Cambi ASA (CAMBI) Earnings Call Transcript & Summary

[Presentation] Good morning, and welcome to Cambi's Second Quarter and Half Year 2026 Results Presentation. I'm Dragos Talvescu, Senior Corporate Relations Manager. Over the next half hour or so, CEO, Per Lillebo, and CFO, Mats Tristan Tjemsland, will present the main developments for the quarter, including operational progress, financial performance and other relevant updates. A Q&A session will follow the presentation. Questions may be submitted at any time by scanning the QR code displayed on screen. Questions received during the silent period and therefore, not addressed in the past month will also be taken. Please note that the presentation may contain forward-looking statements based on current expectations and assumptions. Actual results may differ as a consequence of risks and uncertainties. And with that, let me hand over to Cambi's CEO, Per Lillebo.

Good morning, everyone, and welcome to Cambi's presentation of the second quarter 2026 results. Let me start with the key highlights for the quarter. Operating cash flow was strong at NOK 156 million. The second quarter was characterized by strong order intake and progress across our project portfolio. The order backlog increased to around NOK 1.5 billion, driven by new contracts in Norway, India and New Zealand. Revenue and EBITDA were lower than last year as several large technology projects are approaching completion. The lower margin is mainly due to the contract mix. Technology accounted for a smaller share of revenue this quarter and is the main explanation of the lower margin. We also paid a dividend of NOK 0.30 per share in May. Mats will come back to the financial details later in the presentation. In the second quarter, we secured 3 important contracts across 3 markets. In India, Cambi signed a contract with NCC Limited. This is not to be confused with nothing to do with the Swedish NCC to do. It's a pure Indian listed company for 2 THP systems at the Malad wastewater treatment plant in Mumbai. The contract follows the letter of intent announced in January and part of the equipment will be manufactured locally in India. In New Zealand, we signed an engineering contract with Watercare for 2 THP systems at Rosedale in Auckland. Manufacturing will commence upon a notice to proceed, which we do not expect to receive for at least another 12 months. Finally, in Norway, Grønn Vekst renewed its biosolids handling contract with Bergen municipality. The new agreement runs for 5 years with options for 3 additional years and is Grønn Vekst's largest contract to date. So, all in all, a very good quarter for new business for both technology and solutions. Move to the next slide. Project execution remained high during the second quarter. 3 projects moved to the next delivery stage. Safi in Morocco entered operation, becoming our first municipal THP reference in Africa. Palma de Mallorca and Santiago de Compostela, both completed manufacturing, were delivered to their respective sites and moved into installation. Installation activity was also high. Installation was completed on the 3 U.S. projects in San Francisco, Louisville and Honolulu, as well as at Tuas in Singapore. I would also like to mention that Cambi has now successfully recovered all custom duties paid on imports of THP equipment into the U.S. and all associated risk has now been eliminated. Together with Perth and Wellington, 6 projects are ready to move into commissioning at quarter end, subject to the clients being ready on their sites. Commissioning also continued at Fredrikstad in Norway, while installation progressed well at VEAS in Oslo. Our engineering teams were also busy with the project signed in the spring in the U.K. and with the new projects in Mumbai and Auckland. We also started a paid engineering study for a potential project in South America. Move to the next slide. Now I like showing this map to illustrate our project delivery capabilities across the globe. We have 17 THP projects at different stages of delivery across Europe, the Americas and Asia Pacific from engineering through to commissioning. Just looking at the map, you will see that we have a project in Honolulu and another one in New Zealand. So it's really a widespread activity. So it demonstrates our ability to deliver around the globe. Next slide. This is CNP Cycles. We also had a busy quarter on project execution. The systems for Emmerich in Germany and Salvatronda in Italy completed manufacturing and factory testing and were delivered and installed during the quarter. Several other projects also recorded good progress, while others are waiting for client sites readiness to continue. Sorry, a bit too far. Services remained active across maintenance, upgrades and leasing for the Oxford THP leasing project, manufacturing was completed during the quarter, and the project is awaiting readiness for delivery. Maintenance activity was high, particularly in the U.K., and we completed our first full shutdown maintenance assignment at the Norwegian THP facility. The upgrades pipeline also continued to develop with feasibility projects in the U.K. and the Netherlands. Grønn Vekst delivered a stable second quarter through the seasonal peak. Bulk soil sales were around 102,000 tonnes, close to the level in the same quarter last year. And production and deliveries proceeded without material disruptions. The existing biosolids and garden waste contracts also performed as planned. More importantly, Grønn Vekst has restored profitability after a period of loss-making operations. We focus -- the focus now remains on continued efficient soil production, disciplined site management and cost control in the company. One soil production site was closed during the quarter. The business model is very flexible in Grønn Vekst with local partners used for soil production. So sites can be established or closed relatively quickly and at a limited cost. We continue to work on reducing land lease costs and disposing of assets no longer needed following the closure of the soil bagging facility and the exit from the soil retail business. Since the end of the second quarter in July, we signed a small upgrade contract with Celtic Anglian Water at the Ringsend Wastewater Treatment Plant in Dublin, Ireland. Looking ahead, the U.K. remains our strongest near-term market. The current investment cycle runs through 2030 and several water utilities are planning or already undertaking investments. That creates opportunities for new THP systems, upgrades and services. In India, we continue to build the organization and our local delivery capabilities. We are moving into new offices in Pune, south of Mumbai. We are now pursuing opportunities beyond Mumbai. The engineering contract in New Zealand and the paid engineering work in South America are examples of interesting new opportunities. As always, the timing of larger construction contracts is always difficult to predict and remains largely outside our control. The order backlog gives us good visibility on future activity. But based on the current outlook, we still expect the 2026 operating profit to be lower than in 2025. At the same time, we remain confident in the long-term growth outlook for the business. And with that, I will hand over to Mats for the financial review.

Good morning, everyone. I'll now take you through the financials for the second quarter. Let me start with some financial highlights. Revenue in Q2 was NOK 265 million and EBITDA was NOK 26 million, with a lower contribution from both the Technology and the Solutions segment. Operating cash flow was strong at NOK 156 million, driven by milestone payments received from ongoing construction contracts. Order intake was NOK 554 million due to several new contract awards. The order backlog increased to NOK 1.5 billion and provides good visibility for future activity levels, as mentioned. Finally, also an ordinary dividend was paid during the quarter of NOK 0.30 per share. So let's take a look at the consolidated income statement. Revenue of NOK 265 million was down 22% from NOK 342 million in Q2 last year. Gross margin was 44% compared to 49% last year. The reported gross margin is impacted by the segment mix, where the lower-margin Solutions segment contributed more this quarter than the same quarter last year. I will comment on the activity mix within the segments shortly. Payroll expenses were broadly unchanged, and operating expenses were NOK 91 million compared with NOK 94 million in the same quarter last year. EBITDA was NOK 26 million, corresponding to a margin of 10%. This compares with NOK 75 million and a margin of 22% last year. The reduction is mainly from lower gross margin generation. Depreciation and amortization were NOK 5 million, in line with the same quarter last year. Net financial items were positive NOK 3 million. Last year, this number was a very high NOK 35 million, mainly due to securing a large portion of ongoing U.S. contracts. Profit before tax was NOK 23 million, and net profit was NOK 18 million. Moving on to the Technology segment. Revenue was NOK 169 million in the quarter. This is up from NOK 119 million in Q1, but down from NOK 243 million in Q2 last year. The year-on-year decrease mainly reflects several large construction contracts are close to completion with limited revenue left to recognize. In addition, the newly signed contracts are still in early execution phases. Gross margin was 48% compared to 52% last year, but significantly down from the last quarter. As I mentioned last quarter, the mix within the Technology segment can vary quite significantly depending on projects, and we still have some ongoing EPC projects, which typically have a lower margin than core THP deliveries. It's also worth mentioning that CNP Cycles is now included in the Technology segment. In addition, FX effects also contribute to the reported figures in NOK. Operating expenses were NOK 73 million compared to NOK 75 million last year. Costs remained broadly stable, but now, as I mentioned, also including CNP Cycles. EBITDA was NOK 8 million compared with NOK 50 million last year, mainly due to lower revenue recognition. Let's take a look at the Solutions segment. Revenue was NOK 96 million, broadly in line with NOK 98 million in Q2 last year and well above the level in Q1. Q2 is a high activity period for both segments, Services and Grønn Vekst. The gross margin was 38% compared to 44% last year. The lower margin mainly reflects the revenue mix with lower activity on THP upgrades and higher activity for Grønn Vekst compared to the same quarter last year. Operating expenses were NOK 18 million, unchanged from last year, and the measures implemented in Grønn Vekst have continued to optimize the cost base. EBITDA was NOK 18 million compared with NOK 25 million last year, corresponding to a margin of 19% -- the focus remains on efficient operations, cost control and continued focus on the core business. Moving on to the order intake. As mentioned, order intake was NOK 554 million in Q2 compared with NOK 102 million in the same quarter last year. Technology order intake was NOK 238 million and includes the contracts mentioned by Per just earlier. Solutions order intake was NOK 315 million, and the main contributor was the renewed biosolid handling contract in Bergen. As usual, the order intake also includes spare parts, soil sales and services contracts, variation orders and so on that are not announced on the stock exchange or are below the threshold. So overall, it was a very good activity level in the order intake for both segments. Let's have a look at the order backlog. The backlog ended at NOK 1.5 billion. This is 58% higher than the end of Q2 last year and also a clear increase from the end of Q1. The technology backlog was NOK 836 million, up 20% from 1 year ago. In Q2 last year, CNP Cycles was not included. Currency movements increased the technology backlog by around NOK 9 million during the quarter compared to the previous quarter. The Solutions backlog was NOK 643 million compared with NOK 242 million a year ago. The increase mainly comes from Grønn Vekst long-term contracts. And as mentioned last quarter, the large biosolids handling contract that Grønn Vekst was awarded in Western Norway is not included in our reported order backlog because the contract was awarded to a JV in which Cambi recognizes its share of the net result. Let's have a look at the order backlog distribution. Around 25% of the current backlog is expected to be delivered during the second half of 2026. A further 29% is expected in 2027, and the remaining 46% is expected in '28 and beyond. A large part of this longer-term backlog comes from Grønn Vekst biosolids handling contract, including options. It's also important to note that around 25% of the current backlog is conditional. This mainly relates to the extension options in Grønn Vekst, as I just mentioned, but also THP contracts, which have a formal notice to proceed with manufacturing. And as mentioned before, Grønn Vekst have historically been awarded the options, and they have been exercised. Looking at currencies, half of the backlog is in Norwegian kroner and the remaining half is split in euros, British pounds with smaller amounts in U.S. dollars and Indian rupees. And currency movements continue to affect the reported figures in Norwegian kroner. Let's move to the balance sheet. Cash position increased to NOK 388 million at the end of the quarter. This is up from NOK 282 million at the end of Q1 and reflects a strong cash flow generation during the quarter. Accounts receivable were NOK 124 million, significantly down from NOK 287 million in the same quarter last year. Earned but not invoiced project revenue decreased from NOK 244 million in Q1 to NOK 157 million in Q2, but is up from the same quarter last year. At the same time, accrued project costs, provisions and deferred revenue increased to NOK 153 million, which is the same level as the same quarter last year, but up from the previous quarter. Cambi continues to have a very strong balance sheet and no long-term debt. Let's take a look at cash flow. Operating cash flow was strong at NOK 156 million in Q2 compared with NOK 108 million last year. The main driver was project-related milestone payments from customers, as I mentioned earlier. Financing cash flow was minus NOK 48 million, which is related to the dividend paid in May. Overall, cash increased by net NOK 106 million during the quarter and ended at NOK 388 million. Before moving on, a short comment on dividends. The Annual General Meeting approved an ordinary cash dividend of NOK 0.30 per share, which was also paid in May with a total of NOK 48 million, as I mentioned. And as we mentioned last quarter, the Board has been authorized to declare additional dividends based on the 2025 results. Any additional dividend will depend on project milestones, our financial position and capital needs for investment growth. And with that, we are ready to move to the Q&A session.

[Presentation] So yes. Thank you, Per and Tristan. We'll now move to the Q&A session. Questions can still be submitted via the QR code or link on the screen. We have one question so far. So hurry up and send questions while we answer this one. So I think the question is best addressed to Per, and it is about the expected timing of the remaining awards under the U.K. AMP8 asset investment cycle.

Well, it is a relatively large investment. This is a large investment cycle program that has been, you say, awarded or allowed for the wastewater treatment companies. So we do expect more contracts in the U.K., both within upgrade of existing older plants, but also at new plants. But as usual, it's impossible for us to say anything about the timing that is out of our control. But the program will run until 2030. So there is still definitely time for more contracts to be awarded. That's what I can say.

Thank you, Per. I do not see any other questions. So I think we will conclude here then for today. Thanks to everyone who has joined us and stayed all the way. A recording and transcript of the webcast will be made available on the investor portal later today. And any follow-up questions can be directed to the Investor Relations team. Thank you, and have a good day.

Thank you all for listening.