Freemelt Holding AB (publ)

Hello and welcome to today's webcast with Freemelt, where CEO Donald Gidlund and CFO Martin Granlund will present the Q3 report for 2025. If you have any questions, please feel free to use the form located at the right and we'll take that up after the presentation. And with that said, please go ahead.

Thank you and welcome everyone to our Q3 webcast. Okay, let's make a short recap about who we are and what we do. So again, Freemelt, we were founded 2017. What we do, we develop, we sell and we service advanced 3D printers for metal application. We work with a technology called Electron Beam Powder Bed Fusion, which is highly suitable for productivity because it's really efficient technology you can see on the screen here as well a lot of people think this is lasers different kind of lasers pointing this is an electron beam moving four kilometers per second melting more than 3,000 spots per second was extremely suitable for high volume It's also a clean environment. It's a vacuum, which is optimal as well when you really have high needs of strong and complex materials. And it's also a hot process, which also avoids that you get swings from room temperature up to, let's say, tungsten, where you need to get to over 3,400 degrees. So all in all, it's extremely efficient and also suitable for complex applications and materials, which is typically suitable and demanded in areas like defense, energy, and also medtech. If we then zoom in on our three industrial verticals, they are all growing. And I will say both defence and fusion are currently positively impacted from the current geopolitical situation that we are having. Defence, there you can see they are really ramping up volume demand. And also here I think the importance for if you put it like local or national manufacturing, regional manufacturing to really keep control and take control of your manufacturing process. Like in the past when you have outsourced sub-components. Now you would like to take full control from the material to the end product. Infusion energy. we can also see a substantial commitment now from investors globally. And just to name drop a few, I mean, Bill Gates, for instance, and his fund is investing heavily now in fusion. You can also see that end users, although the technology is not commercialized, but end users like, for instance, Google are committing to buy fusion energy in the grid when it will be available as well. Limitless and also clean energy which you typically call fusion energy have been a key resource now as well for AI and cloud giants. If we look into more on a national level I mean both US who recently announced their top three technology focus areas and where fusion energy was number two at AI and quantum and also China just I think last week announced their five-year investment plan and focus plan and where also fusion energy was included as well so it really has become a top technology priority for the coming years. And I think you even can say that fusion energy now has become the new strategic technology race globally, where you have seen AI in the past and also space. And then lastly, medtech, where the majority of the orthopedic implant OEMs, they are already transitioning to AM for the new applications. So all three of the areas have a structural and good growth underlying. Okay, let's zoom in then on Q3, which was another strong quarter for Fremont. We had a strong order intake and also sales, and where we ended up with a record or the backlog in this quarter. If we would summarize year to date, we are up 228% versus last year. And we have sold 12 machines this year, and I think we have an impressive installed base now of 40 machines. I think it's good to just recap and keep in mind that the first machine was launched in 2019, and then we had a pandemic in between. So 40 machines now, which is really encouraging to see. It was also encouraging that we... almost had a break even operating cash flow, which I think also proves that we have an underlying good operation efficiency and good cost control in the company as well. And then lastly, we had two strategic milestones in this quarter as well. The first one is to scaling for growth, which is we enter into China, the fastest growing market for additive manufacturing. And we also did hand over our assembly or production of machines to Scanfil, which also now has led us to have a more agile supply chain as well when we are continuing on growing our business moving forward. So, projects, I think this was talked about many times as well. One of the key, let's say indicators as well that the industrial side is really the demand and interest is ramping up is our commercial products. So, these are products we charge to customers. Again, we can only share the products that we have shared externally, so these are a few of them. Let's start with Saab Dynamics, where we have two ongoing projects. One that is directly between the two companies. and then one which is also a Vinnova product together with Linköping University. The focus is on pure copper and the direct product is in phase two and is running according to plan. The Vinnova project will be ongoing until early 2026. Regarding one of our other prestige projects in fusion energy, and that's Fusion4Energy. Fusion4Energy is the European part of the largest R&D fusion product, Global Ether. And here we're making great progress. This is about tongues and tiles for plasma phasing wall. And here, I think it's a really great example where additive manufacturing, in this case now electron being part of a fusion, adds its maximized value. So where you can even create material properties that are excellent because we will talk about hundreds of millions of degrees Celsius. It's really a hot environment, harsh environment, but also where you can you need to grade different kind of materials as well here. So you have tungsten first and then you have other materials to really, let's say, efficiently cool down the high temperatures as well. And to get those materials together here additive is adding really great value. Regarding the implant OEMs, which is more in production scalability kind of phase, more in proof of concept. Here, one of the clients do have an email at their production site. One is renting one machine here in Gothenburg at Fremont site. The proof of concepts I would say is on track and here I think we can expect some more tangible updates during mid or second half of 2026. As we have the ambition to become the global leader of electron beam powder bed fusion solutions, then of course we must be present in the fastest growing market for additive manufacturing in China as well. And I think there is still a lot of perception of China being a high labor intensive manufacturing country. And then maybe it is in some industries. But as I said before, China is the world's fastest growing market in additive manufacturing as well. So it's just a must to be here. Actually, yesterday morning, I heard on one of the morning shows on Swedish TV that the former minister of foreign affairs called Bildt, he mentioned as well that China is expected to represent around 45 percent of the world's industry by 2030. And I think you can also see when you go to China and you see their manufacturing facilities, it's highly advanced, it's efficient manufacturing that they already have in place. So they are becoming really, really more efficient from a manufacturing perspective as well. And when it comes to fusion energy, Where, I mean, Freeman, we have a strong position. We have worked now a couple of years, first with the UKEA, now Fusion for Energy and so forth. I mean, China, as I mentioned before, they're also investing a lot of money in Fusion as we speak. And it's included in the five-year plan. So we also see a great potential and value of the collaboration that we have with Yuli that is highly experienced and exposed to energy applications as such in China and outside of China as well. Lastly, the Chinese population is getting more wealthy, which also means that they request more and more orthopedic implant surgeries as well. So why there is also an underlying strong increased demand for additive manufacturing implants. So with that said I hand over to our CFO Martin.

Thank you, Daniel. I'm very happy to present another strong quarter by the Freemail team. In Q3, we had an order intake of 18.5 million SEK. So these are the accumulated value of the orders received in the period. We have an order book at an all-time high, 23.4 million. The order book represents the orders we've received, but that we haven't yet invoiced. So this order book is going to be future receivables, then turning into future cash flows, and finally turning into net sales in our P&L. So this is an indication of what we'll report for the coming quarters. Strong net sales in the period, 17 million. That's up 96% compared to the same period last year. For the year-to-date period, it's even stronger, up 228% compared to the same period last year. We see that the main part of sales, as you can see in the figure on the bottom right, the light green, 81% is from machine sales. We have 12% coming from aftermarket sales and then a small portion from customer projects and others. What's important to note is the margins. So the direct margins in the P&L are a little bit worse compared to same periods last year. And this is for two main reasons. One is the sales mix. Depends very much which machine we sell, what the margin for each sale of the machine is, and also the outsourcing activity that has been ongoing since the spring. Where we see that the initial bills of machines are slightly more expensive, but it's going to go down over time as the efficiency improves with our third party outsourcing partner. Cash flow. Cash flow was also impressive, operating cash flow of almost break even in the third quarter. This is, of course, the result of sales. So sales do come down as cash flow at some point. And we have seen the improvement is big. Mainly due to reduction in receivables, meaning customers paying their invoices, and also a reduction in overall inventory of trade goods. This is also a great improvement from last year. And as you can see from the graph, we've had a great improvement in the operating cash flow. The cash at bank at the end of period was 45.1 million SEK. And for the funding strategy going forward, an important part is the listed warrant, which was part of the capital raise in February 2025. It's going to expire in June. It has the potential to provide the company with 50 million SEK in additional funding. But it does require every warrant holder to take action and subscribe. And I just want to reiterate the favorable terms of the warrant, where the price paid is going to be a discount towards a volume weight price, which is measured in the second half of May 2026. Subscription is in June, and the maximum price for the warrant is going to be 1,33 kroner, or 1.33 SEK. So just as a reminder for those of you who have this in your holdings, that you have to take action if you are interested in being part of the future free milk journey. Thanks a lot.

Thank you, Martin. So let's wrap up Q3. So Q3 was another strong quarter regarding sales and order intake. And I think this also together with a strong Q2, we have ended up with an all time high order backlog as well, which of course is extremely encouraging and important moving forward. We also achieved two major strategic milestones during the quarter. Again, a commercial growth and expansion point of view our presence now in China the fastest growing market for additive manufacturing is extremely important and I think we can also see that based on the first order that we also received on the machine with within such a short let's say time after we entered into the collaboration with ULE. I think it just proves how ULE is operating and executing. Secondly we also with the strategic agreement with Scanfil we managed also to hand over according to plan with Scanfil which is now independently assembling our machines as well so which can will help us a lot when we continue to grow and also when we continue to grow as an industrial company as well and I think we just must remind ourselves that we have sold 40 machines until now and again the first machine was launched in 2019 and We had the pandemic in between and only in this year we have sold 12 machines now. So I think we've taken clear steps towards our ambition of being a leading ePBF supplier. And then lastly, I think it's at this moment now, it's very energizing to be the CEO at Fremont. I think we're well positioned to continue turning our technology edge into further commercial growth and also the external factors that we are seeing now, the geopolitical situation is actually also helping the acceleration as well for the adoption of additive manufacturing. So with that said, thanks for listening and now we open up for questions if you have any.

Yes, thank you very much for that presentation. We'll start with the first question here. Could you give us a breakdown of your order book as of Q3 and also a timeline for the machine deliveries?

I can respond to this one. So we don't provide a breakdown of the order book. We do mention in the press releases sometimes when we expect the delivery to take place. Typically, it takes between three and five months from received purchase order until delivery. And that's also when the machines end up as net sales in our books. We do invoice them in between. So machines are invoiced 30% at purchase order, 60% at delivery, and 10% at install, which is a typical case. It's not always a case, but a typical case. And then I could highlight with regards to the order book that most of it is machine sales, but we also have a few rental solutions which provide income over time, and those are for longer periods. So this is a small part of the order book as well.

Thank you for that answer. Will the transfer of production to scornfill incur any further non-recurring costs? And what impact on gross margin do you expect from the transfer?

Well, Skånfil has been building our products since October 1st on the premises in Åtvidaberg. They have been taught how to build these products. And initially, we do see that the unit cost is higher in the transition. It's going to go down over time. And Skanfyll is also a partner which helps us to industrialize the machines, helps us with procurement and purchasing. So I do see that the margins will improve over time when we work with Skanfyll. And in terms of one-off costs, I mean, it depends very much what kind of initiatives we want to do with this third partner. So I think it's very much up to us what we want to improve, when we want to improve it, and how much we're willing to spend on such improvements.

Thank you, Martin, for that answer. What are your investment plans for 2025 and also 2026?

I can jump in on this one as well. So we normally don't talk about the future investment plans in detail, but just as a broad outline, we I mean, we have an application center in Göteborg. We have an application center in the US. And I mean, the projects that we're doing, we see interest in projects. We need machines in those application centers to perform those projects. So that's one area where it's likely that we need to do a bit of investment in order to be able to get new interesting customers and especially industrial customers as well for the future. And as we've spoken about in the past, the projects that we do, I mean, those are the really interesting ones which we should keep an extra eye on.

In Q2, you made a breakthrough with increased traction in the market, driving record high order intake. And in Q3, your order book is at record high level and order intake is at the same level, but with fewer machines sold. Can you elaborate on that and how you should think about the order values going forward?

I can take that one. Sorry? I can answer that one. Yeah. I think we can all, of course, I mean, confirm what we communicated in the second quarter. I mean, we are seeing in general an increased traction in the market. I think in Fusion, we have strengthened our position recently. And I think in defense, I mean, I think all of us can, you know, read in the news and see in the news that the pressure for change is great. When it comes to the order value, per the respective orders. I mean, it's really depending on the type of machines that we sell, but also depending on the aftermarket that has been generated during the quarter. And during Q3, we did sell less machines, but the two of them were the industrial machine Emelt which have a higher value than our research machines. So yeah, I think that's the explanation why it was different. So the mix of sales, I would say, is really depending on the outcome.

Thank you for that answer, Daniel. You write in the report that your production has now transferred to Skånefil, which reduces your investment needs in the future and ties up less capital. Can you elaborate on it further? And do you see any risk in the collaboration going forward?

Right. Well, it is a central part of our strategy, right? We've walked through this. It does minimize the capital tied up in the company. It increases our production delivery capacity for the future greatly, I would say. And it also mitigates future risks if we would do all this in-house with competence, tooling, production space, strategic purchasing, etc., It's much better to have a specialised third party to do this. I mean, with the specific risks, we've already covered that in the short term, we do see somewhat higher unit costs. It's going to go down over time. We do see that we, of course, will be reliant on a third party. It's not all in our own hands and it's a third party we have to manage properly. That's going to be extremely important for us going forward. And it also reduces our flexibility a little bit because, again, we need to provide firm forecasts to our third-party production partner. Whereas when you have it in-house, there's always a bit of more flexibility and, yeah, easier to handle if you like. But I would say those are the main sort of things to look at from our side.

Understood. Thank you. And during the period, you visited your partner Julie in China, and you have already received your first machine order. How do you see the collaboration going forward?

Yeah, as I mentioned before, I mean, China is the fastest growing market for additive. So again, it's a must for us to be there. I think Julie maybe is maybe not the typical machine Let's say partner to additive OEMs like Fremelt or like to be a reseller. I think ULE, they are a big manufacturing company in high tech applications, mainly in energy applications. So I think, again, with the focus on fusion energy, then I think Uli, they have really strong and good capabilities to get the good presence there as well. I think also, I mean, the machine order that we received within such a short period of time as well after our collaboration agreement was signed. I think that also underscores how well the collaboration have started. So moving forward I just expect this to continue in the same positive path that we have seen from the start.

Martin, did you want to add something there? No. Okay, sorry. And as you mentioned, there is great pressure for change in the defense and you have several ongoing projects in the sector. Can you tell us how they are developing and what we can expect going forward?

Yeah, I think, again, as I mentioned before, There is a high need of advanced components in very complex materials as well, which is critical for defence. And here I think AEM will definitely play a crucial role. I think I've also seen somewhere that AM now is expecting to actually grow substantially within the defense industry, such up to 19% of the total manufacturing at 2035. I mean, we are currently running two projects, which I mentioned before, but with SOB. And they're running according to plan. And we also got the new order with not the named defense customer, but who acquired a premium one machine for material development. So I think all in all, I think the projects and the collaborations, engagement that we're having in defense is running well.

And in what way do US tariffs and government shutdown affect Fremelt?

Well, maybe I can provide some light on this, if I can. I mean, the tariffs is something which we roll over to our customers. That's our initial standing point. It remains to be seen what the sort of price elasticity is and whether the customers will accept this or not. I think it's very difficult to have a view on that. When it comes to the government shutdown, I mean, sure, it is problematic, but I think the signals we hear is perhaps that it creates uncertainty, and the uncertainty as such is the problem, not necessarily anything else as a sort of first problem.

Thank you for that. And compared to last year, Direct margins have come down. What is the reason for this?

Well, I elaborated on this previously. So it's the sales mix. And it's also the fact that we've transferred production to a third party where we initially see slightly higher unit costs. So I'll just stop there.

Why should investors believe that 3D printing can move from prototype printing to serial production and why would traditional manufacturing not be an alternative when for example printing tiles for a fusion reactor?

That's a very good question. I think maybe before I start to answer that question I think it's also important to remind of the fact if we take the the total metal manufacturing industry globally I think that is I've seen somewhere it's like 880 billion euro business. Approximately one percent of it it's manufactured by AM. So still it's a huge opportunity and AM will not take over, will not replace conventional manufacturing in all this. But I think also it's important to highlight as well, I mean, the conventional manufacturing has thousands, actually thousands of years behind a long legacy. And to change a massive industry like this, I mean, it takes time and often it requires a crisis as well. And actually, it's a lot about change management. And actually, now we have sort of a crisis. We have the geopolitical situation. So as I said before, I think now we can at least feel that there is some tailwind on that kind of change attitude. I think it's also important to mention that Additive Manufacturing has been there for a bit more than 30 years. And I think if you look into the design of the machine as well, the machine design has really been set up for more prototype focus business you how you operate a 3D printer is that you you stand at the printer and do all the preparation you also after the print is done you stand at the printer do all the post work so you actually block the machine for productivity and if you cannot produce as much as the you can do with conventional then of course I mean yeah the cost per printed part actually becomes too high so I think that's one This is also a reason why Freeman did actually redesign our machines. I mean, we, as you potentially saw on the first slide, and if you follow us, you have seen as well that we have an interchangeable modular system. So before the print, we prepare everything in a different part of the factory. And after the print, we replace this build module with the one that has been prepared. So really quick turnaround times to reduce the cycle time which is key for production so get more parts produced so get down the cost for it. Secondly I think also and more related to the complex design parts I mean you know some of the conventional let's say technology cannot manufactured parts where you for instance needs internal channels for cooling for instance or graded materials like if you're in fusion for instance so and these kind of things are not nice to have but really the difference between the part to survive in this environment and doesn't and then thirdly and then maybe then more related to the fusion part of the question I mean fusion tiles, these are small tiles that you put into the plasma on the plasma wall. I mentioned before it's like hundreds of millions of degrees. to extreme heat and also thermal shock. I mean conventional manufacturing it creates stresses and also multiple failures in the interfaces between the different kind of materials that you need to have. So with additive and in this case electron beam powder fusion you can print fully dense tungsten parts and also engineered porosity where it's needed, where you need to add other materials. So all in all, I think you get the better kind of material, you get less joints and less cracks, and in the end, longer life. So from that point of view, additive is really adding so much more value to, in this case, fusion tiles than conventional manufacturing.

Thank you for that answer. And I believe you already answered this question, but maybe you can add some more color. Why not just use traditional manufacturing for fusion tiles?

Again, I mean, fusion times at this moment is being manufactured with tradition. But as I tried to explain, I mean, you can get additional value with additively manufactured. You can get longer life. And what you don't want to do is to stop a fusion reactor when it's up and running and have a long life. let's say cycle times before you can run it again. So if you can extend the life of the reactor to be up and running with having better materials, et cetera, then of course, I mean, it's better for everyone in the end.

Thank you for that answer. And we'll take one final question here before wrapping up. Do you get any powder cells from the installed base?

At this moment, so Fremont, we have taken an open source approach when it comes to architecture and software, but also when it comes to powder. So most of the other, let's say, OEMs do have a closed ecosystem. We need to buy the printer, the software, and the powder. Fremont has taken a different kind of approach. So we collaborate instead with partners that can add most value from a powder point of view. We work a lot with Sandvik, just to mention one. So with that said, no, at this moment, we don't sell powder to our customers, but we do that through our partners.

Okay, that concludes today's presentation and also Q&A section here. Thank you very much, Daniel and Martin, for presenting and answering all of our questions. And thank you for everyone for tuning in. Thank you.

Thank you.