Impact Coatings AB (publ)

Good morning and welcome to today's presentation where we have Impact Coatings presenting the Q3 report for 2024. With us presenting, we have Jonas Nilsson, CEO, and Bengt Wernerson, CFO. We'll do a Q&A after the presentation, and you can either type in your question using the form that is located to the right, or if you're calling in and would like to ask a question, please press star nine to raise your hand and then star six to unmute yourself. And with that said, please go ahead with your presentation.

Thank you. So welcome to this presentation of the Q3 report. I am Jonas Nilsson and with me I have Bengt Wernersson. He has caught a cold and he has a weak voice so I will also present his slides but he is online and available for questions. So this is the agenda. We start with Q3 highlights. We have a market and business update, financial update, talk about continued focus, and then a short Q&A. So let us start with Q3 highlights. I would say that Q3 is a strong quarter across the business. Net sales amounts to 31.7 million, which also gives a rolling 12 net sales above 100 million. If we look at the first graph, we see that we, like the previous quarter, had a delivery of one inline quarter IC2000. This was the second system delivered to Boyan in China. In the Coating Services graph you see an increase from previous quarter thanks to Coating Services China. There we are limited by capacity right now but a brand new IC2000 has been shipped and will be installed and up and running during this fourth quarter. For those of you who have read the report, you have seen that the order backlog for coating services amounts to 3.9 million. On top of that, we have 10.7 million that comes from a rental arrangement of a coating line to an antenna customer. During the third quarter, we again demonstrated the results of our new delivery strategy with a successful delivery of another IC2000 within the same quarter as the order was received. This delivery to Boyan in China confirms that our focus on standardization and forecast-based system production increases efficiency. Moving forward, we will work on refining software, coding processes and other system functionalities. And we are in a good position to do that. We have several customers that are running real volume production with multiple machines, and so do we at our coding service center in Shanghai. This gives us the opportunity to fine tune and improve our systems for real serious production performance. Our coating service center in China has been operating at full production capacity in two shifts since the second quarter 2024 with machine setup time and preparations for the next shift. This is in practice around the clock production at the factory. So basically we're running 24-7. So we very much look forward to have the new IC2000 up and running to increase the capacity. We're also increasing our delivery capacity of machines. During the quarter, we began the relocation of our headquarters, including R&D, coating service center and system manufacturing and assembly to our new premises here in Mjärdevi in Linköping. The move is being carried out in stages and we expect to be fully settled in the new facilities by the end of the year. Our path to profitability is based on increased sales. This quarter, we show increased sales on a rolling 12-month basis. And to continue on that path, we need increased delivery capacity. The new factory has an initial capacity of one machine per month and can be upgraded to two machines per month. So talking about rolling 12, After a temporary dip in Q1, we are witnessing an increase in rolling 12-month sales during Q3. Sales growth is the cornerstone of our journey towards profitability. And when looking at sales over the past seven quarters, it's clear that we now have established ourselves on a new level. While Q1 was a bit slow, the quarters before and after have been the best we've seen in the past six years. As we have concluded, we have a strong quarter in all revenue streams. In the quarter, we delivered one system to a Chinese customer amounting to 21.5 million. We saw a positive trend in coating services in China, which reduces the gap compared to last year. We have sales in a quarter of 6.6 million compared to 8.4 million last year. And last year was mainly driven by electrolysis coatings. Aftermarket were slightly up compared to previous year, 3.6 million compared to 2.6. Gross margin is at 50% for the quarter and comes from the product mix during the quarter and the fact that we have repetitive order which affect our price level. There are, however, significant opportunities to lower the production costs. Operating expenses in the quarter were 20.7 million compared to 19 million last year. In the quarter, increased costs in China were partly offset by reduced activity and therefore reduced costs at the Swedish coating service center. Depreciation rose to 1.6 million from 1.1 last year, mainly from investments in the Chinese facility. Currency exposure in US dollars and euro resulted in a foreign exchange loss of 200,000. Interest income amounted to 200,000. In total, this led to a negative result of 6.5 million in the quarter. So we now move to the balance sheet and conclude that during the quarter we have continued to invest in coating systems to our coating service centers. We have also continued our work to produce systems based on forecasts. There are a lot of figures on this slide. I will explain the most important changes compared to end of last year. We start with assets under construction, the third line from the top of the balance sheet with 25 million at the end of the quarter. To support future growth in sales, we have been working with one IC2000 system to the coating service center in China, as I previously mentioned, that the system is now delivered. We have also been working on one IC500 system and other equipment to the new facility here in Linköping. Finally, we have capitalized costs related to product development. In total, this means an addition of 14 million compared to end of 2023. Next major change compared to last year is related to our continued work to manufacture systems based on forecasts. For these systems, we have purchased components, which can be seen in the increase in raw materials by 6 million. We are moving from 80 million at year end to 86 million at quarter end. We also see an increase in work in progress by 4 million. By manufacturing to forecast, we will be able to shorten lead times, generate increased sales and also reduce costs. Moving to the cash flow, we can conclude that we end the quarter with a cash balance at 65 million. Continued sales growth is vital to scale up the business and we are working according to our plan to get in new paying customers and also reduce the lead times to increase sales. The cash flow was negatively affected by the year-to-date results. The increase in working capital at just over 18 million is mainly driven by the new strategy to produce systems on forecasts, which is part of our plan to increase sales. It also includes increasing receivables from a shipment of a coating system at perioden. And as we have mentioned before, investments in the quarter of 50 million is mainly related to one system to our coating service center in Shanghai and a system to the new facility in Linköping. In total, this resulted in a negative cash flow of 54 million in the nine months and a closing balance of 65 million. So this was all the finance slides, which means that we now move to our continued focus. Continued focus is unchanged. We aim to maintain market leadership in electrolysis coatings for green hydrogen, while also striving for market leadership in fuel cell coatings. We want to expand in metalization, i.e. radomes and antenna verticals for the automotive industry. And we do admit that PVD is a horizontal technology, so we do not say no to other businesses. We have profitability as the leading star, both for the rest of the year and also for the coming years. And the main action to reach profitability is to sell more. We still have a high pace in getting new paying customers and we have a strong sales pipeline. And this is especially important when the sales cycles are long. Reduced delivery times has led to and will continue to lead to increased sales. The system manufacturing to forecast is our way of shortening lead times, which has the positive side effect of also long-term reducing manufacturing costs. So with that, I want to thank all of our shareholders and also our customers for your continued trust. And I would also like to send a special thanks to Bengt, who has been our interim CFO since January 23. Bengt will stay until end of this year to make a smooth transition to the new CFO, Lena Åberg, who starts next month. Thank you.

Thank you very much for that presentation. And now we'll jump into the Q&A section here. If you're calling in and would like to ask a question, you can please press star nine to raise your hand and then star six to unmute. And we'll begin with Henrik from Redeye. Please go ahead. You have the word.