Freemelt Holding AB (publ)

Hello and welcome to today's webcast where Freemelt will present its financial results for the second quarter of 2026. Joining us today are CEO Daniel Gidlund and CFO Martin Granlund. You are welcome to submit questions using the form located to the right of the webcast and with that I will hand over to you Daniel and Martin. Please go ahead.

Thank you. Hi everyone and thanks for joining our second quarter webcast. I walk through the highlights of the quarter, and then I'll hand over to Martin for the financials. And in the end, we will have a Q&A session as well. So let me start with the headlines from Q2. This was a quarter of high commercial activity and momentum. Order intake came in at 22.2 million, which is up 11% year on year. and we ended the period with an order book of 25.6 million. We also strengthened the balance sheet with 35 million through the TO1 warrant. And this is thanks to great contribution with more than 97% who exercise their warrants. So really a big thanks to all of our loyal shareholders who believes in what we're doing. Net sales was 9 million, which were lower year on year. And that comes down to mainly timing on machine deliveries, which is difficult to predict and forecast. And in many cases also, I think we have mentioned this before as well, we are impacted by the customers also sometimes not being ready for installation as per plan. And this is also why revenue in some cases is being delayed. But I think what matters during this quarter is that the underlying direction, the order intake and the order book, which all point in the right way. Something we highlighted also in the Q1 webcast is that the additive manufacturing is entering a new phase. For years, I mean, the demand was really about machines and prototype printing, and now it's shifting towards more qualified, advanced metal components, real production capability, and also robust regional supply chains. And we see this most clearly in fusion and defense, where geopolitics, more energy investments and the drive for regional manufacturing are reshaping this industry. And this plays directly to our strategy. As we mentioned before as well, we have built the hybrid business model. which means that we sell machines to clients such as Medtech and we offer to manufacture qualified parts for customers in areas like defense, fusion, for instance. If you take Medtech, we continue our work now during the quarter with some of the world's leading OEMs with intention to become a productivity partner by providing our industrial machine EMELT. for serial production purposes. And MedTech, as we also mentioned several times, is the segment where additive manufacturing is already well established. In defense, we're moving from more feasibility studies towards more proof of concepts, and we saw placed a follow-on order during the quarter. And after the period, we were also granted a Vinnova funding. and Infusion, we are building a strong position, especially regarding manufacturing capabilities of the material tungsten, which is extremely difficult to manufacture. And we got an order from TAE Technologies and also a new alliance, which I'll come back to in a moment. Commercially, I think the quarter was good across all three regions. If we start with the US, we took a very important step with an order from Intelus for two e-melt machines and with an option for more as well. This is our first industrial establishment in the US market, and this is a market we have worked patiently to open as well. And I think it's worth mentioning that there is an extreme focus and also tension in the US to reestablish an advanced manufacturing infrastructure for metal components in general, but specifically for aerospace, space and defense. And I think you can almost daily now hear about the low inventory levels of ammunition such as cruise missiles and the urgent need to ramp up. If you look into Intelus, they are one of these type of companies now where the U.S. government and industrial partners like Lockheed Martin and Blue Origin are funding to establish a manufacturing ecosystem in strategic areas across the country. So I think here more to come. In China, our partner Yuli placed an additional order of the industrial machine Emelt. and Europe is increasingly our gateway when it comes to fusion and where we had the most recent letter of intent with Proxima Fusion and also our Alpha Alliance membership. So all the three regions are moving in a similar kind of direction. I know that we have raised fusion several times already in other webcasts and also investor forums, but fusion still deserves this attention because this is where a lot is happening behind the scenes. If we zoom in on this quarter, we secured an order from TAE Technologies, which is a US company and also actually one of the most established private fusion companies in the world. And our focus in this collaboration is, again, tungsten components. For me, this is just another confirmation regarding our position as a company and our manufacturing capabilities of high quality tungsten components with the best material properties. After the period, we took another important step and we signed a letter of intent with one of the best funded private fusion companies, Proxima Fusion. And we also joined the Alpha Alliance, which is an industrial ecosystem set up to accelerate the next generation of fusion power plants. And lastly, regarding fusion, and I think the point I really want you to take away from this, let's call it fusion deep dive session, Our application development is scaling towards high volume manufacturing of qualified parts. And we are already bidding in tenders for tanks and components. It is still early, but the direction is clear. I mean, Fusion is moving from a prototype manufacturing to high volume manufacturing needs. And we as a company intend to be a key supplier of parts that that market will need. And this is also why we after the quarter have opened a position head of manufacturing operations really to establish the manufacturing capabilities for these extreme materials such as tungsten. So we are ready to act and deliver according to the expectations when the demand is being materialized. And before I hand over to Martin, I would like to spend a moment on defense and also Saab, as I'm really proud of the trust that Saab is demonstrating as they keep supporting Fremont in various projects and repetitive business engagements. We started our first business engagement with SAW back in 2024 and since then they have invested time and also engineering alongside us. And during the quarter we successfully transitioned from phase two into phase three in one of the ongoing projects which started back in 2024. And this of course was very well received by both parties. And I think another testament of a good collaboration was after the period where we were granted Vinnova funding for critical materials together with Saab and also other strong partners like Hitachi Energy, RISE, Linköping University, which we as a company very much is looking forward to kick off as well. So that was the commercial and also strategic picture for the quarter. So with that said, I'll hand over to Martin to take you through the financials more in detail. So Martin, please.

Thank you, Daniel. So if we start with orders and sales and top line, we had a record order intake. 22.2 million SEK in the quarter. That's up 11% year on year, leaving an order book of 25.6 million SEK. The order book is more or less flat compared to a year ago, and it represents the backlog. So basically orders received, but not yet booked in the income statement. If we turn to sales, we had 9 million of net sales in the second quarter. This represents mainly two machine deliveries, and it's down 53% compared to last year. same quarter last year and same quarter last year was as you might remember a record quarter in terms of sales. The composition was 72% machinery sales booked in the quarter compared to 76% which we've seen the last 12 months. We had 19% in aftermarket and 9% in projects and other income. If we then turn to the operating expenses, we had controlled spending in the quarter. The operating expenses were lower compared to the first quarter, but also compared to the same quarter last year. The total was 37.5 million SEK to compare with 40 million SEK in the first quarter and 46.8 million SEK in the same quarter last year. So breaking down then excluding trade goods and depreciation, we had personnel costs of 11 million, which is flat compared to last year. And we had 6.9 million in other external costs, which is sharply down compared to the same period last quarter. Turning to cash and funding we as Daniel mentioned we had proceeds from the exercise of a warrant so after the financing costs or the associated costs sorry we had 33 million coming into the bank we had an operating cash flow which was negative 40 million and it was then negatively impacted by an inventory build-up and also an increase in receivables. The total cash flow was 14.1 million SEK in the quarter which leaves Cash at Bank of 41.6 million end of June. Turning to the balance sheet, we kept investing in our patent portfolio and also in our technology, 5 million SEK in the quarter. And as I just mentioned, we also build inventory up 7.7 million compared to Q1. So that's 84% up and that's basically to meet the upcoming demand and to deliver on the order book of 25.6 million. We also have every quarter we have had goodwill depreciation of 11.9 million impacting our P&L. We only have 10.8 million SEC remaining in the balance, which means it will be completely depreciated in the third quarter. And in the fourth quarter onwards, we will see a significant positive P&L impact when this depreciation no longer affects our P&L.

Okay. Thank you, Martin. Let's wrap up first half of 2026. So again, the world is changing quickly and we are exposed to the political tensions, which actually comes with rising investments, for instance, in energy and also defense. And also across industries, there is a clear growing pull towards regional manufacturing, supply resilience and extreme materials and also qualified parts. And this is exactly what plays directly to our strength and our focus as well. And I think it's important to re-emphasize on what I've said many times before. I mean, for years, much of our most important work has happened behind the scenes. in such as materials development, application development, in deepening customer collaborations and in advancing projects towards serial production. And especially in the area of tungsten components where we have a very strong position. And that strategic groundwork is exactly what position us today as a supplier in the ecosystem for extreme materials and critical applications. So the market is now moving our way and we have been building towards it along as well. So this is now the foundation for the next chapter of Freemelt Story, which we will continue to clarify and also demonstrate as we go. So with that said, thanks for your attention and let's open up for some questions.

Yes, thank you for that presentation. We will now open up for a Q&A session where the first question is, you have a new open position for head of manufacturing operations. Does this new position imply FREEMELT will soon in six to 12 months receive orders on manufacturing components?

I can answer that one. Yes. I mean, as I said earlier today, that we We are already bidding on tenders for manufacturing of components. And of course, I mean, we expect to be successful in some of these tenders as well. So this is why we now also must have someone in place so we can also then establish the operation to manage the expectations on deliveries as well.

Yes, moving on. You have an order backlog of 25.6 million SEC. How much of this do you expect to recognize as revenue in Q3 and Q4? And where is the typical lead time from order placement to revenue recognition for your machine orders?

Right. So as implied in the question, there is a lead time. So from the purchase order to installation of machines, which is the point where we recognize net sales in the P&L, is typically three, four months. But it's also dependent on when the customer decides that they want the machine. It could be that they, for some reason, want it at a later point in time. For example, if the floor space is not ready or whatever, but three, four months would be the typical from order to recognition in the income statement. When it comes to the order backlog and how much we expect for Q3 and Q4. So I would expect the majority to be recognized in the second half of this year. But the order backlog also includes project revenues, which are for longer projects where we recognize the revenue over time. And there's also a part which is machine rentals, which is also then recognized over the period of the rental contract.

Thank you for that. Order intake amounted to 22.2 million SEK while revenue was 9 million SEK. Is the significant difference primarily as a result of the normal lead time between orders and deliveries or are there currently capacity constraints that prevent the order backlog from being converted into revenue more quickly?

Okay, so I can take this one as well. Like I said, it is the normal lead time between orders and deliveries. So this is certainly true. And we do need to or we are ramping up our machine build. That's what we see in the inventory build up. So we're building more machines because we have the record order intake. We're building more machines and we need to scale up capacity at our supplier scan field to meet the current demands. But we don't see any constraints, but we are scaling up.

Yes, moving on. As far as you know, to produce the plasma facing tiles in tungsten, according to the specification from ITER, would a free melt machine be required for this or are there competitors with comparable capabilities?

I think when it comes to fusion and such, regardless of if it's ITER or not, I mean, it's still in development and I think also here I think we mentioned in some other forums as well that I mean we as a company and our technology we have worked a lot to educate the market over the last couple of years when it comes to defining specifications for fusion reactors and so forth that has also been defined since some years back as well which also have been then let's say set for other let's say specification based on other let's say manufacturing technologies as they might not have been aware of of EPBF and Freemius Technology and so forth. So what we have been doing now in those different kind of projects when it comes to fusion, I mean, we are trying, of course, I mean, to demonstrate the capabilities and also, of course, influence the, let's say, the specifications of the, in this case, I think the question was about plasma facing tiles towards our technology. And I think also what has been evident and also why we are pretty much exposed now to a lot of the different fusion products around the world is that now these companies start to realize that additive manufacturing and Fremont now can actually improve the specifications or improve the performance of the materials. So we definitely do everything we can to influence that specification will be updated. And of course, I mean, based on our technology. Having that said, when it comes to EPWEF, and there are other companies providing EPBF solutions as well, but I think it's important to consider here as well that technology is one thing, then it's another thing to develop if you call it the recipes if you take tungsten and the material processes and so forth that's something that we as a company started many years back and I think we that's also why we have established a really strong position and this position of course I mean we intend now to to try to to really capitalize on as well when the volumes of the manufacturer of those tiles are being materialized. So long answer to the question, but I hope in the end it was some sort of answer on the question anyway.

Thank you. Moving on. Based on the current cash position and cash burn, it appears that your existing liquidity may not be sufficient beyond Q1 2027. How do you plan to address the financing needs if the business has not yet reached a more self-sustaining level by then?

It is a correct observation that when we grow we do tie cash in our business and I think what we see here in the second quarter is a good example of this where we tie cash in the business to deliver on the order book that we have. And it depends on the level of growth, how fast we grow. The faster we grow, the more cash will be tied. So let's see how this progresses. It also depends on the sales mix, of course. Some products have better margins, better payment terms versus other products. So the sales mix is important. And the third reflection I would like to give is also that we have started to use debt financing to cover the liquidity needs we have in our business. We started in Q1 and I think we will expand this over time to meet the cash needs for the business.

Yes. A significant part of the investment case depends on future industrial adoption. We have seen other emerging technologies such as parts of the hydrogen sector struggle to convert long-term potential into near-term profitability. How do you plan to generate meaningful revenues and move toward profitability in the near term while building toward that long-term opportunity?

First of all, I think our hybrid business model is one way. I mean, we will have still the potential of selling volume numbers of machines to customers like Medtech, for instance. We will continue to work on projects across all the industries, continue to sell machines also to the academia. I think maybe the question is more related towards than fusion. If it is, then here I think as well, regardless if fusion will, let's say, be commercialized in the end, it's a massive, let's say, R&D industry. And this we have also mentioned many times when it comes to just take one of the reactors, take the ITER reactor in southern France, I mean, if we just go in on specifics for us, when it comes to tungsten tiles, the plasma-facing tiles, I mean, we're talking more than a million tiles. And then, I mean, there are around 45 private fusion companies now. The investments have never been bigger. So I think it's the combination of the business model we have, but also the fact that the R&D and the development business of Fusion is so big and it will also be ongoing for the next, let's say, five to ten years, which we, of course, will aim to capitalize as much as possible from and also, of course, establish an even better kind of position and for and when fusion is becoming an industry, which then it's intended, I mean, it most probably will become the largest industry worldwide as well. But again, I think just to zoom back or zoom out a bit, I think it's our hybrid business model and to have a combination of different type of businesses in near term and longer term as well.

Great. When do you expect the current customer projects, system sales and broader industrial initiatives to start translating into a more meaningful and sustainable inflow of cash?

That's a difficult question. I think it's more or less go back to what I just said. It's really depending on project to project. But again, our hybrid business model is based on the fact that on, if we call it, mature customers when it comes to additive, like Medtech, for instance. Here, these customers, they, in most of the cases, have already decided to convert into additive. Here, yes, we will continue to offer our systems, sell the machines to aftermarket and service and so forth. And then once again, when it comes to defense, when it comes to fusion here, our focus is really to provide qualified parts and parts to the user. So again, this kind of combination that should also lead to a more, let's say, sustainable inflow of cash as well.

During Q2, the number of active projects increased from 7 to 10. TAE is obviously one of them. Can you tell us about the other two?

The other two, so this is, I mean, as a public and unlisted company, in some instances, some customers don't want to be mentioned publicly. So we are trying to be as transparent as possible and sharing what we can share. So that's what I can share.

Yes, and finally, your gross margin was strong in Q2 at 60%. Could you elaborate on the key factors behind this performance and whether you view this margin level as sustainable going forward?

Sure. So this is a good question. We did have good margins and I think it is one of the reasons is the higher percentage of aftermarket compared to what we had in the last 12 months. So the aftermarket part has higher margins and that helps. It's also the sales mix in the quarter, depending on exactly what we sell and to what customer. And in the second quarter we had a second hand printer which was one of the sales which then had a high margin which also contributed to the higher number. But I mean, over time, 60% should not be considered as high, but this is over the longer term. But over the shorter term, we do have new products which we work carefully to improve the margins over time, whereas the more established products have higher margins and it will be volatile quarter to quarter, depending on the exact sale contracts, what the price is and what type of product it is. But we do, of course, aim for margins over time to strengthen.

Thank you. That was the final question for today. So we will now conclude today's conference call. I would like to extend my sincere thanks to Daniel and Martin for the presentation, as well as everyone who submitted questions and joined today's webcast. I wish you all a pleasant rest of the day.

Thank you.