Norsk Titanium AS (NTI) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Norsk Titanium's Q4 2025 Operational Update, Q&A Session. Thank you for joining us following yesterday's publication of the Q4 operational update. I will be moderating today's session. And with me on the call are Fabrizio Ponte, Chief Executive Officer; and Ashar Ashary, Chief Financial Officer. Fabrizio will begin with brief opening remarks, after which we will open the floor for questions. Fabrizio, please go ahead.

Thank you, [ Joachim ]. Can you hear me okay?

We can hear you.

Very good. So thank you, and welcome to the Q&A release, everybody. So the release of this report was originally scheduled for the 4th of March. And I want to confirm, we will still host a full investor presentation in Oslo next week, and I will be there present. However, in the final stages of our recent strategic review, it became evident that we had to withdraw our previous revenue guidance of $70 million in 2026 and the corresponding path to cash flow breakeven in 2027. And in order to meet the market expectation in a timely manner, we had to accelerate the publication. That's why we did it. The main and key and underlying reason of the delay is basically the delayed industrial ramp and commercialization of our technology with our key OEM customers. And we have to say that the company has underestimated the complexity and the amount of time required in order for very large and complex OEM to integrate our technology into their manufacturing processes, okay? So we have to acknowledge that the level of integration and qualification has taken much longer than expected to translate into a commercial ramp. So I joined in last October, so I've been with the company for a few months. I spent considerable time with customers. I'm -- so I have 2 key takeaways from that. One, the long-term opportunity is intact for Norsk Titanium. RPD is a technology that will be integrated in key and large OEM manufacturing processes in aerospace and defense. I'm very positive on that. But on the other hand, the complexity of the commercial part of it certainly has to be considered. So now how are we going to work on this and how we are going to course-correct this. So we have been working on redefining our operating model. Our operating model is going to be an operating model revolving around customers and with customer at the center of it. And we have developed a commercially grounded business plan with a very commercially based view of our business. We are going to continue to focus on our core. So Aerostructures, Defense and Engines, which has been added to the original core. We are going to deploy a dedicated team to work on short-cycle opportunities, which we have many, and we need to make sure that we can win those opportunities to improve our short and medium term. And third and most -- let's say, most important of all, we are also going to launch what we named the RPD Ecosystem strategy, which calls for deploying our equipment and license our technology with selected and key OEMs. Now I'm sure you all have read the update that we provided and we published on our website. So let's open the floor for question and answers. Joachim?

[Operator Instructions]Okay. We have received a few questions in the chat from Sarah. We can start with that. In November, you announced advanced negotiations with the DoD ICAM Office for a funded qualification program. Today, you highlighted 2 multiyear development programs for the U.S. Navy and Air Force. Can you clarify if these Navy and Air Force programs are the same as the ICAM initiative? Or are they separate opportunities?

Yes. So they are the same, and we are in the very final stage of the negotiation. We suffered a couple of delays. One was the government shutdown in the U.S. that delayed, let's say, the finalization and the formalization of certain contracts. We also have now an auditor in the middle of the paperwork to complete this. But these 2 development programs are there and will be finalized in the coming months. Joachim?

Then following on with a question from Kim. With regard to Ponte's statement on his LinkedIn post from 18th December, stay tuned, we expect several groundbreaking announcements in early 2026. Can you please elaborate on the statement and if it's still valid?

It is still valid. We still expect numerous updates coming forward. As I said in my opening remarks, I remain very confident on our long-term outlook. And this is grounded on our customer pool for the technology. So we continue to work with main, large OEM, and we are following the road maps, and we are enabling their industrialization. So yes, you -- in the coming months, for sure, there will be news that will support our outlook.

Then a question from [ Herman Olsen ]. Can you say anything regarding Airbus third wave and how many parts are now in serial production?

Yes. So we are not going to refer to the number of parts in serial production going forward. We learned from the past, so we're going to stop being that specific. However, I can say that we are working hand-in-hand with Airbus on a number of fronts. Of course, Wave 3 and conversion into parts is one of them. And in the coming months, I expect this to start the ramp, which is going to help us already starting in 2026 and going forward. All the work that we are doing with Airbus is still very much alive. Nothing has changed. Actually, it's expanding into many different directions. Ashar?

Yes. Thank you, Fabrizio. Parts in production. So a couple of reasons to kind of not guide towards the number of parts in serial production. All the business that we have earned so far, none of it has been lost. I just want to reassure that. Secondly, there is a mix of development revenue and parts revenue, parts production revenue that continues to be a mix. Therefore, what we've seen is that the parts transitioning to serial production don't indicate or do not provide a leading indicator into revenue at this time. They -- at a certain maturity level, they -- we may mature to where we can provide that type of a leading indicator. But for now, we're suspending providing that as a KPI.

Then another question from [ Sarah Kay ]. In August, you stated your $70 million target for 2026 was a bottom-up estimate anchored in firm contracts and advanced commercial discussions across your 3 main sectors. Despite retracting guidance today, do you still expect a meaningful portion of this pipeline to transition to serial production this year since aerospace was estimated to be 40% of the total.

Ashar, do you want to take that?

Yes, I can start with the response on that. The revenue guidance that we've retracted, those were ongoing discussions with our major OEM customers that we're working with. Those opportunities are still there. We haven't -- like I said, we haven't lost the business. We haven't lost opportunity. The market continues to grow. There continues to be customer pull from the same customers that we have forecast in that. So when we say grounded, they were grounded in our discussions with those specific OEMs. That business is still available. The ramp into that business and the timing of that has now become less clear to us, whereas where we thought that timing, the timing was more understood. So what Fabrizio mentioned earlier is trying to work with those same customers and align the timing of how that revenue comes together. Fabrizio, do you have anything to add to that?

The only thing I want to add is that I do expect the industrialization and the corresponding commercial ramp to start this year. The question was about how meaningful this is going to be. This is exactly what is difficult to predict at this point in time. So we need to work with our customers. We will do our best to maximize and go after the biggest number of parts possible, and we're going to work very, very hard in the coming months in order for that to happen. I expect this to start this year. How meaningful that is going to be is difficult to predict at this point in time.

Then another question from Sarah about defense. With the capability assessments from major U.S. defense contractors to be finalized in the next weeks and Q1, do these represent entirely new customer relationships? Or are they existing partners like, for example, Northrop Grumman and General Atomics?

It's actually a mix. So we have -- no, we've been working with the 4 main primes for many, many years. And this development is coming to fruition. So all the work that we've been doing with the main 4 primes is coming to fruition. But we also see new customers coming on board. There is a very, very strong interest from the Navy in the U.S., but also, we see from defense in Europe. So we have more -- let's say, this is broadening, and we are now working on a couple of very important opportunities that we are going to translate into programs and then into sales. So the defense part is becoming very important. This is driven, of course, by geopolitics, but also by the nature of our technology. So on the one hand, we are able to replace forged parts, which right now are in very short supply and increase in price. And on the other hand, we can deploy our technology wherever we want to, okay? So we have production available in Europe. We have production available in North America and additive manufacturing is, by definition, deployable wherever it is needed. So of course, Norsk Titanium and our specific technology is a perfect enabler to some of the challenges -- to win some of the challenges that the defense industry has at this point in time. We are very, very buoyant about this segment.

Next, we have a question from Herman Olsen. Regarding capital raise, is it planned for 2026 first half or second half?

The timing is not determined yet. So we are -- obviously, we've mentioned in the report that we are looking towards raising additional capital during the year. I think the timing will really depend on how mature and how our customer relationships develop over the year. This -- we've obviously discussed this with our Board, with our main shareholders, and they remain supportive of the outlook of the business, and they remain supportive of determining when the right time would be for the capital raise.

Another question from Sarah. Beyond shortening future adoption cycles, did the recent MMPDS approval unlock a material portion of your existing parts pipeline in industrial sector that was waiting on specific validation to enter serial production?

Can you repeat the question? I'm not sure I understand the question.

Beyond shortening future adoption cycles, did the recent MMPDS approval unlock a material portion of your existing parts pipeline in industrial sector that was waiting on specific validation to enter serial production?

Right. So I'll try to provide a statement here that then if you can refine the question, it would be great. So the MMPDS listing of RPD is, of course, a very important milestone for Norsk Titanium. We are basically the only additive manufacturing technology included in the Handbook. The Handbook is the Bible used by aerospace engineers in aerospace and in defense to basically design parts. So this is going to -- is providing authority to RPD and numbers to engineers to design new parts. And we expect that the inclusion of RPD in the MMPDS will enable a number of parts to be designed on the technology and then, of course, flow to Norsk Titanium for commercialization.

Another question from Herman Olsen. Airbus posted on LinkedIn last month, Airbus has begun serial production of large titanium 3D printed parts for the A350 program, focusing on the cargo door surround area. Is this Norsk Titanium or are they working with other titanium partners?

Yes, there is an important -- let's say that we are a big part of that. I mean it's yes. So we are included in that application. And if you look at that web story, we are featured in the web story. So I think you can draw your own conclusion on how important is Norsk Titanium into that program. This also gives you an idea on the traction that there still is from Airbus on additive manufacturing and specifically on DED, okay? So we are very, very excited about that. So there was a previous question asking what we expect. So we -- I expect to be at a tipping point. And now we need to push further in order to make sure that we help our customers to fully industrialize the technology and we push for the commercial ramp. That's what we need to do in the coming 2, 3 years.

Yes. And in general, I think Norsk Titanium is the only 3D printing or additive manufacturing technology that is qualified for structural titanium parts on aircrafts. So I think it's easy to draw that conclusion.

Next, we have a question from [ Jorgen Haugen ]. Earlier communications suggested that Wave 3 would be fully implemented in 2025 and that meaningful developments could occur in early 2026. The latest update suggests a longer time line and tighter liquidity. What has changed since those earlier expectations? And how should investors interpret the credibility of the current outlook? Also, could you clarify the context of the Airbus related LinkedIn post in February?

What's that question, Joachim? Can you please repeat -- can you repeat the last part?

Yes. The last part of the question was about the clarification around the context of the Airbus-related LinkedIn post in February. But the broader question is also about how investors should interpret the credibility of the current outlook given the persisting delays.

Yes. So I think in our statement, we fully acknowledge that we didn't read the situation correctly. Certainly, we realize that this is a very complex customer and OEM structure and it requires quite a bit of work in order to accomplish what we need to accomplish. We are changing the way we work with customers. We used to work just with the engineers at Airbus. At this point in time, we are working with the entire spectrum of stakeholders, so engineers, of course, but also procurement, program, leadership. So it's really a fully-fledged approach, the one we have with Airbus. As I said in my opening statement, and we reported on the update, we have now developed a commercially grounded business plan. That's the reason why I was brought in. I'm a commercially grounded person and I look at things in a very commercial way and through a commercial lens. I believe that we have work to do, and we have certainly a complex road ahead, but I'm very, very positive that the outlook is positive. And if we continue to go through the -- all the critical steps that are required and we work hand in hand with our customers, very large OEM in aerospace and defense, things will start to happen, okay? So we are in a tipping point. And the next 2 years will be very, very critical for us in order to take Norsk Titanium in a very different place. I'm very confident.

Yes. And in addition, in terms of understanding the customer, one thing that we have done is obviously retracted our guidance. But we're also taking -- looking at our strategy and our operating model. And as Fabrizio said, we have established a kind of a cross-functional connection points with the complex nature of our customers to develop those road maps. So at this time, we're not guiding the market to revenue is precisely for that reason is because it's kind of -- at this point in time, it's hard for us to give a credible number and when these things come home. We do know that there is -- continues to be strong connections to us and that the reason we've been able to access cross-functional teams is because there continues to be a pull from the customer to mature Norsk Titanium into their production systems. But again, as we acknowledge, we've got the timing wrong in the past. So I think we're taking a little bit more prudent approach here to come up with a forecast after we have completed all that work with our customers.

We will pause briefly to see if there are any further questions. [Operator Instructions] One question here. The company need to acquire and report achieved contracts or actual recurring revenues. Will this new commercial business plan include a broader and more aggressive approach to other segments, for instance, oil, gas, transport or other?

Yes, it will. So as I said at the beginning and also, we reported in the update, we're going to remain focused on the core, and core for us means Aerostructures, Engines and Defense. That will not go away. However, we have a number of opportunities that will always flow through our door and we need to get better at winning those opportunities. These opportunities come from many different industries. It can be energy, can be semiconductor, can be urban air mobility, also in aerospace. So there are a number of opportunities that continuously flow in Norsk Titanium. And we are going to work in a very different way in order to win those opportunities. I expect those opportunities to become meaningful already this year and in the coming years.

Yes. And with regards to the reporting question on contracts and actual recurring revenues, we'll continue to report the way we are reporting. And any material contracts, of course, we will report to the market as they are executed.

Great. That also provided a response to Herman Olsen's questions about if they can expect any stock news between the quarterly reports as larger new deals are signed. Another question here from Lars. Please be concrete on the question if Airbus is working with other titanium partners.

That's certainly a possibility. I mean I think it's difficult for us to say who they are working with. We can say that we are certainly one of a prime technology partner. Norsk Titanium enjoys a very important position at Airbus from the technical standpoint. I think we can fairly say that. And we are committed to go and compete from the technical standpoint with whoever is going to be there. I mean we are very, very confident on the value of our technology. This is confirmed by Airbus and by also other OEMs. So we are very, very strong -- we have a very strong foundation from the technology standpoint. I mean our challenge is not the technology. Our challenge is that we are developing this technology into very complex road maps, okay? So that's the biggest challenge that we currently have.

We can't comment on who Airbus is working with in terms of other titanium partners. But what we do know is currently, we're the baseline in the market, right? We enjoy a lead time. We enjoy a control over our specification that we have developed for our process. So nobody else owns our process. We have our process. We have our specification that comes out of our process. So -- and our specification meets forging equivalent to current forging requirements. So it's a very high bar that we've established and we continue to enjoy that position with Airbus. And if you look at Airbus' road map that they put out last year in their presentation, we are part of that road map, and that's where it starts.

Yes. The other thing I want to add is that this is expanding also to other lead OEMs in Europe and North America. So we don't stop at Airbus. There are a number of very important OEMs in aerostructures and in engines that we are working with at the same level as Airbus. So we are diversifying our developments also outside of Airbus. So it's not going to be just Airbus. It's going to be Airbus and a few other very important large OEMs.

Then we'll take one final question. Has Airbus provided an expected time line for the Wave 3 order? Does NTI have deliverables or key milestones they need to reach before the third order is granted?

So okay, that's exactly the challenge that we have. I mean Airbus doesn't work that way. They don't communicate that way. We are -- there are clear milestones that we are working towards. Some, we have to deliver. Some, Airbus has to deliver. So we'll see in the coming weeks how that is going to develop. I want to say that we have -- and this is also different from the past. We have a very structured project charter with key milestones that are agreed and shared with the customer, with Airbus and the other large OEMs. That's a very different way of working. So agreeing with customers on key targets and related milestones is a different way of working. And this is going to provide us with a little bit more clarity on how this is going to develop. But it's fair to say that Airbus unfortunately, doesn't work that way. They don't commit to certain road maps and this also is what is forcing us to retract our revenue forecast.

Thank you. And by that, we will conclude today's Q&A session. Thank you to everyone for your questions and for joining us this morning. And thank you for Fabrizio and Ashar. As mentioned in the operational update, the company will host a more detailed presentation and webcast on March 4 in Oslo. For those wishing to attend virtually or in person, please refer to the details in the provided release. Thank you all, and have a good day.

Thank you, Joachim.

Thank you, everybody.

Thank you, everybody.

Bye-bye.