Hexagon Purus Asa

Hi, and welcome to Hexagon Pyrrhus Q4 2025 presentation. My name is Mattias Meidel, 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 Alaa. 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, as usual, so please feel free to enter a question via the function on your screen. And with that, I would like to pass the word over to you, Martin, who will take us through the highlights of the quarter.

Thank you, Mattias. And good morning, everyone. Thanks for joining our webcast this morning. 2025 was a challenging year. Looking back, we had four key points. One, after a long period of significant growth, the activity in 2025 dropped dramatically, driven by significant market uncertainty that was amplified by regulatory changes, tariffs and geopolitics. That resulted in lower demand and weaker revenue compared to 2024. Number two, we took decisive actions to adapt the operating model to a new market reality to reduce the cost base and protect liquidity. Our primary focus in 2025 was to align the cost base with the near-term expected market conditions. Number three, we also undertook an extensive review of our entire business portfolio to assess our options to improve capital efficiency, to extend the liquidity runway, and to preserve flexibility to support long-term value creation. And finally, number four, we made focused efforts to diversify the customer base across our core applications and were able to broaden the customer portfolio. We saw the positive impact of that now in Q4, where the uptick in volume was driven by several new hydrogen distribution customers. More on that in the outlook section. After a challenging start to the year, we saw a significant uptick in Q4. On the left, you see that revenue for the quarter was 468 million NOC, representing an 18% increase year-over-year and an 85% increase from Q3 2025. The main driver for the revenue increase was significantly higher volume in transit bus, hydrogen distribution and aerospace. The higher volume also translated into improved margins. EBITDA for the quarter was minus 99 million NOC, including 76 million NOC of items affecting comparability. These are primarily related to inventory revaluations and impairments. That means that the underlying EBITDA margin was minus 5% in the quarter, significantly closer to breakeven. So we see the positive impact of higher volume and a leaner cost base. And to the far right, we exited the quarter with an order backlog consisting of firm purchase orders of approximately 728 million NOK, more than 90% of which is for delivery in 26. I'll come back to that in a minute. Overall, we're happy to see the uptick in volume in Q4 and happy to see that the cost measures we've executed are having a positive impact on profitability. Looking at revenue composition, hydrogen infrastructure made up the largest part of revenue in Q4, with a share of 42%. This is a decrease in relative terms from Q4 last year, despite the strong sequential growth from Q3 2025. Transit bus continued to increase its relative share in Q4 compared to last year, with a 10 percentage points increase. And the six percentage point increase in other applications is driven by higher aerospace activity in the quarter. So for the full year, we ended at a revenue composition consisting of 29% distribution, 36% transit bus, and 27% other applications, which is a mix of industrial gas bundles and aerospace. That's a significant mix shift from last year, where more than half the business was in hydrogen infrastructure. Looking at the full year revenue bridge, we had significantly lower revenue for hydrogen infrastructure. Very low volume in the first half of the year. In fact, we had more volume in Q4 alone than in the first three quarters of the year. Around 60% of the full year volume came now in Q4. So, hydrogen infrastructure is the key reason for the year-over-year revenue decline, driven by delay in new green hydrogen projects and delayed commissioning of the significant customer fleet additions that we sold in 2024. Hydrogen mobility declined by 13% from last year, where strong growth in transit bus almost offset the loss of the heavy-duty truck volume that we had in 24. On the battery electric mobility side, the volumes and movements are small, but the 9% increase is related to deliveries of battery electric trucks to Hino throughout the year. These are trucks that will be used for test and validation purposes and for customer demos. In other applications, the main growth driver was aerospace, which compensated for lower demand for industrial gas bundles. And then to the order book, we went into 26 with 728 million knock-in orders, of which 92% is for execution this year. In terms of product areas, the three largest areas are hydrogen infrastructure, hydrogen mobility and other applications, where the largest part of the latter is aerospace. These figures are from the beginning of the year, so they don't include the 14 truck order from Hino that we got in January, amongst others. Looking at the overall situation, we have satisfactory demand and revenue visibility through Q1 and parts of Q2. We're encouraged by the customer dialogues we're currently having and see that there is potential for growth in 26, but the market is still uncertain. And at the current run rate, the order intake is below what we need to break even. We made good progress on the portfolio review that we initiated last year. It's taken time, but we're getting traction on the different initiatives. We've been looking for ways to strengthen our financial position and extend the liquidity runway, while preserving future optionality to support long-term value creation. We've had a strategic review ongoing for the BVI business. We've looked at the different parts of the HMI portfolio, and we're working on the China JV. Since last quarter, we made progress that will materially impact the company going into 2026, both in terms of capital efficiency of the business and the liquidity runway. So let's start with the BVI business. Now I want to give some background for the actions that we took now in January. Over the past years, we have built an industry-leading technology for battery electric heavy-duty mobility. This has been tested and validated on several customer platforms. And those that have followed us for a while will remember that we signed some very significant agreements with OEMs a few years back. when the expectations were that vehicle electrification would scale quickly. So based on those signals back in the day, we scaled up, built a great organization, and invested in sizable manufacturing capacity. And then the market turned. Over the past 12 to 18 months, the uncertainty around regulation and tariffs in particular has materially changed the near-term outlook. And we're sitting with significant capacity that can't be utilized. Looking a bit forward, we believe in the future of truck electrification. And the strong positive feedback that we're getting now from the customer demo programs, we're confident that the technology that we have is competitive and attractive. But it's challenging, if not impossible, to get the business in its current form to profitability short term. So, in response to a weaker and more uncertain market in North America, we initiated a strategic review of the BVI segment back in June, evaluating the full range of operational, structural, partnership and transaction alternatives. The dialogues we've had as part of that review leads us to conclude that it's unrealistic to execute a value accretive transaction in the current market environment. But at the same time, we believe that fleet electrification will materialize, albeit on a longer time horizon. And we're confident that the technology we have developed has substantial medium to long-term value potential. So in response to a weaker and more uncertain North American market, we initiated that strategic review back in June. Again, as I talked about, the full range of operational, structural, partnership and transaction alternatives we had under discussion. So we decided now to operate the BVI segment scaled back to a minimum level to align with the current market condition while preserving long-term strategic optionality. That means that we had to scale back the operations around two-thirds of the workforce have been let go and we are going to consolidate our footprint to the Dallas facility, leaving the Ontario and also eventually going out of the Kelowna facility over time. We will take a restructuring cost of approximately 0.7 million now in Q1, 2026. As part of that, we have also renegotiated the battery cell supply agreement, eliminating the overhang of the 12.9 million in prepayment that was there. And since all the capex now has already been taken, we will retain the ability to quickly scale back up again when demand is growing. So in January, We received an order from Hino for an additional 14 Class 6, 7 and 8 trucks, with expected delivery towards the end of the second quarter and the beginning of the third quarter of 26. Given now the significant cost reductions taken, this is expected to allow the BVI segments to operate at close to cash neutral levels in aggregate through mid-2026. A key enabler of that is the fact that a substantial portion of the components is already sitting in our inventory, which limits the need for additional working capital to complete these vehicles. And then again, with the renegotiated Panasonic contract, which eliminated the outstanding prepayment, the overhang related to that has been removed. Last week, we signed an agreement to sell 100% of the shares in Masterworks, our Westminster business unit, to SpaceX. The Westminster business has performed well during the past years, partly due to significant growth in demand for cylinders for aerospace applications. Aerospace used to be a small part of the business, but has recently become the dominant driver of revenue in our Westminster unit. The space exploration sector is growing rapidly due to falling launch costs and higher demand for satellites, both for commercial and national security purposes. Along with that growth comes a preference from the aerospace customers to secure full control of critical components, like high pressure cylinders, by bringing the competence and the manufacturing capacity in-house. Because of that, we believe the future of our aerospace business is best developed under an industrial owner with a dedicated aerospace focus. The transaction with SpaceX secures a good industrial home for the Westminster business, while it significantly strengthens our financial position and allows us to focus more narrowly on our core strategic priorities and to reduce risk. I also want to mention a few words on China. The Chinese market remains strategically important for us, representing the largest global market for hydrogen-related mobility and infrastructure solutions, and the most competitive supply chain for materials and components. The market has developed slower than expected. It took longer than we thought to establish operations there. And there have been frequent changes in regulatory requirements to qualify for local certification. But it remains the most active hydrogen market in the world today. So we have a manufacturing plant that's operational. We have validated the process, the product and the quality by manufacturing cylinders for our European infrastructure market there last year. And we're now in the final stage of the process to receive certification for the local market. But at this point, the JV is not yet generating profits. So to manage our liquidity situation, we've engaged in discussions with CIMC and RIC regarding potential financing alternatives for 2026. We're seeking ways to minimize our cash contribution while maintaining the JV's operational continuity and market presence. And in parallel, we're jointly exploring opportunities to simplify the joint venture structure, to improve cost efficiency and execution speed, with the main purpose to secure our competitiveness in the Chinese market. We're well aligned with our JV partner, CMC Henrik, so I'm hopeful that we will be able to conclude on the solution within a reasonably short timeframe. So that was the company update, and I'll now hand it over to our CFO, who will take you through the financials. Thank you.

All right, thank you, Morten, and good morning, everyone. Let's have a closer look at the fourth quarter 2025 results. In the fourth quarter of 2025, we posted revenue of $468 million, which is 18% higher compared to the same period last year, and 85% higher than the third quarter of 2025. The increase in revenue is primarily due to strong contributions from transit bus and aerospace applications. And compared to earlier this year, hydrogen infrastructure also recovered and contributed strongly to revenue in the fourth quarter. Full year 2025 revenue amounted to $1,144,000,000, representing a 39% decline compared to the prior year. The main driver of the year-over-year revenue decline for the full year was softness in hydrogen infrastructure, which had a very solid 2024. Operating expenses ended at $568 million in the fourth quarter. The cost of materials ratio was 72% in the quarter and was inflated due to inventory write downs, which amounted to approximately $67 million in the quarter. When excluding these effects, the underlying cost of materials ratio was closer to 59%. When looking at the full year cost of materials ratio, the underlying cost of materials ratio was closer to 56%, which is lower than the average that we've seen in 23 and 24, predominantly due to the fact that hydrogen infrastructure made up a significantly smaller part of revenue in 2025. Payroll-related expenses were 135 million in the quarter, which is about 21% lower compared to the same period last year. Other operating expenses were 95 million in the fourth quarter, which is up sequentially from the third quarter, driven by higher activity-related costs across warranty, freight, plant operations and engineering and testing, as well as about 10 million of one-off items related to development write-offs and customer insolvency. Subtracting total expenses from total revenue, EBITDA ended up at minus 99 million in the fourth quarter, but this includes 76 million of items affecting comparability, which then includes inventory write-downs, warranty provisions, bad debt expense, and restructuring costs. For the full year 2025 EBITDA ended at minus 618 million and includes 186 million of items affecting comparability. Moving below the EBITDA line, depreciation and amortization amounted to 343 million in the quarter and was negatively impacted by 282 million in fixed asset impairments. Of this, 223 million relates to the company's BVI segment, recognized as part of the annual impairment testing based on updated assumptions and the revised business outlook for the segment following the restructuring we announced a few weeks ago. Another 59 million relates to the HMI segment, which mainly reflects write-down of production equipment that is no longer in use. Losses from investments in associates ended at minus 9 million in the quarter and reflects the operating activity in the part of the China joint venture which is not consolidated. Finance income in the quarter was 24 million, where 3 million was related to interest income on bank deposits, and 21 million was related to foreign exchange fluctuations. Finance expense was 83 million, where 67 million is related to non-cash interest on the convertible bonds, and another 9 million was related to interest on lease liabilities, and the remainder was foreign exchange fluctuations of 6 million. At the group level, we are not in a taxable position and tax expense in the quarter was negative 2 million. Loss after tax then ended at minus 508 million versus 667 million in the same quarter last year. Moving on to the segments and starting off with hydrogen mobility and infrastructure. As a reminder, this segment is the business unit that manufactures hydrogen cylinders and hydrogen systems for 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 U.S. Generally, the HMI business unit delivered a strong finish to 2025, converting a sizable order backlog into deliveries through disciplined execution. Revenue in the quarter was robust and resulted in close to break-even EBITDA, reflecting higher activity levels and the impact of cost reduction measures implemented earlier in the year. Workforce reductions during 2025 have lowered headcount in the segment by about 30%, leaving a cost base which is better aligned with current activity. However, we continue to monitor capacity costs closely, given the ongoing market uncertainty. Looking at the segment financials, the revenue in the fourth quarter was $427 million for the segment, which is up 20% year-over-year and up 83% sequentially from the third quarter. The year-over-year growth was primarily driven by higher activity in hydrogen mobility, particularly transit bus applications, as well as strong growth in aerospace. Sequentially, revenue also benefited from a clear rebound in hydrogen infrastructure activity, with the delivery of 27 hydrogen distribution units in the quarter. For the full year, segment revenue ended at just north of a billion NOC, which is down 42% compared to 2024. As mentioned, 2024 had a very solid market for hydrogen infrastructure, which was much softer in 2025, and the macro environment has led customers to extend asset utilization and delay new investments, combined with a push out of new green hydrogen projects coming online. Turning to profitability, EBITDA in the quarter was negative 2 million, which includes 31 million of items affecting comparability, mainly related to inventory effects. Looking past these items, EBITDA was positive 29 million, corresponding to a margin of 7%. The underlying profitability reflects higher activity levels, combined with the cost reduction measures implemented during 2025. For the full year 2025 EBITDA was negative 268 million, which is also impacted by restructuring items and other items affecting comparability of a total of 118 million. 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 U.S. market. As mentioned earlier today and also as announced in January, we've implemented significant cost and operational measures in the BVI segment to align the business with the current market conditions while trying to preserve long-term optionality. These measures, together with the recently received orders from Hino for 14 trucks, are expected to support operations of the BVI segment that close to cash neutral levels in the first half of 2026. Operationally, the Class 8 battery electric truck demonstration programs have been successful, with vehicles tested several leading U.S. logistics customers, and very positive feedback on performance, range, and reliability. The U.S. market environment, the regulatory uncertainty continues to be very challenging and continues to weigh on heavy-duty electrification, resulting in generally longer sales cycles and limited near-term order visibility for the segment. Revenue for BVI in the fourth quarter was $39 million and primarily comprised the vehicle deliveries to Hino and lease revenue from Dallas as we subleased part of the Dallas facility to Hino. EBITDA for the segment was negative 62 million in the fourth quarter, but this includes 45 million of inventory write-downs. These inventory adjustments were largely a consequence of the announced scale-down of the segment, which led to a reassessment of inventory composition, building materials, and future use, resulting in certain inventory being deemed obsolete. Zooming out to the group level and turning to the balance sheet, the balance sheet amounted to approximately 3.5 billion at the year end, down from around 4 billion at the end of the third quarter. On the asset side, we saw sequential decreases in inventory due to the strong revenue development in the quarter, combined with inventory write-downs we've already described. We saw an increase in trade receivables sequentially, which was in line with higher activity levels, while there was a larger than usual decline in property, plant, and equipment due to fixed asset impairments in BVI and HMI, as mentioned earlier today. Cash at the end of the fourth quarter stood at $322 million, which is down from $360 million in Q3. On the liability side, the non-current liabilities, the increase in non-current liabilities reflects the payment in kind infrastructure we have on the convertible bonds. Total equity ended at 579 million, which corresponds to an equity ratio of 17%. The decline versus last year and the decline versus Q3 of this year is mainly driven by losses in the period, including significant impairment changes taken across the year. These impairments are non-cash and reflect balance sheet adjustments where necessary. When assessing the equity ratio, it is therefore important to consider the capital intensive nature of the balance sheet and the long-lived asset base. At the same time, we've taken decisive actions to strengthen liquidity, reduce capital intensity, and lower the cost base. And the current equity level is therefore not expected to constrain near-term operations. Moving to the cash flow statement, which captures the changes in the balance sheet and income statement. Operating cash flow for the quarter was positive. at 14 million there were significant non-cash effects in the quarter which combined with working capital release of 69 million brought operating cash flow into positive territory for the first quarter in about three years cash flow from investments ended at minus 46 million where capex towards PPE was 15 million and capitalized product development was 26 million The latter number is a bit higher than what we've seen in prior periods in 2025, which mainly reflects the completion and final validation of select product and technology initiatives during the quarter, especially in the BVI segment. Cash flow from financing and currency movements was negative 7 million and a quarter, resulting in net cash flow of minus 39 million and the cash balance at the end of the fourth quarter of 322 million. This slide shows the clear step change that we've had in our cash profile throughout 2025. As we've communicated previously, cash outflow was elevated in the first half of the year, driven by lower revenue, restructuring costs, spillover capex from 2024 and limited working capital release. As expected, this improved materially in the second half, reflecting a leaner cost base, lower capex and improved conversion of inventory into revenue. Looking ahead, we expect to continue to work down inventory as deliveries are executed, which should support further working capital release. This is expected to offset a significant portion of operating losses, while capex will remain at low levels. In parallel, we have announced several structural measures that further supports the cash profile going forward. This includes the agreed sale of the aerospace business, which strengthens liquidity through cash proceeds at closing, discussions with our Chinese joint venture partner aimed at minimizing cash outflow to the Chinese joint venture in 2026, and the recent scale down of the BVI segment with the focus on operating close to cash neutral levels until mid-2026. Taken together, while the underlying business is still expected to consume cash in 2026, the combination of a leaner cost base, low capex, working capital release and structural measures is expected to meaningfully reduce net cash outflow and be supportive for our overall liquidity position. With that, I'd like to pass it over to Morten to talk us through the outlook.

All right. Thank you, Salman. Let's take a look at what we expect ahead. We're still facing uncertain market as we enter 2026 with limited demand visibility. We have more comfort in the short term with a good order book for Q1 and decent visibility for Q2, but we still need to fill the second half of the year. This, by the way, is not an unusual situation to be in at this time of year in our business. We were more or less in the same spot last year, and we do have quite a bit in the pipeline that isn't landed yet. And with what we've done in terms of taking out costs, we do have a leaner cost base in both HMI and BVI with a significantly lower breakeven level. and we'll get a liquidity boost once the sale of the US aerospace business has closed. But let's walk through the three main product areas and look at the demand dynamics for each of them. The hydrogen distribution part of our business serves two main customer types, the major industrial gas players and the emerging new green hydrogen players. During 2025, we have made focused efforts towards diversifying the customer base for our hydrogen distribution modules to reduce exposure to a handful of larger customers. And we saw the impact of those efforts in Q4, where demand is increasingly coming from smaller industrial gas and logistics companies, where the use cases remain a mix of traditional grey hydrogen distribution, and emerging green hydrogen applications. We remain positive on the long-term potential for our hydrogen distribution business, despite near-term demand visibility being limited. It's better today than it was this time last year, but we're not back yet to 2024 levels. And while the order book visibility remains limited beyond the first half of 26, The current customer dialogues are encouraging. So looking at the overall situation and the existing order backlog, we're planning for modest volume in 26 and currently expect the full year potential could be somewhat stronger than for 2025. Transit bus has developed quite well over the last couple of years driven by growing demand from municipal and local public transportation authorities across Europe and even some states in the US. In Europe the hydrogen buses are gaining broad momentum across the continent backed by strong regulatory support. The EU is targeting 100% of city bus sales to be zero emission by 2030. And hydrogen is a good complementary technology to battery electric, particularly for routes with extended range requirements, hilly terrain or in hot or cold climates. So we see an increasing number of bus OEMs introducing hydrogen platforms as part of their zero emission offering. And that helps diversify our customer base and is also an important factor to drive adoption. Customers get more options to choose from and can select between different platforms to serve their needs. We continue to expect the overall market for transit bus to remain strong in the near to medium term, but we expect to have lower volume on our side in 26 than in 25 due to capacity constraints at some of our customers and ramp up limitations at others. Our overall order visibility then is good through mid-2026. On the BVI side, given the current state of the US truck market, we have, as I mentioned, limited visibility and limited expectations short term. The overall truck market is weak for all technologies, with fleet operators opting to prolong asset utilization and postpone fleet replacements in light of the economic uncertainty. But it's not all dark. Many fleet operators continue to pursue long-term decarbonization strategies, and there are still many state-level incentives for clean mobility available to support those who do. But we also realize that it's going to take time to get up to the required volume run rate to break even. So that's why we acted now in January to dramatically reduce the cost base and the liquidity needs for that business. Operationally, the demo programs for the Class 8 battery electric truck have been very successful so far. We've had vehicles in testing at several leading US logistics and distribution customers. And the feedback from these programs have been great. The truck has performed really well, both in terms of drivability, range efficiency and reliability. So with the trucks now delivered in Q4 and the ones on order, we'll be able to increase the number of demo programs and hopefully be able to convert several of those into orders. So we're focusing more short term in this business now. With the orders received in January, we currently have visibility through the middle of the year. And we can float through that period with minimal use of liquidity. We enter 2026 with a significantly lower cost base and an extended liquidity runway. which will better enable us to navigate through the year and manage the inherent market uncertainty. Our annualized operating costs going forward will be significantly lower. Working capital requirements are also significantly lower, given that we can convert things we have in inventory now to cash through sales. CAPEX will also be limited, given that we have completed the expansion program and have enough capacity for the foreseeable future. On top, the divestment of the US aerospace business will increase liquidity once the transaction closes. And finally, we expect to conclude on the financing arrangement for the China JV in the near future, which we expect will minimize the cash outflow to China in 2026. So in sum, all of these measures strengthen our financial position and lengthens the liquidity runway. In terms of priorities for 26, they remain the same as they have been for quite some time. We need to fill the order book. So we've done a lot on the cost side, but we need higher revenue to reach breakeven. We will also continue working on balancing costs with a revenue outlook and continue to review and assess the business portfolio, looking for more capital efficient ways to operate the company. And finally, all this is with the overall aim on maintaining sufficient liquidity until we have stabilized the business above the breakeven level. It's not that long ago that my main worry was centered around how to find enough people to scale up the business fast enough. For the past year, we've had the opposite challenge. And when managing that challenge, we've become significantly more short-term focused. The portfolio review is aiming to focus our operation around the most attractive parts of the business with good near-term profitability and cash prospects. and avoid deploying liquidity to opportunities that are far out in time. At the same time, we also try to retain as much as we can of the future upside potential. We are the leading company in our space, with a leading technology platform and leading customer positions. Markets look challenging short term, but we're confident that our technology will be relevant in the future, So we're restructuring our operation with that in mind. Simplifying, taking out costs to match the market conditions short term, and bridge the time until markets recover. We're not fully there yet, but we're well on our way. Working on the right things, taking necessary measures, and we will continue to operate in that same way going forward. So that concludes our presentation for today, and we will now open it up for Q&A. Mathias?

Thank you, Martin. So we can start off with a question from Frank. Does the order book of 728 million still include aerospace?

Yes, it does. So that still includes aerospace and the aerospace-related backlog from – If you take those from Q2 to Q4 of this year is about 135 million NOK.

Thank you. And then a question from Johannes here for you, Morten. Why was the business, the aerospace business sold to SpaceX instead of using the opportunity to generate orders here? How has the company supposed to make new orders now?

So the aerospace market is attractive in itself and you have to balance out what the future is going to look like with the opportunities that you see that you have internally and as I mentioned the very rapid growth in the aerospace business in general and then with the pressure vessels being a very critical component of any rocket or spacecraft So in our dialogue with our aerospace customers, it's clear that they want to insource this. So when we balance them, what does the long term look like? How much should we put into scaling this business up? we decided that at this time it's probably best that that business is developed under one of the space exploration companies, which gives again a good home for the business, but also for us something that alleviates the liquidity concerns short term.

Thank you, Martin. And then a question here from Erik. What is your analyzed operational cost base going forward in 2026 approximately, Samant?

So, we retain the ambition around cost cuts as we've stated previously. So, we're still looking for 350 million of savings compared to where we were at run rate at the end of 2024. So, that's still the ambition for 2026.

Thank you. So that was actually the last question we've gotten in today. So I'd like to thank you both for presenting. And then thank you all for following us today. And on behalf of Hexagon Pures, I would like to thank you all for spending time with us this morning. And we look forward to seeing you in the next quarter.