Aquaporin A/S (00B.F) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Natalie, your Chorus Call operator. Welcome, and thank you for joining Aquaporin conference call annual report 2021. [Operator Instructions] I would now like to turn the conference over to Matt Boczkowski. Please go ahead.

Good afternoon, everyone, and welcome to Aquaporins annual report release for 2021. My name is Matt Boczkowski, I'm the Chief Executive Officer, and I'm here today with our Chief Financial Officer, Bo Karmark, to take you through this presentation. We will start by looking at our 2021 highlights. This will be followed by a business area review of our 3 key areas in which we operate. We will spend some time to discuss our research and development achievements, look at the financial review and then present the 2022 outlook before we move to Q&A. So starting with our 2021 highlights. I think 2021 was the strongest commercial year-to-date for Aquaporin. We've had a good momentum in Q4 where we had -- we have been very busy despite supply chain challenges that occurred in the industry. Of course, these were driven primarily by COVID and some of the pressures that this meant for various supply chains. We saw an increase in demand and an interest for our products. And we also noticed dimension of biomimetic membrane more broadly in the market, which is also highlight that our technology is gaining momentum and gaining interest from various parties in water treatment. I think one of the main areas that I would like to highlight is that we grew our product sales by 229%. This is quite an important achievement for us since 100% of this revenue is coming from products as opposed to potential milestone payments, which was the case in 2020, but not the case in 2021. So what this means in terms of revenue is that we're able to achieve DKK 8 million in 2021 compared to DKK 2.7 million in 2020. We also saw a very strong interest in our 3 business areas. So primarily, the revenue was being driven by drinking water. However, in industrial water and food and beverage, we also saw a tremendous amount of inquiries and interest from various customers. We've also developed a core view products, which allows us to further push our technology into our respective segments. I think 2021 is really the year that laid the foundation for our future. We have had a very successful IPO in June that allowed of DKK 435 million. And now we are listed on the NASDAQ and Copenhagen, as most of you know. And of that IPO, DKK 250 million were proceeds directly to the company. That mainly is being split in really 2 primary areas for Aquaporin, in commercial activities and also in in our continued efforts to innovate and drive the research and development. So on the commercial side, I think we've been able to grow our commercial force. We've been able to grow both the marketing team and the direct sales teams. And on the R&D side, we actually introduced more biomemetic membrane-based products to the market than ever before. I think this also shows that there is a strong fit for Aquaporin products, both in forward osmosis and reverses osmosis applications. We have also taken the time to shift the organization towards a more commercial focus. This isn't simply hiring people in commercial roles like direct sales, but also really transitioning some of our R&D into customer-facing roles such as commercial engineering. And a little bit later in the presentation when we go into R&D, I'll explain a bit more about how we've been doing that. We've also taken the time to lay a very clear strategic road map on how we want to develop Aquaporin for the next 3 to 5 years. Of course, we're going to continue focusing on our drinking water, food and beverage and industrial water applications, but we also want to make sure that we put a focus on system solutions. Systems are basically large equipment -- engineered equipment that allows us to put Aquaporin membrane and technology into them and to get closer to the customer. We hope to accomplish that through partnerships, but we're also considering some organic and both inorganic developments. And lastly, moving to highlights in R&D. Again, R&D for us includes technology, but also open innovation. We've had 2 successful patent filings, one around the hollow fiber technology and other one around the Aquaporin protein. We've continued evolving the Aquaporin site formulation so that we can develop second-generation products, would even further increase in differentiation and value for our customers. This can be translated into a better rejection, for example, or into a higher flux when it comes to membrane performance. We've looked at things like the substitution of membrane chemicals with green chemical alternatives. We've also looked at areas like machine learning to increase the speed at which we deliver products to the market. And finally, we are even looking at things like providing recyclable membrane components as we move into the future. As we know that this is something that our customers are really eager to find in the market. A few words about -- maybe about open innovation. One of the things that we've kicked off in 2020 -- at the end of 2021 is really this idea of increasing the number of public and private partnerships, and we do this through open innovation. This is really part of our culture and our DNA, and we really hope to accelerate this going forward, as it brings us, of course, closer to end users to customers, but also allows us to cocreate with other parties, that's with whom we find the right fit. Now looking at our financial results versus the guidance that was achieved in 2021. We realized a revenue of DKK 8.9 million. This was for a guidance that was revised in November to DKK 6 million to DKK 10 million. So we are within the guidance and closer to the upper edge of what we had revised. In terms of EBITDA, we had a loss of 74 -- we actually -- so we realized a loss of DKK 74.8 million for a projection of a loss between DKK 70 million and DKK 80 million. And lastly, in terms of EBIT, we had a loss of DKK 93.7 million, again compared to a guidance of DKK 90 million to DKK 100 million. So again, both in terms of EBITDA and EBIT, we are within our original guidance. And for revenue, we are within the guidance that we revised at the end of the year. Now moving into our business area review and starting with drinking water. Perhaps before going into the numbers that we realized in drinking water, I'll start by saying that this is a market that is hundreds of billions of kroner in size. What is important for us is to realize where do we want to play, how we want to play in the market, and what types of customers are we really going after. Once we've taken the time to identify the right segment, it has been a lot easier for us to go ahead and execute on our strategy. So for Aquaporin, the drinking water industry is really something that we look at through a key account strategy and a key account lens. This means that we don't have geographic boundaries so much as we look at key accounts that have -- that see the possibility to differentiate themselves through Aquaporins technology, and then we enter into longer-term strategic discussions with them. So when you consider this is our strategy and you look at some of the key wins that we have here in 2021, I think we can clearly say that this strategy is paying off and that we are executing clearly on what we have promised. We've won 2,500 -- a contract for 2,500 ZERO purifiers from Vestel, which is a very large Turkish conglomerate. This is a company that has shown trust to Aquaporin and with whom we are looking forward to developing business as we go forward. Another key win I would like to highlight here is an order of flat sheet membrane from AquaShield. So just to clarify quickly, when we say flat sheet membranes is really the membrane that we produce with our Aquaporin Inside technology that our partner intakes and shapes into membrane elements that are then put into purifiers that are sold to tens of thousands of people. So this particular order is also of significant importance because it shows that there is a demand for the Aquaporin Inside formulation and our technology and it is being seen as something that allows to make a difference and allows our customers to differentiate themselves. And again, this is a core part of our technology to work with such large customers and push on the co-branding angle of our offering. In the last Q1, I'd like to highlight is the sale of 40,000 drinking water elements. These are small elements that will be called 18 12. So in technical terms, this means that it's one of the smaller elements that goes into standard purifiers. And this again is a big win for us because selling 40,000 elements means that we can power close to 40,000 water purifiers. And of course, we have advanced many different dialogues in many different geographies in countries such as India, for instance, or the United States. So what does this mean in terms of actual financial performance? Drinking water contributed to more than 70%, so 72% of our total revenue. This is a 540% growth compared to 2020. And again, this is very much in line with our strong strategy of focusing on drinking water first as we see this as the first segment in which we will be generating significant revenue for Aquaporin. In terms of numbers, this contributed to DKK 6.4 million. This is just the beginning. We -- in the near term, we plan on focusing on a number of different areas in drinking water. The #1 thing is going to be continuing to expand our relationships with the strategic partners and key accounts that we've already established. Now that being said, we're also going to drive new key accounts, and that means that we will continue staffing our commercial team to expand our strategy in that direction. We're also going to add commercial resources and target geographies. What this means is that we see good traction in China. We may be adding some resources in that area. We see a very good potential in the United States. We may be adding some resources in the United States. We really try to follow where we see commercial traction and potential partnerships with key accounts in order to be able to execute upon our strategy of delivering to those -- delivering to those customers in the future. Now one way that we need to look at the market is to always look at it through a customer lens. And we want to make sure that the products that we introduced have gone through a lot of considerations as to what the consumers and the end users want. And that is, for instance, what we have done with our kitchen purifier, which we are in the process of developing, and it's something that we hope to announce towards the end of this year, more broadly to the market. Another area that we see also as a key enabler for us in drinking water is IoT or the Internet of Things, which also means digitally enabling our devices. But being able to see how much water is consumed in our devices, how often the filters need to be changed, what type of water is consumed. We're able to understand the trends and habits of our consumers a little bit better. And with this information, we should be able to deliver an offer that is closer to our customers' needs and desires. And it's also something that we believe our partners can leverage to get closer to customers as well. So overall, a very good performance from the drinking water business that's aligns very much with our strategy of growing our Aquaporin Inside brand, promoting Danish design and Scandinavian water quality and water, of course, filtered by nature. Now moving to Industrial Water. Industrial Water is the area where we treat wastewater, where we extract water through our forward osmosis technology from different waste streams and where we concentrate the waste so that we can reduce either the energy demand on the evaporators or the amount of trips that trucks would have to do back and forth in order to dispose of some of the liquid waste. There are many advantages to forward osmosis and wastewater treatment, and one of our big challenges at the beginning of the year was to figure out where and how we want to focus. And I've got to say that I'm extremely pleased with how we performed in industrial water in 2021, since we've been able to really convert a lot of the focus that we've done spending a few elements here and there to test out the market into 2 or 3 very concrete areas where we are trying -- we're going to be focusing in 2022 in the near term. So before we move into those areas that are listed a little bit below here, I just want to talk a bit about the numbers. 23% of our total revenue came from industrial water. This is a 25% growth over 2020, and that corresponds to approximately DKK 2.1 million in revenue. I think one of our key wins in 2021 was what we call our bLEAF container. And this is a pre-engineered solution that comes in a 40-foot container that is meant to treat leachate overflow, in this particular case in China. However, you could deploy that container to any leachate plant or leachate collection station. Again, for -- just to clarify, when we talk about leachate, in this particular case, we're referring to waste transfer stations where you have a lot of the liquid leaching out of garbage, which could contaminate soils and it's often quite difficult to deal with. So in this particular situation, we're able to collect this leachate, pass it through our container, extract the wastewater in a very energy-efficient way, concentrate to leachate and either reuse or recycle the water or discharge it in a safe -- to the environment safely. I think in addition to the bLEAF container, we've been also able to convert a small forward osmosis pilot into a full scale project. In the past, we've been asked as to how our pilots are converting into projects. I think this is a perfect example of a system where we've used 6 hollow-fiber forward osmosis membranes, which demonstrated the excellent performance in a wastewater treatment plant, and this has led to a much larger full-size pilot that counts over 100 forward osmosis modules. So again, this is going to be -- this is being executed in 2022. And we hope that this successful pilot is going to lead to many repeat projects in the future. Another key achievement in 2021 was the launch of our brackish membrane series called CLEAR. These are reverse osmosis membranes that are designed to fit an existing reverse osmosis systems. The characteristics of the CLEAR membranes are that we are able to provide low energy, reverse osmosis membrane alternatives that we sell in the standard format of a forage membrane and a [Indiscernible] membrane, which can be used as a direct replacement into existing systems. We are at the beginning of our journey in this area, we are identifying channel partners. We are identifying end users, and we're also in discussion with a few key accounts who are testing our membranes and incorporating them in their plan designs for future systems. One of the areas that came out as a key focus area from the different tests that we have done with our FO technology is the digestate and farm waste industry. This -- a lot of the digestate and farm waste is actually used to produce biogas, which is a very popular topic these days given the different scenarios that we're encountering around energy security in Eastern Europe. But basically, what we are able to do here is we're able to take the digestate and the waste has been used to create biogas and to reduce the volume of that waste. So they can second be disposed of in a fairly safe way and the water can be extracted and returned to the environment. Our technology allows to, again, reduce the size of -- reduce the volume of waste that is being created, which means that less waste has to be trucked off or spread across fields. A few other areas in which FO has proven to be quite attractive is in the lithium industry. Also in another industry where we recover valuables from the wastewater. And we have also made some progress in our Fashion for Good program in the textile industry where in 2022, we hope to run the pilot that will demonstrate the use of our forward osmosis technology in a couple of textile applications in Southeast Asia. So what would we like to achieve in the near term? I think delivering full system solutions for leachate and digestate is we would like to accelerate. We would like to, of course, continue piloting and growing scale to demonstrate our technology. I think we want to also convert some of the pilots to large-scale system orders. And again, this idea of entering into systems is something that you're going to hear me say a few times when it comes to industrial water when it comes to our strategy and also food and beverage. And again, we are exploring some organic and inorganic ways to move into that systems play. Moving into systems has also another consequence for us, which is the expansion into services. As we grow, I would like Aquaporin to expand into services to be able to provide an aftermarket service offer, both in terms of our core technology such as membranes and key spare parts, but also in terms of optimization where we can predict how our system is going to operate where we can then help our customers to manage their FO assets in a better way. Now moving to our third business area, Food and Beverage. This represented the lowest revenue for Aquaporin of DKK 0.4 million. But in terms of activity, actually, it's been a very busy year for us in Food and Beverage. And the low revenue shouldn't be linked here with a lower activity since what we have been spending a lot of time on is on application tests and developing areas in which we want to focus with our customers. Similar to industrial water, FO membranes can make a big difference for various customers in various areas. What is important for us to do here is to focus on areas where we see the most immediate success and the highest added value. So for Aquaporin, Food and Beverage was really around demonstrating the Aquaporin Inside forward osmosis performance in the area of flavors. And we did so by building our own mobile system and running a couple of modules with a few key accounts that witnessed what our systems can actually do in the field. We also got opportunity to demonstrate how our systems are able to perform in both wine and juice applications, which we believe could be the future, a near-term focus for us once we've gained successful momentum in flavors and ingredients. We signed 2 new partners in our key focus segments and have also identified an execution partner since we are able to deliver standardized solutions to our customers in Food and Beverage. I think the other important part that is important to realize is that including beverage, this is where we generate a lot of excitement, a lot of customers are coming to us, and they see the potential that forward osmosis has for their processes. This can be reducing volume, but it can also be creating new products. It can be trading new revenue streams for them. And this is something that gets them quite interested in our technology. So going forward, of course, we're going to be getting closer to those customers. We're going to be working on applications with them, and the idea is to move from an application test to a pilot to then eventually a full-scale solution, which in some cases for some customers might just be a few repeat pilot projects given that some of those applications are extremely -- they're lower volume processes, such as in flavors, for example. But if we move into juices and move into wine, now we're talking about larger plants. And again, that is the end go for us here. So now moving to our R&D overview. Just before I start, at Aquaporin when we look at how we invest our resources. We really look -- we look at spending a portion on commercialization of increasing our commercial efforts in drinking water, food and beverage and industrial water, which is what we covered so far. And then we look at another area, which ensures the longer-term growth of the company in terms of future products, the more immediate success in terms of the next generation of Aquaporin protein and that is what we do through our R&D branch. In R&D, we look at 3 different segments. First one is deep tech, second one is open innovation, and the third one is commercial engineering. Now commercial engineering is really not a typical R&D activity, but this really shows how we are moving from product development into application engineering, which for us falls under what we call a commercial engineering department. Starting with Deep Tech, where we are doing Deep Technology is the development of our core Aquaporin Inside formulation. This is where we develop formulation that we apply to membranes, whether it could be in-house or it could be through CMOs. And we look at how quickly and by how much could we improve the different properties of those membranes through different types of formulations and advances in how we mix both our biological and chemical components together. We have filed 2 successful patents in 2021 and we've been able to establish a very successful collaboration with a contract manufacturing organization, and that allows us to ensure the development of our drinking water membranes to future generations where we can expect an increase in flux. We're also looking at how could we improve the rejection rates of our forward osmosis membranes so that we could tackle some applications that might require rejection rates that go beyond what we can do today. But these closer near-term application is what we do in Deep Tech and that has a very narrow focus for us, which is really necessary to bring these improvements to the market quickly. Then as we move into another area of R&D that we call Open Innovation. This is an area where we really look at public and private partnerships, where we look at technologies counting, and we try to understand how could we use the Aquaporin protein in different ways or in different applications. Really what gives first to this Open Innovation department is the idea that Aquaporin has been built on Open Innovation. And our founder, Peter Holme, who is the Chief Innovation Officer, is really well positioned to drive this into -- to drive it towards its success. I think we have had some key wins in Open Innovation, even though it's been something that we've launched very recently. But it just shows that we've been doing Open Innovation for quite few time. What we decided to do is to actually give it a proper and stronger focus. And I think that's something that is going to be paying off for Aquaporin in the future. So for instance, we've utilized the Aquaporin inside membranes in space for water reuse application. That's something that we've published in the past, but it's something that is really a result of Open Innovation. We also extended the development of substitution of membrane chemicals with green alternatives, which was also a result of Open Innovation. We are looking at things like machine learning to optimize product development and previously also mentioned using -- or looking into recyclable memory components, which again is something that we do through this Open Innovation initiative. Now moving to our final part of R&D, which we call here commercial engineering. This is really what -- this department actually used to be called product development at Aquaporin. But the closer we got to customers, the closer we got to applications with our forward osmosis technology, the more we realized that we now need to engage in preparing proposals, we need to engage in preparing P&ID drawings and we started moving a bit away from product development into commercial engineering. And so we decided to rebrand this department and to give it a name that is more aligned with its activities. And a lot of the press releases or a lot of our success stories are really powered by this commercial engineering department. So for instance, the bLEAF container comes out of the work done within this business unit in collaboration with the customer, with the partner and of course, the commercial team. Things like the food and beverage mobile pilot system again, the resources has come from the R&D budget. However, the outcome of the work is something that is done by the commercial engineering team towards the end consumer with whom we can now test various applications in a real scale and a real -- with real products. Another part that is quite important for us in the commercial engineering department is the development of standardized forward osmosis containers or containerized units. These systems are standard systems that are developed in a 40-foot container and allow us to scale up quite easily from an application test to a pilot and to a full-size project. Of course, if the full-size project requires more than 2 or 3 containers, we will execute as a project, but executing something as a project goes beyond our current capabilities, and so we will review how we would go and tackle such an endeavor. This concludes what I wanted to present here on both our commercial activities and R&D, and I will pass it to Bo Karmark, our Chief Financial Officer, to walk you through our financial review.

Thank you, Matt. Income statement in 2021, there was commercial acceleration to that point. Revenue for 2021 amounted to DKK 8.9 million, an increase of 62% compared to 2020. In 2020, Aquaporin received a milestone payment from a strategic part of DKK 2.8 million. In '21, we did not recognize any milestone payments. So looking solely at revenue from product sales, the increase in revenue was 228%. The driver behind this was drinking water revenue amounted to DKK 6.4 million. This is an increase of more than 500%. The drinking water revenue relates both from point of view systems and membranes. Gross profit for 2021 amounts to DKK 3.4 million and mixed margin of 37.8%. The decrease in margin compared to 2020 is driven by a mix and is due to an increase in drinking water revenue. Operating costs amounts to DKK 97.1 million, an increase of DKK 7.2 million. Sales and marketing costs increased in line with the strategy as we are adding more commercial resources as Matt also was mentioned. R&D costs decreased as we source converging towards commercialization, where we were, for example, spinning out the commercial engineering departments and administrative cost increased as a consequence of being a listed company. Special items in the income statement amount to DKK 37.3 million, and this is related to the IPO, the total IPO costs amounted to DKK 41.4 million. Cash flow statement, cash flow from operating activities amounted to a negative DKK 155.2 million. The increase in expense relates to -- primarily to the IPO. Cash flow from investment activities amounted to DKK 10 million and is kept at a minimum, as we are working with an asset-light model. Cash flow from financing activities amounted to DKK 267 million. The activities are driven by the IPO. Cash equivalents at end of 2021 amounts to DKK 143 million.

Thank you very much Bo for the financials. Now moving to our outlook for 2022. In 2022, we are planning on introducing new products in drinking water, industrial water and food and beverage. This is part of our product pipeline, and we are advanced in making these introductions in various areas of components business segments. We also point of growing into systems, and I've already mentioned this a few times, but we are looking at ways to do that this year. We are working on developing Aquaporins next-generation membrane. We want to increase our ability to upper membranes that differentiate themselves in the market through higher performance. And we will be continuing commercialization by adding key commercial resources in either key segments or geographies. We are going to continue to focusing on people and culture. We've hired a new HR manager at the beginning of 2022, and we are very pleased with the changes that we've already been able to implement. Now in terms of the numbers, we expect revenue of DKK 20 million to DKK 30 million, which is 2x to 3x the revenue that we registered in 2021. So fairly ambitious growth targets; percentage wise, this corresponds to 125% to 240% increase. Now our EBITDA, we expect a loss to be in the range of DKK 90 million to DKK 100 million and EBIT to be a loss in the range of DKK 105 million to DKK 115 million. So overall, we're very excited about 2022. We are continuing in our 3 key segments. We are also looking at launching initiatives through open innovation and continue the commercial traction that we have kicked off in the past few years and continue, of course, accelerating it in 2022. With this, we will wrap it up, and both Bo and I will be very happy to take any questions that the audience may have. Thank you.

[Operator Instructions] And the first question is from the line of Thomas Bowers from Danske Bank.

Yes. A number of questions for me here. So if we just -- well, we can maybe take one at a time here. So if we just look at the '22 outlook, and of course, also a bit on your '24 aspiration. So you previously commented that the drinking water would be sort of fairly consistent growth over the years to '24 and then the industry part would be more hockey stick like. So is this still how you sort of would see things based on your '22 guidance? And then also referring to that outlook, so that DKK 20 million to DKK 30 million, I assume that that, of course, will -- do you have some phasing from the delays in '21 as you highlighted in November. So basically, my question is to actually still believe that it's realistic for you to reach those DKK 250 million to DKK 300 million in drinking water by '24?

Yes. Thank you, Thomas, for the questions. So first, to answer the first question you had about the split. Yes, the split is such that the majority of the revenue is coming from drinking water. So about 80% of that DKK 20 million to DKK 30 million guidance is coming from drinking water, so it's still in line with our strategy. And the minority -- or the minor part of the revenue is going to be coming from industrial and food and beverage. So yes, now to address your, I think the second part of your question about delays in 2021. It's true that we had delays in 2021 as we communicated, that's what led us to revise our guidance. Some of the delays have materialized early in 2022. Some have not materialized yet. And some are not going to materialize. We have a few opportunities that -- we were very sure of closing, but then there were some changes, and we scale them down from a high probability to a medium or low probability. But this is a minor opportunity that fall in that category. What happens also is that when we delay some of the revenue that we have recognized in 2021 and push it to 2022. What tends to happen when we work with, let's say, a couple of large key accounts, and this is where we are right now is, it actually shifts things -- it's shifts I guess everything by, let's say, a month. So yes, some of this revenue will come in 2022. But I also want to be mindful that this may shift some of the revenue that we have planned with those customers towards the end of the year of 2022 out of this year as well. And so overall, it's -- I wouldn't want to say that everything that we were supposed to recognize at the end of 2021 is actually happening at the beginning of 2022 because that would not be the correct way to look at it. That being said, you also -- your valid question about the aspiration. I think when I look at the drinking water market, this is a market that is projected to be DKK 120 billion, DKK 130 billion by 2024, 2025. Our aspirations are 0.1% of that market. I think that we are setting the right strategy in place, both in terms of introducing products, growing through the co-branding strategy. And I believe that the pace at which this is going to increase is still in line with hitting our aspiration. So it's we're doing everything we can to put the right products in place, put the systems in place, put the solutions in place. And it's the adoption of our customers, our ability to successfully commercialize them and the growth of the Aquaporin Inside brand that is really what's going to take us to the aspiration. And I think in light of where we are and given the size of the market, it's something that we're still striving to achieve.

Okay. But have you been, maybe a bit surprised about how long things actually take -- to actually materialize and then also in terms of general execution? Because you can say that, that based on your previous comments on you would say the growth trajectory, so seeing drinking water being fairly consistent in the growth trajectory compared to industry being more hockey stick like. So are we seeing now drinking water also being more hockey stick? Or is it may be just the delays that actually maybe -- so you're running 6 to 12 months behind your original expectations for drinking water?

I think -- so just to, I guess, reiterate the traction that we're getting in drinking water is it's just there. I mean if you look at the AquaShield announcement we made, if you look at the Vestel announcement, I think we are getting to the customers that we wanted to get to that we had identified initially. And it's also what we are working on here is really introducing a new technology in their existing products. And it's also that adoption that happened to those customers is something that happens gradually. And -- but the beauty of this is that as this happens, it does grow our -- the brand awareness of our component side which then grows other customers to want to get on the sort of on the Aquaporin Inside bandwagon, if you want. So I do see the hockey stick curve in industrial water and food and beverage, that's yes. I do see that. And we are looking also getting into systems so that we can flatten out this hockey stick curve a little bit by being in the system play sooner than we initially sort of anticipated in my sort of original thoughts around how we're going to get there. But drinking water, I would -- I wouldn't say that we are behind. I think execution-wise, we are talking to the customers that we wanted to talk to. And it's just -- it's a matter of simply 2 more of what we are doing and accelerating the number of strategic customers that we are able to onboard on Aquaporin side.

Okay, good. And then maybe just on your earnings outlook. So of course, I fully understand the full year effects from the investments made in H2. But I'm just bit curious here on the SG&A level that they needed to support those close to 10x the current terminal over in drinking water by 2024. So are you sort of in place with that team? So or do you need to make significant investments in '23 and then maybe also in '24 to reach those revenue numbers?

No. In drinking water, again, the beauty of focusing through key accounts is that we don't foresee needing a lot of key accounts to get to our growth targets. I think that we currently have the right sales team in place. We may add 2, maybe 3 commercial resources. But that's about the investment that we will make. I think in terms of other investments, we talked about the kitchen segment at the time of the IPO. And this is something that we have decided to go ahead with. And we have made the investment that was part of our budget already committed to growing at Aquaporin. And we are actually now with the first prototype of that kitchen unit. We expect to have this sort of ready towards the end of this year. But that's the investment that I also see in terms of developing new products that allow us to tackle a good market segment. The other sort of next generation of products that we are looking at in terms of membrane or in terms of next-generation purifier that could be IoT connected or there will be IoT connected -- these are just part of the regular sort of product upgrade costs. And I wouldn't -- they won't require any special investment that we haven't accounted for.

Okay. Perfect. And then just on your cash position. So you have DKK 143 million by year-end and also a small credit line here. So can you maybe just add a bit of color on your considerations on the cash balance with the '22 outlook in mind? So are we looking into any -- do you need to strengthen that balance at some point in time this year maybe?

No, look, I think we have enough cash for the next year. And we are, of course, keeping an eye on our expenses and keeping an eye on the revenue that we are generating. So that's part of just the day-to-day or the normal way of running the business. I think with all this in mind, of course, in the fall, we will look at -- we will take a closer look at doing -- do we have where we are at and what's the situation like and we investigate do we need any sort of different or additional funding. But I don't see it being a problem for the moment.

Okay. And then just a few housekeeping questions. So just on special items. So I understand, of course, in '21, it was IPO-related, but I'm just -- now you're also guiding before special items. So is there anything in '22 we need to be aware of here? And also on the CapEx, is there any material year-over-year changes that we need to be aware of?

Right now, we are not expecting any special items organized. But of course, based on the situation in Russia, we've also missed that in the outlook, in the annual report. We have some stock that we were expecting to sell to Russia. Now we have stopped selling. And then of course, we are pursuing different opportunities, but see later in the year, but right now, we are not expecting anything.

And on CapEx?

Same.

Okay. And then yes, but actually, Russia is sort of my -- one of my final questions on the list. So you had this 40,000 filter order to Geyser. And it's my impression that you have delivered this, but revenue recognized only a part of this. So is that -- so how should we see this affect your '22 numbers? Is there still something that you are expected to be revenue recognized in that outlook? Or have you just removed the remaining revenue that you need to get from that one?

Yes. It's a good question. I think your interpretation is completely correct. In terms of -- it is the 40,000 elements that we sold and shipped to them. The deal with Geyser was to receive payments in a few installments, of which I believe we now have received 1 or 2 payments. And we've been able to collect the money, and we don't see any issues with collecting the money in the future. However, we also did take out -- we do have an insurance to cover a good portion of the payment should we not be able to collect it. So that being said, we did take the decision not to enter in further commercial exchanges in Russia until further notice. And I don't think that's -- we didn't have -- we only had a small portion of our outlook originally related to future potential deals within Russia, but it's minor. There's nothing that I would say changes our outlook.

Okay. Got it. And then just a final question. So just on new products within drinking water. Can you maybe add a little bit of color on the solutions compared to ZERO and ONE that we should be expecting?

Yes. So I think -- we -- so the ZERO and ONE are 2 product lines that we have. One is, of course, not powered by electricity. The other one is [indiscernible]. We are looking at future generations of those products of upgrade performance, whether it's performance of the ZERO or whether it's for instance, connectivity of the ONE, and that's what I mentioned, the IoT enablement. These are again things that we are already discussing with suppliers, and it's something that I do believe can happen this year. And so we have in our technology funnel. In addition to these improvements, I think we have one more product that is -- actually 2 products that I'd like to mention for drinking water. One is the kitchen unit. So that's a unit that is going to be targeting mid- and high-end kitchens. It's a built-in cabinet that offers hot water, cold water, ice cubes, boiling water and bubbly water. It's something that we are designing together with input from some of the larger kitchen makers. So that's -- and that's in also back and forth and the prototyping is taking quite a bit of time, but we want to make sure we get it right. And we hope that we can get this finalized by the end of this year. I would love to have it finalized in Q3. But of course, I think we're probably going to be looking at some time in Q4. But we will keep the market updated on this because that's a nice development that we're very, very proud of. And the other product, I think, is I mentioned that through Deep Tech, we continue evolving our current membrane performance. Today, we are offering a membrane that has a certain flow rate. We want to continue improving this and while keeping the rejection constant. And what this really means for people in the market is that they're now able to still guarantee the same removal of things from water, whether it's viruses, bacteria and other substances, but really get more flow from the machine, and that is a differentiator. So we are working through R&D on that second technology -- second generation of membranes, which we also hope to have sometime this year.

[Operator Instructions] The next question is from the line of Peter Anderson.

Peter Anderson, private shareholder. So first of all, congratulations on a super nice designed annual report and quite thorough, which is nice, the private shareholder. My question is somewhat a follow-up to what Thomas mentioned. You had a downgrade last year, a little bit of management changes. What makes you comfortable that you'll be able to deliver your guidance for '22, and specifically thinking commercially?

Yes. Thank you, Peter, for the question. I think when -- we also had a lot of learnings in 2021. We realized towards Q3, Q4, that the supply chain, and that's the way that we had estimated some deliveries was perhaps a bit too ambitious. And when we look at our guidance in 2022, we really take in a lot of those learnings into account. Just maybe some background into how we come up with the guidance, we look at the opportunities that we have in our pipeline. We look at their probability. And we look at the ones that have the highest probability of success. And we use this information to build the guidance. And so in our guidance for 2022, it is really built on conversations that we are having advanced conversations with customers. And some, I would say, a medium to highly advanced conversations with customers. So we really are quite -- we're quite strict into what we put in the guidance from a point of view to ensure that we are able to deliver on our promise to our shareholders. Again, the majority of the revenue is going to be in drinking water, which is where we have the highest number of advanced dialogues and the sort of larger customers that we -- from whom the revenue will be coming. We made some announcements already at the beginning of this year with product shipments. And so we expect this type of momentum to continue. So I think we are well-geared, well-positioned to meet our guidance. And in addition to that, we are also planning on hiring another resource to help us accelerate our progress in drinking water. And so should you know something that fail to materialize or something else should take us by surprise, we want to make sure that we have a good amount of pipeline that we can activate and then we can push to close in 2022 so that we can meet that guidance. I hope this answers your questions, but let me know if you want me to elaborate a bit more.

No. I think that answers the question because my follow-up was reducing dependence on kind of single account materializing. But I think you covered that with the last part of your answer.

There are no further questions at this time. And I would like to hand back to Matt Boczkowski for closing comments.

So I just think as you wrap up, I just wanted to express our thanks to, of course, our shareholders, our customers, our employees who -- everybody has been working relentlessly to make 2021 happen, and we're going to continue to that, of course, in 2022. I think it's -- we're on a great mission to deliver water to as many people as we can to ensure that we save energy, to ensure that we create new products in food and beverage. And I think it's really our shareholders, our customers and our employees that are making all of this possible. So as we wrap up here, I just wanted to thank everyone for their contributions.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining. Have a pleasant day. Goodbye.