NX Filtration N.V. (NXFIL) Earnings Call Transcript & Summary

Good morning, and welcome to the NX Filtration 2025 Full Year Results Webcast Call. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to the CEO, Floris Jan Cuypers, to begin today's conference. Thank you.

Thank you very much for your introduction, and welcome to our full year 2025 results webcast. In the call, we also have present my colleagues, CFO, Jan Fei Zwiers; and COO, Michiel Staatsen. We will present our key highlights, strategic progress and the full year 2025 financials. Now over to the highlights of full year 2025. Our total revenues for 2025 ended on EUR 14.1 million, which is a growth year-on-year of 28%. And in the second half of the year, we saw our year-on-year growth be 45%. Also in line with our strategic plan, we are working on our funnel of OEM partners, and we significantly improved that funnel. For our flagship hollow fiber nanofiltration product, we grew the OEM funnel with 20 OEMs during the year to a total of 180 OEMs, and we also saw OEMs progressing towards more advanced stages. Then our gross margin was ending at 59.1%, which is a continuous reflection of our strong technology position. On the flip side, we have been relentlessly working on our cost and CapEx sides. We lowered our operating expenses while in parallel growing the business, which resulted in a step-up in our normalized EBITDA from minus EUR 17.4 million in 2024 to minus EUR 13.8 million in 2025. Then our cash position ended the year at EUR 28.5 million because we have fully invested in our new factory and the large part of our CapEx is behind us, and we continue to expect our cash position to be sufficient to fund our growth ambitions into the future. Here, we also reiterate our medium-term objectives, which we stated is a revenue growth of, on average, 50% per year, sustained strong gross margins and realizing EBITDA breakeven operations. Then if we go into the revenue growth in the second half of 2025, we saw that the total revenues in the year were EUR 14.1 million, which is an increase of 28% year-on-year, also in line with what we have communicated end of year in the announcement there. Of course, we saw a relatively slow start of the year for the first half, 12% year-on-year growth, which was impacted by evolving lead times and the schedules of the projects of our OEMs and end customers. We did see significantly increase in the second half of the year with year-on-year revenue growth for the second half being 45% year-over-year. We see the growth both in our Clean Municipal Water segment as well as in Sustainable Industrial Water segment. We have also seen in our commercial team, yes, a clear enhanced focus with a fierce focus on filling the pipeline and also converting together with our OEM partners. This execution discipline leads also to give more clarity in our sales performance and more grip in how we steer our conversion across the various regions. We see also a nice split between the revenue of our sales of goods, where Asia plays a big role and also Europe and North America have a significant share in our sales. Also, we see multiple OEMs maturing and moving to repeat orders. I will now hand over to my colleague, Michiel.

Thank you, Floris Jan. And I will zoom in on our OEM partners with whom we are progressing towards smart, sustainable and recurring water treatment solutions with our breakthrough hollow fiber nanofiltration membranes for smart industrial applications in food and beverage or for cooling water or water recycling, but also for sustainable municipal drinking water and wastewater recycling applications. And you might recall the visualization on this slide from our CMD in which we project a typical trajectory we follow together with our OEM partners. But we start on the left side in the technology selection phase to get our technology qualified for real-world application in the first project realization phase up to the installed base, where we are striving together for repeat projects and recurring replacement business. And as you can see in the graph, not only did we increase the total number of OEM partners we are working with to 180, but also we were able to convert 8 additional OEMs into the installed base phase while also increasing the number of OEMs in the first project realization phase. And this means that we were able to broaden our base to drive our all-important future repeat business from. For instance, with respected OEMs such as Veolia in Europe and Ceramed in India. And despite the fact that this funnel reflects our nanofiltration offerings only, I also want to mention that we are gaining traction with our competitive ultrafiltration and microfiltration membranes, with important customers such as H2O Innovation in Canada and Wabag in India with large brewery groups, but also with large soft drink producers. And in these markets, we benefit from short cycle sales cycles with replacements in existing membrane systems. But we also see traction increasing in greenfield projects, both with our UF and MF membranes. And in 2026, we will maintain our focus on progressing with our customers further through the funnel, but also on further strengthening our base with our repeat customers while driving for larger projects simultaneously. And if we reflect on 2025, looking at our ESG impact, we now covered our sales numbers and trusted customer base, but what does it mean in terms of real impact? How were we able to help with challenges around water scarcity and water quality around the globe. With our UF and HFNF hollow fiber nanofiltration membrane treatment -- membrane modules sold, we enabled the production of 649 billion liters of clean water, filtering out viruses, bacteria, color, plastics, pesticides, hormones, medicine residues and even PFAS from polluted sources such as rivers, lakes and wastewater streams. And with the application of our hollow fiber nanofiltration membranes, instead of conventional membrane treatment technologies, we are helping our customers save over 6,000 tons of CO2 through avoiding 11.6 million kilograms of wastewater treatment chemicals. And these are impact numbers that we are at NX are very proud of. These numbers are very motivating for our whole team. We're working on driving these numbers up with great dedication. And on the right side of the slide, you do not only see where in the world this impact is being made, but also the number of full-scale HFNF hollow fiber nanofiltration projects that we have sold so far, which is over 80 meanwhile, underpinning our global reach and our market-leading position in this technology. And now to you, Jan Zwiers.

Thank you, Michiel. In the next 2 slides, I will take you through the financials of 2025. I will start with a summary of the profit and loss. In 2025, total revenues amounted to EUR 14.1 million, an increase of 28% compared to 2024 and in line with our expectations at the end of 2025. Strongest growth in Asia and North America, following our strategy to increasingly target our efforts towards sweet spot product market combinations. Revenues in the second half of 2025 grew by 45%. Gross margin remained strong with 59%, consistently reflecting our strong technology position. 2025 was a transition year in terms of cost and CapEx reduction. We completed the transfer of all our activities to our new factory and launched various efficiency programs. We also narrowly focused our research and design activities to further cement our broad and competitive product portfolio across all 3 product ranges. These efforts have already resulted in lower operating costs in 2025, while simultaneously growing the business with 28%. As a result, normalized EBITDA loss decreased by EUR 3.6 million from EUR 17.4 million in 2024 to EUR 13.8 million in 2025. Our FTEs slightly decreased to 158 at the end of 2025 versus 169 at the end of 2024. We benefit from efficiencies resulting from our larger scale operations and continue to proactively align our cost levels to the timing of realization of our growth, there with controlling our path towards breakeven operations. And now to the balance sheet. We are fully invested in our new factory with 2025 CapEx in total of EUR 6.4 million. This is mostly related to finalizing and consolidating our operations in our new factory. The CapEx is 75% lower than in 2024 and further reductions are expected for 2026. Working capital amounted to EUR 17.2 million versus EUR 14.5 million at the end of 2024. This increase was primarily driven by a reduction in payables. At the end of 2024, our payables were temporarily higher due to the outstanding CapEx invoices related to the construction of our new production plant. Our cash position at the end of 2025 amounted to EUR 28.5 million compared to a cash position of EUR 53.4 million at the end of 2024. We continue to expect our cash position to be sufficient to fund our growth ambition well into the future. And now I hand over to Floris Jan.

Thank you, Jan Zwiers. And that brings us to the last slide of this webcast, where we also make clear the levers underpinning our growth ambitions into the future and medium term. We continue to expect our cash position to be sufficient to fulfill that. If you look at the points on the outlook, we reiterate that our medium-term objective to grow our revenue on average with 50% per year, combined with -- in the medium term to sustain strong gross margins. Combined with the OpEx to further exploit operational efficiencies like we showed also during 2025 to bring us -- to align our cost levels to the timing of realizing our growth. Furthermore, in CapEx and working capital, we will see further reductions in CapEx we expect with limited maintenance cost in the coming years and further optimization of working capital, mostly related to inventory reductions. Based on above business plan and levers, we continue to expect our cash position to be sufficient to fund our growth ambitions well into the future. With our strong customer focus, disciplined execution, we will deliver on our objectives in the coming years. We see the underlying fundamentals are moving in our favor. And with our relentless focus, we are working very hard every day to provide clean water to industries and communities across the globe. Now I hand over to the moderator for Q&A.

[Operator Instructions] The first question comes from the line of Usama Tariq from ABN AMRO ODDO BHF.

Just a set of two small questions. Number one, could you comment on the dynamics of the growth per segment? So Sustainable Industrial Water was up 23%, whereas the Municipal Water was up 29%. So has there been some impact per segment? Or what has been the dynamics for the year? And my second question would be on inventory. So there was a write-down on inventory. Could you just comment was it a particular membranes? Or was it hollow nano fiber or was it ultrafiltration? Or if you could comment on it, that would be great.

Yes. Maybe let me -- Floris Jan here, let me comment on the segments. Well, what we see is that in both segments, so Municipal as well as Industrial, we see growth. As you know, we've also diversified our portfolio, which still the flagship, of course, being hollow fiber nanofiltration, in which we see very strong traction, but also our broadening of our portfolio in ultrafiltration with launches of new larger surface areas filtration up to 65 square meters and deals with [indiscernible], et cetera. We see also the industrial sector becoming more important. In that industrial sector, we serve ultrafiltration, but also in hollow fiber nanofiltration for industrial water. So both segments continue to be very important. And also one sidenote is that we see also our sales teams pitching for ever larger deals. So the average deal size is also increasing step-by-step as we keep investing in our new product launches and offering. But maybe I hand over to Jan Fei also for the second piece.

And for the second question about the write-down of some of our inventories. So as part of our accounting procedures, we, on a regular basis, review our inventory levels and the obsolescence of some of the inventories. So for one product, we had to write down those inventories. From a prudency perspective, we took a provision that product highly certain will no longer be sold in the future. That's the reason why we took an inventory provision for that. It's a specific product.

The next question comes from the line of Kristof Samoy from KBC Securities.

Sorry to be maybe the party pooper on this conference call, but I have trouble in gauging your outlook statements. So you reconfirm medium-term revenue growth of 50% on average. You reiterate that liquidity at NX Filtration is not an issue in the medium term. Why are you so certain about this? Why -- what gives you comfort in reiterating these statements given the fact that we've had, for profit warnings in the past? Is it because you have a solid backlog? Why don't you disclose it then? And if we say 50% revenue growth on average, I mean, we had roughly 25% last year. So are we heading for 75% growth this year then?

Well, thank you for that, Floris Jan here. So we indeed see underlying that the fundamentals are moving in the right direction. So we have sharpened our execution discipline on the commercial side, including changes there, but also in terms of operations and cash preservation. You saw our OpEx going down. And very selectively, we will continue to invest in CapEx, but at lower levels. This provides us with more grip and the ability to be more agile. Also, indeed, our guidance in terms of, on average, 50% annual growth. That path is sufficient with our current cash position to deliver that path towards breakeven EBITDA. Of course, on average, 50% can mean in a year, 60% or 70%, but also 35% or 40%. That's correct. But we do think that our grip and also measures that we are taking and can take provide us with a view through on that path.

Okay. But you understand that we might be a little bit critical with regards to these targets given the track record in guiding revenues in the past.

Yes, I understand your question. But I also think if you look at both the grip and the commercial side, the OE funnel progress, but what we see in terms of average deal sizes that are being pitched in combination with a turnaround in OpEx, which went down close to EUR 2 million last year, and we are continuously looking at how to bring that further down and also cash preservation in terms of CapEx and working capital management that on both sides of the medal, we are aggressively, yes, hunting it down. And with that track also for us, it's very clear also for this year that we are well funded. There's no emission needed, and that's for us, crystal clear.

The next question comes from the line of Christoph Greulich from Berenberg.

It's two from my side, please. The first one is coming back to the guidance revision back in December. Yes, could you provide a bit more color on what exactly has changed or came different compared to the initial expectations for H2? And then also the project, which had been affected by changes in phasing and time lines. And what's the latest status of that? Is there any update here that you could share? And then the second question would be with regard to the outlook on the OpEx side for 2026. Towards the end of your prepared statements, it sounded like you see some further scope or potential for operational efficiencies. So just wondering what we can expect on the cost base in this year. Should we kind of assume that to be more or less stable? Or do you think that could go further down?

Yes. Let me answer the first question and feel free to chip in. And then the second piece will be answered by Jan Fei. So if you look at in the 2025 year, all of us, the sales teams, but also the Board members are closely involved in our OEM contact directly. And that we saw in that sense, also shaping up the level of grip and transparency on the stages, all the factors of the proposals together with the OEMs to urge end customers. As you can imagine, we see step-by-step our average deal size increasing also the pitches and the proposals that we make. But at this level of revenue base, you can imagine that a proposal which involves EUR 1 million, if that moves from one half to the next half to the next year, it has a significant impact. Particularly in the first half, we saw that happening. And in the second half, we saw it pick up in line with our guidance. But indeed, our average size of deals is increasing a pitches, but it has a significant impact at this revenue size of our company.

To add to that, Floris Jan, the projects that were pushed over the end of the year, which we were aiming for to get in, in 2025, these projects were not lost. So very often, these projects, it's a matter of timing. So we have them on adviser to turn into real projects and orders in 2026. So that's an important addition, I think.

Indeed, and if you take the operating cost as well is that what we experienced is due to the transfer of all the activities to one location that we have significant benefits from a cost point of view. So that is one dimension. We have the -- due to the fact that we have that new facility also from an operations side, there are still some further efficiency gains, which we can realize. And if you take our size of our indirect organization, then in the years to come, we can benefit from that. We can leverage on that organization, and that means that we will require in the medium term, no significant increase in terms of operating expenses.

We currently have no questions coming through. [Operator Instructions] We seem to have no further questions. So I hand back over to you for closing remarks.

Yes. Thank you, moderator, and thank you for the interaction. Thank you for your participation. As stated, we are relentlessly focusing on our commercial execution as well as our adaptability in terms of cost and CapEx. We have a strong customer focus and disciplined execution, and we see good underlying fundamentals moving in our favor. So we continue to work with relentless focus to provide great technology solutions for clean water for industries and communities across the globe. Thank you so much, and we'll talk to you next time.

Thank you for joining today's call. You may now disconnect your lines.