Cadeler A/S (CADLR) Earnings Call Transcript & Summary

Good morning, and welcome to Cadeler's Q1 2025 Earnings Presentation. Presenting today are Mikkel Gleerup, Chief Executive Officer; and Peter Brogaard, Chief Financial Officer. Please be reminded that the presenters' remarks today will include forward-looking statements. Actual results may differ materially from those contemplated. The risks and uncertainties that could cause Cadeler's results to differ materially from today's forward-looking statements include those detailed in Cadeler's annual report on Form 20-F on file with the United States Securities and Exchange Commission. Any forward-looking statements made this morning are based on assumptions as of today, and Cadeler undertakes no obligation to update these statements as a result of new information or future events. This morning's presentation includes both IFRS and certain non-IFRS financial measures. A reconciliation of non-IFRS financial measures to the nearest IFRS equivalent is provided in Cadeler's annual report. The annual report and today's earnings presentation are available on Cadeler's website at cadeler.com/investor. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given in the question-and-answer session. As a reminder, this call is being recorded today. If you have any objections, please disconnect at this time. Mikkel Gleerup, you may begin.

Thank you. Welcome to this Q1 2025 presentation. Thank you for joining us for the presentation of what has gone on in Q1 '25 in Cadeler. Firstly, a few highlights. What we want to say is that our financial performance in this quarter is in line with our expectations. No negative or positive surprises, we are following a plan. And hence, the results that we came out with today is exactly as we expected it. We took delivery of 2 newbuilds, the Wind Maker and the Wind Pace in Q1, and that is 50% of the newbuilds that we are supposed to deliver in our program this year, and we have delivered them in the first quarter on or ahead of schedule and on budget. And the remaining 4 newbuilds we have on the program, they are on track for delivery also on or ahead of schedule. We now have 7 vessels that are active either in Europe, APAC or U.S., and that is demonstrating Cadeler's global footprint. We continue to see a growing demand for O&M services, and that is strongly contributing to the utilization of Cadeler's fleet, and we do believe that this is very important on a continuous basis. Cadeler's contract backlog continues to strengthen, increasing to over EUR 2.5 billion in the quarter. On the vessels, we have seen activity on different -- in different parts of the world in different regions, and the fleet has been busy just after coming out from the yard. I think that we are -- as I said before, we are following the plan. We see that Wind Orca is very busy first with the O&M campaign and then hence, after that on the He Dreiht project for Vestas. On Ørsted, we are doing an O&M campaign for Vestas. And after that, we are going to do the Baltic Power project, our first project in Poland. On Scylla, we continue to work for Ørsted in the U.S. On Zaratan, we continue to work in the Asian region with an O&M campaign in Taiwan. On Peak, after we took delivery of Peak, she came back to Europe, started an O&M campaign and have now started the Sofia project where we work for Siemens on an RWE project. The Wind Maker, we managed to deliver the Wind Maker on the schedule where we needed to have her, so she could mobilize and be ready for the project in Taiwan together with Ørsted, also something that we are really pleased with. And on Wind Pace, last but not least, she is currently steaming towards her first project, which will be in the U.S. In terms of the backlog, we see that we are continuing to build a backlog, and we are now standing at EUR 2.5 billion, and that is a backlog that is diversified across types of work, types of clients, different clients and also regions. And we have further reservation agreements that is not included in the backlog and lots of projects that we are working on. If we look at what the contract backlog standing at currently, we have said it before, EUR 2.5 billion. It continues to grow also from when we did our full year '24. But what is also changing here is that 100% of our backlog today has reached FID. And I do believe that, that is a very, very important number that we currently are sitting with 100% of our backlog that has made a Final Investment Decision. We have also secured a significant project at an offshore wind farm in the U.S. that is supposed to start here in the second quarter of 2025. And the Wind Pace, as I said, is already steaming towards that project. It is continuing until Q1 '26 after which she's coming back to Europe to start the first installation project that she is designated for. We have also signed 2 contracts with undisclosed clients for the utilization of Wind Mover in '26 and the scope of work may include both O&M and installation work. And the total estimated contract value is up to EUR 75 million. We have also entered into a contract for Wind Zaratan and has commenced work and that is on an O&M campaign in the Asia Pacific region. On Vessel Reservation Agreement, we don't include that in the backlog, and that is a decision we have made a long time ago, so that's not new. But we are continuing to see a lot of activity on the tendering phase and also leading to vessel reservation agreements that eventually will lead to contracts and to further backlog. And we have signed one Vessel Reservation Agreement also in the Polish waters for BC-Wind for installation of circa 30 turbines in the Polish, Baltic Sea, and that has value between EUR 48 million and EUR 56 million. In terms of the newbuilds, we are coming very, very close with Wind Ally and Wind Ally is currently expected to deliver around 7 to 9 weeks ahead of schedule. So that's also very, very strong performance there. Wind Mover is also still on track to be built and completed by Q4 '25, and Wind Ace for Q3 '26. And Wind Apex also as expected for Q2 2027. And they have different completion stages at the moment, but I think that what is important to say here on the newbuild and the CapEx program is that we are following the plan, and we are where we want to be and where we project to be. In terms of financial highlights, I will here hand over to Peter.

Thank you very much, Mikkel. As Mikkel said, in the beginning, the quarter was, from a financial point of view, exactly as planned and expected. Revenue was EUR 65.5 million, significantly up from last year, where the 2 O-class vessels were out for training upgrades. Equity ratio is 49.7%. It's going down a little bit as we take on more debt with the deliveries of the vessel, but still a very strong balance sheet. Utilization was 79.4%, and it was really a quarter of transition. So you can see that the unadjusted utilization was 55%, whereas we -- when we adjust for the drydock and transition from the delivery, it's 79%. We got delivery of the 2 vessels Maker and Pace in Q1. EBITDA, EUR 23.7 million, also significantly up from last year. Nearly all EBITDA was flowing through to the cash, so EUR 20 million from operating activities, backlog, as mentioned, EUR 2.5 million (sic) [ billion ]. And the 3 months daily average turnover was EUR 5.6 million. If we look at the P&L, all line items were as expected, already touched upon the revenue, which is significantly up and the cost of sales, the OpEx is also exactly as planned, of course, increasing when we get more vessels on the water. SG&A is up as compared to last year, but also according to the plan, it's the organizational ramp-up that we have been doing for some quarters now, and that is also exactly to plan. The vessel OpEx per day was EUR 36,900 per day, up from last year, and that is really also as planned, as we communicated around the annual report, we have some extra OpEx this year because we are putting extra trainee positions on some of the vessels on water to prepare for the newbuilds coming in. We had the 7 vessels operational at the end of Q1 as compared to 4 last year. Headcount is significantly up. In average, we were at 272 in the first quarter onshore. Consolidated balance sheet, you can see noncurrent assets are going up with deliveries and noncurrent liabilities, interest-bearing debt is going up also with the deliveries, but still a solid and sound balance sheet, which is important in a capital-intensive industry as ours is really the best protection in such an industry. Working capital more or less unchanged. The CapEx program, we have shown this slide a couple of times. But still, we see that the CapEx program is fully financed. We have signed a committed facilities of EUR 841 million. We have not started the only vessel without a financing in place is the third A-class vessel, the Apex, but that is delivered in '27. Hence, we have not started that yet. It will be simply be a too long period of paying commitment fees. Cash was EUR 94 million at the end of the quarter, and then you have the outstanding installments on the last M-class vessel, Mover and then the 3 (sic) third A-class vessel, but a solid surplus of funding. Still we are following strictly this hedging policy we have, which is 50% of U.S. dollar exposure is hedged. That's primarily the installments to the yards in U.S. dollars, and then we have hedged 50% of the interest exposure on a forward 5-year starting basis. This is the financing overview. Total committed is the EUR 1.9 billion and the total is EUR 2.2 million (sic) [ billion ]. The A-class has been syndicated on the 2 first vessels we are waiting for a planned Sinosure issuing the LOI here in May month as we also communicated at the annual report. And then we will start the Wind Apex financing in '26. Full year outlook. We maintained the outlook as presented in the annual report, revenue of EUR 485 million to EUR 525 million. EBITDA, EUR 278 million to EUR 318 million, significantly up, of course, as compared to '24. The full year is impacted, of course, with the deliveries of Maker and Pace going on contracts now and the 2 upcoming vessels Wind Ally and Mover. And then we spoke a little bit also about the foundation projects. They start to be -- the revenue and costs start to be recognized here in '25 to a lesser extent than it when it kicks in when we start installing in '26. But still, there are some revenue and costs there, and it's with a lower margin on some of the T&I scope that starts in '25, then we will see for the full project over project time. Then there has been this termination of Vessel Reservation Agreement that will have a positive impact on '25, but that is still to be analyzed, and we will communicate on that as soon as we have finalized those analysts on the impact.

Yes. In terms of the commercial outlook, we have, of course, been asked a few questions about that lately. And what we just want to say, we remain of the view that Cadeler is still the go-to provider of T&I and O&M solutions. We sit with a vessel fleet of 11 vessels when all newbuilds are delivered. And we believe that we have a very, very strong foothold in the market. Our proposition to the market and our proposition to the clients really offers flexibility and the ability to meet the demand, which also are reducing the risk of project slippage. And we do believe that this overall package that we're delivering to our clients is something that they really have as a value adder and as an enabler of taking the necessary project decisions. We also see that our complementary vessel strategy is enabling the stronger fleet utilization and also the earnings visibility for our investors. We are also have an ability to meet the demands for larger scopes and project sizes, and that is on a global basis. In terms of our view on the market, then you can say that we are basically in offshore wind still going from record to record. We are seeing stronger and stronger, let's say, levels of projects being auctioned. We are seeing more and more projects coming online. And I think that, that is still very much what is the actuals in the industry. But one cannot be in this industry without also looking at some of the noise that is going on with projects being stopped in the U.S. and then being started again, projects being delayed and then let's see what happens. But what I want to say is that we are looking at a very strong growth across all markets in some markets, less of what was expected and what maybe was projected in particular by politicians rather than industry people. But I think that in Europe, we can say that the focus is really on the security of supply of stable energy. Many governments at the moment are calibrating approaches, but also different auction schemes. Is it a contract for different scheme like we have seen now Denmark is going towards, which I think most industry people would probably have rejected as a possibility just 1 year back. We are also coming closer to an auction round 7 in the U.K., where most industry people believe that this will be a very, very strong auction round. And the Denmark government has approved a 3 gigawatt tender, which I think is really important and really significant. And it will be important to see how that will pan out also to maintain Denmark's position in the offshore wind space. The Dutch government is also working on an action plan to improve auction conditions and also talking about an implementation of subsidies, which is also, let's say, a shift from the past where the Netherlands were leading on subsidy-free wind farms. And then as I just said, Hornsea 4, is it canceled or is it delayed? Our long-term agreement with Ørsted still remain in place. In APAC, there's a strong need for more power. We are seeing a record high tender activity in the key markets there. And I think that it's fair to say that developers, they really prefer to work with experienced contractors. And I think that Cadeler's position in that market is strong, and I think that we have a very good access to the clients there with a fantastic team in the region. The U.S., it is a market that is a little bit hard to predict at the moment. There are executive orders that are putting hold on projects. And I think even the most advanced and sophisticated companies in the world struggle to understand what is exactly going on in the U.S. But it is a fact that there will still be installed wind in the U.S. in the coming years, and we are taking part in that. We are helping our clients to complete the work in the U.S. And if projects are coming on the back of those projects in the U.S., we will also be ready with the experience we have now gained to support the U.S. offshore wind market. And we do believe that there is a long-term offshore wind future in the U.S. The stop work order on Empire Wind has been lifted, and we congratulate everybody who is part of that project because that was the only right decision. And there is a fundamental need for more energy. The U.S. energy need is increasing day by day, year by year. And I think that there will be a realization at some point in time that energy also in the U.S. will be a mix. In terms of undersupply of installation vessels, we expect that, that will be particularly visible from 2028 and forward. We have tried here to map how we see the undersupply and also our book capacity. And we believe that there is a very strong correlation. And we will continue to see this that there will be stronger booking of capacity in the inner years, followed by a more, let's say, strategy of cover, the basics, but also be open to the possibility. And that is the strategy that Cadeler is following, and we have talked about that for a significant number of the previous quarters and we will continue to follow that. We believe we have a very good view on the market, and we believe that with the fleet of the most capable vessels in the industry, we are in a very, very good position to take the projects that we want to work with, with the clients we want to work with. And we also believe that a lot of the supply that currently is mapped as supply in the industry will, in the coming years, be gradually phased out because it will be much, much harder for them to be efficiently competing in the industry. And the undersupply, it's important for me to say that, that is both on the foundation and the WTG side. And we believe that with our order backlog, we have a position of, let's say, I'm careful of using the word comfort, but at least we have comfort that we have been able to build up a very strong backlog with 100% FID, and we will continue to build that and also document that to the market that we are able to add further projects with our clients. Next slide, please, Peter. In terms of FIDs and projects that are being auctioned, we believe that there's a lot of opportunity for further FIDs and further auctions out there. The developers, they are returning from maybe auction rounds that were not capable of delivering what we wanted to deliver. And we see that the bids are more substantial. They are more well constructed. They are less speculative and there is really a focus on bankable offtake structures. And we are looking at around 7 gigawatts of projects that have reached FID this year, and that is already higher than last year. So as I said, we are in a situation where we continue to break the record almost every year. And as I said before, 100% of Cadeler's backlog has reached FID. Then we also have a bit of news for you guys. And that is that Cadeler is introducing an O&M offering to the market in the division that we are starting from now on called NEXRA. NEXRA refers to the next era, and that will be Cadeler's answer to the O&M needs in the market. And we have a small video to show you. [Presentation]

So what we are aiming at Cadeler to do is to create an O&M powerhouse, which really can deliver what our clients are looking for. We have faced the situation many times that when we talk to our clients, we are talking to our clients in one area for the installation business and in another area for the O&M business. And it's not always that we speak the same language. And what Cadeler has tried to do in the O&M market is to serve that market with our installation team and our installation experts. We believe that now the time is right for Cadeler to be very, very serious about O&M and to come with solutions for the O&M market that are directly crafted for the O&M teams that are sitting with our clients. So we are looking into a very, very attractive market, especially for the bigger turbines, which will be the focus of Cadeler. The business segment in itself is something that has already delivered a lot of value to Cadeler. And we believe that by focusing up, focusing on the resources, having a dedicated team only focusing on O&M clients, we will be able to deliver the most safe, efficient and value-adding services. So for us, NEXRA is the next era of Cadeler, where we build the synergies that we believe that are with our core business where we can help secure and maintain high utilization for overall Cadeler fleet. And it is really about a platform for growth for Cadeler where we will continue to deliver as we have done on the installation side. In terms of how we are seeing the fleet in NEXRA, we are seeing Wind Zaratan will be one of the dedicated assets for O&M services. And in time, the Wind Scylla will also shift from the installation space over to the O&M space. And then we also have installation vessels that have gaps between projects where we will try to utilize them on O&M projects. And what the real benefit here is that by establishing close links with our clients on the O&M side, we create an internal client that know about this utilization way before we know that today, which makes us able to plan and drive utilization to new levels. So welcome to NEXRA, we are happy to introduce this to you. In terms of investment highlights, as we have said before, Cadeler is currently sitting on the largest, most capable and most versatile fleet in the industry. And we believe that there is very strong complementarity and the fleet enables really cross utilization efficiency and project derisking for our clients. We have the best team in the industry. We are super proud of our team. They have a proven track record. They have the know-how, and we believe that if anybody can do what we are doing, it is really the team that are delivering this every day. We believe that we have a global growth platform and the experience on projects, and we have presence in all major markets, and that is really what makes us able to do what we do. We still expect that there is an undersupply of capable vessels for both turbines and foundations from '28 and onwards. And this is really due to the significant increasing market demand. We have strong track record in the capital markets backed by a record high backlog, EUR 2.5 billion, 100% of that is FID-ed. And that really creates the earnings visibility that we have been asked for since we listed the business. So really a key focus on being a good custodian of capital and a solid partner to our clients. And with that said, we will hand over to the Q&A section.

[Operator Instructions]. Our first question comes from Martin Huseby at DNB.

Quick question on the offshore wind industry in general and contract quality. As I think you flagged quite well in the presentation, there's been some projects not progressing as planned and you had this preferred supplier agreement cancellation as well disclosed in this quarter. I understand it's hard to make comments for specific contracts, but could you help us shed some light on contract quality and protection in general for the industry and also if possible, for your backlog?

Yes. We believe that everything that is in the backlog is very well protected from a contractual standpoint. We believe that we have been able to sign contracts with the right terms in them to both secure us but also our clients for the delivery that they want. And hence, we believe that we are in a very good situation when it comes to that. And I think we have talked about this since the listing back in 2020 that contract quality is something we have worked with alongside the whole, let's say, economical part of the contract. So for us, it has always been a hand-in-hand thing where we are focused on both. And I think that, that is something that serves us well today.

Good. And touching on the Hornsea 4 project. Since the announcement from Ørsted on that project, there's been clearly some uncertainty in the capital markets related to utilization for one of your foundation vessels that I think most people expected to do this project. I know execution on this project was pretty far out in time, and it's still uncertain what will happen. But if replacement work is required from your perspective, can you tell us something about the comfort level and how we think about securing an alternative work for that vessel?

Yes. I think that particular vessel is still on a contract with Ørsted. As we said in the presentation, the long-term agreement that we have with Ørsted has not been terminated. That still continues. And hence, in principle, that vessel will continue to work for Ørsted for the duration of the contract until we hear anything different to that. But in general, what I can say to you is that we never only work with one plan, so to speak, even on a project where in all fairness, we had high confidence as Hornsea 4. We always work with backup plans. And this is really the -- some of the things that our sales team and our commercial team, they do incredibly well they always have backup plans and different routes to go should something work out differently. This is not new to us that things can shift in time and stuff like that. It has not done that recently for us, but we have tried it before. And I think the ability to shift focus, regroup and then reassess and then attack another opportunity, that is something that we can do and certainly a capability that is within the team. So I'm pretty confident that we will show a continued strong utilization of our fleet despite the fact that Hornsea 4 is currently delayed.

Good. Taking one step backwards to Hornsea 3, which is clearly ramping up as we speak. With respect to the margin contribution on this project before the vessel arrive, should we think about that being flattish at around the current levels? Or would it be fair to think there is also a gradual margin increase throughout the year before the vessel arrive late this year, early next year?

There will be a gradual increase, but still the healthy margins will come in '26 when the business starts to install. But there will be both in terms of revenue and margins increase towards the end of the year.

Some more kicking in towards the second half of the year?

Yes.

Our next question comes from Jamie Franklin with Jefferies.

So firstly, I just wanted a bit of help to understand 2Q in terms of contracted days relative to the first quarter. So obviously, you've got the 2 newbuilds with Wind Pace starting on contract in the second quarter, and you've also got Wind Maker likely to contribute a lot more meaningfully. So we'd expect to see a big step-up in contracted days in the second quarter. But just wondering if you can give any more color there and if you expect to see any planned maintenance or downtime on any of the 7 vessels in the second quarter, please?

Yes, I think that is correct. It also goes for Zaratan. Zaratan started an O&M contract in Asia late in the quarter and hence, she will also be having much more meaningful contribution in the second quarter. I think that, that is completely correct. And that is really also the thing that we would like to remind people when we take delivery of vessels, they are not working the day after in the open market because they have to, in many cases, to repatriate from the yard and then to where the project is. In the case of Wind Maker, that was very fast because the project was in Asia. So we were mobilizing in Singapore and then back up to Taiwan to start the project, and hence, that was very fast. In terms of downtime, we do not expect any adverse downtime on the vessels. As we have also talked about in one-to-one conversations, when you deliver vessels like this, you are seeing teething issues, but I believe that it's under control and also that our operational team are handling it incredibly well together with our suppliers. And hence, we are still delivering to our clients and are comfortable around what we are seeing there.

That's great. And then second question, just on your order book. You mentioned that your order book for 2025 is substantially filled. But where there are small gaps, is it fair to assume those are towards the end of the year? Or are they kind of evenly spread through the year, and that's what you will fill with O&M work?

I think the gaps that we currently have are either gaps that come from transiting to projects or, let's say, the very end of the year potentially on Zaratan. And I think that, that is something that has very low likelihood to fill because of the weather situation there. But of course, how long we are working into Q4 is always a question on Zaratan in the Taiwanese water. But I think the remainder is really transiting to projects where, for example, Ally, where it has been decided that she will not do any other work than Hornsea 3. So she is steaming directly back and preparing for being 100% ready for Hornsea 3 because we believe that, that is a derisking of that project that is very, very important. So where we, on the other projects have tried to do a bit of utilization prior to the project on Ally, we are focusing on being 100% ready when that project starts.

That's great. And finally, just on O&M. So exciting to see your NEXRA offering. Can you just tell us where you are in terms of sort of day rates in operations and maintenance at the moment? Are they still kind of on par with turbine installation rates?

I think if we look at the spot market, it's certainly at par with the installation market. If we look at the longer-term contracts that are currently in the market, then I think that we are seeing rates that are slightly lower, but let's say, with more visibility. So I think the offshore O&M market has 2 sides to it, the spot market and the longer market. And we are, of course, let's say, have been building up to this. We have talked in the last few quarters as well that we believe that the O&M market needs more care from a company like us. And I think that, that is something where we're now taking that step to show our clients that we are ready to embark on that journey with them to make sure we take good care of the turbines that have been installed and deliver more renewable power to the world together.

Our next question comes from Roald Hartvigsen with Clarksons.

Mikkel, Peter, first I want to touch a bit upon the new generation vessels that have entered operations now. So you have Wind Peak, which has started installation work on Sofia and Wind Maker, which has started work on Changhua. So can you give some color on the performance of these new generation vessels so far? And I guess I know it's still -- you have a limited time of operation and limited data so far, but are you achieving the enhanced installation rates to the tune envision for those vessels?

Yes. I think we are. I think in all fairness, we have seen more issues on Peak than on the other vessels, but it's also the first that we have taken delivery of and we are getting acquainted with the systems, but also kind of like the spare part strategy, what is it exactly that we need to have in the inventory for spare parts we are working closely with our suppliers. And I think that we are really seeing the benefits of the serial production of these vessels where we have a lot of similarities in terms of cranes, jacking system, stuff like that across the fleet of the newbuilds. The Peak is performing well, but we can already see improvements to Pace and also Maker because of what we know now from Peak. So Peak maybe becomes a little bit scapegoat, although she has a very strong technical uptime, but she becomes a little bit scapegoat because we are learning from her and we are implementing it. So it's really about taking operational knowledge and transferring it to the newbuild team to ensure that we take that knowledge in while the vessel is still in yard. And it is fair to say that we are seeing an improvement already.

And then on my next question, I want to sort of touch a bit upon yard prices versus secondhand market. So we have generally seen yard prices just continue to rise, which I guess makes that a greater hurdle than it has been in the past. So could that make secondhand transactions a more viable option for growth going forward? And how do you assess that market currently?

That's probably a fair assumption that, that could be relevant for some to look at that. I would like to say that, in my view, there are very, very limited quality out there. And hence, one have to be very careful of not adding something that could be deadweight in a few years. So I think that, that's something where the teams have to go through these processes very, very diligently if something is looked at. I think the benefit maybe one has to look at that is that it's probably with the current narrative in the market for anybody to, let's say, come in speculatively is probably not realistic either. So that maybe takes a little bit of the pressure off the yards.

[Operator Instructions]. Our next question comes from Åsne Holsen with ABG.

I see you have a really good order book growth year-over-year. But I noticed that there is not a lot of development from 31st of March until now. Are people sort of awaiting signing contracts with a waiting for a little bit more certain market environment? Or how should we think about that?

I think in offshore wind, one has to be very careful not to compare, let's say, too strictly on a few months because these contracts are in negotiation for a long time. And hence, it can be the contract negotiation happens at a certain point of time or an auction happens at a certain point of time. I think we more focus kind of like what is our target for the year and what we want to achieve in a year rather than what month it comes in at. And we will continue to report on the backlog in the same format, so you guys can follow it. But I think what we tried to convey to you guys in the backlog slide and in general on our market slides is that we are -- we still believe that there is an undersupply of the most capable assets and also that the most capable assets will be very busy in the years to come.

We have no further questions at this time. Thank you for your participation. I will now hand the floor back to Mikkel Gleerup for any closing remarks.

Yes. Thank you, and thanks for everybody who joined. It's always a pleasure to be able to have the questions directly from you guys. Remember that we are always available if there's any follow-up questions that is better asked in a one-to-one forum. Thanks to everybody who have been part of the journey so far. We know that there's a lot of noise out in the market at the moment, but we still believe that the fundamentals in this industry are very sound, and we will continue to fight to deliver what you expect from us. Thank you.