Cavendish Hydrogen ASA (CAVEN) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Cavendish Hydrogen's Third Quarter Presentation in 2025. My name is Robert Borin. I am the CEO of Cavendish Hydrogen. And with me today, I have our CFO, Marcus Halland. The presentation this morning will last approximately 20, 25 minutes, and there will be a live Q&A session after the presentation. So most of you know us well, but for those of you who are new to our company, I will start out with introducing our company briefly before I move on to the Q3 business update. So in Cavendish Hydrogen, we are in the business of ending emissions from mobility, and we do so through reliable hydrogen fueling solutions across the world. So -- and why are we then talking about hydrogen in the first place? Well, hydrogen has strong advantages over fossil fuels, like, for instance, no emissions, which we consider to be a hygiene factor in the mobility business today. But hydrogen also has advantages over battery electric vehicles, like, for instance, longer driving range, where we today regard a well-functioning truck to be able to -- require a well-functioning truck to have a range well above 800 kilometers in 1 charge or 1 refill. And that's something that we can do with hydrogen and which is hard to do with electric -- battery electric vehicles today. And finally, the grid connection needed to install a hydrogen fueling station for heavy-duty mobility is significantly smaller than the grid connection needed for a heavy-duty electrical charger to be able to charge a truck in a comparable time. And with the increased electrification of our society that the grid connection is fast becoming the growing problem, which is -- which needs to be overcome because the grid is already becoming a limiting factor in many of our European markets that we see. So moving on, in Cavendish, we offer the complete scope of equipment required for installing fueling stations. If we start out to the left here, we start out with the so-called connection panels, and the connection panel is where you connect the hydrogen source. It can be either an electrolyzer or a pipeline or trucking hydrogen to the site. Then we have the on-site storage, which is depending on the size or the type of supply you have in the back. If you, for instance, are connected to pipeline or an electrolyzer, the on-site storage can be smaller. If it is a truck coming in and dumping off hydrogen, then typically the on-site storage is a little bit larger. Then, you have the actual fueling station. This is where we are doing the magic, where we are compressing hydrogen, where we are cooling it and where we are controlling it so that it's filled onto the vehicle in a good and safe way. And finally, you have the dispenser and the dispensaries, where we have the interface to the vehicle. On top of that, we are providing services ranging all the way from design and manufacturing to maintenance and operational services. So moving on to the business update. First of all, we secured a new contract for fueling stations from a long-standing customer in Poland. This station is going to be built on the same location as an already existing fueling station delivered by Cavendish, and this is to extend the capacity of this existing station already. So it's going to be 2 stations in 1 location. We also announced that we are exiting the Korean market, and we are doing this to focus and adjust our strategy and our efforts. And they will also -- this will also lead to reduced operational complexity and reduced cost. We, also this quarter, see that the volumes dispensed from Cavendish equipment continue to increase, and this quarter was not an exception with an all-time high. And finally, in October, just after the quarter closed, we recently announced that we have signed an important order for supply of hydrogen fueling stations in Italy, which we see as a very important growth market in Europe. So moving on to the dispensed volumes in the third quarter, we, again, as I said, see an all-time high. We are 45% up compared to last year, both coming from more stations in the field and from higher volumes per station. We see especially high volumes in Germany and Poland, which are both key markets for us. Year-to-date, we have actually dispensed more volume as of September than in the totality of last year in 2024. So this is, of course, a really, really positive development. So as a conclusion, high utilization and reliable operations is paving the way for future success and increased sales. And looking at the operational side of things in this quarter, we completed Cavendish's first station ever installed in Italy. This is also a very important station for us because this station will be filling the buses, which will be transporting the athletes during the 2026 Winter Olympic Games. So it will not only be a nice addition to -- with the green transport, but it will also be a good market opportunity for us. We are currently working on one station in Poland, which is the one I just mentioned. And I will come back to that station a little bit later. The fourth station in France is about to be completed and 2 new stations in Italy are in the planning stage. And finally, the third station with our U.S. customer is about to be finalized. So moving on to Poland, more specifically, so the Rybnik station here and the Rybnik extension, where our existing customer, PAK-PCE, is expanding their bus fleet to more than 30 buses, will after the expansion be one of the most utilized stations in Europe. And the existing Rybnik station has been in operation since third quarter 2023 and has fueled more than 7,500 buses and cars and dispensed more than 100,000 kilos of hydrogen. So this is really a high heating station. Cavendish has already installed 7 stations, and we have 7 stations in operation in Poland. And since Poland is a key market with regional expansion potential, we regard this as an important step towards additional sales in the region. So that's really positive. And moving on more specifically to Italy and the new contract that we announced here, so this was after the close of the quarter, but still in the beginning of October. We are proud to announce that we have signed a new contract with a customer building hydrogen stations in the Northern Italy, and these stations are expected to be completed by second quarter 2026. The contract includes hydrogen fueling station modules along with installation and commissioning services. So it's the full package here. Cavendish already has a footprint, as I mentioned before, in Italy with our first station just installed and in operation for the 2026 Winter Olympic Games. And again, Italy is an important growth market for clean energy with significant heavy-duty and bus fleets, which are directly a good target for being fueled by hydrogen and fuel cell transport. So this is really, really positive. This project, again, shows that Cavendish can deliver competitive solutions. And finally, it's also strengthening our European footprint. And moving on to a short update around the European market landscape. And we are now approaching the deadline for submitting the so-called national policy frameworks and targets to build hydrogen fueling networks in line with -- after the alternative fuels' infrastructure regulation. The deadline is by the end of 2025. So far, the submitted policy frameworks have surprised positively with approximately 30% more stations announced than we expected, but we haven't seen announcements from all European states yet. I think we are around 11, 12 states that have put their plans forward. So we're still waiting for that, but that deadline is getting closer. In Germany, we see that the third renewable energy directive, the RED III, or the RED III, is continuing to set the direction for transformation from fossil fuels to renewable fuels of nonbiological origin, so the so-called RFNBO, and this pushes heavy-duty transport to go from fossil fuels over to renewable fuels. In the Netherlands, a total of 8 partnerships will reduce up to EUR 40 million -- or has received up to EUR 40 million in subsidies from the so-called SWIM, and this is the subsidies for Wasserstoff in mobility, and that's a foundation that is aiming to build hydrogen fueling stations. And this subsidy will also enable these collaborations to purchase hydrogen-powered trucks and buses. So that's also really positive. And finally, the EU Commission has awarded grants to 13 projects in their last funding round to produce and use hydrogen as fuel in heavy-duty mobility. So all in all, it's going slowly, but surely in the right direction here. Cavendish is right now having firm bids in several EU member states right now as we speak. So that's also going according to plan. And then, I just wanted to point out that in September, we were proud to welcome over 80 hydrogen experts from around the world who participated in the Annual ISO Conference for Standards within heavy-duty hydrogen mobility. And this conference was hosted here in Herning, Denmark at the Cavendish facilities and contained a variety of presentations, workshops, meetings and you name it between the top names in the business. And at the conference, the main topic was to advance technical standards for heavy-duty, high-flow hydrogen fueling. And it's, of course, a testament to our leading position in the business that Cavendish is not just waiting passively for someone to tell us the standards and how the standards will look like. We are very much part of creating the standards, and we take pride and honor in doing so. So that's also just a side note here. And with that, I would like to hand over to Marcus to go through our financial numbers. And so please, Marcus, go ahead.

Thank you, Robert, and hi, everyone. The revenues came in at EUR 4.1 million this quarter, and this is in the lower end when comparing to the trend over the past quarters. The main reason is low order intake for new stations over some time now that, again, led to very few stations finalized for delivery to customers. The low revenue from equipment deliveries is offset by higher revenues from installation and commissioning projects, as we have completed one new station in Italy and working on the finalization of another station in France and in the U.S. Included in that is also the effect from a project termination from a U.S.-based customer. And the settlement agreement with them led to revenue recognition of previously received payments for project work. This effect is EUR 1.7 million. There is no risk for the revenue from the equipment deliveries that has been completed previously, but the timeline for the next commissioning projects is highly uncertain. And due to this high uncertainty, we have reduced the order backlog accordingly. The EBITDA came in at a negative EUR 4.4 million, an improvement from the previous 2 quarters. Also, by excluding the one-off effect of EUR 1.2 million related to the decision to exit South Korea, the underlying profitability was negative, minus EUR 3.2 million. The revenue effect from the project termination in the U.S. is offset by a similar and related effect from writing down spare part inventory. And even with the low revenue level, the underlying profitability is improving due to the reduced cost base after the restructuring exercise in Q1 this year and the continued strong cost control. Financial outlook for the rest of the year and first half of 2026 remain cautious, and we expect the revenue to be somewhat lower than this quarter and the financial performance in a similar range. The order intake situation has improved with 1 new station sold in Q3 and 2 more stations sold in October that will be part of the next quarter's order intake. We still need more firm orders to increase revenue going forward. But the recent wins in the market, we see that as a start of positive trend. There is also a good development in the number of firm bids that are up for decision in the relative short term. And we ended the quarter with EUR 23 million in cash. So with that, I hand the presentation back to you, Robert.

Great, Marcus. Thank you very much for that. Moving on to sort of summarizing the quarter. The third quarter brought encouraging commercial activity with new station sales, strategic portfolio adjustments and steady operations of our fueling stations, steady and increased, I would say, operations of our fueling stations. So positive trend there. We secured important contracts in the quarter and also in the beginning of Q4, which was a subsequent ones there, of course. We announced strategic realignment as well as cost and complexity reduction by exiting the South Korean region. And we continue to see positive signals in a challenging hydrogen market. And as Marcus just said before, we keep a cautious outlook for the remainder of the year. However, we see a positive long-term market outlook for heavy-duty hydrogen mobility, and Cavendish is very well positioned to take on that challenge. So thank you, everyone -- thank you, everyone, for listening in and watching our presentation this morning. And we will now go on to the Q&A. And we are, of course, also looking forward to seeing you at the Q4 presentation, which will be in February 2026.

And with that, let's move on to the Q&A session. And just to mention a bit of the practicalities here, so before you start speaking, raise your hand and then tell us who you are and remember to unmute your microphone, and please, mute if you are not speaking. So please go ahead.

Anders Rosenlund in SEB. I have a question on this slide that you included in your quarterly presentations where you show dispensed hydrogen on Cavendish equipment. Does this include all the, I think, 145 stations that you've installed?

Well, some of the -- all in all, we have installed a little bit more than 150 stations since the start. Some of these stations, which were first generation technology, has been decommissioned since then. And that means that it's a lower number of stations that is dispensing the volumes than the 150 because we have discontinued some of the early technologies. But what we also see is that the newer and more modern stations are, of course, dispensing significantly larger volumes than the early ones. So the more stations we are putting in the market with the more modern technology, the higher the volume. So -- but it's basically -- so to answer your question, it's not including the very first stations that we installed. Some of them are -- most of them are out of operations today.

Okay. But let's say it's 120 stations or something like that or 100 or...

Yes. I don't know exactly the number, but I think we are close to, I think, around 100 stations in operation right now. Yes.