M Vest Water AS (MVW) Q4 FY2025 Earnings Call Transcript & Summary

Welcome, everyone, and thank you for joining us for today's presentation. My name is Tor Olav Gabrielsen. I am the Executive Chairman of M Vest Water. I'm also joined by our CFO, Mr. Morten Hilton Thomassen, who will take you through the financials and summarize the key takeaways from this presentation. This webcast is being recorded, and a replay will be available on our website later today together with the presentation material. Just to get the formalities out of the way, the following disclaimer applies to all content presented today. We start with a brief overview of our recent highlights, followed by a short introduction to our company. After that, I will go through the status of our business activities and financials. Please submit your questions by using the Q&A panel during the presentation, and we will answer as best as we can after the presentation. The growth in chemical sales we highlighted in previous quarters continued into the fourth quarter of 2025. In fact, the last quarter marked our strongest chemical sales to date with an increase of 44% year-over-year and a 67% increase year-to-date. Total revenues for the fourth quarter amounted to NOK 7.2 million, up from NOK 4.7 million in the same period last year, representing a year-over-year growth of approximately 53% EBITDA improved by approximately NOK 2 million, representing an improvement of about 34% compared to the fourth quarter of 2024. Our technological advancements within aquaculture have resulted in 2 new contracts during the quarter. One of these contracts involves equipment to be installed at a newly built factory scheduled to start production in the first half of 2026. And the second is an additional purchase order from an existing customer, a global leader in aquaculture. Regarding our activities in the Middle East oil and gas market, the pilot project for a major oil producer in Saudi Arabia, which was previously postponed due to regional geopolitical conditions is currently scheduled for completion in the first quarter of 2026. In Germany, the paid long-term pilot at Meta is ongoing. This represents the final qualification step toward replacing synthetic chemicals with our green alternatives at the dredging facility in Hamburg. Upon successful completion, we proceed with commercial negotiations for a long-term contract with Meta. Finally, we completed a private placement in the beginning of the fourth quarter. The conversion of a NOK 12 million in shareholder loan, combined with NOK 8 million in gross proceeds demonstrates strong investor confidence in M Vest Water's technology and long-term potential. M Vest Water develops green technologies for water and wastewater treatment, helping industries address the water pollution challenges. Our 2 main products are NORWAFLOC, a green and biodegradable chemical and NORWAPOL, a high-performance filtration technology. In addition to these products, M Vest Water delivers equipment and total solutions, combining both chemical and technical expertise to meet our clients' needs. We have established facilities in Norway and Germany, and we also operate in the U.S. and the Middle East through partnerships and agent agreements. More than 80% of the world's wastewater flows back into the environment without any water treatment and about 1 million to 3 million tonnes of nano and microplastics are released into nature annually. M Vest Water's mission and contribution is to offer eco-friendly water treatment solutions, replacing microplastic-based chemicals and enabling the sustainable reuse of valuable sludge. The world is facing a water crisis driven by climate change, urbanization and increasing competition for limited water sources. In large and emerging markets such as oil and gas and dredging, urgent action is needed, both from regulatory authorities and industry players themselves and the shift towards natural products has officially begun. According to a new published market analysis report, M Vest Water is listed as 1 of only 10 producers of natural chemicals worldwide. We believe that M Vest Water is perfectly positioned to capitalize on this huge global megatrend, scarcity of water. We are experts in water treatment across a wide range of growing industries. We have a patented, unique and proven technology. We have a scalable capital-light business model with high earnings capacity. And we have already established a profitable business area within aquaculture with recurring revenue and where we experienced a growing order intake and visibility in our earnings going forward. In addition, we are growing our tender portfolio across other business areas like dredging and oil and gas. Let's start the business update section with an overview of our growth in chemical production. In 2025, we produced around 390,000 liters of NORWAFLOC, including 140,000 liters during the fourth quarter. This compares to a total production of 245,000 liters in 2024. In terms of revenues, chemical sales increased by 67% year-over-year in 2025 with a 44% increase in the fourth quarter. Today, production for the aquaculture and oil and gas markets is handled at our Bergen facility, while chemicals for dredging applications are produced in Germany through our manufacturing partner. Our latest technological advancements in aquaculture have resulted in 2 new contracts during the quarter. The first is a purchase order from our business partner, Downstream Marine, for the delivery of our sensor-based and adaptive technology to a newly built Norwegian salmon slaughterhouse. The second is an additional purchase order from an existing customer, a global leader in the aquaculture industry. This includes a system upgrade designed to improve robustness and treatment efficiency as well as optimize logistics related to chemical supply. To give you some background, 2 years have now passed since the EU regulation were introduced in the aquaculture industry. To this date, 2 of Norway's 45 salmon slaughterhouses have been required to implement water treatment under the new legal framework. Both facilities completed in 2024 chose to integrate M Vest Water's chemical NORWAFLOC from the very start of their operations. The third facility mandated to implement water treatment, we also expect to supply with our eco-friendly chemicals following our recent purchase order from Downstream Marine during the quarter. Production is estimated to start in the first half of 2026. Several slaughter houses are still receiving feedback from the authorities regarding their exemption requests. So far, no exemptions have been granted, but compliance deadlines ranging from 2 to 4 years have been issued. Based on current information, the majority of factories are expected to implement water treatment solutions between 2026 and 2030. Moving forward, our goal is to capture the market as the deadlines approach. In close collaboration with our clients and Downstream Marine, we have developed and implemented solutions that help these facilities comply with the upcoming regulations, analyze data trends and manage fluctuations in production volumes and other conditions. We are now proud to say that our 24-hour sensor-based and adaptive chemical treatment technology has demonstrated stable operation, high purification efficiency and strong robustness. This dedicated work has provided valuable insights that allows us to recommend treatment solutions specifically tailored to each facility. The 2 contracts awarded in the fourth quarter confirm the industry's confidence in our solutions. I would also like to mention that in parallel, we are exploring sludge dewatering solutions for the industry. Wastewater treatment and sludge management are closely linked and M Vest Water is actively researching improved dewatering methods to ensure a more complete and integrated approach in the future systems. By maintaining our leading positions, we have good visibility into future expansion as the implementation deadlines for the EU regulations approach. Our ambitions remains high, and we are targeting a 70% market share within 2030. Over the past year, we have focused on establishing our presence in the Middle Eastern market. Our approach has been twofold: winning contracts to pilot our technology and securing participation in tender processes for long-term deliveries of our products and solutions. Two important pilots were planned in the Middle East for 2025. The first is an assignment to qualify our technology at an oil treatment facility in Saudi Arabia. The pilot was initially scheduled for June '25, but was postponed due to a geopolitical situation in the region at the time. The current expectation is to conduct a pilot in Q1 of 2026. M Vest Water, together with our partner, Enertec Systems has already positioned both equipment and chemicals on site and are prepared to initiate the project upon approval from the customer. The second was a Green De-Oiler Technology pilot carried out in collaboration with a national oil and gas producer in Oman. The pilot has been executed and met its key technical objectives. We are currently waiting for the customer's final evaluation report, which will determine the potential commercialization through sales of NORWAFLOC. Back in April 2024, we announced our first formal contract in the Middle East. During the second half of 2025, we received the initial orders under this agreement. Project implementation is ongoing and the first recurring commercial deliveries of NORWAFLOC are expected in the first half of 2026. While currently limited in scale, the contract represents an important commercial reference and a platform for future growth in the region. In the Norwegian oil and gas market, M Vest Water supplies 2 treatment facilities with services, technical solutions and chemicals. Both these facilities treat highly oil contaminated water from oil production in the North Sea with excellent results using M Vest Water's eco-friendly NORWAFLOC products. These installations provide stable revenues and serve as an important commercial and technical references. For our German business, the ongoing and paid long-term pilot at Meta is currently our most important priority. Meta is a flagship in the dredging industry recognized for its scale and leadership in sustainable dredging management with a strong ambition to eliminate the use of synthetic chemicals in sludge dewatering. In August, we completed the third of 4 qualification steps to our NORWAFLOC product. In October, we received a purchase order for the final step, a long-term pilot, which has now started and is expected to be finalized during the first quarter of 2026. So far, 13,000 liters of our NORWAFLOC has been delivered at Meta. Upon successful completion of the final qualification step and provided that both Meta and the Hamburg Port Authorities expectations are met, M Vest Water will go into further commercial negotiations regarding long-term contracts with Meta. I will now hand it over to Morten, who will provide you with an update on the financial and wrap up the presentation with a few key takeaways.

Thank you to [indiscernible], and hello, everyone. As usual, we will start with the overview of the key figures. Profit loss shows improvement in all key figures compared to the previous year. In the fourth quarter, we delivered our strongest chemical sales result to date. Total revenues in the quarter amounted to NOK 7.2 million, up from NOK 4.7 million in Q4 2024. The revenues consist of chemical sales, equipment sales as well as services related to process optimization and technical support. In total, we reached a revenue of NOK 26.5 million for the year, an increase of 17% compared to 2024. The share of chemical sales relative to other sales categories increased compared to last year and was the main driver behind the improvement in EBIT and EBITDA margins. EBITDA showed a negative result of NOK 3.9 million in the fourth quarter, an improvement from the negative result of NOK 6 million in the fourth quarter of 2024. The net loss for the quarter ended at NOK 4.9 million, an improvement from NOK 6.5 million compared to the same quarter last year. For the year in total, net loss improved from NOK 24.5 million in 2024 to NOK 19 million in 2025. Looking at the balance sheet, CapEx remains low and investments in the fourth quarter totaled NOK 0.8 million, primarily directed towards patents and R&D. Cash flow from operating activities in the quarter was negative NOK 3.4 million. The company has a credit facility of NOK 8 million issued by the bank, of which NOK 1 million was drawn as of December 31, 2025. In October, we completed a fully underwritten private placement, raising NOK 8 million in gross proceeds at NOK 8 per share. In addition, 2 existing shareholders converted shareholder loans totaling NOK 12.6 million. The proceeds will be used as working capital to support the company's ongoing projects and tender activities and to meet the growing demand for NORWAFLOC products across all segments. Our business model is based on chemicals as a consumable for our customers, providing long-term recurring revenues. Annual recurring revenues were NOK 20.9 million in 2025, representing a year-over-year increase of 44% for the quarter and 67% for the year. The Aquaculture segment continues to deliver solid profitability, accounting for nearly 90% of total revenues during the period. We are positive about the trend in chemical sales as recurring revenues provide a strong foundation for future profitable growth. Now let's take a look at the company's financial development over a longer perspective. The company has more than doubled its revenue since 2023. As mentioned earlier, the aquaculture segment has so far been the primary growth driver. In this market, we have high visibility regarding when slaughter houses are required to implement water treatment solutions. This allows us to plan for a ramp-up of chemical production for future deliveries. Our leading market position supports high growth ambitions over the next 3 to 4 years. Toward the end of this period, we expect the Aquaculture segment to generate annual revenues in the range of NOK 100 million to NOK 150 million. Dredging and oil and gas, on the other hand, a market with significantly greater revenue potential but involve longer lead times. M Vest Water remains confident in the relevance of our solutions in these markets and the revenue potential moving forward. Finally, here are the key takeaways from this presentation. We entered 2026 with a solid base of annual recurring revenues with the fourth quarter delivering our strongest chemical sales to date. The aquaculture segment continues to be our primary growth driver, delivering financial results in line with expectations. Revenues from this sector accounted for close to 90% of total revenues in 2025. Our latest development, the sensor-based and adaptive chemical treatment technology has resulted in 2 contracts during the fourth quarter, confirming the industry's confidence in our solutions. M Vest Water has strong visibility into the timing of upcoming water treatment requirements in the aquaculture industry. This provides a solid foundation for predictable market expansion and sustained growth. Activity is expected to increase gradually through 2026, followed by a period of significantly stronger growth from 2027 to 2030. Our international growth initiatives continue to represent substantial long-term value for our company. Although markets such as dredging and oil and gas involve longer lead times and lower visibility, M Vest Water remains confident in the relevance of our solutions in these markets. Our company is fully focused on the successful execution of current and upcoming pilot projects in Germany and Saudi Arabia with the ultimate goal of converting these into long-term contracts for our environmentally friendly technology. I will now hand it over to Feldt for questions and answers.

Good morning, all. So that concludes the presentation of results, and we will now move over to the Q&A session. [Operator Instructions]. So starting off, we have a few questions related to funding. So separately from the earnings release this morning, you announced a convertible loan. Can you please provide some more color on this? Additionally, can you please elaborate on the status of the overdraft facility?

Yes. Thank you. We finalized the negotiations for this convertible loan of NOK 10 million. It's unsecured convertible with the price of convertible share price of NOK 8. So we believe this gives us -- this provides us together with the revenue and the projected revenue, this gives us the confidence that we can execute on the projects and our product portfolio that we have in our current states today. And it also proves that the existing shareholders are quite confident in our ability to execute on these projects.

All right. Thank you, Secondly, we have a few questions related to the aquaculture segment. First of all, you guide for gradual growth in 2026 and stronger growth from 2027 to 2030. Could you please be more specific on what underpins that visibility? To just follow up on that. I think you have -- you covered that quite well in the presentation, but there is an additional question related to the revenue target goal that is 4x the revenue from 2025 to 2030, I believe. Can you please provide some visibility on that?

Well, I think Morten covered it quite good in his presentation, but we can provide some color on it. It's basically, we know all the slaughter houses, which is mandated by -- and when the kind of needs to implement this new treatment systems. And we know that the time frame going forward for it. And so it's quite a good visibility because this is a license for them to operate in this market. We have projected that we want to have -- we are aiming for a 70% market share of this based on that, 19 of these slaughterhouses represents about 80% to 85% of the produced volume. And these slaughterhouses the majority of them are using the disinfection systems that our partner, Downstream Marine is also delivering to -- have delivered to these slaughterhouses. So we have quite good visibility and knowledge about the technical systems. We know where we are in the process, and we have dialogue with them. So therefore, we have a quite good visibility for the next couple of years when it comes to the slaughterhouse market for the salmon slaughterhouses. And we also know the production volume, so we can calculate approximately how much chemical dosing, which is needed based on their production. And we also know generally based on our historical installations, we know what kind of equipment sales each slaughterhouse represents based on their volume and capacity as well. So I don't know, Morten, if you have anything more to elaborate on that.

No, I think you covered it. We have also the overview of water consumption for the industry. So yes, so I think the estimations are quite good for the market potential.

Yes. These are -- currently, it's the salmon slaughterhouses, which is mandated under this law, but we also see some development in the other markets for pelagic fish. And we hope that for us, obviously, we hope that they will also be mandated under this regulation. So we see a potential in other segments of the aquaculture as well in the future. But this is for the salmon slaughterhouses, it is quite a good visibility for us. So therefore, we can be that specific in our projected revenues going forward.

Perfect. So the next question is also related to the aquaculture segment. Do you have any competitors in that segment? How do you assess these alternatives if there are any? And are there any sort of new bio-based competitors emerging? Do you see that?

I guess we have competitors. Of course, we have competitors out there that is mainly other kind of competing technologies. We don't see any direct competitors when it comes to what can be similar to what we are offering to them. And in our experience, our solutions, our technology provides best cost benefit for the end customer. And we also believe that it's much more about delivering and understanding how these regulations actually work than only providing a chemical or a technical solutions to it because these regulations and the water treatment is a quite new activity for these slaughterhouses that they need to implement. This is a slaughterhouse and they are not usually -- they have not very long experience in treating water. So we have accumulated a lot of knowledge about these new regulations. I think we are in the forefront when it comes to providing not only the actual solution for it, but also how they can solve the problem and also how they can actually make this work in the whole value chain from the treatment of the blood water to the sludge. So of course, there are competing technologies. We know that. We believe our technology is providing the best cost benefits. Of course, we are expecting new competitors as well, but we think we are in the forefront of these new regulations. We have been working with it for several years now.

Perfect. And then a final question on the Aquaculture segment. How many contracts for chemicals do you have today? And how many of them are in aquaculture? And a follow-up on that is also how much of your revenue in the fourth quarter were generated from chemical sales versus from equipment sales in the aquaculture segment?

Morten, you need to -- you can elaborate and you need to correct me on the details here. But I think there was one question for chemical sales to the aquaculture, and that is 3 contracts we are delivering our NORWAFLOC and our chemical solutions to as of now. Regarding the -- I think there was a percentage of the sales to the aquaculture divided into equipment and chemicals. And I think it was around 70% in chemical sales and the rest equipment sales. And if you look at the full year '24 compared to '25, what is interesting about it is that the revenue composition has improved that more of that revenue is actually recurring revenue as we have more chemical sales than equipment. So the equipment sales that really drove the revenue in '24, that is being translated into more chemical sales in '25. And we will also see this trend going forward that our composition of the revenue will consist more and more of the recurring chemical sales, which we also have a better margin on.

Just want to add a few things. I see the -- based on the questions of how many contracts with continuously supply of chemicals we have, the number is 5 and 3 of them are within aquaculture. In addition, we also have frame agreements in Germany, where we also have minor deliveries but these contracts, we, of course, our aim is to also have frequent deliveries of chemicals towards these clients.

Thank you, Morten and Tor Olav. So moving over to [indiscernible] on Meta revenues, first of all, when will the fourth pilot phase be finalized? And what would be the consequences of a failed pilot?

Well, I think it will be finalized during the first quarter and maybe going into a little bit of the second quarter, but we are aiming for finalizing it during the first quarter. If it's been extended, this is a paid pilot. So we don't mind if they want to extend the pilot. If it fails, Well, the consequences pretty much lies in -- yes, the outcome of it. So if it fails, I guess we will not move forward during -- for the next commercial phase of it. However, we have been -- this pilot is ongoing. We started it before Christmas. And we know that from an operational standpoint, from a technical standpoint, we are delivering the results, which are expected. So it also defined -- it also depends on how you define a fail. It hasn't -- we know that we are delivering on the technical and operational aspects. And we know that we can have a good cost benefit for the client. But of course, it's a totality of the whole package and the whole system of it. And I believe your question was also the -- was it the size of the commercial contracts, Nicolai?

Yes, I don't think I've asked that, but it would be nice to know for sure.

Yes. Well, I see [indiscernible], yes. Just to provide you some background about Meta, this is the largest dredging facility, and it consists of -- they currently have 2 chamber filter presses and 6 belt filter presses at this plant. We are now doing this for the chamber filter presses. So our -- a reasonable assumption would be that if we are succeeding in all the criterias and moving into the commercial phase, we will implement this first on the chamber filter presses and then move over to the belt filter presses. But they will also change the belt filters and install new chamber filter process for it. But in total, we believe conservatively that it could represent maybe EUR 1.5 million to EUR 1.6 million in annual recurring revenue. It might be -- that is a conservative estimate. So around plus EUR 50 million to EUR 20 million depending on the exchange rates in the recurring revenue for this plant. implemented on all the lines, production lines.

Okay. Just a follow-up on that, Tor Olav. So if I remember correctly, your trial is based on 1/3 of the production capacity at Meta, right? If your trial succeeds and you go to commercialization, do you believe it will be -- you will sell chemicals for 1/3 of the production facility or the whole thing?

Well, like I said, we are currently on the chamber filter press, which, as you say, represents about 1/3, maybe a little bit more. So I believe that it will be -- our solution will be implemented in stages. That's correct. So I don't think that we will come into full-scale deliveries for the whole plant for the first stage because we also need to test it on the belt filter presses. But what we're aiming for is actually to accelerate that process, so we can also test it in parallel on the belt filter. But currently, it is now being tested on the chamber filter press. Regarding the -- what you said about the capacity, what we are seeing is actually that the capacity, even though the chamber filter presses, they only have 2 of them. We see that the use of our product actually means some less downtime for these production lines because the share stability of the sludge. So they can actually increase the amount that these 2 lines represent can actually be increased compared to the total volume. And the time line, well, the time line, we are -- this pilot is ongoing. It will be -- it will probably be finished, as I said, during the first quarter, maybe extended. For us, if it's extended, that is probably because we can extend it to test on the belt filter presses and it's also paid. So that's a good thing. The next phase would be commercial negotiations for our long-term delivery contracts. And how long that's going to take, that's kind of hard for me to have an estimate on. But of course, we are wanting to close this as soon as possible. But we also think that if this -- if it ticks all the boxes, the commercial and the technical aspects and the operations, it's quite a big incentive for the facility to implement this as well because of the cost benefits by using our products and also the indirect cost benefits that our products do have a lower carbon footprint, which represents also an indirect and in certain cases, a direct cost for the clients with a higher carbon footprint. So hopefully, negotiations can be concluded during the second quarter, maybe moving into the third quarter. And as we are negotiating with them, we will hopefully also be delivering chemicals to them in parallel. So we can have a continuous revenue stream from this operation.

Perfect. Just a question on -- I think we can wrap up the Meta chapter for now. I also have a question on the VEBIRO contract that you have because that also represents quite significant revenue potential. Can you please just update us on the status of that frame contract?

Yes. I think we communicated in earlier reporting that we executed quite a few of these pilots with VEBIRO. The pilots show that there are some minor modifications needed to be done on the equipment side with -- that our partner, VEBIRO is delivering. We have done or they are in the process of doing this equipment modifications at their own cost because they see the potential by using our products. And we are also now aiming for we are scoping or finding larger pumps or larger projects that we can implement this for the next pilots. And I believe that it's an ongoing work, but I believe that the large-scale next pilot will be conducted maybe in the end of the first quarter or maybe in the second quarter for this.

Okay. And if I remember correctly, VEBIRO has 20 mobile dredging units.

I think it's more 10, 11.

10, 11, yes. How many units do you sort of project that you will be selling your chemicals to?

Well, we hope, of course, for all of them, but we need also to see it's the specific sites. And as I said, we need to fine-tune the equipment a little bit. And the best cost benefit would be to look at larger sites where this can be -- where this is applicable. We don't see any changes in what we have communicated before, but we see that we need to optimize the equipment for our solutions for it. And it's -- they are currently in the process of doing it because they see that it's really a big push from the market to transfer over to biodegradable products. right now. So we are moving as fast as we can on the VEBIRO contract. But at the same time, we need to be honest that we have -- the Meta contract has taken a lot of our resources as well [indiscernible].

I see. Just the final question is sort of to -- are you able to sort of quantify a probability of turning the oil and gas trials into full-scale contracts?

That is quite hard. I really don't want to do that, but because it's a lot of parameters to it, but I can try to give some color on it. Let's take the pilot that was being postponed, and we are aiming to execute this and start this in the first quarter of 2026. What I can say, which we have also written is that we have the equipment on site. We have personnel on site and we have the chemicals on site. And we are just waiting for the time window. This is one of the largest facilities in the Middle East. So obviously, it needs a lot of planning, but we are on site, and we hope to execute as soon as possible. If it meets all the technical and operational parameters, of course, it's also a commercial aspect of it and turning it into a full-scale pilot, I think that is a quite good likelihood if we succeed on the technical and operational boxes. So a full-scale pilot, that is -- I will not say a percentage, but it's very likely that will be turning into a full-scale pilot if we succeed on the first stage.

Okay. That's good to hear. So I think we reached the end of the questions. I would like to thank you all for contributing. And thank you, Morten and Tor Olav, for letting us host your quarterly presentation. And with that, I'll just leave the word over to you, Morten and Tor Olav, for some concluding remarks. Thanks.

Thank you, everyone. So yes, if you have any questions or want to visit the facility, just let us know, and you are welcome any time. And thanks for your support. Thank you, Nicolai.