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

Welcome to M Vest Water's Presentation of our Second Quarter 2026 Results. My name is Tor Olav Gabrielsen, Executive Chairman of M Vest Water. Joining me today is our CFO, Morten Hilton Thomassen, who will take you through the financial review and outlook. Please note that this webcast is being recorded. The replay, including the presentation slides, will be available at our website later today. Here, you can also find our second quarter report for more details. Before we begin, please take note of the following mandatory disclaimer. We begin with a summary of our recent highlights, followed by a short overview of our products, solutions and the industry challenges that M Vest Water Technology helps to address. We will then provide an update of our latest business activities and financial performance before concluding with our outlook going forward. Lastly, there will be a Q&A session, so please submit your questions by using the Q&A panel. By the end of the second quarter, our total revenues reached NOK 15.7 million, representing a year-to-date increase of 27%. In the second quarter alone, recurring revenues from chemical sales grew by 36% year-over-year. Aquaculture continues to be a profitable stand-alone business segment, providing strong visibility into our future earnings. Our ambition in aquaculture remains to generate annual revenues of NOK 100 million to NOK 150 million between 2028 to 2030 only from salmon slaughterhouses. During the summer, we received the first chemical order from the third Norwegian salmon slaughterhouse in our portfolio. The newly built facility is expected to ramp up production during the second half of 2026, and we estimate that in 2027, this customer will become our largest within the aquaculture segment. In the second quarter, we also completed the delivery of 2 sensor-driven technologies for salmon slaughterhouses, helping our customers comply with regulatory requirements. Within oil and gas, Norway, our successful cooperation with SAR has continued and our NORWAFLOC supply to the plant has increased significantly during 2026. The pilot at a major oil field in Saudi Arabia remains a project of high strategic importance to M Vest Water, but once again postponed pending a stabilization of the geopolitical situation in the Middle East. Finally, M Vest Water reached a milestone in Germany with the successful completion of the paid long-term pilot at METHA's large-scale dredging plant in Hamburg. The pilot confirmed the performance and reliability of our technology under real operating conditions, and we are now moving into commercial negotiations with METHA. The development of M Vest Water's technology was driven by a fundamental paradox and challenge in the water treatment industry. While wastewater treatment is essential for protecting the environment, many of the chemicals traditionally used in the process are in itself synthetic and contribute to environmental pollution. The reality is that more than 80% of the world's wastewater is discharged without treatment while an estimated 1 million to 3 million tonnes of nano and microplastics are released into the environment every year. M Vest Water was founded to address this challenge by providing natural-based alternatives that deliver effective water treatment when enabling the sustainable reuse of valuable sludge. Our 2 main products are NORWAFLOC, a green and natural-based water treatment product designed to replace synthetic chemicals and NORWAPOL, a high-performance filtration technology. M Vest Water supports industries in solving water pollution challenges by delivering complete water treatment solutions, combining products, equipment and the chemical and technical expertise needed to meet our customers' needs. M Vest Water have established facilities in Norway and Germany, and we also operate in the U.S. and the Middle East through partnerships and agent agreements. Our main targeted industries are oil and gas, dredging and aquaculture. What these industries have in common is the high water consumption, increasing regulatory and environmental requirements and a growing demand for sustainable water treatment and sludge management solutions. With our patented and proven technology, combined with a scalable capital-light business model, we are well positioned to capitalize on these long-term market opportunities. In the Norwegian oil and gas market, M Vest Water has established 2 commercial reference installations treating highly oil contaminated water from the North Sea. At SAR Mongstad, NORWAFLOC has been in operation since 2023. And in 2026, the solution was expanded into a second treatment step, further strengthening recurring revenues from this site. Over several years, both facilities have delivered strong and consistent treatment results, providing valuable validation of our technology under real operating conditions. M Vest Water has, over the past years, focused on establishing our presence in the Middle Eastern markets. What is driving interest in our solutions across the region is the growing need for produced water reuse, increasing water scarcity and stricter environmental requirements. Our collaboration with EnviroTech Systems, a U.S.-based produced water treatment company began in 2022 through an innovation program where M Vest Water's NORWAPOL technology was selected as the top-performing solution among several environmentally friendly alternatives. Today, together with EnviroTech Systems, we are working towards a full-scale pilot at the Safaniya oil field in Saudi Arabia. Safaniya is the world's largest offshore oil field and alone produces volumes equivalent to approximately 30% of the entire Norwegian continental shelf. In March last year, we announced that a large oil company in Saudi Arabia had decided to qualify our technology at one of its major oil fields. The pilot was initially scheduled for June '25, but was postponed due to the geopolitical situation in the region following the 12-day war. The next available execution window was during the first quarter of '26 and the pilot was rescheduled accordingly. In February, M Vest Water and our partner EnviroTech Systems mobilized the equipment, NORWAFLOC products and the personnel to site in preparation for the pilot. However, following the renewed outbreak of war on February 28, our focus shifted to personal safety and evacuation and the pilot was once again placed on hold. In July, a new execution window opened, but once again, we had to withdraw personnel from the area. Today, the field remains shutdown due to the lack of export routes for the oil. Consequently, a stabilization of the geopolitical situation is required before this strategically important pilots can be carried out. In the dredging industry, developing natural alternatives to synthetic chemicals has been a challenging process. Over the past 4 years, our team has worked systematically to develop products capable of not only partially but fully replacing the synthetic chemicals traditionally used in the industry. While regulatory pressure in Germany has been an important driver, so as the ambition to develop solutions that in addition to being natural, deliver clear economic and operational benefits to our customers. Given the significant time and effort invested, the successful completion of the long-term pilot at METHA in Hamburg in July marked a major milestone for M Vest Water. METHA is a flagship in the dredging industry recognized for its scale and leadership in sustainable dredging management. The long-term pilot started in late 2025, but was temporarily paused by the operator due to the substantial need for renovation of the plant's existing dewatering equipment. In June '26, the pilot resumed and was successfully completed during the summer. Executed on the real operating conditions, the pilot demonstrated that M Vest Water's natural-based NORWAFLOC products improved both treatment performance and operational efficiency compared with the plant's existing products. Completing a paid long-term pilot at a flagship facility of METHA's scale provides strong validation of NORWAFLOC's performance, robustness and commercial relevance, strengthening our confidence moving into the commercial negotiations. The aqua industry is a regulatory-led market opportunity for M Vest Water. Not only salmon slaughterhouses, but also other parts of the industry, such as pelagic slaughterhouses, fishmeal factories and land-based fish farming will have to comply with the EU regulations. By developing solutions for salmon slaughterhouses at an early stage, M Vest Water has established a strong first-mover position in this market. While we expect competition to increase over time, our focus remains on delivering the best available technology to our customers. A strong validation of M Vest Water's market-leading position is that the third salmon slaughterhouse mandated to have water treatment in place has selected our technology and placed its first NORWAFLOC order in July. This third and newly built facility in our portfolio is estimated to become our largest to date. The facility is currently ramping up production and is expected to reach full operation by year-end. Another important step forward is our advanced sensor-driven technology has now been installed at 2 salmon slaughterhouses. The solution provides continuous 24/7 monitoring and optimization of the treatment process, helping customers maintain regulatory compliance while ensuring stable and efficient operations. The Norwegian market for salmon slaughterhouses consists of 45 facilities that will need to comply with the new EU requirements. Based on our current time lines, most investments are expected between 2028 and 2030. Aquaculture has become a profitable stand-alone business segment with strong visibility. We estimate the market potential at NOK 100 million to NOK 150 million in annual recurring revenues in addition to NOK 300 million to NOK 500 million in equipment and regulatory compliance investments. Our ambition remains high, and we are targeting a 70% market share by 2030. Over the past several years, M Vest Water has invested in developing and piloting new technologies, improving our product portfolio and building expertise in key industries. Our focus has been on establishing strong positions and references within aquaculture, dredging and produced water treatment, and these markets will remain our key priorities going forward. At the same time, extensive testing has demonstrated that our products have significant potential across a broader range of water treatment applications and industries. Building on this momentum, M Vest Water is now scaling its sales efforts to expand our market footprint across both our key industries and other market opportunities. Rather than applying a one-size-fits-all approach, we focus on identifying and developing the right commercial partners in each market we enter. The factors driving demand, regulatory pressure, water scarcity, treatment costs and other local requirements differ significantly from region to region and so does the type of partnership and sales model required to succeed. Moving forward, we will focus on capturing synergies from our existing investments, expanding into closely related markets and exploring opportunities through partnerships, sales and distribution agreements and licensed production. This flexible strategy allows M Vest Water to enter new markets quickly, adapt our commercial approach to each opportunity and build a broader and more diversified pipeline for NORWAFLOC and NORWAPOL worldwide. As part of our strategy to expand our market reach and strengthening sales efforts, we are launching a new product catalog for our water and sludge treatment solutions this week. The catalog will feature the full NORWAFLOC product range, including technical specifications, application areas, delivery options and other key product information. Making our product portfolio more accessible is an important tool for increasing market awareness, generating new business opportunity and supporting our expansion into new industries and applications. With that, I will hand it over to Morten, who will take you through the financial review and outlook. Thank you.

Overall, we continue to experience an improvement in all our key financial figures compared to 2025. Looking at the second quarter 2026 financial results, we delivered higher revenues, improved EBITDA and lower cash burn compared to the same period last year. At the same time, our capital-light business model is reflected in a consistently low level of CapEx. M Vest Water maintains access to external financing through its credit facility in the bank and the loan facility provided by our largest shareholders. At the end of the second quarter, NOK 4 million have been drawn under the NOK 8 million bank facility. In addition, NOK 6 million have been utilized under the NOK 10 million shareholder loan. As a growth company, our working capital requirements are closely linked to project execution and order intake. The conversion of our tenders into firm orders will therefore be an important factor in determining future capital needs. Our revenues are the most important financial indicator for M Vest Water as they reflect both the adoption of our technology and the development of our recurring revenue base. In the second quarter, revenues reached close to NOK 10 million, bringing year-to-date revenues to NOK 15.7 million and a year-over-year growth of 27%. The foundation of our business model, recurring revenues from chemical sales increased by 36% compared to the same period last year. In addition to chemical sales, our revenues include equipment deliveries and services related to process optimization and technical support. Aquaculture continues to be our largest business segment, accounting for more than 80% of total revenues. At the same time, we experienced an increase in activity within oil and gas, particularly from one of our Norwegian reference installations. Aquaculture has become a profitable stand-alone business segment for M Vest Water. Our ambitions remain high, and we aim for the aquaculture segment alone to generate annual revenues in the range of NOK 100 million to NOK 150 million by 2030. In addition, equipment sales are expected to provide a significant revenue opportunity as the industry invests an estimated NOK 300 million to NOK 500 million to comply with new regulatory requirements. For 2026, based on project execution and our existing order book, we expect revenues to exceed NOK 30 million. This baseline has the potential to increase further as a result of ongoing tender activity and growing demand for our solutions. Our international growth initiatives within dredging and oil and gas continue to represent substantial long-term value creation opportunities. However, given the early stage and timing uncertainty of these projects, we remain cautious about providing revenue guidance for these markets. M Vest Water has a capital-light and scalable business model. To support our growth strategy, we continue to evaluate opportunities where we can leverage the expertise, technology and commercial references developed across our key industries, aquaculture, dredging and oil and gas. With that, I would like to thank you for your attention and hand it over to our host at Fearnley, who will guide us through the Q&A session.

Yes. So that concludes the presentation of results, and we will now move over to the Q&A. [Operator Instructions] So starting off, there's a question relating to the aquaculture segment. Are you seeing signs that the industry is moving ahead and start to implement the new regulations? And do you have concrete leads or dialogues with other slaughterhouses at the moment?

Thank you for your question. Yes, I think it's fair to say that we see that the industry is starting to realizing that these EU regulations, they need to actually implement it and take it seriously. And they have set certain dates. And based on the experience, they also see that they need to be in the forefront and start planning and testing the different solutions because every slaughterhouse is different. So yes, and we are having a lot of activity in that sector. We have a dialogue with most of the actors and players in that segment. We have active tenders, but we also have other kind of dialogue how to implement the different solutions. So yes, we are seeing increased activity in the aquaculture sector.

Perfect. And then one question that follows on to that is looking at the rest of 2026, do you see scope to sign another slaughterhouse or other new customers this year? Or is the near-term story mainly about ramping what you already have?

The near-term story, we have ramping up what we have already in our order book and what we have sent out a notice on before. So the third slaughter out that we expect to ramp up the production during this year, and that will contribute a lot. At the same time, as Morten mentioned, we have a tender portfolio, and we expect some of them to might convert into firm orders this year or going into 2027 as well as we have other activities in that segment as well that we hope that we can convert sooner.

Then a question on the liquidity situation. You have book equity of NOK 24 million against NOK 20 million minimum equity covenant and the shareholder loan matures in February 2027. How are you thinking about funding the business from here?

Obviously, we are quite comfortable as of now with the combination of the order book, the tender activity and the conversion -- expected conversion as well as the credit lines, both to the bank and to the owners. And as long as the company sees a good development and growth as we saw also this quarter, we are in continuous dialogue with our main shareholders providing the credit lines. So we will have backing and enough capital just for the short and long term in order to actually fund the tender conversions that we expect in the next quarters.

Perfect. On METHA, can you please provide a bit more color on where you stand with METHA and realistically, when could -- when that could start contributing to revenues?