PowerCell Sweden AB (publ)

welcome to power cell quarter one 2025 uh presentation uh we're looking forward to spend and half an hour together uh it's myself richard berkling and understanding cfo uh since the last six months so let us dive right into the quarter one presentation we issued the uh the presentation earlier this morning. And as we have as a headline, it's steady pace through rough waters. And we'll try and elaborate on this one together now for the upcoming 25, 30 minutes. So we still see a rather interesting growth. 42% growth in quarter one is something that we're quite proud of, with 11% growth rolling 12 months. We are seeing an improved EBITDA to minus 6 million SEC, which means that we are closing in on breakeven, as is the ambition of the company, of course. What was important to see as a performance highlight in quarter one was, of course, the large breakthrough order on our newly launched methanol to hydrogen fuel cell power plant. 150 million SEK as an OEM order, which was very, very encouraging. Not the least to the fact that we introduced this product quarter four last year to see that we get traction quite early on with new product introduction is of course very encouraging and important. Equally important is to also build industrial stability. So receiving the certification AS9100, which is a quality certification for aviation suppliers, is very important because it really proves that we are an industrial mature company, which is something that is extremely important in the process or timing that we're entering into right now in the market phases. We see a decline in cash flow from working capital to customer orders, something that Anders will comment more on. But we also see that we now, for the third consecutive quarter, have an order intake from product sales over 150 million SEK. So we continue to see this steady pace, but we also acknowledge the fact that it is a difficult market sometimes out there, especially when it comes to policymaking and regulation. Moving on. If we comment the strategic execution of what we do, we now see that we continue to shift from the pilot driven sales that we have before to more structured OEM focused partnerships, particularly in the marine and power generation sector. The new platforms such as the M2 Power 250 that we received the large breakthrough order, and the Marine System 225 that was introduced in Q2 last year. They are designed to support integration into the customer workflow. This is not just technology evolution or that we are providing one-off projects. We're now designing in our systems into the customer offering, which is the important baseline of volumes that we're trying to build with the OEM business. So the strategic focus is on growing installed base, but we also need to increase value per sold system, which is the growth strategy of PowerShell. Expand number of installation and of course, expand value per installation. That is extremely important in the stage that we are in this technology shift. We have a clear focus on supporting the long term industrialization at our customer sites. Achieving this ACE 9100 certification, as I commented, it underlines the readiness to support really demanding applications, including aviation. But this is also relevant for our marine power generation customers, because we are now going into a phase where products are put into commercial operational use. And that means that we need to be able to support and control over a complete lifecycle. So this is the introduction to the quarter one report. Ander, if I hand over to you for the financial comments and updates.

Thank you, Richard. I will start to just swiftly walk through some KPIs. Richard already mentioned some of them, but I would like to, as you maybe have noticed in the report, there are some explanations about foreign exchange effects that has been affecting us in Q1. the reason behind and I think this is important as we is more a company that delivers according to percentage of completion in projects when they are re-evaluated that impact our top line depending on the way the currency swings and in this quarter it has affected us by minus 18 million sec Those changes have occurred in the past and they will occur in the future. And we will be careful about making sure that you understand how they impact us from an accounting standpoint. Although it's important to notice that as basically all our transactions are done in Euro from a pure financial standpoint, this is less of an impact, more of a accounting situation. And we will do our best to guide you and make you understand how that impact us quarter on quarter. However, in this quarter, it's about 18 million that affected top line and about 8 million that affected the EBITDA level, both obviously in a negative favor for us. Looking into the cash flow, if we walk over there and we'll go down to that line, I think when we had the large order in last quarter and we had the presentation we were curious about we were concerned about making sure that it was understood that the very strong cash flow in q4 will have rollover effects into q1 as we have purchased in q4 will pay in in q4 and start deliver not yet being able to invoice and collect in q1 That's why we have the big shift and one should, in order to understand the underlying flow, basically even out those two quarters so that you find the average between the two to make a more robust analysis and understanding of how we perform. I think that I will make no comments on the equity ratio, but rather move into the next page, which is about sales and EBITDA development over time. We have spoken in the last quarter about that we would see a more, let's say, evened out sales during the quarter. We think that this first quarter is an indication of that. However, I think it's important to recall that a flat variance between or no variance between quarters in the coming year cannot be expected because we will still have the kind of hockey stick effect over the quarters, but it should be expected to be less articulated than it has been in the past. Looking to the EBITDA level, one can say that we had last year in Q2, a hefty negative such thing, that we have made differences to how we operate. We have had leverage from our sales and we have gradually been able to manage ebda in a better way and obviously like everyone can understand as we grow and if we continue to grow we will soon and hopefully which is an ultimate target for the company find ourselves at a break-even level one can maybe uh have some some trust in that q4 and q1 in combination it's a break even on ebd level With that, and looking forward to potential questions following on, I would hand over to Richard again to continue.

Perfect. So then if we move over to what is the strategic focus for 2025, this has been presented before, but it's a good reminder and it ties into what Anders said. Main focus is reaching breakeven on rolling 12 months. This is not the forecast that we will do that in the current calendar year, but as Anders points out for the last six months, we are now on rolling six months breakeven. We are quite happy with the top line growth of 44% that are driven by the OEM contracts. That should not either be taken for granted going forward because what we do is not easy. We are acting on a novel market. Business development in any technology shifts requires the pioneer mindset. Powercell, we have set a very clear path. And as I said before, we have a golden rule of growth strategy, grow number of installations in the market and grow your value creation per installation. When we do that, we will capture the volumes that are out there and we will drive more penetration and we have a clear perspective on how to create value for the end customer. What is important where we are right now as a company is also not just to grow from OEM contracts, but to scale from existing product generation, because that will drive towards break even and balance the cash flow. But with that said, we remain really strong in accelerating next generation of product portfolio because we need to continue to be competitive going forward as well i've stated this before we could reach break even if sooner if we would delay future product development or technology development but then we would jeopardize the future earnings. So the whole management team is extremely dedicated to find this balance point where we do enough innovation to remain competitive and stay ahead with the offering that we have, but at the same time leverage growth so we can show break even on the early volumes in this technology shift. So we're proud of the ability to balance innovation, industrial stability and still leverage growth with a clear path towards breakeven. So that is the whole focus of 2025 on a higher level. If we look at it from a market perspective instead, we can now say that the market, and we've said this before, it's shifting market dynamics. We see now a clear direction going forward. In the broader business context, it is challenging with a cautious market sentiment. We see longer decision cycles and we have really mixed policy signals. When I say mixed, I'm being very, very liberal in my interpretation. Despite this, we see continued demand from customers and they have now a more structured procurement process and they have a defined industrialization plan. This is a sign of a maturing market. We also get encouragement from external assessments like the NERC, which made a long term reliability report, which is showing that this is not just about decarbonisation. We need to get more energy resilience into society today because we are sitting on rather old infrastructure and we see a growing demand from electricity throughout the whole world. So that is a trend that is reinforcing our underlying business and we see that we see clear cases of implementing our products into customer applications that goes beyond just decarbonization. So even though short-time volatility is likely to continue, we remain really focused on executing against the long-term fundamentals and we do this with a realistic and adaptive approach. So if we then summarize where we see the market now and where we see ourselves, we see an ambiguous market characteristics, but we also see OEM driven sales rather than just subsidy driven growth or product driven growth. There is an uncertainty around policy and regulatory aspects but at the same time we see clarity from IMO that is pushing the marine industry to really support energy transition where it's becoming business critical or a business advantage to be early out with a new technology because you are then future proofing your assets. We remain a technology leader and a product leader in the marketplace. We still have the best-validated FuelSec technology in the industry, together with Robert Bosch. And we now can also, with some pride and humble, state that we have successful products that are reliable and high performance. We are now also going into the commercial deliveries. So this is not just technology exploration, but it's becoming business critical for our customers. So we are starting serial delivery to commercial applications and we are scaling our production. We're actually running two shifts at Powercell in Gothenburg since two weeks back. So if we then look forward to where you can meet us next, we have the AGM next week in Gothenburg. You're more than welcome to join physically if you have the time. Otherwise, we have the interim report for the first half on July 17th. And then you can see the rest of the agenda or schedule going forward. So with this, we open up for more time for questions and comments from the audience, because that's quite often where it's most interesting. So we have a question from... I cannot pronounce the name, Mark. Is Amogee still a customer to Powercell? Yes, they are. We still have a very good collaboration with Amogee. Amogee is the leading provider of ammonia reformers to hydrogen in the industry, focused on especially marine. We have a continuous dialogue with them but as every part of a technology shift some areas move faster than others. A year ago ammonia was viewed as the ultimate solution for especially ocean going marine vessels now see that methanol have a slightly faster pace time to market but at the same time ammonia remains one of the most important fuels to put into the mix which is an energy carrier for hydrogen going forward so they are for sure a very interesting partner for us to continue to work then we get a question that is of course really really relevant at the time we see right now from from pamela how do we see the potential impacts as they currently stand? Well, the problem with the question is the final part, as they currently stand. Tariffs tend to shift more on a daily basis on what's the current flavor from the White House. We don't really know. We don't see at the moment a large export of... Going into the US, which would be the underlying question, would be high tariffs. It would affect us, but it would most likely affect most of our competitors as well. So at the moment, we don't see any significant negative effect for Powercell. We have an opportunity to source from Europe for the European market. We will have an opportunity to set up production or final manufacturing in the US if that would be the case with a large customer. because we have this asset-like business model where we can more easily establish new assembly sites close to the customer. So it's affecting our industry but it's more affecting our industry with uncertainty rather than actual cost that we have a difficulty managing. We have a question on Bosch and their ending their relationship with Cirrus Power. How is our relationship with Bosch? Do we notice any sign that they will end relationship with PowerCell? No, on the contrary. The fact that Bosch clarified their strategy to be PEM fuel cells only, supported by also their electrolyzer business. I think it's a very good focus for Powercell because that means that Bosch is supporting our technology at the moment and we see strong interest especially in China for the Bosch products that we have our technology designed into. So we have a very good relationship with Bosch and they are still not just a larger owner at Powercell but they are also developing Powercell as an industrial partner. So we have a very appreciated collaboration with Bosch. And then we have from Henrik Alveskog from Redeye. From the marine segment, do you expect your methanol system to make up for the major part of new sales in the next few years considering restrictions regarding access to hydrogen? That is a very good question. While we see restrictions regarding access to hydrogen, I think you refer to the green hydrogen. We also see a compensating trend where more customers are accepting other versions of hydrogen. We have now a more diverse view on hydrogen as a fuel. So we we have customers that we initially operate on gray hydrogen, perhaps moving to blue in the future. Not the perfect solution. We all know that the green hydrogen is the best solution from an environmental perspective. But at the same time, I think it's a very important and appreciated sometimes I say sobering up from the industry, that we cannot wait for the perfect solution with green hydrogen. We need to build the infrastructure and we need to get the value chain rolling on other sources of hydrogen because that would build the volume, that would be the critical mass that eventually will be the off-takers of the green hydrogen that is available. So methanol, yes, it's complementing hydrogen, but it's not replacing and we don't see it as competing. I think it will be at short term, it will be determined on availability from a geographic perspective. And methanol is a good complement because it is available today in many areas where our both power generation marine customers are operating. So it's a really viable fuel to accelerate the deployment of fuel cells into industries where you need to go greener. And then we have a question from Henrik as well on the commercial product for Hitachi and Hyflex. Well, of course, equally with Bosch, we cannot comment on our customer's business or our industrial partner's business. But we see from the communication from Hitachi that they have a really high activity. related to HyFlex. They have communicated a number of customer partnerships and customer applications. So hopefully we will see that as orders coming into PowerCell in the future. Then we had a question once more on which type of customers or segments will prefer methanol reforming versus prefer pure hydrogen. And as I said before, it's not necessarily so that we can distinguish its segments from a customer segment perspective. I think that we will see or we expect to see growth both from power generation, marine, both with the methanol reform solution and traditional fuel cells with hydrogen. So it's more about, as I said, availability of different fuels and also what type of installations you have and how fast you can get regulatory support for hydrogen, because that is sometimes limiting. We see California as a very good example. They are stimulating electrification in a very good way. They have funding available, but the regulatory process to get certificate for handling hydrogen is extremely slow. That is why Texas, despite being more negative towards the green aspect of this energy transition, deployment in Texas and build up of volume in Texas is going faster than California because of the rather slow regulatory processes in California. So it would be interesting to follow this going forward. Interesting question from Danny here. In the long term perspective, plus 10 years, what will be our main segment in our business? And this is a question that we discuss constantly within PowerSat. I've said in the past, and I still stick to it, I think that stationary power or power generation will be the dominant volume segment because of this issue of energy resilience that we see throughout the whole world. So from a volume perspective, that should be the main segment. We will have the backup power, peak shaving, et cetera, main power in remote areas where you don't have grid access, et cetera. So there is a palette of potential applications where we see a really interesting fit together with access to green sources of energy like wind and solar. You have an energy storage in the form of electricity back while reforming it and running through fuel cells. So very interesting applications. Marine, I think, will be very strong more from a financial perspective for PowerSoft because those are more specific applications, much more demanding. So they will have a higher price for us and also most likely a higher gross margin. Both of these segments will have an interesting aftermarket revenue as well as we go forward. Marine and power generation they are our main segments when it comes to growth of volume and also growth of top line If we look at it With with aviation as an aspect, aviation has never been the volume segment for power. So aviation is our like Formula One segment automotive. This is where we push technology. This is where we expand the boundaries or explore the boundaries of new products and features. We try new materials, et cetera, to qualify it. for our more volume segments. So even though the new generation of fuel cell stack that you see on the image here, which is the heavy duty stack that can be configured up to one megawatt, we are developing that. with aviation requirements and aviation is leading and accelerating that development and industrialization, most likely deployment as a product will happen in power generation and marine before, because time to market in those segments are different than aviation. But aviation is still a very good accelerator for PowerCell and our products going forward. I commented on aviation. I have a number of questions here from that. Also, how the newborn project is developing. That is the collaboration projects around this new generation stack that is progressing well. We have a very solid consortium of 14, 15 contributors led by Honeywell. And they are leading in this in a very impressive way. So we see good progress. We have built a number of full stacks that we are running. We see very good progress when it comes to developing more performance from the stack. I think we have commented that we expect to have 55% better energy density, which of course then gives us more power at a smaller footprint and a lower cost. So it is really an interesting development. And as we said, the project together with the consortium is going really well. And a lot of questions here. An interesting question here from Carnegie. The increased value per system. This goes back to the growth strategy. With the methanol to hydrogen fuel cell reformer package, the methanol power plant that we received an order on in quarter one, The sales value per megawatt is significantly higher than when we just sell the fuel cell system or the marine system 225. And that comes from the value of integrating more solutions into our application and simplifying for the end customer and in this case the marine vessel builder. Of course, climbing the value chain comes at a benefit. You get a higher top line growth. You get a higher gross margin. But at the same time, you also see more responsibility. I wouldn't expect to see the same multiple on revenue per megawatt going forward on the methanol reformer. but now the initial one is of course a really valuable breakthrough but it will be significantly higher than just selling standalone systems because that that is a value from from integration and this is why we have the growth strategy of truly trying to to integrate more and more value into our offering because integration is not just about building top line for power so it is truly simplifying for the end customer, taking responsibility, minimizing the technical risk, minimizing time to market and minimizing investment for the end customer. So doing this is a very, very important enabler to go and build a volume base out there. Anders, do you see any questions here that we have missed or that you want to address?

I noticed some questions on the cash flow and I noticed some questions on the currency effects, and I can only go back and articulate what we said before. The cash flow need to be viewed over time, depending on the significance of individual purchases and individual deliveries we have at project milestones. And I think that's important to take into account when you look into the rolling six rolling 12 rolling 18 cash flow when you try what way you will do your estimates for the future for those of you that work with forecasts for us I also think that mentioning the FX effects, they have been in the past always associated to items on the balance sheet and particularly those projects where we have a build-up of asset in the project as such. What is happening now and I think it is obvious that the ratio between the krona and the euro has gone in the wrong direction for us. At the same time, We have proceed further in our projects, which means that it's a bigger asset base to reevaluate at any point in time. And at the point when the euro has a negative impact on us and the asset that we reevaluate is larger, the impact effects effect is growing. Obviously, when we get into more balanced portfolio in the future, this will even out. But for the time being, when we have a more mature project portfolio at this point compared to previous quarters, the effects of the revaluation is higher. And one need just understand that mechanism.

We also have an additional question here on Our competitors. We comment on competition from Toyota, New Hydrogen Technology or other competition. We welcome that competition and we think it's extremely important. Unfortunately, we are not head-to-head competitors with Toyota because we are not active in the automotive segment. That is through our partner Bosch. But I think it's really encouraging to see companies like Toyota and others continue to invest into fuel cell as technology and product portfolio, deploying more and more systems into the market because we need to have healthy competitors. 2024, unfortunately, led to a situation where a number of our colleagues in the industry went away. So if you are positive, you say that the power cell relative competitiveness is increasing by that. But we would rather have more and stronger competitors because we think that we have a very strong product offering to the customers. We have a very good understanding on how to support the customers through this transition. So we are not discouraged by having strong competitors. Quite the contrary, that would make us even better. So we continue to monitor what is happening in the industry. We continue to learn from the breakthroughs and really great development that they are doing. But we are also quite proud and confident in our own ability, both from the... the product offering, and of course, the expertise and commitment that we have in our employees that are out there at the moment doing commissioning and deployment at customer operations at a very high pace. So more competition is welcome from PowerShell. Now we have a final question from Konstantin Hess. Can you comment on your order book and what visibility you currently have for Q2 and will you be able to continue report breakeven. What about ordering intake in Q2 so far? Well, this is an ongoing dialogue between Konstantin and I, where we don't comment forward-looking. We will do that going forward to give better guidance. But if you look at the order book build-up from what has been communicated from Q3, Q4 and Q1, you will get a rather good understanding of how our order book looks. What is still the case is that a lot of the orders are now coming in with a short turnover time. I think I stated this in quarter four and quarter one. Previously, from initial discussions, order and delivery, and then payment from customer, that cycle time was five years. What happened after summer 2024 was a really shift in the market because now we have commercial customers and they don't have too much time to spend. So turnover time from from initial negotiation to customer delivery and payment is now between 12 to 18 months. So that is really accelerating the industry. And it's a very healthy indication of what we said before for mature customers that we see. And I think Anders, you answered the question on cash flow that was there. If we expect positive cash flow this year and how we think about the development throughout the quarters. As you said, we need to look at cash flow over a number of quarters to see them balance out because you have rollover effects over the quarter. Or do you want to comment on that one?

No, I think that is exactly the way one needs to understand the situation we have and we are dependent on large orders and large pre-purchase for them and obviously they will be on a roll over effects between quarters. And I think maybe one should just comment, and I think this is potentially stating the obvious, but like Richard said before, we are aiming for a breakeven situation. And with everything else in our financial books, excluding the R&D section, a breakeven will bring us closer to a breakeven also when it comes to operating cash flow by gravity, you can say.

And then also a need for explanation that Konstantin has noted here. We have now for the third consecutive quarter an order intake on product sales over 150 million per quarter. That means more than 50 million SEK per month for nine months in a row. That is something that we're quite proud of. And it is a shift in the industry in general and of course for Powercell. So then to summarize, we are continuing to navigate through rather rough waters. We keep a very good pace, a steady pace. There are no guarantees in what we do, but we feel that we have a very strong position where we managed to provide 44% growth in quarter one. We get a leverage from that growth, improving IPTO and operational income, while we're still investing into new capabilities all over Powercell from industrial stability, production build up, but also innovation development of next generation product portfolio to remain competitive and secure future earnings. So we are happy with the position. We would, of course, be even more pleased if the underlying market would clarify and get uncertainty out of the way, regardless if it's being around tariffs or regulatory instances. But we also see that the underlying market that is out there, that is driven from customers that are pioneering, is at the moment supporting Power Cell growth journey in a very interesting way. So with that, we thank you for listening in. And as always, you're more than welcome to reach out. You can find Anders and myself through email, LinkedIn, and of course, Popeye Power Cell in Gothenburg if you want to make a factory visit and meet the people. So with that, hope you enjoy the day and have a nice weekend when it's time for that.