Eqva ASA ($EQVA)

Good morning, and welcome to EQVA's First Quarter 2026 Results Presentation. My name is Olav Hilmar Koloy, I'm the CEO of EQVA ASA. I'm joined today by our CFO, Daniel Hjertaker Molvik. Thank you for taking the time to join us. Before we begin, I want to give a short summary. The first quarter of 2026 is a quarter where the reported numbers taken at face value do not reflect the underlying strength of our business. Our job today is to walk you through what happened in the quarter, what is driving the headline figures and most importantly, why the platform we have built is positioned to capture the rebound when the market shifts. Today's presentation will be structured in three parts. First, we will give a brief reminder of EQVA, what EQVA is and the platform we have built. The second will be to discuss of the current market environment and what lies behind our Q1 figures. And third, we will go through the financial in details, including our pro forma view of the business. So let's begin with EQVA today. EQVA is a full-service provider of industrial service, built through the development of long-term ownership of strong complementary industrial companies. We serve some of Norway's most demanding industrial customers in smelting, process industry, agriculture, the maritime sector and offshore. Our core capability cover engineering, mechanical solutions, steel structure, piping and tank system, ventilation, power and automation and the development and operation of small-scale hydropower plants. Three principles define how we operate. First, we combine organic growth with disciplined target acquisition. Second, our portfolio companies operate with a high degree of autonomy, within a clear governance framework and a shared support function. And third, we run an asset-light model with a strong focus on cash generation, which gives us an attractive capital structure and the flexibility to grow profitably over time. With more than 700 specialists and a strong presence across Norway's key industrial regions, EQVA is positioned for continued growth. Our largest segment, EQVA Industrial Solutions today consists of nine complementary companies, each preferred supplier within discipline and region. BKS Industri in Kvinnherad is the largest company with 300 employees. IMTAS in Mo i Rana and Harstad gives us a platform in Northern Norway. Austevoll Rørteknikk in Austevoll is an entry into land-based aquaculture. And once Einar Øgrey Farsund closes in the second quarter, we will also have a meaningful platform along the southern coast of Norway. Our customer base is made of solid blue-chip customers such as Boliden, Hydro, Elkem, Equinor, Aker Solutions, Mowi and [indiscernible]. These are long-term repeat customers and that customers' quality is one of our strongest defensive features of the business. The principle of decentralization, decision-making stays close to the customer. EQVA ASA, the parent, provides capital allocation, business development, M&A and shared back office. That is the model. Now I will hand it over to Daniel, who will explain the platform we have built in the last 3 years.

Thank you, Olav. I want to take a moment on this slide because it tells the story of the journey we have been through. In 2022, EQVA was established as a developer and long-term owner of complementary industrial companies with the BKS Group and Fossberg Kraft as the cornerstones. Then in 2023, we sharpened the industrial focus by divesting the legacy shipbuilding entity, Havyard Leirvik. Before we, in 2024, launched EQVA Industrial Solutions and acquired Kvinnherad Elektro. In 2025, we extended the platform to the North of Norway with IMTAS and into aquaculture with Austevoll Rørteknikk. And in 2026, we have completed the refinancing of the group through a NOK 500 million bond. And we have signed Øgrey Farsund to extend our reach into the Southern Norway. And this is then the platform that has been established today. We have NOK 1.4 billion in pro forma LTM revenue, which is -- gives a 6.3% pro forma EBITDA margin, NOK 90 million in pro forma EBITDA, an order backlog of NOK 1.1 billion and over 700 employees. At the same time, we have a leverage ratio pro forma under the bond definition of 2.6x EBITDA. This means that we have, in 3 years, gone from a regional company to a national industrial platform. Now EQVA is more than the industrial service business. We have three operating segments and a parent level financial position that taken together provide both resilience and optionality. First, EQVA Industrial Solutions is the engine of the group. LTM pro forma EBITDA margin in this segment is 8.2%, and we see a momentum to build upon. Second, EQVA Renewables, Fossberg Kraft, develops and sells small-scale hydropower plants. We have successfully constructed and sold seven plants to date thus far, and we have over 85 gigawatts per hour per year in our pipeline of owned waterfall rights. And just recently, after the balance sheet date, we have signed an agreement on a new project, Gjosa, which is expected to generate NOK 62 million to NOK 67 million in revenue. And third, EQVA Real Estate consists of industrial properties used by the group companies with an externally appraised value of an estimated NOK 120 million. Then at the group level, in total, we hold a cash position of NOK 360 million. This corresponds to an interest-bearing debt of NOK 234 million. The book value of equity is NOK 402 million, while the current market capitalization of EQVA is NOK 286 million per the end of Q1. This further then implies an enterprise value of approximately NOK 520 million. Now the first point I want to make on this slide is the sheer scale of the Norwegian industrial landscape. Norway is home to a large number of industrial hubs and around each of these hubs is a cluster of strong local industrial companies that serve them. We have identified more than 3,000 such companies in Norway, and this shows the size of the market that we are able to address, provided we have the right companies inside the group to serve it. And this is an enormous opportunity. Of those 3,000 companies, a large portion are identified as companies that could potentially be relevant as acquisition targets. But as -- and this is as important, this has to be vetted against our criteria for what makes a good acquisition. And our acquisition criteria are clear and they are disciplined, and at the same time, strict. The companies must be in industrial services companies and serve energy-intensive industries, aquaculture, defense, maritime and offshore. At the same time, we look at predominantly Norwegian companies with the potential for regional and Nordic expansion over time. The companies we look at have an EBITDA normally in the range between NOK 5 million to NOK 50 million, which is too small for public listing and private equity, but it's perfect for our group. The EBITDA margin should be above 7% for the targeted companies, and they should have a good cash generation through an EBITDA relative to working capital of above 40%. At the same time, the company should have an asset-light model and an equity ratio of above 30% as well as having showed a clear history of strong financial results over time and rather privately or family owned. It's also important to note that we use earn-out structures that aligns incentives well with the companies we acquire. And this now is a proven and strategy. It has delivered the platform we have today. And the qualified shortlist of targets that meet our criteria brings a solid opportunity to continue building on that foundation. Now as you see, we have executed this far on our strategy. IMTAS was included from Q1 2025 and has delivered NOK 379 million in last 12 months revenue for Q1, and has extended the platform's reach to the Northern Norway. Austevoll Rørteknikk is our entry into land-based aquaculture from Q4 2025 and has already secured over NOK 150 million in contracts together with BKS Industri. Einar Ogrey Farsund, which is expected to close in the second quarter, will strengthen the Southern Norway with mechanical and electromechanical capabilities, a business with 20% revenue CAGR from '21 to '25 and a 9% EBITDA margin. Now the firepower to continue is in place. We have NOK 360 million in cash, a leverage ratio of 2.6x EBITDA, an active pipeline and a typical entry multiple of 4 to 5x EV to EBITDA. We are evaluating opportunities continuously, and we will be selective. And that brings us to the second part of the presentation, the current quarter, the macro context and what lies behind the figure. And for this, I will hand the word over to Olav.

Thank you, Daniel. Before we go into the numbers, it's important to understand the end markets that drives our business. We see a mixed but overall constructive picture across our end markets. In smelters, EU tariff in selected ferroalloys have introduced an uncertainty and a moderate recent investment activity. However, we expect a return of the modification market driven by capacity expansion, electrification and emission reduction. In land-based industry, regulatory change and driving demand for biogas plants and the rapid growth in data center in Norway is creating new opportunities. Statnett estimates that planned data center account for about half of the project power shortfall. In aquaculture, which today represents 34% of EQVA's Industrial Solutions revenue, the industry has significant land-based smolt and farming expansion plans. And regulatory changes on minimum fish size before sea release are driving demand. Customer preferred supplier who can deliver integrated turnkey projects, which is exactly what we offer. In defense, we see a clear long-term growth driven by rising defense budget. The overall project picture is -- and the short-term variability in some segment, but the long-term direction is supported of EQVA's position.

Yes. So this slide captures the core message of today's presentation. There are short-term headwinds. There is geopolitical instability. The commodity market is uncertain, and you have input cost inflation. And all these things combined are making our customers cautious on capital expenditure. And this results in an investment decisions from customers that are currently being deferred. Projects are being pushed in time. The order backlog is, however, still intact. This means that this is a shift in timing and not in size. And EQVA is built to weather periods like this. We have a diverse customer base, which reduces dependency on individual contracts. We have framework agreements that provide a recurring baseline of revenue, and we have a solid balance sheet that gives us a flexibility. And we have one phrase that we believe captures how we are operating at the moment, and that is that the most important work is happening below the water line. While our customers pause, we are strengthening our foundation, our processes, our integration of recent acquisitions, our commercial position, and this will carry the load when the activity picks up. And this is one message that we want you to take from this presentation. Now back to the order book. This stands currently at NOK 1.1 billion, which has grown for 6 consecutive quarters. The current macro conditions are causing some projects to shift in timing, but the order book itself is intact. And it's also important to note that the upside in EQVA does not lie in squeezing additional margin from existing contracts, but it lies in a platform that absorbs new revenue without proportionally increasing overhead. We have built capacity. We have the infrastructure. We have the governance model. And as volume returns and as we add new acquisitions, the operational leverage in this platform is significant, and that is the structural opportunity. And then when we look at the order book in more detail, we see that the order book is continuing its growth. And what's just as important, we see that we have an increasingly diversified customer base at the same time. And this reduces the reliance on any single contract or customer in our business. Now on the quarterly financial reporting, I will start with handing this over to Olav for the key developments during the last quarter.

Thank you. The recent quarter holds three developments that we especially want to highlight. First, the bond refinancing. In January, we completed NOK 500 million bond issue. Beyond refinancing existing debt, it gives us the flexibility and financial capacity to execute on our strategy, both organically and through M&A in our niche markets. Second, the acquisition of Einar Øgrey, which has been noted previously in this presentation. Third, operational performance. Despite short-term market headwinds, activity across our core segment remains solid. The order book stands at NOK 1.1 billion and has grown for the 6 consecutive quarters, supported by framework agreement and diversified customer base. Some projects are being deferred, which is weighing on the near-term mix and margin. We are using this period to maintain capacity, strengthen execution and prepare the platform for the rebound. As noted previously, EQVA Renewables recently entered into an agreement to develop and sell the Gjosa hydropower plant. The agreement is expected to generate between NOK 62 million and NOK 67 million in revenue, a confirmation of the underlying value of our hydropower pipeline. Back to you, Daniel.

Thank you, Olav. So let's focus on the headline figures for the quarter. Now the reported revenue for the quarter was NOK 370 million. This is up 46% year-on-year, mainly driven by accretive acquisitions. At the same time, the reported EBITDA was 2.9% and an order book that currently stands at NOK 1.1 billion. The book value equity is NOK 402 million. At the same time, it's just as important to look at the pro forma LTM figures, which is how the business should be understood at a normalized full year basis. The pro forma LTM revenue is NOK 1.4 billion, while the same figure for the EBITDA margin is 6.3%. The net interest-bearing debt is NOK 234 million, and the pro forma leverage ratio is 2.6x EBITDA, all on the bond definition terms. Now the headline reported number for the quarter does not represent the real underlying earnings power of this platform. And I will walk you through both the reported figures and the pro forma key items on the next slide. Now when we look at the consolidated P&L, the operating income is NOK 370 million. This is up from NOK 253 million in the same quarter last year, which is a growth of 46%. The EBITDA for the quarter was NOK 11 million, corresponding to an EBITDA margin of 2.9%. This compares to NOK 16 million and 6.2% in Q1 2025. Now to explain this, there are two factors at play. First, the revenue growth was partly impacted by a slow start of customers, the project deferrals as we described earlier. And second, in order to maintain capacity for the rebound, we have kept resources busy on lower margin work. And this has compressed margin in the short term, but preserves still our delivery capacity for when the activity returns. At this slide, we will see our quarterly EBITDA development. And here, we have two main points we want to note. The current macro headwinds are, as noted, impacting the project mix in a quarter that also seasonally is never our industry's strongest. And secondly, and this is a key reference point, the pro forma LTM EBITDA margin is 6.3%, which is then compared to 6.7% for Q4 2025. And that we believe is the underlying business. When we look at the segment view, we see that Industrial Solutions delivered NOK 370 million in operating income with EBITDA of NOK 17 million, which is equivalent to a 5% EBITDA margin in the quarter. This is below the last 12 months run rate, which is reflecting the project mix issues we have discussed. When it comes to Renewables, this reflects the fact that there's not been any developments in the period, but will take up as the Gjosa project starts soon. At the same time, Real Estate is internal revenue and expenses for the Industrial Solutions segment and is eliminated on the group level. The Other segment, which captures parent and group holding costs, was a negative NOK 7.9 million. This is broadly in line with our normalized overhead OpEx guidance of NOK 22 million to NOK 27 million per year, partly affected by some seasonal effects like audit and ESG reporting. In total, the group EBITDA was NOK 10.6 million. The Industrial Solutions story is the story of the group right now. And the path back to the LTM margin run rate is what we are focused on operationally. Now when we look at the pro forma bridge, we start with the reported Q1 2026. And then we add the EQVA Group Q2 and Q4 reported figures. We add Austevoll Rørteknikk for the same period that they were not in place in EQVA as per the reported figures. We take out EQVA Renewables as they are not part of the bond term agreement, and we are excluding minority interests. At the same time, we're adding back NOK 8 million in one-off transactions and refinancing costs. And the result is a pro forma last 12 months revenue of NOK 1.4 billion and a pro forma EBITDA of NOK 90 million. This is equivalent to 6.3% margin. And this is, as noted, the EBITDA definition under our bond agreement, and it represents the normalized earnings base of the group. Now on the balance sheet, the picture is one we believe is of significant strength. We have a cash position at the end of the quarter, which is NOK 360 million. This is up substantially from year-end as a direct result of both the bond issue and a lower net working capital binding. The net working capital is NOK 397 million, and the equity ratio is 31%. At the same time, at the debt side, we have NOK 500 million in bond term loan, NOK 3 million on a revolving credit facility in EQVA Renewables as well as NOK 38 million in real estate loans in BKS Eigedom, which is in the real estate segment. As well, we have NOK 51 million in lease liabilities. This totals interest-bearing debt of NOK 593 million. Net for the cash position, then we then get a net interest-bearing debt of NOK 234 million. Now against the pro forma EBITDA of NOK 90 million, this gives us in total and adjusted for the bond effects 2.6x, comfortably within what we believe is the covenant headroom we should have, and we are also well positioned for further M&A. And the bond refinancing has done exactly what we wanted it to do. It has consolidated the bond structure. It has extended our financial reach, and it has given us the flexibility to execute on our strategy. And that completes our presentation for today. We would like to thank everyone for following. And I hope everyone is excited for the future, and we are welcoming any questions in the Q&A session shortly.

And we just wanted to note also that if you have any technical issues in posting questions into the web player, you can send the questions to [email protected]. And hopefully, we will be able to catch those questions there. And after the webcast, of course, you can always send a mail to me as well directly at [email protected]. And it seems we have no questions for now. So I think we will conclude for today, and then you can post the questions on the noted places -- we have one question, it seems. Okay. So we have a question that says EBITDA margins was disappointing this quarter, driven by weaker project mix. Can you say anything about how margins are expected to develop in the coming quarters in line with Q1 2026 or continue to be weak due to the project mix? What we can say is that the current market or the current macro environment is challenging at the moment, and that's because there is uncertainty on the macroeconomic development from customers and how they want to react on it. But what we're seeing is that the customers are slowly stabilizing around the current environment, and we're seeing uptick. The question is always how long will it take before they get back to full speed. We are seeing the uptick already, and we expect especially the summer months to be strong months as this is maintenance and service months for many of our customers where we have strong framework agreements. And we see, hopefully also going into the second half of 2026, we will be seeing a more full ramp-up of the customer base and the order book that we have built up. So I think we will see a Q2 that is also a bit below what we saw in Q4 and Q3, but we have an upside coming after that again. But I just want to note again that we are closely following the macroeconomic environment, and that's at the moment, the controlling factor in this part. I got a question. Can you share some color on the expected margins on the Gjosa project? What I can say is that we have an expected revenue on the Gjosa project of between NOK 62 million to NOK 67 million, and that's upfront payment, a large part to ensure that we have a neutral cash flow during the development and then we get the final payment at the end of delivery to the buyer. And this is, of course, posted during the project period in terms of revenue and margin, the next 15 months. What I can say on a general basis, if you look at the project that has approximately NOK 60 million in revenues, you would expect a margin of between NOK 10 million to NOK 15 million. But this is project specific and can vary, and we will come back to more details on the specific margin on Gjosa in the future. But you can assess the margin to normally be in that range for that types of projects. And while we're at the question, I think it's very well worth noting that the pipeline of Fossberg Kraft is getting stronger and stronger. And normally, you have a time span of between 1 to 8 years from you start negotiating with the water rights owners until you have a finished project with concessions from the government to build a power plant. And now our pipeline has progressed that much further that we have several projects potentially coming in the future in addition to the strong pipeline of 85 gigawatts per hour that lies underneath. So we see this as a very good point for Fossberg Kraft and expect that to be a new leg for us to really benefit from going forward. I think that was all the questions. So I just want to note again, just send me e-mail, send a mail to the [email protected] as well or call me if you have any questions, and we will try to answer them as quickly and fast as possible. So thank you.

Thank you.