Impact Coatings AB (publ) (IMPC) Earnings Call Transcript & Summary

Good morning, and welcome to today's webcast where Impact Coatings will present its financial results for second quarter of 2026. Joining us today is CEO, Jonas Nilsson; and CFO, Lena Aberg. At the end of the call we will have Q&A. [Operator Instructions]. With that said, I will hand it over to you, Jonas and Lena. Please go ahead.

Welcome to this presentation of the second quarter 2026 interim report. Here is the agenda for today's webcast. We will start with highlights and business momentum from Q2, and the big highlight is, of course, order intake of SEK 39 million. We will also give you a tour of the coating services here in Linköping showing the production. Our CFO, Lena Aberg, will take us through the financials of the quarter then summary and outlook and a Q&A session at the end. The main message from the quarter is that we had a strong order intake of SEK 39 million. We received 2 system orders in 2 of our main market segments. We also increased volumes within Coating Services and continue to add new customers, particularly in the Energy segment. Net sales increased to SEK 9.7 million, mainly driven by Coating Services. Overall, the quarter shows that the strategic decisions we have made in the recent years are gradually converting into customer orders and business. Impact Coatings is active in 4 main market segments: energy, automotive, electronics and luxury goods. These markets may look very different, but the applications have several things in common. They require advanced coatings, often on relatively flat components and they need efficient production at industrial volumes. During the quarter, we had good order intake in 3 of these 4 segments: energy, electronics and luxury goods. This demonstrates the value of having a technology platform that can serve several different industries. The fourth segment, automotive, remained somewhat quieter during the quarter and activity is still affected by the weak general development of the car industry. But we continue to work mainly with existing customers in automotive, particularly when it comes to decorative components that must be transparent to radar signals. During the quarter, we received 2 orders for our in-line coater IC500 system. The first order was from HJWave, a supplier of waveguide antennas used for radars. We shipped the system in mid-July, only 3 months after receiving the order. And we have now also done the installation and site acceptance tests in Korea. This short delivery time was possible because of our decision to build systems based on sales forecast and keep key components and subsystems in stock. The second order was from LINDBERG, the Danish premium eyewear company, which is now part of the Kering Eyewear Group. These orders are good examples of how our platform can serve very different applications while using the same core technology. I talked about the Wave order and waveguide antenna market in the Q1 webcast. So let's now focus on the LINDBERG order and the luxury goods segment. LINDBERG manufactures premium titanium eyewear. Their frames are known for their design and quality. And personally, I think they look very good. Over the years, LINDBERG has purchased 8 coating systems from Impact Coatings. We have several machine customers in the luxury goods segment, for example, company coating parts for watches. And at our coating service center here in Linköping, we also provide decorative coatings for products as medical hearings. Eyewear components for watches and hearings, all have 1 important requirement in common. The color must be exactly right. Our systems use a continuous process. This allows the customer to measure the result and adjust the process continuously to stay within very tight tolerances. Immediately when a part comes out of the machine, the color is measured and the process is tuned by the operator in real time. That is, of course, not possible with traditional batch coating systems. Coating Services is an important part of our business, particularly in the Energy segment, it generates revenue, but it also allows customers to test and qualify our coatings before moving to larger production volumes and before buying their own machines. During the quarter, one of the new strategic customers we discussed in Q1 has placed substantial coating orders and has now passed SEK 5 million. This illustrates how our customer relationships normally develop from initial testing to qualification to growing production volumes and, in some cases, eventually to system orders. To show you what this looks like in practice, I will now hand over to Peter, our IR Director for a short tour of our factory downstairs. It's a bit noisy in our production, so you might need to turn up the volume to hear Peter properly. [Presentation]

Thank you, Peter. So we have system orders in electronics and luxury goods and coating services volume orders in energy. But as you saw, we are not only doing volume production of PEM electrolyzer plates here in Linköping, we also do coatings in our other business segments. And due to a high level of automation in our factory in Shanghai, we run most of the customer samples here in Linköping. We have the same machine concept for all our business areas, and we use the same machines from customer samples all the way up to fully robotized production lines at the customer sites. This is a competitive advantage for us. Let's leave the factory tour and have a look at our strategy. Our development during the quarter supports both our tactical and our strategic direction. Tactically, we focus on the orders and business opportunities available today across our 4 main segments. Strategically, we are building a long-term position in the commercially driven solid oxide market, particularly in stationary power applications such as data centers. And now we are starting to see concrete results from this strategy. During the quarter, we added 3 new paying customers in solid oxide applications. Winning 3 customers in a new market is an important achievement. It's naturally more difficult than adding customers in a market where we already have an established position. So let us take a closer look at the new customers we have added during the quarter. In total, we added 11 new paying customers during the second quarter. 3 of these were in solid oxide applications, 5 were in PEM electrolysis, where we already have an established position. The initial orders from new customers are normally small. Our sales cycles are long because coatings must be tested, qualified and approved before production volumes can increase. This customer, therefore, make only a limited contribution to revenue today. However, they create a foundation for future coating volumes and potential system orders. The customer development during the quarter gives us confidence that our strategic focus is taking us in the right direction. So going back to PEM. PEM electrolysis for hydrogen production continues to be an important part of our energy business. During the quarter, we added 5 new electrolysis customers and we continue to see substantial coating services production volumes from existing customers. The international electrolysis market is consolidating. Some companies have left the market while investment is increasingly concentrated among the companies with the strongest position and the best ability to scale. Today, most of the leading international electrolysis companies are paying customers of Impact Coatings. And this, of course, gives us a strong position as the market enters its next investment phase. We also signed a letter of intent with a South Korean company LT Metal at the end of the quarter to collaborate on the commercialization ofiridium oxide coatings. This can expand our business both with existing and new customers by adding more value to each coated component and by making the qualification process easier for the end customer. With that, I will hand over to Lena, who will take us through the financial results.

Thank you, Jonas. And we will start with the Q2 summary. Total net sales for the quarter amounted to SEK 9.7 million. Coating Services was the main contributor with the SEK 9.1 million, more than doubled sales compared to the same period last year. Aftermarket has been slow, reflecting the lower activity at many of our system customers, SEK 0.6 million compared to SEK 2.1 million in Q2 2025. The order backlog for Coating Systems was SEK 29.4 million at the end of the quarter for the 2 machines sold in Q2. And order backlog for Coating Services was SEK 1.7 million, the same as Q2 '25. Looking at the first half of 2026. Total net sales amounted to SEK 22.4 million compared to SEK 16 million. Coating Services increased from SEK 10 million to SEK 20.9 million. Aftermarket decreased to SEK 1.5 million compared to SEK 6 million, mainly due to some sold machine upgrades made in 2025. And they were reported as aftersales. Operational costs, but excluding raw materials and supplies, was minus SEK 40.0 million compared to minus SEK 46.5 million, reflecting the effects from the cost-saving measures implemented. EBITDA improved to minus SEK 19.5 million in the first half compared to minus SEK 26.3 million. And EBIT improved to minus SEK 24.1 million compared to minus SEK 30.1 million. Closing cash balance was SEK 15.2 million compared to SEK 30.8 million. But the larger order backlog and lower customer advance payments than last year, and we will come back to more details at the cash flow statement. If we take a closer look at the income statement for Q2 2026, all the amounts in SEK million and compared to Q2 2025. Even though net sales for the quarter increased to SEK 9.7 million, total revenue decreased to SEK 10.5 million compared to SEK 14.7 million. This was mainly due to the low change in work in progress, while Q2 2025 was SEK 6.8 million. Gross margin increased to 62% compared to 48%. Other external costs decreased slightly to minus SEK 5.6 million compared to minus SEK 5.7 million. Personnel costs decreased SEK 3 million to minus SEK 12.3 million compared to minus SEK 15.3 million. And the number of full-time equivalents for the group by the end of the quarter was 41 compared to 57 in Q2 '25. Depreciations increased to minus SEK 2.3 million compared to minus SEK 1.9 million. And there was a currency gain of SEK 0.6 million compared to 0. So operating loss for the quarter was minus SEK 13.0 million compared to minus SEK 15.8 million. Looking at first half of 2026 compared to first half 2025. Net sales increased to SEK 22.4 million compared to SEK 16 million in the first half of 2025. But total revenue decreased to SEK 23.1 million compared to SEK 34.4 million. And again, this was mainly due to only SEK 0.7 million in change in work in progress this year while the same period last year was SEK 14.9 million. Gross margin increased to 62% compared to 50%. Other external costs decreased to minus SEK 10.5 million compared to minus SEK 11.6 million mainly due to reduced travel expenses, lower marketing costs and lower cost for consumables. Personnel costs decreased to minus SEK 24.9 million compared to minus SEK 31.2 million, clearly reflecting the implemented cost reductions. Depreciation increased to minus SEK 4.6 million compared to minus SEK 3.7 million. And the currency gain was SEK 1.6 million compared to a currency loss of minus SEK 0.8 million. Operating loss for the first half of 2026 was minus SEK 24.1 million compared to minus SEK 30.1 million last year. And we move to the balance sheet, and I will make the comparisons with the year-end 2025. We have had low level of investments, so total fixed assets decreased from SEK 68.6 million to SEK 68.3 million, mainly due to depreciation. Inventory in raw materials increased to SEK 58.2 million from SEK 54.7 million, mainly in components. There was also an increase in work in progress to SEK 24.6 million compared to SEK 21.7 million, and that's for the coming machine deliveries. Receivables increased by SEK 1.7 million to SEK 25.2 million compared to SEK 23.5 million, mainly due to increased accounts receivables from increased sales. Outgoing cash balance by the end of the quarter was, as mentioned, SEK 15.2 million compared to SEK 37.4 million by the year-end in 2025. And we will come back to that in the cash flow statement. Equity decreased to SEK 133.6 million from SEK 154.5 million, mainly due to the cumulative loss for the year. Prepayments from customers decreased to SEK 1.1 million from SEK 7.9 million due to invoiced sales in the first half of 2026. And short-term liabilities increased SEK 13.8 million to SEK 56.7 million, mainly due to increased accounts payable and increased prepaid revenue. Looking at the cash flow statement for the first half of 2026 in comparison with the same period in 2025. Cash flow from operations, before change in working capital, was minus SEK 19.9 million compared to minus SEK 27.5 million. Cash flow from change in working capital was positive SEK 3.3 million compared to SEK 8.3 million. And the positive effect this year is mainly from increased short-term liabilities such as accounts payables and prepaid revenue. Cash flow from operations was minus SEK 16.7 million compared to minus SEK 19.2 million in 2025. Cash flow from investing activities was minus SEK 0.6 million compared to minus SEK 4.1 million due to low level of investments. Cash flow from financing activities was minus SEK 5.0 million this year due to the repayment of the short-term loan, while financing was plus SEK 20.5 million in the first half of 2025 due to the raising of new loans. In total, this resulted in negative cash flow for the first half of 2026 of minus SEK 22.3 million, of which minus SEK 3.0 million in Q2. And compared to minus SEK 2.8 million in the first half of 2025. And a closing balance of SEK 15.2 million compared to SEK 30.8 million by the end of Q2 2025. That was the financial update, which means that we move on to the summary and outlook.

Thank you, Lena. So to summarize, we had strong order intake during the quarter with business across 3 of our 4 main market segments. The 2 system orders demonstrate the strength and flexibility of our technology platform. At the same time, the 11 new paying customers are building the foundation for future coating volumes and potential system orders. It's particularly encouraging that 3 of these customers are in solid oxide applications. Winning customers in a new market takes time. And this is an important indication that our SOFC strategy is starting to convert into real business. We now have a broader customer base, a clearer offering and a stronger starting point than we had 1 year ago. Going forward, we will continue to focus on sales and customer development. At the same time, cost control, cash flow and improved margins remain essential as we work towards long-term profitability. With that, we are ready to take your questions.

Thank you for that presentation, and we will now open up for a Q&A session. [Operator Instructions] With that said, Lara Mohtadi from ABG, the word is yours.

Jonas and Lena, just a couple of questions from me. Firstly, I'd like to ask a little bit on the market and if we start with Europe, you've pointed to clearer policy signals in the U.S. and China feeding into momentum, but Europe has been a bit absent from that framing. When would you say that Europe sits in the demand picture? Is it structurally lagging? Or are there any specific policy or maybe customer catalysts you're watching for to make it to turn.

If you look specifically at the Hydrogen and Engine market, I would say that it's structurally lagging. But despite that, if you look at the number of new customers we have during the quarter, so we had 11 new customers during the quarter. And a substantial part of those 11 new customers, they were actually in Europe. So I would say that, yes, Europe is a bit slower, but we are making progress also in Europe.

Okay. That sounds promising. And just on sort of the competitive -- or your competitive position, you said that you haven't lost any recent orders to competitors, if I understood you right. What would you say is actually driving that? Is it more your technology? Or is it more sort of the relationships that you built through these qualification processes?

I would say it's a combination. So first, it's the technology and the fact that we can use the same machines all the way from customer samples to coating services and sell the same type of machine, that's appreciated by the customers. And the fact that we can easily make customer samples means that we can get new customers. We can start qualify them. And that process is quite long to qualify a customer. And the earlier you start, the better. So this is a competitive advantage we have. Another competitive advantage is that we are starting to become one of the big players in the market. And sometimes, we are referred to as the biggest player when it comes to coatings for electrolyzer. And in China, when it comes to coatings of fuel cell plates, we are the biggest player. So that also helps in the customer relation.

Very clear. And then you had recently had 2 orders with one of them being delivered recently. And could we just talk a little bit about your other application areas, such as well the -- SOFC, which you've recently started to actually, you think that, that will contribute to orders. When do you think you'll get an order from SOFC?

Yes. So as we saw this quarter, we have 3 new paying customers in SOFC. We have previously reported that we do have a collaboration with Ceres Power and the collaboration with Ceres Power is giving us access to the licensees of Ceres Power. And that is, of course, giving us a jump start with the customers. However, it's still the fact that customers, they need to do sampling. They need to test in their own stacks. They need to test everything. And typically, tests for solid oxide fuel cell stacks, they run for 5,000 hours or 10,000 hours. And if you look at 5,000 hours, that's half a year, 10,000 hours, that's 1 year. So it's very much driven by how much do the customers need to test. The good thing is that the customers in this market, they have standard products. So they are not project-oriented. So they have their standard products. They plan their production, they plan production volumes. So when they switch from 1 coating method to another coating method, they will do that for all their production and all their customers and all their projects.

And these samples and test that you just alluded to, will that generate the coating services revenues? Or is this something won't contribute to your revenues?

So we always charge for samples. So even sort of the smallest test gives some small revenue. But what we see so far on the solid oxide market is that there might be sort of going directly from sampling to machine sales. Some of the customer dialogues we have, they are more like, okay, first we sample and when the testing is done, well, then we go for a machine. Other dialogues are more that, okay, first, we sample, then we will go for coating services for a short period of time and then there will be machines sale. So the solid oxide market is more machine focused than, for example, the PEM electrolyzer market where the customers tend to stay longer in coating services. But in both markets, the end go for both us and the customer is to have a machine at the customer side.