and commissioning. So the lower revenue this quarter compared to previous quarter, we need to see higher order intake in order to get back to those levels.

If we adjust for -- if we look at the EBITDA, it remains at a stable level if we adjust for onetime effect in Q2 2024, where we had the listing of the company. And we had a positive effect in Q4 2023 that also have affected the EBITDA positively. So if we adjust for those, the EBITDA is at a stable level because we manage to have lower costs from our stations in operation, and we demonstrate good cost control where we adjust cost levels to the activity level. And this we do while we have higher indirect costs from being a separately listed company.

So although the order intake situation, was limited this quarter to Service work and the contract for installation and commissioning. There is no new station order intake and this we experienced that there is a general slowdown in the hydrogen market and fewer projects are given the green light to move ahead.

Signing significant new orders have taken longer time than anticipated. However, we are still working on several promising prospects and leads. And with our operational improvements and long experience in the market, this should put us in a strong position to turn that around. We are seeing several tenders and upcoming projects opportunities that targets medium- to heavy-duty mobility, underlining that our strategic direction with higher focus on heavy-duty applications is the right one.

So I hand it over to Robert to summarize the quarter.

[Robert Borin, executive]

Thank you very much, Marcus. So to sum up, this quarter, we saw continued positive trends in performance on our equipment. The reliability improved and the dispensed volumes of hydrogen increased again. And this was mainly driven by opening of new stations and increased utilization of the already installed equipment.

Last quarter, we reported on a record high handover of stations. This quarter, we see stable progress on three ongoing projects, but we had no handover to customers. Even though the market is in a bit of a waiting position for the Alternative Fuels Infrastructure Regulation, AFIR, to come into effect, we see medium- and heavy-duty high-capacity tenders being announced, and we believe that this trend will increase as soon as the preliminary AFIR plans are submitted by the end of this year.

So thank you very much, everyone, for watching our presentation today. Please remember to register on our website for the Q&A session, which is later today, Thursday, 28th of November at 13:00 CET.

Again, thank you very much for listening in and watching our presentation, and have a great day, everyone.