Hexagon Purus Asa

Hi and welcome to Hexagon Pyrrhus Q3 2024 presentation. My name is Mathias Meidl and I am the IR Director of Hexagon Pyrrhus. I will be moderating from the studio in Oslo and from the studio I am also joined by Group CEO Morten Holum and Group CFO Salman Alam. The agenda for today includes, as usual, the highlights from the quarter, a company update, the financials and the outlook. We will end the presentation with a Q&A session. So please feel free to enter your question via the function on your screen. So with that, I will pass the word over to you, Morten, who will take us through the highlights of the quarter.

Thank you, Mattias. And good morning, everyone. Thanks for tuning in to our webcast this morning. The key figures have been out for a while since they were made public as part of the equity race we did at the end of October. So it should be no surprise that we continue our journey forward, delivering another quarter with strong growth and continued improvement in profitability. So let's look at the Q3 highlights. Number one, we continue to deliver strong revenue growth, both on a quarterly and on an LTM basis, with all-time high quarterly revenue of 544 million NOK. Number two, we signed a multi-year agreement with Gillig for delivery of hydrogen transit bus systems in Q3, and also signed an agreement with Newflyer earlier in the week, confirming our strong market position in both Europe and North America with leading bus OEMs. Number three, We got the initial firm purchase order from Hino for the Tern RC8, covering the first test and validation trucks that are scheduled for delivery now in Q4. And finally, we successfully raised a billion NOK in equity in October, which is intended to give us runway until the point where we have positive EBITDA and generate positive cash flow. It's a challenging sentiment out there where few companies have been able to raise capital this year, so I think we can safely call that a highlight. Made possible by our strong performance track record and solid anchor support from our strategic partners, Hexagon Composites and Mitsui. Looking at revenue, we had solid year-over-year revenue growth of 43% in Q3, driven by strong demand and the fact that we now also have higher capacity following the establishment of our new production footprint. LTM revenue is up by 39% to north of 1.8 billion NOC and closing in on our full-year target for 2024. And as you can see from the chart on the right, group profitability continues to improve as volume and scale increases. The EBITDA margin was minus 9% in the quarter. This is somehow and somewhat boosted by a one-off reimbursement from Daimler. But we continue to climb our way towards breakeven. And the EBITDA margin in our hydrogen business in Europe and North America was positive also in Q3. So that makes two consecutive quarters of positive EBITDA for the HMI segment. I'm happy to see that positive gross margins in the hydrogen business also translates into higher EBITDA margins as volumes increase. And we have yet to deliver meaningful volume in the battery and vehicle integration business, so I expect to see continued improvements once that business gets going. Taking a closer look at revenue composition, hydrogen infrastructure continues to be the largest product area and a key driver of revenue growth year over year. This is mainly driven by continued strong demand for distribution units to deliver hydrogen for industrial applications. But we also saw higher sales of mobile refueling units in Q3. A mobile refueling unit is more or less a distribution unit where we add dispensing technology on board to enable fueling of vehicles in areas where there are no refueling stations. While hydrogen infrastructure remains the most important overall product area at this moment, the largest source of year-over-year growth in Q3 was actually mobility. The main driver here was higher activity in the transit bus area where penetration continues to grow and also heavy duty trucking where Nikola continues to grow sales of their fuel cell electric truck in the US. We had limited activity in the battery and vehicle integration segment, so the revenue increase recorded there in Q3 was the reimbursement payment from Daimler following the termination of the utility truck program that we had with them. Main activity in BVI at this point is to prepare for serial production in 2025, but we expect to see some revenue there in Q4 as we are scheduled to deliver the test and validation trucks to Hino in December. The revenue reduction in the other category is mainly related to aerospace, where we had a very strong quarter in 23 and a somewhat weaker quarter this year. So this is an area where revenue moves a bit up and down quite a bit between quarters. So it's just timing effects and doesn't signal any directional trend shifts. And the other piece of other is the industrial gas bundle business, which is quite a stable business running at capacity. The order backlog stood a bit north of 900 million NOC at quarter end. The backlog is still dominated by HMI, covering close to 90%. The majority of that relates to hydrogen infrastructure, but mobility is increasing its relative share of the backlog as the transit business continues to get traction. Around 56% of the order book at the end of Q3 is for execution in 24, which gives us good visibility towards the full year 24 revenue target. And the year end target is fully covered by orders, so it's only a matter of execution now, getting product out to customers before the end of the year. In total, we're comfortable with the order situation. The order stock is a bit lower than last year and last quarter, but we have good coverage for this year. I would have liked to have a larger order book for 2025, but we had decent order intake during Q3, more than 400 million NOC, and most of that is for delivery in 2025. We're continuously in dialogue with our key customers on their expectations for 2025, so we should know more as we move towards year-end and into 2025. But as I mentioned in the last quarter, the relative order visibility will decrease going forward, as most of the expected orders in reality will be standard call-offs from long-term agreements. So let's take a closer look at that and where we expect demand to come from in 2025. Starting on the left, the main product area in our business is hydrogen infrastructure. Demand here is driven by industrial hydrogen applications, both longstanding users of hydrogen and a growing list of users that are integrating hydrogen into their processes to replace fossil energy sources. A lot of the industrial hydrogen is gray, but will over time transition to green. Our type four based distribution modules have higher payload than traditional steel based modules, which gives better operating performance and lower total cost of ownership for our customers. The majority of orders again are expected to come from existing industrial gas customers and call offs on the framework agreements we have. typically had long order visibility on these, partly driven by our limited capacity, but order visibility has come down this year, also partly as a result of our increased capacity, so there's less reason to put in orders early to reserve capacity. But in total, we have no reason to believe that the underlying demand for industrial hydrogen will decrease. So let's see where we are when we get a bit further into the new year. The other key area that's growing is hydrogen mobility. Also here, volume in 25 is expected to come from LTAs and framework agreements with existing customers. Transit bus is a key area, and the demand here is shaping up well, so we expect this to continue developing positively in 2025. Then we have heavy-duty trucking, where we have had some demand in 2024 and expect to see more demand in 2025. As you know, Nikola is the only OEM that has a commercial product in the market, so our success here will of course depend on Nikola's success. The Nicola Tre FCEV has been very well received by customers that have put it into their fleet. So we're hoping for their continued growth and success. The last area is battery electric trucking, where we expect to see deliveries of turn trucks to Hino in the US now in December. The order visibility here is short, so we don't have full visibility yet on what 25 will bring, but we're obviously in continuous dialogue with Hino on their demand projections for the initial year. We do expect a gradual ramp up of volume following start of serial production next year. So it will likely be a back end loaded year with less volume in the first half of the year. So that's how it looks for now. There is higher uncertainty around the market for zero emission vehicles in North America and how that will develop following the U.S. election. But I will address that a bit closer when we get to the outlook section. I mentioned that demand in the transit bus area is shaping up well, and this is partly a result of growing demand in the US, as more and more cities are integrating zero-emission hydrogen buses into their public transportation fleets. In Q3, we entered into a multi-year agreement with Gillig for the supply of hydrogen fuel systems for their new bus offering. Gillig is the second largest heavy duty bus OEM in the US after New Flyer. They have so far concentrated their clean mobility efforts on natural gas, but are now expanding their lineup to also include a hydrogen fuel cell powered bus offering. We will start the deliveries to Gillig in 26 out of our hydrogen cylinder and systems facility in Westminster on the US East Coast. And late Tuesday this week, we announced that we have again been selected by Nuflyer as a supplier for the fifth consecutive year. Since 2020, we have delivered hydrogen fuel storage cylinders to more than 200 Nuflyer hydrogen transit buses. So I'm pleased to see that we have gained their trust and that we have been selected for yet another year. The size of the agreement has also increased from last year, which is in line with what we see with other customers in the transit bus area. Demand is growing. The combination of these confirms our strong market position with leading bus OEMs in both Europe and North America. New Flyer and Gillick together cover almost all demand for hydrogen transit buses in the US, so we have a strong market position there in a growing segment with good commercial momentum. On the BVI side, we, as I mentioned, have received the initial purchase order from Hino for the delivery for the first turn trucks. This first batch is for test and validation vehicles to dealers and to select customers. And we expect the bulk of this order to be recognized as revenue in Q4. And as I said, the ramp up of serial production is expected to start in 2025. The initial focus for Hino is going to be California and a few northeastern states, since that is where these states are the most forward-leaning ones with the strongest regulatory requirements and the most supportive incentives. We continuously look for ways to improve capital efficiency. So in October, we reached a deal with Panasonic on a renegotiated supply agreement. We have cut the remaining prepayment in more than half and significantly improved the payment terms without any negative impact on our access to sales. This is obviously very helpful for our capital efficiency efforts and a good demonstration of our strong relationship with Panasonic. And we have similar processes, both ongoing and completed with several other suppliers as well. We have high focus on improving working capital efficiency, working with our customers and suppliers to improve payment terms and shorten the cash conversion cycle. We're coming from an environment where we've had to prepay for many of our key raw materials and components, but with an increasing number of these now moving to more normal payment terms, we expect to see meaningful improvements in our working capital performance and overall capital efficiency in 2025 and onwards. And with most of the CapEx behind us, these initiatives are an important factor in reducing the overall capital needs of the business on our way towards cash breakeven in 2026. And when it comes to capital expense, we have now completed the new vehicle integration facility in Dallas. This is the last piece of the puzzle in our manufacturing footprint, and it marks the end of our multi-year capacity expansion program. We can assemble up to 1,000 vehicles per year in this facility, and the turn trucks that we're planning to deliver to Hino in Q4 will be assembled here. With the expansion program now more or less completed, we have significant capacity to grow without incurring major new capital investments. Our revenue capacity out of this footprint is more than three times the targeted revenue for 24. So this is supportive for a more capital efficient growth path going forward. We don't intend to launch any new major CapEx initiatives in the foreseeable future. CapEx going forward will mainly relate to maintenance, selected product development initiatives, smaller investments to the bottleneck to increase manufacturing efficiency and so forth. So our focus for the next few years will be to maximize the utilization and efficiency of this footprint. This is another important factor in addition to the working capital initiatives that will help contribute on our path towards cash break even in 2026. Let's now move over to the financials. And for that, I will hand the word over to our CFO, Salman Alam.

All right, thank you, Morten. And good morning, everyone. We'll start off with the group P&L. We had a record quarter, as Morten already mentioned, revenue-wise in Q3. We posted revenue of 544 million, up 43% year-over-year. Our year-to-date revenue as of the third quarter in 24 has now almost reached 1.5 billion. This is about 55% higher than the same period last year. Both the growth in the quarter and so far in 2024 has mainly been driven by our hydrogen infrastructure and hydrogen mobility business. Total operating expenses ended at 595 million in the third quarter, up from 496 million in the same quarter last year. Our cost of materials ratio was 56% in the quarter compared to 62% in the same quarter last year and 57% year-to-date in 2024. Quarterly fluctuations in the materials cost margin are to be expected, driven by product mix and certain special items. And in the third quarter, we recognize the diameter termination payment of 29 million at zero associated costs, which has an impact on the margin picture. Payroll-related expenses were 196 million in the quarter, up from 160 million in the same quarter last year, but decreased significantly year-over-year in relative terms compared to revenue, and also kept stable compared to the second quarter of this year, which is helped by contributions from the civic funding grant that we received in Canada earlier this year. Subtracting total operating expenses from total revenue, earnings before interest, taxes, depreciation and amortization ended at minus 51 million in the third quarter, equal to an EBITDA margin of minus 9%. This is a significant improvement compared to the EBITDA margin we saw in the same quarter last year of minus 30%, even when adjusting for the Daimler payment. Similarly, our year-to-date EBITDA margin is minus 17%, up from minus 33% in the same period last year. This trend is consistent with our expectations of improved profitability overall in 2024, as we recognize more revenue at solid gross margin and scale and operating leverage increases. Moving below the EBITDA line, depreciation at 55 million in the quarter compared to 39 million in the same quarter last year. Generally, the increase in depreciation is caused by a higher balance of depreciable assets due to our capacity expansion program. Of the 55 million, about 39 million relates to depreciation of property, plants, and equipment, as well as amortization of intangibles, and about 16 million relates to right-of-use assets depreciation. The resulting EBIT for the quarter was minus 106 million versus minus 154 million in the same quarter last year. Losses from investments in associates, which reflects our minority shareholdings in associated companies, ended at minus 3 million in the quarter and was largely unchanged compared to the same quarter last year. Finance income in the third quarter was $38 million. About $2 million of this comes from interest income on bank deposits, and the remaining $36 million relates to foreign exchange fluctuations. Finance costs in the quarter was $80 million, of which $54 million is related to non-cash interest on the two convertible bonds we have outstanding, and another $11 million is related to interest on lease liabilities and other interest-bearing debt bonds. The remainder under this line item relates to foreign exchange fluctuations. At the group level, we are not yet in a taxable position, and tax expense in the quarter was minus 2 million. Loss after tax ended at minus 149 million versus minus 197 million in the same quarter of last year. Moving on to the segments, starting off with hydrogen mobility and infrastructure. As a reminder, this segment is the business unit that manufactures hydrogen cylinders and hydrogen systems for the storage of hydrogen on board, either off-road or on-road vehicles, or for infrastructure purposes, such as the distribution of hydrogen from the point of production to the point of consumption. It also includes our industrial gas business in Europe and the aerospace business in the US. Looking at the financials for the segment, revenue in the third quarter for the HMI segment came in at 514 million, which is up 35% compared to the same period last year. The largest revenue component was hydrogen infrastructure, which made up 59% of revenue in the quarter and showed 34% revenue growth year over year. Hydrogen distribution modules made up the majority of revenue in this application vertical in the quarter. And we had product deliveries to blue chip customers like Air Liquide, Linde, Plug Power and Life. We also had deliveries of mobile hydrogen refueling units to a Polish energy customer, which contributed to the year-over-year revenue growth that we saw in the quarter. The second largest application area in the HMI segment, and actually the fastest growing, was hydrogen mobility, which continued its strong growth momentum that we've seen so far this year. It made up 29% of revenue in the quarter, and revenue increased by more than two and a half times compared to the same quarter last year. The drivers of this increase is primarily related to an increase in deliveries to our transit bus customers, such as Solaris, Caytano and New Flyer, combined with increasing deliveries to Nikola. The other segment, which consists of our industrial gas and aerospace business, had lower activity compared to last year, mainly due to timing effects. Moving to the right, looking at the year-to-date revenue, we see the same trend as we saw earlier in the year. Total revenue for the HMI segment is up 55% year-to-date compared to the corresponding period last year. And growth drivers to date is again the hydrogen infrastructure and the hydrogen mobility business. Looking at EBITDA on the right-hand side of the page, third quarter was the second quarter in a row where the HMI segment reported EBITDA positive figures. EBITDA for the segment in the quarter ended at 11 million, equal to an EBITDA margin of 2%. This compares to minus 29 million in EBITDA, or minus 8% in the comparable period last year. The positive EBITDA in Q2 and Q3 also keeps the year-to-date EBITDA in positive territory at 13 million, equal to 1% EBITDA margin, up from minus 7% in the corresponding period last year. Moving on to the battery systems and vehicle integration segment. This is the business unit that engages in battery systems production and complete vehicle integration of battery electric and fuel cell electric vehicles for the North American market. We also have a complete suite of proprietary key components required for electrification of heavy-duty trucking, and many of these are IP protected. The financials for a BVI segment are still influenced by the prototype and ramp-up mode that this business unit is in, and has been in for a while. The first trucks to Hino are expected to be shipped in the fourth quarter of this year, followed by commencement of serial production in 2025. The financials for the third quarter for the BVI segment are dominated by the Daimler contract termination payment of 29 million. This brings year-to-date revenue to 50 million, which is 61% higher than the same period last year. Moving to EBITDA, the Daimler payment was recognized with zero associated costs and thus has a positive impact on EBITDA in the quarter. We also recognized a contribution from the Commercial Vehicle Innovation Challenge, also called CIVIC. You may remember that this is a funding that we secured in Canada earlier this year, which positively contributes to EBITDA and aims to recuperate costs that have previously been incurred at the product development stage. Year-to-date, EBITDA as of the third quarter for the segment is roughly on par with last year. Taking a step back and looking at the group level again, moving to our balance sheet, total assets at quarter end was approximately 4.6 billion. On the asset side, the main meaningful changes can be seen in property, plant, and equipment connected to our capacity expansion program, as well as an increase in working capital. The working capital position is a reflection of the rapid growth pace we've had for several quarters in a row, as well as the ramp-up phase that BVI is in, where we currently have to procure inventory ahead of time before we're ready to ship trucks. Our cash position at the end of the third quarter stood at 269 million. And this is obviously before accounting for the 1 billion NOC capital raise that we completed recently, which will be recognized on the balance sheet when we report our Q4 figures early next year. Moving on to the equity and liability side of the balance sheet, there's no major changes at the end of the third quarter compared to the second quarter. Our equity ratio at the end of the second quarter was 38%. Moving on to the cash flow statement, which reflects the movements in the balance sheet and P&L, our operating cash flow in the quarter was minus 115 million. Operating losses before tax makes up the bulk of this at minus 151 million, combined with the mentioned increase in working capital, which was 59 million in the quarter. This is a result of the revenue growth for the hydrogen segment and the inventory build on the battery side of the business, which we've already touched upon. The main item on the cash flow from investing was capital expenditure of 128 million, which is mainly related to our capacity expansion program. There is still some capex to be dispersed end of this year and early next year, following final acceptance testing of all the equipment that we've taken delivery of recently. Cash flow from financing was minus 25 million in the quarter, making total cash flow end at minus 274 million. With that, I'd like to pass it back to Morten to walk us through the outlook.

All right. Thank you, Salman. We operate in an uncertain market environment with limited forward visibility of the map. That's a fact. The overall energy transition is moving forward, but at a significantly slower pace than we expected a few years ago. The factors are known and quite easy to understand. With increased cost of capital, inflationary pressure, technical challenges and uncertainties around regulatory support, projects have become more expensive and investor interest has declined. This has delayed the build out of the necessary supply chain and infrastructure to support the adoption of zero emission vehicles in both the battery electric and hydrogen electric mobility space. And with the election of Donald Trump as the next US president, the uncertainty has suddenly increased significantly. So. The whole world is now busy speculating on what impact Donald Trump in the White House will have on their business. It's all over every publication, every news outlet and every company presentation these days. And we're no exception. We're also trying to analyze what this will mean for us. Reading the headlines and listening to some of the statements made on the campaign trail, Donald Trump spells bad news for anything renewable or climate related. Many people behind Trump and the MAGA movement are vocal climate skeptics and believe that global warming is a hoax. Trump himself is expressively pro oil and gas and has opposed mandates to phase out the internal combustion engine and the forced transition to EVs. He has already signaled. that he will scrap the $7,500 incentive for light duty electric vehicles. And I've been critical towards the IRA. In his previous time in office, he was working for the softening of vehicle emission standards and contested individual states' rights to set stricter standards than the federal EPA standards. So on the surface, This is not good for the energy transition or for us. However, we think that this is a bit more nuanced than how it may appear at first glance. Trump's main goal is to secure more manufacturing jobs in the US. And that is what the IRA is really all about. Cumulative clean investments in the U.S. have nearly doubled since the IRA was enacted in August of 22 and has now passed the $1 trillion mark. The vast majority of these investments and the government incentives that go with them, they have gone to Republican states. So naturally, many Republican members of Congress are urging him to keep the IRA tax credits in place. Trump will likely seek some adjustments to the IRA, but I think that a full repeal with the associated job losses is a rather unlikely scenario. Another and potentially more important factor is the massive increase in future energy demand in the US driven by data centers to power the AI revolution. which really is a global race for supremacy, vital for both commercial and military purposes for US competitiveness and US national security. This increase in power demand can't be covered by more oil and gas alone, so more renewable energy capacity will be needed. And remember, renewable energy production in the U.S. actually grew during Trump's first term, including the renewable tax credits for renewable energy. So the forces of gravity around these two factors alone, the IRA driven investments and job creation in Republican states, and the surging energy demand from AI-driven data centers, that suggests that things are unlikely to change dramatically. Then there are a multitude of other mitigating factors. You have all the technical factors of how difficult it is to reverse bills that are already put into law and written into the tax code. You have long-term planning cycle of OEMs. We have to think far beyond the four year presidential term. You have sustainability targets of individual states. You have sustainability targets of customers. You have Elon Musk and his belief in electric mobility and the launch of the Tesla Semi next year. So lots of factors that suggest that the impact is unlikely to be dramatic. So to summarize, It's not that I don't worry. The uncertainty has increased significantly. And I don't think this additional uncertainty is good news for us. And the risk that this will have a negative impact on the short term has increased. But long term, I have a hard time seeing how a full reversal of the green shift will happen. I think the logic and the forces behind the energy transition and the shift to zero-emission mobility are strong. And I think that the US leaders, in the end, will see it in their long-term interests to place themselves firmly behind the steering wheel instead of taking a back seat on the developments of these key technologies. So despite the near term uncertainty, we are well positioned across core applications. Our technology is market leading. It's commercially ready. We have manufacturing capacity in place and we have a strong customer base. This puts us in a very good position. We have a large base load of business, mainly driven by industrial demand for hydrogen, which is partly independent of needed growth in renewable energy and new green hydrogen capacity. On top of that business, we have exposure to various mobility applications where the expected increase in demand will be cascading towards the end of the decade. Starting with the growth momentum we're seeing today in the transit bus area. And on top of that, the significant future upside on heavy duty trucking. So with a good base load in hydrogen infrastructure, we don't really need mass adoption of heavy duty trucks to be a profitable and cash generating company. Our current setup and commercial readiness will enable us to flex and also allow us to take advantage of additional opportunities that may arise over the next couple of years. So we're well positioned for the road ahead. For 2024, looking at year-to-date revenue and adding what we have in the order book for delivery this year, we're covered for the full year. We're on the final stretch, so this is now purely an execution game for us, ensuring that we manage the supply chain and that we get everything built and shipped to customers before year-end. There's always execution risk related to that and the risk that some deliveries will flow into January. But we're hoping that we will be able to get all the planned deliveries completed before year end. It's quite hectic at the moment, and I fully expect this to continue all the way through to the end of the year. And in parallel with that, of course, we will work on getting better order visibility going into 2025. So our financial targets for 24 and 25, they remain unchanged. As I mentioned earlier, the sentiment appears to have weakened recently, and the uncertainty has increased following the US election result. But we expect to reach our targets for this year, and from where we're standing today, we still believe that it's achievable to reach at least 50% revenue growth and a continued significant improvement in EBITDA margin in 2025. And beyond revenue and EBITDA, we target to reach the point where we generate positive cash flow by the end of 2026. We think this is achievable. First, we have significantly lower CapEx commitments following the completion of the capacity expansion program. CapEx will mainly relate to maintenance, plus some development and efficiency related investments. And that will be a significantly smaller number than what we have invested annually during the past few years. Second, the new terms with Panasonic have significantly reduced the new term capital commitment. The remaining prepayment has been more than halved and payment terms have significantly improved. Third, we have worked with our other suppliers and with customers to also improve payment terms, which will have a positive impact on our working capital tie-up and our cash conversion cycle. And finally, we will start generating volume in the BVI business, which so far has had no meaningful revenue, but a sizable cost load to develop the technology and to prepare for startup production. So summing it all up, we are still well on track. We acknowledge that the uncertainty has increased, but we also think that we have positioned ourselves well for the years ahead with flexibility to adjust to different market developments. And our main focus going forward, more important than any other target, is to secure that we get to cash break even in 2026. That concludes our presentation for today, and we will now open it up for Q&A. Mathias?

Thank you, Morten and Salman. So I think we can start with the first question then from Helene. how will the Canadian import tariffs impact the profitability of your business with battery system manufacturing Kelowna in Canada? Do you have any pass-on mechanisms for potential tariffs under the framework agreement with Hino? How do you consider the risk of not being competitive versus peers with parts of your manufacturing being located in Canada?

First of all, I think it's still very unclear what the tariffs will bring and what tariffs there will be in the end. So this is very early stage. And I think that a whatever, you know, a trade war is never good and it brings losses to everyone. But then I think if you look at how we are placed, we have our battery production in Canada. There's no way to get around from that. But we also have space and ability to produce these modules in the US. We have a cell contract from the US. We have also, looking beyond just the battery side of the business, on the cylinder side, we have a facility on the east coast of the US that can serve the North American business, both transit and truck. And we have access to key raw materials in the US, both battery cells, carbon fiber and other types of materials and components that we need in our business. So at this point, we don't think that, you know, it's possible. possible to be precise on where this will end up, but we think we have good opportunities to react and adjust to whatever environment that there will end up being when it comes to tariffs.

Thank you, Morten. And then another question from Helena. How do you consider your chances of getting any replacement work for the lost contract with Daimler? How far has new negotiations come? And has the election of Trump as the U.S. president impacted this process?

Yeah, so we, as we also mentioned at the point of the Daimler contract cancellation, we have had dialogues going on other opportunities, some for a very long time. The dialogues are positive. They have progressed. since we spoke about it the last time. And then this is not something that takes weeks. This is several months in order to get to an agreement. We're still hopeful that we, in not too long, will be able to give more clarity on what this is. And yeah, it's hard to say anything else at this point.

Thank you, Morten. And then a question from Enrico on Trump as well. So besides the uncertainty, do you also see any chances for changes for hexagons with President Trump in 2025?

I'm not sure how to answer that. I mean, right now, it's very hard to see what the actual outcome is going to be. As I mentioned, there are some very negative signals and there are also a lot of positive signals. In the end, I think what Trump wants is to get the American business going, to make sure that there is manufacturing happening in the U.S. and that business gets flowing. Is there also an opportunity that this is going to help us and bring more business to us? Certainly. But I think at this point, it's very hard to speculate on where this is going. We are preparing for all scenarios, to put it that way.

Thank you, Morten. And then a two-part question here from Torben. Can you provide more information with regards to the China joint venture, status of hydrogen cylinder certification? And the second question, can you comment on claims made in the Norwegian media that the hydrogen tank system on board the vessel Skolebass lacked appropriate certification? So, Morten, I guess you can take the first one.

Yeah, so on China, it's going forward. So, again, the building is there. The equipment is there. We're working on the final pieces of acceptance testing. We are not seeing precisely how long the certification timeline will be. It's very hard to speculate there. So... On the good side of things, I think China is really moving forward when it comes to hydrogen. I mean, it's very alive, very vibrant. It's all type three cylinder based at the moment. But just as a data point, there are more heavy duty hydrogen trucks in China than there are hydrogen vehicles of all classes in all of the rest of the world combined. So, I mean, this is really moving forward and it's growing quite quickly. Again, a type three based market. We are confident that we have a very competitive manufacturing facility and technology once we get certified into that market. And in the meantime, I think we are working on alternative outlets for the volume that we can manufacture in China that don't require China certification. And that is, you know, other Southeast Asian markets and also China. working on how to bring some of that into our European business.

Thank you. And Salmon, you can take the second question on the school bus.

Yes, yes. I think the latest information we have on the school bus is that that ship is supposed to be docked next summer and then have both the hydrogen cylinders but also the fuel cell installed on board that vessel next summer. So there's no change to those plans with the latest information that we have. Okay.

Thank you. And then another question from you, Salman, from Helene. Could you shed some more light on how you expect working capital to develop with the better payment terms?

Yeah, absolutely. So I think generally, Helene, I think working capital this year has been a source of cash spent for us. One has been the strong revenue growth that we've delivered. The second is the BVI business, which is ramping up. There is a lot of inventory buildup which needs to happen before you can start shipping trucks. That has an impact on the working capital buildup and also the cash conversion cycles. You had some, I would say, extraordinary effects this year. I think looking to next year when the full group is in serial production, I think you'll have more of a normalization just from the fact that you're now generating revenue across the business. That's one aspect of working capital improvement. The other aspect of working capital improvement, which Morten touched on in his comments today as well, is the work that we've done this year to improve our payment terms, especially towards our suppliers. So we've been in an environment where we've had to prepay for materials. Now we're on to payment terms, and that has a big impact on the working capital terms that we're able to get. So I think In terms of specificity for 2025, we'll come back to that when we report our Q4 numbers next year. But there should be a significant decrease in the amount of working capital that is tied up if you measure it, for example, as a percentage of revenue.

Thank you, Salman. And then a final question for you as well from Daniel. When you say cash flow positive in 2026, which cash flow definition are you referring to? We're referring to total cash flow, total cash flow. And then one final question that slipped in here. With the CapEx program now complete, how should we think about maintenance CapEx levels in the near term? This is from Elliot.

Yeah, so I think, Elliot, in Q4 and probably also still in Q1 next year, we'll have the final payments, as I commented on, related to our current capacity expansion program. So those will keep going for a remainder of this year and probably also slip, some of it will probably slip into Q1 next year. I think looking beyond this, as Morten said, we'll be very selective with new investments. It's mainly maintenance capex. It's mainly very select investments that we would do to de-bottleneck some of our production processes. And then the exact number that we should expect for 2025, I think we'll also get back to, but it will be a significantly lower amount than what we've seen so far this year and what we have as full year expectations.

Very good. So that was the last question. So thank you, Morten and Salman. That sort of wraps up the questions we have from the audience. So on behalf of Hexagon Pures, I would like to thank you all for spending your time with us this morning. And we look forward to seeing you again. So thank you very much from Oslo.