Betolar Oyj (BETOLAR) Earnings Call Transcript & Summary

Welcome. I'm Vibeke Krohn, and I'm the President and CEO of Betolar. Thank you for joining us today. We are here to present our Q2 numbers. And in this webcast, you'll meet myself, Vibeke Krohn; and our CFO, Mikko. I have recently joined Betolar as the CEO. Over the last past weeks, I've spent time with our employees, our Board, our customer and our partners, building my understanding of opportunities and challenges ahead. We closed off a first quarter with a continued revenue growth, strengthened financing and a sharpened strategic focus. What has impressed me with Betolar is our strong foundation in technology, our ability to turn opportunities -- market opportunities into solutions and real customer demand, both in metal extraction and critical infrastructure protection. And also finally, that, it's a strong company, it's a strong foundation and a driven -- purpose-driven setup. Betolar operates in the intersection of resource efficiency, critical raw material, circular economy and industrial decarbonization, all topics that are increasingly more important globally. Challenging geopolitics continue to highlight the importance of resilience, creating new opportunities and market demand for critical infrastructure protection and proprietary extraction of rare earth metals. Building on our strong foundation and our material knowledge, we are well placed to meet this demand and to really drive our strategic focus areas going forward. So here today, we will share a little bit about the details, both some highlights, and we will also share financials underlying this revenue growth that has continued and our financing situation. This is our disclaimer for -- about forward-looking statements. So please review. Our agenda today is highlights, as I said, financials. We'll open up for questions, and you get a chance to get to know me. Okay. So who am I? Prior to joining Betolar, I have focused on building businesses. I built businesses across many markets and -- but mainly building business, scaling technologies and rapid commercialization. I bring with me about 15 years of C-suite roles, CE roles and C-suite roles in various scale tech up -- tech scaleups, difficult, and multinational corporations. I'm very much driven by purpose and solving global challenges. I'm super excited about Betolar. I am -- what really attracted me was the opportunity to help scale the transition, from technology development to commercial growth and industrial implementation. It is early on for me. It's my day 8.5. Today's focus will very much be pre-my time and our current business and performance. Looking ahead, though, my priorities as CEO will be to drive commercialization and customer adaptation. We need to be disciplined, we need to be focused and execution oriented to continue to develop the company to drive value, both for customers, partners and shareholders. And with that, Mikko, I think I'll hand over to you.

Okay. Thank you, Vibeke. So let's then move to the business highlights of the second quarter. And indeed, we had quite eventful quarter here. And we will first focus on the business side and then move to the financing arrangements, which we also had during the second quarter. So starting with the metal extraction side and strengthening the financing and partnerships that -- what are we then using to drive the growth in our metal extraction business. Starting from the partners with Scalewolf and first explaining what is Scalewolf. So Scalewolf is a venture capital fund and that is -- we have been partnering with them and signed a letter of intent with them. And the plan is that we are then accelerating the implementation of our metal extraction technology business. And Scalewolf is very much providing access to access to capital for us together with them. They are extremely well connected to the different parties there, for example, they have good [ nature ] connections and also that they have an impressive track record in building businesses and finding funding for them. And the first step that -- where they have been committed is to our financing arrangements for the convertible hybrid loan, and I will talk about that later on today. But that's not all that -- we are also planning there to make some structural changes there under the letter of intent, and all the details will be then disclosed that when we have been then executing those. But the plan is that we would be doing -- establishing a new entities under our parent entity together with the Scalewolf and with their help, then we are able to collect more capital to these entities where we can actually then create value for our shareholders and also for all the owners of the different entities there. And -- we will then disclose more details that when we are progressing with this collaboration there, but the first step anyhow is that during the third quarter, then is that -- the Scalewolf that will be then participating that our convertible hybrid loan program. And the second deal, what we announced there during the second quarter in June is that we secured the exclusive rights to utilize [ titanium-rich ] mine tailings from Otanmäki mining area in Finland. And just to give some of the scale of that how big is the mining area and the tailings there. So there are roughly 10 million tonnes of titanium-rich mine tailings in the mining area. And Otanmäki, that's a place in Finland, Finland there and what is then essential there that it's a closed mine. And when the mine was operating, so during that time, all the extraction technologies were not that efficient. So that's why the mine tailings are -- having big quantities of valuable metals. And if we transfer the titanium value when that has been then refined to metals, metals, so we are talking roughly about EUR 7 billion value of the metals. So it's a big opportunity, and to capture the value from this mine tailings there, we need, of course, that partners. Scalewolf is the main partner there, and that's why these 2 arrangements are also linked. Then a third point in the metal extraction side is that we have been applying for further grants from EU. And we secured EUR 2.1 million grant from EU LIFE Programme. The program is called MINERVA project, and that is then collaboration project that is related then to Sokli mine project in Finland as well. And Betolar's role there is to extract the metals out from the mine tailings and also to produce low-carbon circular [indiscernible]. And regarding this project that we will then disclose also that the results there when the program is then advancing. And this is a multiyear program there, and which is about to start during the second half of this year. And then if we move to the critical infrastructure protection side. So we see the demand increase there and basically the increasing security concerns. And then we have seen the physical damages done to the critical infrastructure, and the threat is growing all the time there, and we have seen drone attacks happening there in the different parts of Europe and also some drones landing to the Finnish site there. And we have been developing our solutions there and innovation, and we have been patenting new technologies there regarding the critical infrastructure protection side there. And we have also announced the letter of intent with the cooperation with Enersense so that we can then protect electrical substations, but more also to be disclosed about this cooperation later on when we are then moving forward with our commercialization and building our solutions. But as Vibeke was mentioning that the critical infrastructure protection side that is -- that -- there we really see the growing demand going in the future. And the last point is, of course, that in the circular material sales side, we are continuing there that we have the ongoing operations in India and also, as we have been mentioning earlier, that we have -- we have our own slag available in Finland, and this is also what we have been communicating during the second quarter and also now lately after the quarter is that it's available there in Finland, and we have progressed with all the preparations, with all the paperworks, and the product is ready to be used from our terminal to our customers. And next, moving to the financing arrangement, what we announced in June. So starting from the top, that the last day of June, we announced that we are -- we have agreed -- or actually, we signed during the last day of June that we agreed that we are then having a EUR 3 million term loan from Danske Bank. This is then guaranteed by European Investment Fund and one of our largest owners, Virala. And on top of that one, then we have issued convertible capital notes or as we are saying that in the review that we are also talking about convertible hybrid loan, meaning that the capital notes are convertible to equity with the strike at [ EUR 2.1 ] per share, and this has no maturity date, and we have then declassified this as an equity in our group financial statements. And we had our largest owner, Virala and Nidoco, Ilmarinen and Ajanta participating this program with EUR 1 million each. And this was issued at the end of June. And on top of this one that we released that we have a [ tap ] issue on the convertible capital notes, and this is that where Scalewolf has committed to subscribe with the same terms as mentioned above with other investors. And this was then subject to approval from our extraordinary general meeting that took place last week, and we got the green light there. And now we are working on to execute this last part of this financing deal. So with all of these financing that we are then collecting EUR 9 million, and with that money that we are then securing the runway there to the 2028 side. And let's then move to the financial operational indicators side. Starting from the revenue, our revenue growth continued, and that more than doubled year-on-year when looking at the H1 numbers, and we are very close to the numbers of entire year 2025. So meaning that our first half revenue was EUR 902,000. And then when reviewing our EBITDA levels, the EBITDA level is roughly on the same level where we were a year ago there. And there are a few main reasons there that one is the other operating income. And as I mentioned in the first quarter, we had one-off item in the first quarter other operating income regarding the grants, and that's one reason why we have been coming -- we are on the same level with the EBITDA. But then turning -- looking at the balance sheet side there, the liquidity that -- the cash balance was roughly EUR 6 million at the end of the quarter and then the total liquidity and undrawn grants, totaling then more than EUR 12 million. And on top of that, that one will then come the convertible notes then from Scalewolf, which will increase the number then after the third quarter. And then turning to the order intake side. So order intake was unfortunately low there. And -- but now going forward there that we are concentrating on the execution of our strategy and speeding up the commercialization in all of our businesses, especially in the critical -- protecting the critical infrastructure side. And then finally, having a look then for our financial position and outlook. And starting from the outlook. So the guidance for the entire year remains unchanged. And the revenue for 2026 is expected to grow compared to the previous year. And the financial position mentioned already, the cash balance roughly EUR 6 million, and on top of that one, that we have the European Union's LIFE grant, EUR 2.1 million. Then we have some EUR 0.5 million remaining of business finance grant and then some EUR 100,000 related to other grants that are still -- still remain to be undrawn. And then at the end of June, we had the entire amount of the senior loan undrawn and then EUR 1 million of the convertible capital notes that did not land to our bank account during the end of second quarter. So that came in the early days of June. So that was in the numbers. So all in all, so we are there -- we have more than EUR 12 million with our liquidity and undrawn grants. And this was in a nutshell, the highlights from the business side and also from the financial side. And I will then hand it over back to Vibeke.

Good. Thank you. Exciting. Many things ongoing, lots of customer interest adoption slower than perhaps we expected and perhaps even the market expected. We have a lot of great questions and great engagement, and you know that you can continuously ask questions. I will, with the help of Mikko, now try to address the main questions that we've had, perhaps not everyone, there's quite a few, but let me try to take them in order of priority. There's a few questions on the partnership with Scalewolf and the opportunities relating to MET, also on the opportunity mentioned by Mikko, the Otanmäki mine tailings that I will try to cover. We've also had some questions on the opportunity of the market, customer segments prioritized for critical infra and a few more. So let's see how far we get. Yes, let me start from the top. We are obviously very excited about the opportunities in the metal extraction space. We have, over time, got to know and also now entered into a partnership with quite an interesting company called Scalewolf, which is a strong growth we see, with quite an impressive track record in building dual-use companies, different companies, critical infra. They tend to invest in companies they find mission-critical and that has demand -- customer demand from private sector and/or governmental demand. They're backed by strong American funds and wide investors. So it's a good party to be part of. They -- is quite -- they're quite excited about the Otanmäki opportunity, and you are well aware that we have secured the exclusive rights for the tailings. We are developing now a structure where we will, together with Scalewolf, explore the opportunity, understand in more depth the -- I guess, the scope and the metal concentration that we can find in Otanmäki to really build a strong case. So far, there has been a strong case for the market and also investors, and we're very much excited. We have about 5, 6 months now where we work closely with Scalewolf to execute on this opportunity. On the CIP side, several questions. First question on market sizing. I think the market size for critical protection is rather huge, and it's almost a little bit comparing apples and pears depending on what you put in. And we haven't provided you with a direct number. And the reason for that is that we more so look to the various customer case or the customer segments. Some of the customer segments that we've explored over the last few months is subsea. We have explored and are exploring in great depth on land, our solutions for power grid, for water supply and for dual use and defense. So far, one could argue that the customer uptake is lower. We've had a couple of good cases that have given us some revenue, but we are really seeing great interest and also perhaps pent-up demand on the critical infra. That said though, I think it is important to say that building critical infrastructure for subsea, for land, obviously has some lead time to get to market, but we are -- is really our focus going forward. And with the likes of Enersense on power grid, we are very much excited about the LOI with Enersense and that we will move this into, hopefully, a joint -- joint go-to-market effort to secure power grid and substations. Other questions. There was a couple of questions on revenue and order intake that I'd like to cover. Having now worked in listed companies for more than 20 years, I think revenue expectations or revenue forecast is probably more of the difficult ones. The challenge isn't necessarily the demand, it's more the timing of commercialization. And I think Betolar perhaps is a good company there where we have spent time. We have spent time to develop R&D -- to conduct R&D and to develop technology to get into position now to start commercializing and also to drive and to build customer solutions and to drive actual commercialization. We -- our forecast, obviously, we try to be as honest as we can. Our forecast reflect the realities of what we see, but perhaps the realities of some of these customer projects, especially on the CIP side, are a little bit longer due to customer decision cycles, regulation and rather complex installation, I think subsea installation and on land installation as well. But we're pushing ahead. And I think as much as I with you, perhaps look at the direct order book a little bit lower than expected, that's really going to be my first priority going forward. Anything else, Mikko, that we want to cover? There was a couple of questions on grants. Yes, we have been, and we are well positioned for grants, both from EU and the MINERVA project. We have a good -- strong, long-standing relations with the [ Business Finland ] and also [indiscernible]. So I think we're well placed. I think it is important though that in the shift towards commercialization, we should not live on grants, we should definitely get to actual revenues. So that's also where our focus is. And I think you know what, credibility comes from delivery and not really on the forecast, and that's what I live by. So if there's no more questions, perhaps we go to concluding remarks. I'd like to thank you. We -- we're in the midst of a strategic turnaround. We're really pushing towards commercialization of our solutions. In short, 4 points. I think the geopolitics that we have around us provide opportunities for Betolar, both within critical infrastructure protection and metal extraction. We are shifting from technology development to commercialization. Our partnerships also discussed today, EGR partnership with Scalewolf and Enersense really scale -- help us scale with lower capital intensity. And we're coming from a strong base of technology. And technology development gives us, I guess, the reason to play, but execution is what creates value. So with that, -- thank you so much. We have enjoyed this time. We have, as a normal, quarterly presentation upcoming, the next one coming in October. We also would like to invite you for a Capital Markets Day, day to be announced very soon, and we intend to then go a little bit deeper in terms of strategic priorities, focus areas, but we also do deep dives on our strategic business areas, and that we hopefully can come back with some exciting news, both on the revenue side and also on partnership and how we drive long-term value for owners and society in general. Thank you.

Thank you.