Powercell Sweden AB (publ)

STO:PCELL

Q3-2025 Earnings Call

[Operator]

Welcome to the PowerCell Group Q3 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to the CEO, Richard Berkling and CFO, Anders During. Please go ahead.

[Richard Berkling, executive]

Good morning, and a warm welcome to this quarter 3 report on what is a very busy day on the Stockholm Stock Exchange with a lot of companies making their presentations. So we're extremely happy to see that many joining us at PowerCell. So we have closed quarter 3, and we are quite happy with the outcome. Previously, in quarter 1 and quarter 2, we reported with the headlines of steady pace through rough waters in quarter 1, which actually gave a good description on how quarter 1 played out.

Quarter 2 had the headline steady pace through improving waters, really showing that we saw improvement in the market. And now the third quarter, what is describing the headline is the steady growth and solid margins, which actually described the company quite well where we are at the moment. We saw good growth in quarter 3 compared to 2024, up 90% compared to last year. Year-to-date, it is up over 50%, which is quite encouraging.

Gross margin is continued to improve, although not on record levels, but we have talked about this before that we see volatility over the quarters. Also encouraging to see that the rolling 12 months revenue remained over SEK 400 million, which is the top line momentum we want to have in the company. Also encouraging that we protected the EBITDA in a way that we are still positive overall [Technical Difficulty]. Can you hear me?

[Anders During, executive]

Yes. Go ahead, please.

[Richard Berkling, executive]

I was kicked out for some reason. So continued positive EBITDA on rolling 12 months, also very encouraging. This is one of the focus areas we had for PowerCell. I would say, since the beginning, we need to show a breakeven level also in the early stage of this technology shift. So this is quite interesting. Anders will go more into details on this. We managed to leverage on the fixed cost base and drive growth and then despite having a slightly lower quarterly volume. So we're really happy with this progress that we can now show.

Also some orders in quarter 3, although I would have expected or hoped for more, but it's also quite volatile in this market. What is encouraging is that we are continuing to see more OEM orders in the marine sector, where we now broke into the bulk carrier segment with the first -- world's first bulk carrier to GMI Rederi in Norway. So quite encouraging to see how the quarter was playing out. What we are in is a time of very focused execution where we also see then a quite good tangible process. I would say that the middle section here, where we talk about the operational resilience, is what is most important to me.

We managed to provide a positive EBITDA on rolling 12 months because we are now in delivery mode. We are now actually tomorrow shipping the final shipments to our large Italian marine OEM, which means that we have completed deliveries of all those orders. And now in quarter 4, we are ramping up the final production assembly and will complete delivery to Torghatten up in Northern Norway with a large 2x 6.4 megawatt ferry installation, which means that we have now actually managed to build a company that is industrially stable.

Starting production as we did in April this year is always something that you need to ramp up and industrial stability doesn't come for free. So the fact that the organization has been able to pull this off, deliver high quality on time or even before time, is something that is a very important quality mark for PowerCell. So the focused execution is something that I think that we should talk more about the PowerCell. Quite often, we talk about growth and we talk about the innovation of the company. But being an industrial credible partner is something that is going to win the orders going forward because with the OEMs that are placing the trust in new technology, they also need to place the trust in a very, very stable partner.

So this is something that we're quite happy to be able to provide and also report. We also see, as we said, repeated demand around the Marine System 225 that we introduced last year in June. And that has been a very strong commercial success based on the fact that it is world-leading when it comes to performance, when it comes to energy density and when it comes to the value it creates for the customers that put this into operation. And then for PowerCell, once again, the operational resilience that we were able to start production and work on productivity, efficiency protecting the gross margin, which is extremely important for PowerCell going forward.

So the combination of this is something that I'm quite happy to be able to report. With this, I would like to hand over to Anders on the numbers, and then I will come back and talk more about the outlook and how this connects into the broader context.

[Anders During, executive]

Thank you, Richard. I will take the opportunity to just run through the numbers. I think these numbers, after having listened to Richard, are in a way that, of course, the 19% growth is something to notice. I remember us saying in the beginning of this year and even at the quarter 4 report last year that we would find some more stabilization between quarters. And I think the third quarter is another evidence for that the more even, let's say, turnover in each quarter is there to stay for the future.

Gross margin is slightly up. That is -- I mean, to the volumes we have and to the product mix we have when we sell, the variation of 6 percentage in a single quarter is not for us anything that is unexpected. It's more important to look at it when we get to the accumulated numbers and understand why the changes are there. EBITDA, I think, it goes without saying that we are happy with only being at minus SEK 2 million, given that we have taken SEK 5 million in provisions for the reorganization that we have announced. And I think the burning platform, and that what everyone is more concerned about listening to us today, is the operating cash flow.

I think we have been quite explicit in the report describing what has happened in the first 3 quarters this year. I think that having listened also to now Richard saying that we're in final deliveries of immediately one of our larger orders ever and then continuing final deliveries of the second one, everyone can understand what that will do to cash flow as we progress into the future quarters of this year and the beginning of next year. So we go on to the accumulated numbers.

We look at this point basically on the gross margin. Everyone recognized from the second quarter that we had a large deal with Bosch that brought in a lot of gross margin to us, given the fact that we were selling IP. And of course, for the remainder of this year, we will still see, on an accumulated level, a very high gross margin based on that deal. That is a level that, if I would guide anyone on this thing, may not be contained over the near future. We hopefully get back there later on. But short term, in each quarter, that level will not be maintained. I think it's important to also see that if we look at -- Richard mentioned operational leverage, you can claim a lot of things about what different things derives from. But one thing is certain that given the turnover we had last year, given the turnover this year and the change, excluding for all unusual items in the different accumulated book numbers are about SEK 88 million. And that for us feels very strong, acknowledging that at least half of it, when you make comparison, derives from the deal we made in Q2 with Bosch. But still, it's a very impressive for us at least change in how we manage profitability and earnings in the company.

And as I mentioned and as I've highlighted to the right in this picture, background being given and everything that we feel completely comfortable about is that we have passed a lot of what has been described as the reason for building up working capital, and we also come to a stage where we can see that we are delivering and what follows with that. So moving on to the next one. It is basically saying that we feel comfortable having a stable path. We grow 30% plus in our industry. If you went back 5 years, I guess, that would be viewed as very humble. If you flip it around and say that this is an industrial company in an earlier stage of the market, it's a number that I feel that we are very comfortable with.

And also that we have brought on rolling 12 months EBITDA to a positive number of SEK 21 million, and that makes us feel comfortable for the future as well. Having said so, I will leave it back to Richard for the continuation of the presentation.

[Richard Berkling, executive]

Then also reminding you on the upcoming reports, quarter 4 report February 4, 2026, and then quarter 1 report in 2026 on April 23. So then if we look at the segment highlights and what is building up the result and the business at the moment, we see good commercial traction in Marine, all subsegments. We saw the order from GMI Rederi, which was quite encouraging because that is, as we said, the first break into the bulk carriers. We need to mention then the IMO decision or postponement of decision last week. It was a disappointment to the industry. Many put their trust in the fact that the IMO would regulate the net zero tariffs on a global scale. However, in Europe, we already have in place even stricter regulations.

So to me, I'm not too surprised that they delayed it because it takes time to change industries in a technology shift. So you will always have resistance. So hopefully, a year from now, they will have a resolution that is signed that is perhaps a bit more easy to adapt for the operators. But in the meantime, we continue to see a strong demand from especially Europe, but a lot of interest globally as well. Power generation, we were quite happy to yesterday report that Zeppelin Power Systems placed an order for 2 different systems implemented in Europe. The fact that they are now exploring to different applications is quite interesting because power generation, as we have pointed out, we believe that power generation will be the largest segment going forward.

The difference from marine is that we have still not seen a trigger where an OEM is putting a stick in the sand and said, now we do this. But we are seeing a more clear commercial landscape emerging for backup power and peak shaving applications. There is a lot of discussion on data centers. Of course, we have a quite close collaboration with parties out there. But as I said, we have not seen the trigger where somebody is really putting a stick in the sand and say, now we do this. So we try to contribute with that. We try to challenge the industry, and I will have later on in the presentation some more news on what we will do in that segment.

In aviation, we continue the certification process with ZeroAvia and other aerospace partners. They're not the only one who are in certification process. What is quite encouraging is that now ZeroAvia actually have delivered their first systems to customers, and they will be put in operation in 2027. So now we have a deadline on that one, which is really, really encouraging. This is the first information we have seen from them on when this will be put into operation. What we also have seen is that we have now industry validation that our strategy with the medium temperature PEM, which is our next-generation fuel cell stack is the good enough step for larger turbo aircraft in the next generation.

So more interest in our collaboration together with Honeywell on the Newborn platform, which is already materialized in the commercial agreement in marine. But for aviation, the fact that we can do with the medium temperature is a technology step that is really valuable to PowerCell because that's where we have invested our position from a technology perspective. Going once back to the operational leverage. One reason why we are able to show this rather good underlying progress when it comes to operational leverage is that we have had for 2025, a strategy to consolidate. And we have consolidated to be able to accelerate.

We have consolidation of product platforms. Previously, it was a bit fragmented, which was a risk for a company like PowerCell because you might end up in doing projects everywhere. Now since the introduction of MS 225, we have seen now a serious delivery, which you see in the bottom there. Start of production in April. We now have more than 100 systems in order and in the pipeline. As we said, we are completing the delivery to our Italian shipyard this week, tomorrow, which, of course, is one of the reasons why we have been tying up working capital to the extent that you have seen in the report.

Now when we move on to delivery to the Norwegian ferries up in Bodo that is just one more proof point on how well the consolidation strategy have worked, which is also seen in the gross margins of PowerCell. But then in quarter 3, we also reported a change in the management group, which is also a consolidation of the organization. When building up a company like PowerCell, we changed more or less everything in the last 4 years, building up technology portfolios, product portfolios, operations, marketing, sales. I wanted to have a large management group to be able to cover all the aspects of PowerCell.

Now we are more mature. We now see a more clear path towards growth. And then we need to have a more streamlined operational management team, which is also why we have consolidated the organization. So this is to increase speed and acceleration and also clear out more accountability now when we actually will speed up everything we do. Anders talked about this before, the fact that we have growth without cost base inflation, I think, is really, really important. Many companies like PowerCell when they grow, they tend to overinvest and always scale up with more and more resources.

We are actually going to run 2026 on a lower overhead cost base than we have had before, which is also one proof point of this consolidation strategy, which is also then, I would say, a mitigation to make sure that we can defend both EBITDA and EBIT breakeven on lower levels than most of our colleagues in the industry. So the strategy is, of course, being profitable and scale through discipline. This is something that is in the DNA of the company, but you always need to be there and protect it, especially when you grow. But we see now that we maintain a breakeven level at around SEK 400 million of top line revenue.

So then looking at the product strategy and next-generation platform. This is now something we have had in the reports a number of times, but it's worth reiterating. We see that the Marine System 225 platform that was introduced in June last year has been very successful. I would say the most dominant product in the marine industry for fuel cells. Now we are complementing it with a CE marking in quarter 4, optimized for power generation segment, which is a very important proof point and a quality stamp for PowerCell.

We continue to see interest in the methanol reformer, both cruise ships, service vessels [indiscernible] and but we also see a growing interest from power generation. The main value there is that you get more energy on a smaller energy storage footprint. So where we have backup power for potential data centers with hydrogen, you need 1/6 of the size, if the energy is stored as methanol. So there is a large interest in this technology from the power generation segment as well. Also availability of methanol is quite good in different regions of the world at a low cost.

So this could be something that is enabling growth in areas where you don't have access to hydrogen. And then power generation. In quarter 4, we will have an enhanced product offering in power generation, more optimized for that segment. It is built on the Bosch collaboration that we communicated in quarter 2, to be able to attract more price-sensitive applications. And this is something that is quite important in a technology shift that willingness to pay between segments are different.

Marine commercial, for instance, have much higher requirements on performance, quality, robustness, et cetera, which makes the product there more expensive. For power generation, we need to have something that is a bit less expensive. It's a bit more price-sensitive segment, and this is where we now will introduce a new product platform in quarter 4. And then as we said before, we have a strong interest in our next-generation fuel cell stack, which is, I would say, our guarantee for future earnings, which is quite valuable to PowerCell.

So reiterating what we said before, the building of the strategic foundations for PowerCell is that we have a platform system and product readiness, the ability to actually have industrialized components because right now, we see growth with a rather short from order to delivery. The demand is a bit volatile, but when we see an order, it's rather short delivery time. And this is really important to us that we are able to meet that. This is also why we have tied up a bit more working capital than perhaps we would have liked, but that is a trade-off that you have to do as both CEO and CFO in a company like PowerCell.

It's also important to have the industrial partnerships because the OEMs will drive growth in the industry. They are the Tier 1 to the end user, and they need to invest and be the guarantee of technology, not just as a delivery but also over the life cycle as a service partner. We support with service to them as the second tier. And then, of course, the fiscal discipline. This is really, really important for PowerCell. And we will protect breakeven at low volumes, more or less regardless of anything.

So if we then look back to what we set out to achieve in 2025, this was part of what we have said as the focus areas for 2025. So one focus was to reach breakeven on rolling 12 months. We can check that one. We also had an ambition to continue to grow with OEM contracts because we believe that, that is what we give the most sustainable growth. Also, those customers put products in operation. So they are proven and tested and actually validated that they generate value to the end customer. That one with the 2 recent OEM contracts that we have signed in quarter 2 and quarter 3 is quite encouraging.

We have said that we need to scale existing product generation. And this is also what has now been generating the growth and also the fact that we reached breakeven. We are doing this, while still investing into the next generation. And I think that the last sentence there is quite important that we are proud of the ability to balance innovation, industrial stability and leverage growth. It's quite easy for a company like PowerCell to optimize on either/or.

But the fact that the company has been able to provide this and also that we have had the support from the Board to pursue this sometimes complex strategy is something I'm really happy about because it is not just giving us the fact that we have breakeven today on low volumes. But with the next-generation products, we are now also well positioned for what will happen in future earnings. So that balanced approach is something that I'm really happy about, and I'm proud that we have had the support from both Board but also the commitment and the, I would say, brilliant performance from our team, both in operation and innovation and technology and sales and marketing.

So really happy with that progress because it's -- we need it. It's difficult to do business in any technology shift, but we have proved that we can do it and we can actually breakeven on very low volumes. So with that, we open up for questions.

[Operator]

[Operator Instructions]

[Richard Berkling, executive]

Now I have to admit that I don't see the question. Let me see here. Here we are. Do you have any concrete initiatives in the data center area?

We know that Bloom Energy and the situation in the U.S. is a question from [ Ari ]. Yes, of course, but as always, we cannot talk about things before they have materialized. There is a massive interest from the data center industry. And this is not only for CO2 emissions, but it's also for energy resilience.

In many areas, the grid is full. So getting access to the grid, getting access to stable electricity is quite difficult. So replacing some of the old diesel generators with either fuel cells or something else is quite attractive for the data center operators. And they also have rather high margins on their own business, so they can do this. So we see a lot of commitments from the larger players. We met with some of them in New York during the New York Climate Week. But as I said, it is a combination of getting the whole value chain in position. You need to have supply of fuel, you need to have the grid access, et cetera. So finding the right balance point has been a bit tricky. But in quarter 4, as I said, we will come back with a more clear product offering and hopefully some clarity also in the potential that we see in this industry.

So let me see here if we have more.

[Operator]

[Operator Instructions]

[Richard Berkling, executive]

Anders?

[Anders During, executive]

Yes.

[Richard Berkling, executive]

Yes. We had a question, of course, on the cash position and how we see the end of the year and the beginning of next year, even though we don't make the detailed forecast, do you want to comment on that one?

[Anders During, executive]

I think it's without making forecast, which we will try not to do, but we would like to guide everyone reading the report as we understand that this is one of the key questions from a financial standpoint. And I think the efforts we have done in the first 3 quarters this year would -- either way you would have done it, accumulated more working capital. On top of that, we also spent money on those proceeds that we discussed during the share issue last year.

And following what Richard just mentioned in the beginning of the presentation that we are in final delivery stages in 2 large projects. Obviously, those 2 large projects has terms and conditions included in them that indicates that once delivered, we get paid to not giving you any guidance, but with more stating that we feel comfortable about those dynamics. We are comfortable at this point in time.

[Richard Berkling, executive]

Very good. And then we had a question from [ Niklas Holmgren ] here. Once again, regarding the data centers, do you think you have the right product offering to make this a significant source of revenue for PowerCell over time? So far, it's been mainly SOFC manufacturers like Bloom Energy has been successful in this space.

That is a very good question, and it requires some explanation. One reason why our technology, the PEM fuel cell complements the SOFC is that SOFC is a very stable installation. It doesn't take dynamic load well. So where we see a potential growing demand is for backup power and peak shaving because that's when you have the fast dynamic load that the PEM fuel cell is very strong with. The solid oxide fuel cell cannot do that because it takes a very long time to ramp up and ramp down. So there are different applications.

So I think that the different technologies complement each other. And we believe that PEM fuel cells and the backup power peak shaving is a very relevant application for data centers because there are today very few areas globally where you can fully rely on grid access. So we believe that our technology will have a strong opportunity for the data center segment. With that said, as we presented here in the report in quarter 4, we will come back with a more clear product offering because we believe that the price point is slightly different from other segments. And we are now preparing an introduction of more targeted products to be able to capture that growth. So it's a very good question, and it gave us an opportunity to also explain the difference between our technology and the one that has been prevailing so far in this segment.

Then also, we have a question on Torghatten. With Torghatten final delivery, can you comment on the service agreement with Torghatten? Yes, I can. Since we are completing delivery, we start delivery now in quarter 4 and will be completed in quarter 1. That means that for 2026, the service contract will be in place. It is a 10- to 15-year service contract that we will sign together with Torghatten. But the details of that contract, we need to come back to when it's signed because it's still under discussion.

But of course, now when we are getting more large installations in operation with customers, the service side of PowerCell will be more interesting because now we will have a service revenue and a service opportunity that has been lacking before. And this is also one positive benefit of moving away from the early stages of project execution to more normal industrial applications and customers that put products into operational service. So it is both an opportunity for revenue, but also an opportunity to learn more and also show the industry how this works. So it's a good question.

We had a question from Rakesh at Chevron Shipping. How do you expect the IMO Net-Zero talk failure to affect future orders?

Well, since we didn't see any effects on the contrary that we had a positive effect because the IMO was not signed yet. This was just a proposal. It's been postponed now for 12 months. I think that the -- what we see now is that certain areas will wait. That is for sure, but I think that they waited anyway. So the segments and geographical areas where we see growth like Europe, that will continue because Europe already, as we said, have a more strict regulatory framework than what the IMO proposal was. So it's more likely that we see a continued hesitation in the U.S. for certain marine applications.

But on the other hand, there are also those who want to accelerate because this is actually making business sense in certain areas already now. So we will continue to follow this and monitor, but we don't see any immediate impact on the order book or on the leads funnel that we are operating.

I think that, that more or less concluded. We are now 1 minute past the deadline. So as always, thank you very much for listening in. We always encourage you to come and visit us in Gothenburg at the factory if you have time, regardless if you are a shareholder or if you are a financial analyst. So look us up, come visit us. And with that, have a nice day, and see you in February.

[Anders During, executive]

Bye-bye.