I-Tech AB

It is early afternoon and we continue to dive deeper into today's reports release. And now we shift our focus towards iTech, who during this morning published their report for the first quarter of 2026. And standing next to me is Marcus Jansson, who is the company's CEO. Welcome. Thank you very much, Mike. Great to be back. It is good to have you back. So you will give us a short presentation and then I'll return to ask a few questions.

Indeed. So firstly then, for those of you who are experiencing or meeting iTech for the first time, just a brief introduction before we jump into the numbers and sort of the outlook going forward. So the space that iTech is operating in is today a marine transport. So our sort of innovation space, you could say, is this statement here. What if one third of the global fleet of 110 commercial vessels were using 36% more fuel than needed, even just for one day. What would that actually mean for operating costs and emissions? And the fact of the matter is, it is this bad, right? This is actually our data when in docking ships coming in after five years of service. They are using too much fuel. And it's the effect really of biofouling on the ship's hulls. So essentially, you know, when a ship is submerged under water, organisms start to grow on the ship hull. And in the beginning, it's typically slime. Later on, there could be weed and also then different hard fouling species like barnacles, for instance. and this significantly increases ships fuel consumption and of course that is impacting you could say operating costs but also then in elevating so the emissions of of co2 and ghg gases and so really having good biofouling control is an important topic and that's then where itech and our product selectop comes in right and we help the the ship owners and ship operators to reduce their emissions to air We help to predict marine ecosystems because biofouling on ship's hulls is actually seen today or viewed as the number one source for transfer of invasive aquatic species. And we need to protect our sensitive coastal environments. And lastly, what is also important is that we want to reduce the emissions to the sea, to the oceans. And here also Selecto presents a very sort of great innovation in terms of how much chemicals are actually emitted to the ocean. So briefly on iTech today then. We believe we have a very scalable business with plenty of additional potential. So we have a unique technology and we possess sort of intellectual property in terms of patents, but also you could say know-how in terms of formulations and coding developments, etc. We are an asset-light company, so our production is outsourced. So the company today mainly focuses on sales and marketing and innovation. In terms of market penetration, then we estimate that Select Hope is today present on around 3,500 ships out of a global fleet and of around 110,000 commercial vessels, as we said in the beginning. So plenty of room for continuous growth. And this is the development that iTech has had since the IPO back in 2018. So a really solid growth journey, and we see that also is continuing for now, right? So without further ado, then let's dive into the Q1 results. And hereby, I will hand over to our CFO and Head of Operations, Magnus Henell.

Hello everyone. Yes, it's nice to be here again and it's also nice to be here presenting a good result. And before Markus continues to discuss the outlook further on, I will dig in a little bit through the numbers. as you as marcus said before we have had quite interesting growth from ipo until 2025 with a small hiccup during 2025 with some lower volumes and as you can see on this graph up here three out of four quarters during 2025 was actually Significantly lower or at par with the previous quarters the year before. So it's really good now to see that we can come back with actually a growth both in terms of volume and in terms of currency adjusted revenues. We are losing 7% on the top line in Swedish krona, but that is mainly the exchange rate. Well, it's in fact only exchange rate. Sorry. And the growth and the base that we are working on with our customers, it is solid. Amongst our largest customers, we have a very solid base and we have significant growth with the smaller ones. And as we discussed last year, we had one customer that took significantly lower volumes than the year before. They are now back on a more normal level for this quarter, which then means, as I said before, on the top line, we lose 7%, but we gain equally much in Swedish krona on the gross margin. because that is also significantly improved. And that is the main effect of the gross margin is the continuous work with our producers, but also the customer mix. It's a little bit more of the more higher revenue customers for this quarter than for the previous ones, which then coming back, coming down to the sort of the more main profit EBITDA and EBIT, we are strengthening them. a little bit, one million up on the EBIT level, significantly on the margin level. We are going from 35% to 39% for this quarter. So very good quarter financially. What we can point out is actually what you see in front of you as well, that the operating cash flow is significantly lower than last year. One main effect is that now When we used all our tax benefits, we're actually starting to pay the taxes. So the main effect here is that we had almost 10 million in a tax payment effect from previous year coming into this year. So it's a little bit more normalized cash flow. But on the other hand, also, we had quite much more revenue coming from Korea, which I will talk about. The next slide where we have a little bit longer payment terms with our distributor there than we have in the rest of the world. So that is also one effect for the cash flow this quarter. And coming into the geographical spread, you can see that Korea's share has increased quite significantly. It's both due to the second largest customer, but also to our main customer, CNP, who has also higher sales in Korea than previous quarter last year. The other regions are a little bit lower in terms of volume, but I would say that there's mainly a distribution in time effect over the year. It's been a positive development also for these regions, but I think Korea is really sticking out on this quarter. And now we also look into the small highlights, if you say so, from the financial part. Of course, the growth. Being back on a growth path again is really wonderful to stand here and present for you. The diversification amongst our customers is also very interesting, that we are continuing to diversify the customer base and with the strong sales in Korea and, of course, our margins. We should have high margins. We're having high margins and hopefully we can continue to have high margins. On the grass margin, Marcus will come back to some issues that might soften that a little bit in the coming periods. But in general, it's been a very nice development for the quarter. So then I'm leaving over for Marcus again to take on the outlook.

Thank you very much, Magnus. Very great numbers indeed and happy to be able to present that today. So a little bit on the market outlook then. Our sort of familiar viewers, you have seen this slide a number of times, right? But it's just to explain the market potential as we see it, right? So every year, approximately 2000 new vessels are being built. But at the same time, then, this fleet of 110,000 commercial vessels, they need servicing, right? And they have to do that at least every fifth year. That means that there is roughly 20,000 dry docking events happening each year. So the dry docking, the maintenance segment, is the big segment for iTech to focus on going forward as well. The opportunity for sustainable anti-fouling solutions we estimate to be roughly in the range of 3 to 500 million US dollars as a gross potential. The graphs in the bottom just showing you the split between the different markets. In terms of new build, China is dominating with more than 60% and actually have increased you could say the share of new orders also now in the first quarter of 2026. So they're really dominating then, followed by Japan and Korea. And probably that order has been reversed this year as well in terms of new orders anyway. Also for the dry docking for the maintenance segment, China is dominating. And here you can see that it's other Asia, including Japan, but also Turkey and to some extent still Europe has a role to play in the maintenance segment. So that is sort of the gross market potential as we're looking into and a little bit explanation. If we look at the outlook for shipping as such we talk about you could say both about the earnings for the ship owners and the ship operators but also then on the activity in terms of new building and there of course we are specifically tracking new orders, sort of new ship orders that are being placed, because it's important to see then in the future what would the market be like. So if we start with the Clark C index, which is sort of a measure to see how well paid are the ship owners for their shipping goods, and here we can say it's up tremendously in the first quarter this year. And that sort of solely comes as a consequence of the uncertainties in the Middle East. So it's the tanker segment and crude tanker segments specifically that have seen really increased charter rates. So the price of shipping oil has increased tremendously. The other charter rates are more stable. So you can say that that has not moved so much in Q1. If we look at the new building and the contracting of new vessels, we can see that that has also actually hit a 17-year high as the activity or new contracting activity rose 40% year on year. And this has been driven, you could say, by a tripling of new tanker orders. So at the same time as charter rates have increased, also the number of orders for new tanker vessels have increased. And also there has been a rebound in the LNG contracting, LNG tankers. Chinese shipyards continued to advance their positions. They really got the lion's part of the new contract. 70% of these new orders actually landed in Chinese shipyards. Korean yards captured another 20%. So they also have a strong start to the year. And if we look sort of going forward for this year, it's the geopolitical issues overall, you could say, that remain one of our major risks to the growth momentum. And we come back to that in this slide that is after here. So essentially what is happening now is that we are in a tightening supply situation when it comes to crude oil, but also all the derivatives of crude oil. So essentially all the chemical raw materials that is needed, you could say, on one hand to build ships, but also then to produce the anti-fouling coating that ends up on the ship. And this has been covered now as well, right? We see, especially in Asia, really a crunch in terms of the availability of raw materials. For ITech it's not so much an issue of availability since we are producing quite low volume but on the other hand we are hit by tremendous price increases on raw materials and that's what you can see in the graph to the right here. So you can see that raw materials have steeply increased, indexed you could say at 140 compared to 2023. And coming back then to what Magnus was saying, so we have been able to negotiate, you could say, better production fees, but of course this is impacting our total production costs as well going forward. So measures will have to be taken then from our end going forward. So we come to the re-registration process of Celectope in the EU and this is also a long runner here and what has actually been used and we released that this week is that the standing committee on biocides has actually made a written procedure a so-called voting in writing to extend the current approval of Celectope to the end of the year so December 31st 2026. It was actually set to expire now in the end of June but we can see then a proposal for non-renewal has not been discussed in the committee and they haven't initiated the final stages of the process which is inter-consular services and the WTO-TBT process which has not started. So it's mentioned then as a way to be You could say to have the time necessary to conclude on the case. We, of course, view this as very positive because that gives us a sort of an extended timeline, of course, to influence the outcome. And of course, the standing committee on biocidal products, they will have more time to review all the input and the data that have been put forward. And also ITEC, we are commissioning a new and an additional safety study to try to iron out and solve some of the unsolved issues on the science part, so the data available for the assessment of the safety of Select Hope. So that is very positive. If we come to the business development pipeline, it's also been something we talked about throughout the last year and which has continued to advance in this year. We are looking into complementing technologies such as additional active ingredients, so additional biocides that could be complementary or synergistic with Celectope. but also other additives and also like binder materials that represent also a significant part of the formulation cost of our customers. We announced in December a new collaboration with HAVE and those discussions have advanced very favorably and in a positive direction. So we hope to be able to talk more about that during this year. We are also exploring you could say additional market segments like aquaculture and the yacht market going forward and also looking into new and more innovative business models. So all in all we hope to be able to share more information about this during the course of this year. So wrapping up and then coming to the business outlook. So we definitely foresee the need for price adjustments as a response, you could say, to the escalating raw material price situations. So that will be a theme for this year. As I already said, then in terms of new strategic partnerships regarding technology and business development, we definitely aim to have more news here throughout the year. And of course, a continuous strong focus then on advocacy linked to regulations, not only in the EU, but we have a number of ongoing cases also in the US and New Zealand and other places. So more work being done here. And also we have been welcoming new team members in iTech. So we are growing the team and that's essentially to be able to grapple with all the new activities that are ongoing at the same time. So that was in short, you could say, the presentation. Now we really look forward to the questions, Mike.

yes very much so thank you very much marcus johnson and also magnus hegnel um there's a lot of activity in the chat and i'll try to balance both the questions here but first of all you're delivering a record quarter for itech relative to your volume sold but despite this net sales dropped seven percent you mentioned that there this was due to currency effects but is it solely due to currency effects there's no So there's no sales per volume metric that has also been affected?

No, I would say it's only the currency effect for this. And if you look to it, we have a 13% degradation of the US dollars compared to... Q1 last year so it's been quite stable for Q1 this year but still when you compare the quarters between them you have this 13% degradation and that comes directly into effect on the top line unfortunately.

And moving further down a little bit in your P&L, you reported good margins as well. Gross margin increased to 60%, operating margin 35%. Magnus, during the presentation, I believe I heard something about margins maybe softening in the future. What would cause that?

Yeah, but as Marcus explained, we are now looking into a quite turbulent world market on crude oil and all the derivatives from the crude oil. And we anticipate that we will have higher production costs moving forward. We're also anticipating to take some of the effects of that from the customers on our side and increase prices towards them. But I'm not looking for a huge amount of percentage, but some small percentages drop it could be for the coming quarters. It's not written in stone, but we need to bring it up. But compared to previous year, it should not be any major effects.

And Oscar also asked, these increased production costs, is that something that you're already noticing or is that ahead of time?

That is ahead of time. All the production, and you can also see that on the gross margin, because we haven't been able to increase the prices towards the customer for the first quarter. And of course, you see that we have a very good gross margin. So that is ahead of us, yes.

And in talks of also raising potential prices to clients, what is the price? How would you describe the price elasticity?

Yeah, so I would say in normal circumstances, price increases are quite challenging, right? Because, of course, we are talking about long term contracts, you know, new ship orders have been placed, etc. Right. Maintenance market is more fluid and it's maybe easier there. in general and then of course we have commitments you could say to our customers however the situations right now are quite extraordinary as a consequence really and we see that sort of also from our customers right and downstream of us the people are implementing price adjustments simply to be able to cope with the situation right to be able to have material to offer to the customers and to be able to complete the projects right So I would say there is also a general understanding that price increases will have to happen throughout the value chain as a consequence of the uncertainty. And even if we have some sort of a conclusion to the existing situation, we have created a backlog of issues. This will take months to sort out in any case. Even if we take a very positive development from now onwards, we're talking months of turbulence still in the market before this is settled and we are back to more normal levels.

Do you see any significant risks that driving prices up will decrease volume?

That could be a risk. I see more is a risk that we mentioned in the market outlook, right? Simply that our customers are unable to source the appropriate amount of raw materials because it's not available. So they're actually not able to produce the amount of antifouling coating needed to satisfy the customer, right? I see that as more of a risk, right? But of course, you're right. There is to some extent that risk as well.

We'll talk more about the raw materials soon, but before we do that, a viewer asks, please, could you explain why receivables increase so much? Are you extending credit terms to customers or are customers taking longer to pay?

No, we're not extending payment terms, but we have longer payment terms with our Korean distributor. And since the share to Korea increased from a little bit more than 30% up to 45% for this quarter, That will of course have an effect also on the credit days.

Last time you were here presenting your Q4 report, you talked about your significant client that decreased their volume during the fourth quarter due to financial difficulties. How was that situation developed?

Well, I think as we mentioned then, we saw a stabilization of the order patterns during Q4 already last year. And as Magnus alluded to here, we've seen quite a strong start in the beginning. So, I mean, they're back to more normal levels now as we would have expected.

And Oscar asks, do you expect that the second customer's demand is now more normal or stable during the last month? And I assume that the second largest customer is the customer that is?

Yes.

Yes. All right, good. Then continuing on to Oscar's question, he also asks this one. If you have to choose one, which market is the most important for you in the coming two to three years?

I mean, all our markets are important to us, right? But we have obtained quite a strong position in both Korea and Japan, right? So we talked about, I think, in earlier shows as well, right, that China is our number one growth market, right? And penetrating, you could say, the maintenance segment. So if you say China and maintenance segment, these are the key growth areas for us, right, for Select Hope going forward. So, you know, we, of course, value Korea and Japan, but we need to grow more in China, definitely, going forward.

So interpreting that, then you're choosing growth over stability when choosing one market?

No, I mean, stability is the base for growth. So, of course, you know, like I said, right, our existing customers and the markets are really important to us. Right. But in terms of unlocking additional growth, we will need to put additional resources and focus on specifically China and the maintenance segment going forward.

Let's talk about then the Middle Eastern conflict and its consequences. You describe in reports that the conflict has affected tanker contracting during March. So far into Q2, how was that developed?

Well, it's difficult to say how it's impacting, you could say, new building contracting, right? There's typically a delay here. Like we say in the report, we saw a decrease of sort of new orders coming in throughout March, right? But we will have to see the April numbers are not really out yet to our knowledge, right? So I think if, you know, there was really a surge in new contract, you could say in the beginning, right, for tankers. So I would expect then this to normalize a little bit throughout the year, right? Of course, you know, it's an aging tanker fleet. It needs replacing. And of course, they need to meet up, you know, to renewable fuel criteria going forward. But also, I would expect sort of the levels to be more normal going forward in this year. But let's see.

And are there also concerns how oil availability and chemical raw materials will affect the shipping sector more long term in the aftermath here?

Yeah, definitely. I mean, in terms of availability, I think short term positive benefit for operators of tankers. They, of course, can charge more for transporting oil, etc. But as we talked about here, sort of the big crunch and the availability of raw materials is, of course, affecting the business negatively. I mean, if you talk LNG or liquefied natural gas, And here we know that there are ships sort of idling at the moment because they don't have business, right? The production has simply dropped so much that they do not have business. So, you know, there are many impacting sort of parts of the shipping business being impacted of the consequences in the Middle East. Of course, from our perspective, we are worrying more about the availability of raw materials and the ability of our customers to satisfy the shipyard's need for anti-fouling coating because that will directly impact our business.

Maybe we should point out that it's not the availability of our production of the raw materials. It's mainly the binders and everything that you need to put into the paints that we receive an effect of.

Precisely, because a viewer did ask what specific raw material would be impacted and can these raw materials also be sourced from other regions?

Well, typically solvents, right? That's one that's been talked about, but also the raw material for binder production. So, I mean, that's the problem. We live in a global world, right? And 20% of the... of the available output has been sort of reduced significantly. And it's not only the oil coming out of the Middle East, it's all the chemicals as well. And of course, you could say there is a possibility for chemical industries in other regions to fulfill the need. But if there is an overall lack for crude oil, of course, then there is a lack of crude oil. Then it doesn't matter that you have free capacity to turn it into solvents if the oil is not available. So if this continues throughout the year, it could be quite severe consequences. And of course, not only for shipbuilding, but for all businesses, essentially.

And to circle to the oil then, low availability and high prices. Couldn't one make a case that that would benefit you considering you're helping clients drawing down their oil consumption? Absolutely.

And also there are a lot of ships idling at the moment, being exposed to biofouling. So after this, a lot of ships would have significant fouling problems. So of course, the ones that have invested in good anti-fouling solutions would have lower operating costs. So definitely.

Let's talk about regulations then. The EU has extended their approval for Selecto to take further time to finish the ongoing process. Date is now the 31st of December. How do you view this decision?

Well, as I alluded to there in the presentation, it's quite positive, right? I mean, although you could say that the extension is sort of expected due to the process, right? They do not have enough time, you could say, to complete the necessary steps of the process, right? So they had to extend it in any case. However, the positive side of that is, of course, there is more time, you could say, to consider the input that has come into the process. And there is more time, of course, than to generate support for, you could say, a more thorough evaluation of the product segments of anti-fouling when it comes to all our products, not only our products, but the others in this product category. So we view it as quite positive. It gives more time to influence the process.

Possibly a very difficult question, but the decision to push up the final decision date, has that changed your expectations regarding the final decision?

I think it's too soon to say. I mean, it's still, you know, a lot of uncertainty around that, right? I would say it's not negative, let's say that at least, right? So slightly leaning towards the positive, of course.

That was all my questions, but we have many more viewer questions. We'll simply take them one by one. First of all, can you share any information about new products that are being developed?

Not really at this point, right? We will come back to that throughout the course of this year.

Next question is, what is the estimated market share of iTech break down to New Build and Tridoc?

Yeah, so we look a little bit at our market then. So if we take Korea, for instance, our sales to Korea, this is predominantly new build, right? So all that volume tend to go into new build. In Japan, it's more of an even split. And the same you could say goes for our sales to China. So we typically say, you know, around 60-40, so 60% new build, 40% maintenance. Of course, with a rising trend, you could say, on the maintenance side, right? But that is simply, you know, it's a 10 times bigger market. So it takes a longer period of time to grow that share significantly.

Next question is, can you elaborate a little bit on EoGRT that you're conducting? What is the timing on this and how long will the study take?

This is a complex and long-term study, because you essentially study the effects of a chemical onto a test species over generations. So you simply look at the offspring and what happens to that offspring, etc. So it's multi-generations. I think we are counting on approximately two years to complete the study as such, right? And, you know, long time, complex study, of course, quite costly to do as well, right? But we are happy to do it as well, right? And sort of it's mainly for other regions that we are doing it, but of course it's useful in the EU context as well. We hope that that sort of can... really shine some light on the remaining uncertainties of the effect of Celectope. Is there an endocrine effect or not? And of course, we are arguing there is not a detrimental or a negative effect on the endocrine system, but to be found out with the study.

I'm about to read up the last question from Laura, but as I do, I would like to also remind the viewers that if you have any more questions, then please post them in the chat. So of the nine major paint companies, two are still in development stage. Is there any update on commercialization timing for those?

Not really in terms of timing, but the customer number seven is sort of approaching slowly, we would say, to be more of a steady and regular commercial customer. But we have still not changed the classification. So we're still saying, you know, it's regular business to six out of nine with an option of number seven and joining soon.

One of the viewers also clarified that it was the same viewer that asked the question about the market share. How much do you estimate the market share of iTech in the maintenance out of the entire TAM? Same for NewBuild.

In general, we estimate around 3 to 4% of the total market share. And as Mark has said, approximately the maintenance market is 10 times the... So I would say 0.3 to 0.4% of the maintenance. And, well, I don't do the math that fast now, but a little bit higher on the...

new bid side. A new question from Laura. You mentioned some hires during the quarter. How many additions should we expect over the course of the year? And how should we think about the operating expenses trajectory for the rest of the year?

Yeah, so we are bringing on three new full-time employees, you could say. That's the plan for this year. And of course, that situation can be updated throughout the course of the year, but currently there is no firm plan. So that is the added effect that we see now. And maybe you want to talk.

now but if you talk in general on the operating cost of course we have the entire eu situation where we which have driven a little bit more cost during q1 than the q4 so but it's it's actually a matter of how much that will drive i would say how much effort we need to and of course we're coming into the uh to the study, to this endocrine disruption study, that will take significantly efforts. And we have spoken about it before, that it's a 10 million study over two years. So we said it before, so I can say it now as well, that we'll take half of this year, roughly.

That was all the questions that I had from the chat. But Marcus Jansson and Magnus Hanell, thank you very much for being here, presenting and answering our questions.

Thank you very much.