Vow Asa

Good morning, everyone, and welcome to this first quarter presentation here at WOW. This morning, I have a few people with me. So Cecilia Heckneby, our new CFO. I also, for the Q&A session, have with me Jonny and Tina, who's been with the company for a while. My name is Gunnar Pedersen. I'm the new CEO of WOW. I will start by sharing some highlights with you, and then Cecilia will take you through the financial numbers. I will come back and talk a little bit about the market and the business and how it develops, give you an update on that, and then finally some closing remarks before we open up for questions. So next up is the old disclaimer. You should probably read this later on by yourself. So moving on to the highlights. Year on year, our order backlog has nearly doubled. On the performance side, we show double digit margins. And the activity level is quite high, specifically in the cruise sector. We'll come back to more details on this. We are delivering equipment to 18 cruise vessels this year, and we are commissioning 12. The pipeline, the sales pipeline in the maritime sector is strong. We'll take you through some details on that as well. But our industrial segment is suffering a bit from delayed order intake. The biocarbon and biochar projects are progressing and commissioning is due to start in the second half of 2025. Also lately, we've had some very positive development on raw green metals, and we'll get back to that towards the end of the session. So some key financial numbers first. I'll start on the left-hand side with the revenues. So revenues for Q1 versus Q1 2024 is up by 12%. That leaves us at 261 million in revenue for Q1. 12 months rolling, we are slightly above 1 billion in revenue. And we can see a slight growth in that. The adjusted EBTA, the nominal number, is showing positive developments. However, The legacy projects and the currency turmoil is hampering somewhat on the margins. Our order backlog, we're on the right hand side now, is strong. You can note the shift in Q4 last year. So with that shift, we have a very strong backlog. The new contracts that we enter into now have improved margins. And also, there are mechanisms in the contracts for price adjustment to take down the risk from inflation. And by that, I think I will ask Cecilia to take us through the details of the numbers. And then I will return on the market and business update. Cecilia.

Good morning. I will take you through, I will give you an update on the financial number for the first quarter, starting with the operating key figures. And the reporting currency is in Norwegian kroner. In the first quarter, revenue increased by 12% to 261 million, up from 232 million in first quarter last year. The increase in revenue is driven by growth in the industrial solution segments and aftersales, while the maritime solution segment was in line with first quarter last year. Gross profit is up 3 million. The gross margin of 29% is slightly lower than in first quarter last year and is still impacted by progress on legacy contracts in backlog and in addition to adjusted cost forecasts. Employee expenses of 38 million is down 8 million from first quarter last year. partly related to restructuring in the french subsidiary but employee expenses vary with project activity and hours allocated to projects other operational expenses of 25 million in the quarter were 3 million up from one year earlier. The increase is mainly related to changes of IT suppliers, recruitment costs and in-house consultants. There were non-recurring items of 4 million in the quarter related to changes in management. An adjusted EBITDA ended at 13 million, which is up 8 million from the same quarter last year, showing increased operational profitability. Let's look into the development of the segments. WOW has three main segments. The maritime solution segment delivered 108 million in the quarter, which is in line with the first quarter last year. Performance in this segment is driven by phasing of projects and equipment deliveries. The adjusted EBITDA margin in the quarter was 12%, which is slightly lower than one year earlier. And adjusted EBITDA in the quarter was 13 million. Profitability in the maritime segment is still impacted by progress and delivery on legacy contracts. The backlog amounted to 1.3 billion and has more than doubled compared to the same quarter last year. After sales continue to grow with increasing number of ships in operation equipped with BAO systems. Revenue of 58 million in the quarter is up 22% from 48 million in first quarter last year. measures taken to improve profitability are starting to show results. The adjusted EBITDA margin of 15% is up from 12% in first quarter last year, giving an adjusted EBITDA of 9 million in the quarter, up from 6 million in first quarter 24. The industrial solution segment continued to deliver on large ongoing contracts during the quarter, and delivered revenue of 94 million, up from 78 million with adjusted EBITDA of 1 million. Profitability in this segment is impacted by costs related to tendering, project development and holding capacity in anticipation of orders in new industry verticals and is something we will look into. There is good project on feed studies, but it takes time to convert into firm orders. Administration consists of expenses not allocated to the business segments. These are costs related to general administration, owner cost and costs associated with being a listed company. In the first quarter, administration cost totalled 14 million. And 4 million of the costs are non-recurring related to changes in management and associated transitional costs. The increase of 2 million in adjusted costs are mainly related to in-house consultants. Moving on to the financial performance in the quarter. The positive operational development is offset by higher depreciation and amortization costs related to increased number of completed R&D projects. Share of net loss from Vav's share in VGM and negative development of net finance. Result before tax ended at negative 30 compared to negative 17 in first quarter last year. As well as reports in Norwegian kroner, key financial figures have been impacted by significant fluctuations in foreign exchange rates in the quarter. And we have a net foreign exchange loss of 12 million in the quarter compared to a foreign exchange gain of 4 million in the same quarter last year. Interest costs of 13 million are down from 14 billion in the same quarter last year. There is a real storm in the international currency market, and the turmoil had some significant effects around the cutoff date 31st of March, with the development in Norwegian kroner against Euro down 3% and down 7% against US dollar from the 31st of December. And there is a net foreign exchange loss of 12 million included in the financial items in the quarter. The majority of the contracts on order backlog is in euro and in US dollar, and about 60% of the project cost are in the contract currency. In a currency market with less fluctuation, there has been a natural hedge, but in the volatile currency market we have seen lately, it impacts our key financial metrics more. The backlog and other balance sheet items are translated to NOC on the currency rate at quarter end, giving an unrealized currency loss, while profit and loss items are translated to NOC based on average monthly currency rate. We watched the development closely and are considering alternatives to mitigate the currency risk. Now let's move over to the balance sheet. There are two main developments I would like to highlight. that is the development in debt and working capital. Interest-bearing debt amounted to 480 million at quarter end, up from 395 at the 31st of December. That is an increase of 85 million. And as you can see on the bottom on the right-hand side of this slide, we made a significant down payment on loan in 2024. And the increase in net interest-bearing debt in this quarter is related to the drawn amount on our working capital facilities to offset working capital movements as net working capital has increased compared to year-end 2024. mainly due to phasing or milestone payments from customers and supplier payments. Other assets have decreased due to reduction of prepayment to suppliers. Working capital will fluctuate and it is an important area for us to watch closely. And we have a close and positive dialogue with the bank. And subsequent to the quarter, amended covenant were secured with improved headroom and extension of our loan facility until third quarter 2027. Let's turn to the cash flow. Looking at the cash flow development, we started the quarter with 47 million in cash. The negative operating cash flow in the first quarter is mainly related to working capital movement due to significant milestone payments from customers and supplier payments. Investments are reduced compared with historical levels as several R&D projects are completed. The drawn amount on working capital debt facilities in addition to leasing and interest payment lead to a temporary net increase in debt during that quarter. We are going out of the quarter with a relative comfortable cash situation with 41 million in cash and 136 million in available liquidity. Milestone payments from significant projects impact the cash flow and it is important for me and my team to monitor and manage liquidity, working capital and debt closely. Before I leave the floor to Gunnar, a few words about my current priorities. My colleagues have already started several initiatives for financial improvement, but it is a priority for me to look into how we manage working capital to optimize cash flow from operation and enhance our financial position. This is especially important for WOW with long production timelines and project milestone invoicing with long receivable cycles. Exchange rate risk has earlier been considered as limited in VAU with a large part of our cost in the same currency as in the contracts. But in a more insecure world, we see that significant frequent currency fluctuations impact key financial indicators. A second focus area for me will therefore be to consider alternatives for how we can manage for an exchange risk related to supplies and contract management. WOW made significant down payments on its loan during 2024, but financing of debt and overseeing the capital structure will be a third focus area. And finally, the fourth focus area is operational performance. Several initiatives have already been started to enhance efficiency, reduce cost, and increase performance. And I look forward to contributing in these processes. Now, Gunnar, you will take us through a market and business update.

Thank you, Cecilia. So now for a market and business update, and I'm going to start with the maritime segment. As I said, Cruise has had another busy quarter in terms of project deliveries. The margins are expected to improve in this area as we complete the legacy contracts with lower margins and start delivering on newer contracts with significantly improved margins. We just started that and it's developing over time. Our backlog in this segment has more than doubled year on year, and it stands at 1.3 billion. We recently signed a new contract for advanced wastewater purification system to be delivered on a cruise vessel at 3.5 million euros. That's after closing of first quarter and later on you will understand why I mention this. So let's take a closer look then at the pipeline, the sales pipeline and the backlog that we have. So, We have a strong backlog with contracts to deliver systems to 35 vessels. And also there are options for two more. If you remember from earlier, there were options on old contracts and we felt that they had unhealthy margins. These options have now elapsed. So when we are tendering now, we are tendering with new and improved margins. And we are tendering now for a number of new contracts. Total is 44 new bids that we are tendering for now. If you look at the graph on your right-hand side, what it shows is the year when the vessels are going into operations. And where it's not updated is in the delivery of 26, the one gray, that's the contract that we signed. So we're now ordering equipment to be delivered for that. So currently now it's nine for 26 that are going into operation. So that's the comment on the new contract. And so why is this important? Well, This shows a good predictability in this market segment. It's the contracts that we have as firm contracts that you can see quite some years going ahead and also what cruise vessels are to be built and that we are tendering for so that the pipeline is also very visible. It gives us a good visibility going forward. So what we order today equipment which is going to be on board vessels that are to be put into operation so delivered in 27 and 28 mainly with the exception of the one in 26 and that turns into revenue in 2025 so looking more at the equipment deliveries as I said quite high activity in in 2025 and When we deliver, one to two years before handover. And this year, we deliver to these 18 vessels, plus another retrofit. And what you see on this map here is actually our whole market. Cruise ships are generally, and I know it's not very precise when I say generally, but they are generally built in Europe. And as you can see, all the major yards that are building cruise vessels and all the major cruise lines are our customers. Once the equipment is delivered and you're getting close to handover of the vessel, it's the commissioning activities. Commissioning is when you start up the equipment, see that it operates and functions well, always things to be fixed and so on. That goes for any supplier on board the vessel. And you perform tests to verify that everything is good. And that commissioning is in the very last period before the vessel enters into operation. To date, we have commissioned four vessels. And for the rest of 2025, there's another eight that we are going to commission. So this means that we are putting 12 more vessels into operation this year. And as they enter operation, they go into our after-sales market. And what we do then is really we turn it into recurring revenue. So looking a bit closer on the after sales. On board these vessels, it is important that all the systems on board are well functioning. And to be able to deliver well functioning systems and to keep them well functioning, we think that's a differentiator in the market. So what we deliver is various consumables, chemicals and so on to keep the processes going, its spare parts and services. And we have also set up as a service provider with logistic hubs and so on to be able to handle this to the cruise fleet. An increased number of vessels in operation also means increasing numbers, number of systems, but also after sales. And as I said, 12 more vessels entering operations this year. So that's good. On the margin side, in the after sales, we've seen improvements now. And we will continue the good effort to continue the improvement also on the margin side on the after sales. Now for the industrial solutions segment. Now, heat treatment remains relevant to our industry customers, both to adapt to energy costs, but also to reduce emissions. And about one third of our backlog is related to what we can call our standard product portfolio. We are working on feed studies for new and big projects to help our customers mature them towards final investment decisions. The Rhode Island project and Wow Green Metals make up the remaining two thirds of the backlog. And what we see is, of course, that these big industrial projects are challenging. The backlog is a concern to us, and this is obviously an area that we are going to look closely into going forward. I will touch on some of them. And these would be known projects to you, I believe. So the customers on these projects are progressing. We are supporting them in feed studies to mature these projects, find the good solutions, how they can work and what investments level they need so they can mature their investment cases, business cases towards the final investment decision. They represent a considerable potential to us. But this is a far less predictable market than what we saw on the cruise side, where you know when these vessels are going into operation, you know when the yards have to place the contracts. So typically what we see is that they need a lot more time to mature these projects towards the investment decision. a lot more time than we have expected, and also a lot more time than I think the customers themselves have expected. On a high note, I mean, the last few weeks and what's going on around wild green metals, we are quite enthusiastic about that, actually. so um with high tech vision which is a professional investor entering this this business um where technology from wow is so instrumental we think that is a very good sign the board of our green metals have recommended the shareholders to accept the offer from high tech vision VAU has accepted the offer and we certainly hope that others will do that too. We think it is good for VAU Green Metals to have a strong financial and a strategic owner come into play. And also closing this transaction is important, we think, to VAU Green Metals. obviously but also to us as this will serve as a good reference for our technology on the status of the project itself so the installation of equipment is in its final stages and commissioning is about to start just after the summer and I know that all our engineers they are really looking forward to see this system startup it is important to us Some final remarks. So Cecilia and myself, we have joined the company over the last two weeks. This is my day eight with the company. And on a personal note, I think it is a very interesting company. I met a lot of competent and hardworking people. It's a company with a solid market position in cruise. There are interesting opportunities, however challenging they may be. And it's also a company with a purpose. Our customers, they are chasing every opportunity to take fossil carbon out of their cycle. And also turning waste into value. You can see that very clearly in the cruise industry. Also, I must say that in my background, delivering projects with high technology content to yachts and vessel owners feels a lot like home. What we're doing now is working hard to get our arms around the company. We're talking to a lot of the people in the company. looking into the projects, understanding the business, meeting some of the customers and so on, trying to figure out what are the next steps we're going to take in addition to what is already started. What are the next steps we are going to take in developing this company? And we certainly look forward to sharing some of that with you in the next quarters. Before I end the session and open up for questions, I would like to say thank you to Tina, who has been CEO with the company for quite some time, for all of her efforts, and also to Johnny, who has been stepping up as a CEO in the interim period. So thank you for that. and by that i think we open up for questions and to help answer questions in all the details we haven't had time to dive into of course we will use tina and johnny as well thank you okay well they then open for questions and we'll start with questions here from the audience while we're waiting for the audience online to post their questions so are there any questions from the room

No? Well, it seems... Okay, there's one.

Please state your name.

The cruise contracts have been problematic with margins in the past, and you're saying you're working with that. But is there anything you can do with the cash flow profile of the customer contracts, seeing that working capital is an issue with the company? So you can always work on trade creditors and such, but this is anything you can do with the contracts themselves to better match the cash profiles.

Yeah, I think I can answer. It's something we're monitoring very closely. And if you see also by the announcement of the amended loan agreement now, we are increasing our guarantee facility. And that's an important tool for us to improve this working capital situation. And that's some of the measures we're doing in parallel with monitoring it closely.

Any other questions from the room? Okay, we have a couple of questions from the online audience. First, do the legacy cruise contracts also cover after sales agreements? In other words, will vessels commissioned under these older contracts result in lower margins for the after sales segment as well?

Yes and no. As we are progressing in delivering vessels, based on our method of supporting the cruise operators, we see a tendency that they come back to us for assistance, both in terms of service and spare parts and consumables. I believe we have over 90% of our own fleet covered with our after-sales service. In terms of after-sales agreements at the point of entering contracts, as we're contracting with the shipyard and not the ship owner, that is the part that comes later on. And we have fleet-wide after-sales agreements with many of the largest operators in the world.

Thank you. There's now a question concerning the onshore US activities. Can you say more about the negotiations ongoing on potential contracts there?

I'm afraid it's difficult to go into details on specific contracts. So I'm afraid that we cannot guide anything on that. Other than that, what we've seen in the presentation, we remain optimistic. We are carrying out the feed studies. We see some of the business cases for the clients are really good. So we're still optimistic. However, at the same time, being vigilant about the situation when anything changes, we need to change as well.

Thank you. A question about order intake. There has not been many new contracts announced recently. Can you please remind us what is rule of thumb in terms of contract amounts in announcements?

That varies, of course. We see a tendency in signing contracts from second quarter and out. We recently signed the contract for the latest new build in a European shipyard. And as you saw from the presentation, there are 44 ships in tendering activities right now. And we know that these vessels have already been contracted with the shipyards. So they are up for grabs. There is financing in place. So it's a matter of the competition that we find ourselves in to go get these contracts.

There's a follow-up on VGM where we've seen very good news from VGM. The question goes, and then what signals are you getting from them with respect to phase two at Fulham? Is phase two included in your order backlog as of now?

As of backlog, no, phase two is not included in the order backlog. We find it reasonable to believe that this is something that the new owners also will execute on as the off-tax agreement that they have with the market on their side reflects the amount of biocarbon to be supplied. But of course, it's a question for VGM to ask and how they will foresee their expansion of the plant.

Thank you. Then there's one more question, and that's the last one for now. Can you please, in a few words, tell us what is your views on the prospects pipeline and market in general?

I think we saw from the presentation that all these gray columns that are distributed throughout the years these are our prospects these are our these are pipeline for for for the crew segment as for the industrial segment the feed studies feed studies represent the same type even though they have a higher uh insecurity concerning uh final investment decision i guess that's what i can say about that segment we know a lot about um and and uh

So we're good with that. On the industrial side, more of a concern and unpredictability in that market. But again, quite a lot of work going on now on various prospects.

Okay, that seems to conclude the questions from the audience, both online and here in Oslo. So back to you to round off, if you like.

thank you thank you to everyone who's been involved in doing all the presentations it helped us a lot and thank you to everyone being here and also to the audience online so thank you have a good one