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

Earnings webcast and conference call. I will now turn over the call to today's host. Please go ahead.

Well, thank you, moderator. Thank you, Lynn. Well, thank you all for being here. I'm here together. My name is Floris Jan Kuipers. I'm the CEO of Nex Filtration, and I'm here together with my 2 fellow Board members, Michel Staten and Jan Ss. We will take you through the first half year results of 2026, and we'll go through slide by slide. And at the end, we'll do some Q&A. Before I go into the slide that you see on the screen, I want to emphasize that we have a pretty good first half year of 2026 for EX Filtration. As you know, we have a clear execution path to growth and breakeven, and we try to optimize our speed. We do that through creating maximum focus on our key customers and OEMs and with clear propositions and with disciplined management in sales and across the company. We see our revenue has grown in the first half year by 19%. If you look at it from a last 12-month basis, it's plus 31%. And notably, we have a record order intake of 61% higher than the same period last year and a record order book, which is 5x larger than at this moment last year. We see also that our margin remains very strong at 59%, reflecting our disciplined commercial focus and leading technology position. If you look at our commercial approach, as I said, it's about focus and discipline. We see tipping points in each region across each region, which is different in each region, but it's happening in each region at the right time and for the right value proposition, OEM combination. We see that reuse is very strong, but also drinking water. One notable milestone is in Europe in stressed, where we won a large and highly competitive tender where we are chosen as the partner of choice for drinking water in Sweden at large scale, and we're very proud of that. It's the largest order in our history. But notably also and later on, Michel will talk about it, we saw Heineken ordering for their breweries, Heineken. We saw in Middle East good orders from Ele, for instance, in Turkey growing fast. and Gradient, a well-known water company, is also ordering from our world-class membranes. The OEM funnel, we see strong progress, both from the number of OEMs that we are in contact with is 193, but also the healthy development in that funnel from early technology vetting into first orders and repeat orders. We progress on our path towards EBITDA breakeven. We are very disciplined in how we manage our assets and cost base and bring that also in line with our revenue curve. Our cash position at the end of 30 June this year is EUR 18.4 million. The large CapEx is behind us as we have now fully invested in our new factory, and we are well positioned to further execute on our strategy with maximum speed. If you then go to the next slide, you see the revenue step-up, which is on the left side showing 19% year-on-year growth in the first half year. If you compare it last 12 months, ending 30 June and comparing that with the last 12 months ending 30 June 2025, you see 31% growth. On the right side, you see the record order intake, record order book. So that's very positive. So underlying, although the 19% growth in the first half year is something that we need to try to compensate for with even more growth in H2. Underlying, we see very, very positive metrics. As you know, we have a competitive offering, not only in our flagship nanofiltration product, which is over 90x installation sold and over 40 or 50 in commissioning. So very positive. We win against competitors and the market, our OEMs, our engineering consultants and utilities and industries know that it works. It's effective, it's simple. and it's proven. Also, we are competitive in ultrafiltration, where we have one-on-one replacements with our key competitors, the names that you know, Pentair, DuPont, Paul, et cetera, Toray. So we have a broad portfolio. We launched 65 square meters, 80 square meter, and we see fast adoption in our distributor and OEM base. In microfiltration, our food and beverage sector, we saw also diversification with new orders from Heineken and of course, customers with other major brewers that are also ordering with us. If you now zoom out, you see diversification in geography. So in all geographies, we see very positive momentum also with multiple OEMs and with all these PMCs, so drinking water, but also reuse for data centers, for food, for irrigation and also contaminants removal. I just want to give a bit more color. For instance, last week, I was in the Middle East with our team. All of our teams have regional off-sites with customers involved. I visited 1 or 2 of those. I was in Istanbul in Turkey, there's huge momentum. I see that the clarity in which our customers understand our value proposition in nanofiltration, but also see our broad ultrafiltration and microfiltration offering see us as a real membrane technology platform. So we are a very viable, mature, broad membrane technology platform, which is future proof, no PFA is in there. And also, they see our service offering. We have customer intimacy. We are close to customers, and that gives a lot of comfort. One thing to light out, for instance, in Pakistan, in 70 villages, we make drinking water with aniltrltrafiltration. So that is also from a purpose and ESG point of view, amazingly positive and motivational. If you go to the next slide, slide 4, shortly, you see the breakdown in terms of our revenue base. Again, Asia is growing very strong, not only in India, but also in Southeast Asia, in Japan and elsewhere. So that's more than half of our revenue. We see Europe with a decent chunk, 27%, not only in Sweden, but also in Belgium, in France, in Spain, in Italy, in the U.K. and across the continent. In North America, which includes Mexico, it is 5%, but we see very positive early signs also in the U.S. for us, a good recovery and then Rest of World is also. So I think we continue to look at sales performance from our salespeople to give them the right focus, but also in terms of sales performance, getting new people on board if that is needed. And sometimes also that means changing people that are currently in the company. I will hand it over to Michel.

Thank you, Florian. And not only did we build a strong commercial team, we also sharpened us in and external communication along 4 clear PMCs. PMCs with the highest impact, where we show clear advantages and differentiation in terms of better economics, lower chemical consumption and lower energy consumption. And this results in a clear messaging to our customers and focuses our team on those opportunities with the highest chances of success. And I will quickly run you through these PMCs. Number one, drinking water from surface water. We see clear growth potential since most surface waters are becoming more challenging to treat and drinking water standards are getting higher at the same time. And the second, wastewater reuse for high-quality water with growing demand for high-quality water globally, being it cooling water for energy production or data centers, food and beverage production or drinking water, we believe that wastewater reuse is one of the most important trends in the water market and will be an important growth driver for NH filtration. And number three is removing -- is about removing pollutants from industrial wastewater. And while these industrial wastewaters are becoming more and more complex, discharge limits are becoming stricter. And this requires robust, effective and efficient technologies and solutions. And we see our membranes increasingly becoming part of those solutions. And number four is all about clarifying beverages. While being a smaller market compared to the water treatment market, we see that our PFAS-free membrane chemistry offers a very interesting and often better alternative for existing products in the market. And after our commercial successes in beer and wine filtration, we are now exploring other applications such as pharma and protein recovery. And I'm very proud to announce that we have reached over 90 hollow fiber nanofiltration membrane projects worldwide, 9090. And please allow me to give some examples of where we are successfully implementing our unique technology. The world is facing different water challenges driven by climate change, demographics and economic developments, resulting in different needs when it comes to water treatment. Let me start with Americas. There, our success started with treating highly colored surface water in Canada. And then we progressed to industrial waters in the U.S. And now in Mexico, we are commissioning the Salo project, the largest hollow fiber nanofiltration-based indirect potable water reuse plant in the world. And looking forward, we expect increasing investments in the U.S. driven by PFAS regulations. And in Latin America, we want to capitalize on our successes in wastewater reuse. Moving to India and the Middle East. We see increasing traction driven by investments in high-quality water recycling for cooling wire, for data centers and energy production, but also in other industrial applications. And here, we see water as a service upcoming as an important trend, and that will accelerate investments in water treatment facilities. And as you already know, in Asia Pacific, we're already applying our nanofiltration membranes for many, many years, treating highly colored water. And in China and Asia, we see also many growth opportunities for wastewater reuse, driven by investments for industrial use, such as data centers and microelectronic production. And when we look at Europe, -- our recent win in Sweden is a clear example of how our commercial approach leads to concrete results. The city of Utterson has awarded the largest land filtration-based drinking water plant in the world, and this is a very important milestone. It demonstrates the shift towards next-generation drinking water treatment in Sweden with resilient solutions, lowering the need for water treatment chemicals with less energy while meeting stricter drinking water regulations. And it provides additional proof that our technology is getting widely accepted for drinking water applications. And also it proves our growth strategy with our OEM partners, where we work together with strong regional system integrators who can deliver large projects. And together with our strong entrepreneurial partners, we're proud to be part of the state-of-the-art solution in Sweden that will provide safe and affordable drinking water to the people of Iason. And now I will zoom in on our OEM partners with whom we are progressing towards sustainable and recurring business. You might remember this visualization from our CMD, in which we project a typical trajectory we follow together with our partners. Where we start on the left side in the technology selection phase together technology qualified for real-world application in the second phase, the first project realization, up to the installed base phase where we are striving together for repeat orders and recurring replacement business. And as you can see in the graph, we've increased the total number of OEM partners we are working with to 193. -- we were able to convert 6 additional OEMs to the installed base phase. For instance, prospective OEMs as applied membranes in North America and gradient in Malaysia, 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 the all-important future repeat business. And despite the fact that this tunnel reflects on our nanofiltration offerings only, I also want to mention that we're gaining traction with our competitive ultrafiltration and microfiltration membranes, with an important first sale of our brand-new 80 square meter ultrafiltration membrane product for to a greenfield project to the Turkish OEM E. And our first full-scale beer filtration project with Heineken. As you will remember, in these ultrafiltration and microfiltration markets, we benefit from shorter sales cycles with replacements in existing membrane systems. And we will remain our focus on broadening this customer base, further strengthening our business with customers while driving for more and larger projects. And as we all know, we need to do more to secure water supplies and treat our polluted waters globally. And with our technology, we enable robust and chemical-free solutions at a lower CO2 footprint compared with conventional solutions. With our UF and filtration water treatment membrane modules sold in the first half of 2026, we enabled the production of 371 billion liters of clean water while filtering out viruses, bacteria, plastics, pesticides, hormones, medical residues and even PFAS from polluted sources as rivers, lakes and wastewater stinks. And with the application of our membranes compared with traditional technologies, we are helping our customers save over 4,000 tons of CO2 by avoiding the use of 7.8 million kilograms of water treatment chemicals. And these are impact numbers that we are very proud of, and the numbers are very motivating for the whole team and who are working on driving these numbers up with great dedication.

Thank you, Michel. In the next 2 slides, I will take you through the financials of H1 2026. I will start with a summary of the profit and loss. In H1 2026, total revenue reached EUR 7.8 million, representing 19% growth compared with H1 2025. We achieved a record order intake, up by 61% year-on-year, and an order book 5x larger than 1 year ago. Gross margin of 59%, remaining strong and reflecting our leading technology position and disciplined commercial focus. We maintained operating expenses at last year's level while simultaneously growing the business, leading to a lower normalized EBITDA loss from EUR 7.2 million in H1 2025 to EUR 6.7 million in H1 2026. Total FTEs slightly increased to 156 at the end of June 2026 versus 154 at the end of June 2025. 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, thereby controlling our path towards breakeven. And now to the balance sheet. We are fully invested in our new factory with H1 2026 CapEx totaling EUR 1.2 million, which is 71% lower than H1 2025. Working capital amounted to EUR 18.2 million versus EUR 17.1 million at the end of June 2025. The increase is mainly due to higher receivables, partially offset by lower inventory levels and increased payables. Our cash position at the end of H1 2026 amounted to EUR 18.4 million compared to a cash position of EUR 38.3 million at the end of H1 2025. Being fully invested in our new factory, we are well positioned to execute our strategy and fund our growth ambitions. The last slide will be presented by Floris.

Thank you, Jan Fei. To reiterate and summarize our key priorities and outlook. We have 4 things that we mentioned here. We are continuing to build on the underlying commercial momentum, which is clearly visible. The building blocks for our company are in place. We have the strong foundation to support the growth in a broad and competitive portfolio of products, both in Nano, Ultra and microfiltration. Our production capacity is there, ready to scale, Capex behind us. And we have a strong global commercial organization with eagerness and hunting spirit to drive further order book growth and revenue growth. In that commercial focus, we have, as you know, since last year, our Capital Markets Day, a clear OEM funnel that we disciplined manage. We enhance the funnel and we make it faster to go through the stages. We have clearly defined strategic objectives and commercial milestones and act accordingly. Also, the flip side is that we have a disciplined path towards EBITDA breakeven, which we can view in the coming time. And also, we have a disciplined management of our asset and cost base. We are well positioned to execute our strategy and fund our planned growth, and we also have a clear multi-year on average 50% guidance on our revenue, and we are aligning our cost levels and our commercial rollout according to that. Now back to the moderator, Lynn, for Q&A.

[Operator Instructions] Our first question comes from Uma Tariq from ABN AMRO...

Yes. I hope I'm audible. Congratulations on the good set of results. I have a few sets of questions, if I may. Firstly, on the sales efforts for this year. I do see that you have put considerable effort on the sales side. Could you update us on that front on different geographies? My second question would be about the replacement cycle. While I do understand that maybe it would be early, but do you see, to some extent, a replacement cycle kicking in from, let's say, the older installed base that you still have? Those would be my first 2 questions.

Yes. Thank you, Usama. So Filsan here. So the positive thing is what we see in our commercial execution is that we see growth across the various regions, across the various PMCs and product groups and also across multiple OEMs and distributors. I always summarize that we have more ages in more baskets. So in more OEMs and distributors, we are talking to more, we're selling to more. And per distributor and OEM, we see more projects. So -- and that is very positive. So it doesn't hinge on 1 or 2 or 10 big orders. No, we have a broad scope. Of course, having said that, we know that the macroeconomic environment around this is volatile. So it's not a walk in the park everywhere in terms of timing of investments and those types of things. For instance, in the Middle East, there's a war there. You can argue that it has a bit of a slowdown in the past. We see it picking up again. But there, of course, you face that problem. Also across other geographies, some people are hesitant to make large investments. I think we are countering that and showing our underlying order book growth and also our revenue growth. because of the very big trends in water reuse and having real efficient treatment for clean drinking water. So I think that's why we see a large drinking water order, but also multiple reuse activities in Europe. The data center boom is obvious. You read about it every day in the newspaper. We see people protesting against water usage in data center areas. That plays to our technology clearly. Our nanofiltration is perfectly suited to help there with efficient reuse, same for U.S., and we have multiple conversations with AAA OEMs for data center and AI-related great water reuse, but also for agriculture and drought. So to answer your question about regions, we see in all region's growth. But particularly in Asia around AI and data centers, there's a very positive tailwind. And also in Europe in terms of not only in Sweden, but also in France, Belgium, Spain, they understand that our product works very well. So there's also a good tailwind. So that is question one. Then question 2 is about replacement cycles. Now I do think that, of course, for all of our products, there are replacement cycles. You have, we're doing that, and we're replacing competitive products. Also for MF, we're replacing competitive products because they see our AAA quality and competitive pricing better than competitors. So that's very positive. I guess you mean nanofiltration, and that main point is roughly, let's say, a replacement cycle for nanofiltration depending on the water input is around 5 years. So yes, the first replacements are kicking in indeed because already 6 years ago or 7 years ago, we were making water in some countries. So yes, the replacement cycle is also for nanofiltration step-by-step kicking in.

Very grateful. And if I can just squeeze in one extra question, then I'll go back into the queue. It would be the outlook for H2 and next year. So the order book is 5x higher than H1 2025. Could you maybe provide some color how much it for 2026 or 2027 is, that would be really great.

Yes. So good question. Thank you so much. So we have a multiyear guidance of on average of 50% growth. That can mean a year 60%, it can mean a year 30%. We all know the tax and what that means. We are eager to drive growth every year. We are also cognizant of the fact that H2 for this year needs to be a higher growth than the 19% that we saw in H1. The positive underlying signs are there, the order book, the order intake, 61% higher than last year, but we fight every day to make this a reality. So every day, all of our salespeople from around the world fight in July, August, September, October, November, December to bring our growth in that healthy space of that multi-year guided tour, which I reiterated. I do think that, as you can see, that the order book is there, the size of the order book now it's about pulling things as much as we can into '27 and even into Q4 '26. So -- and I think the better position that we are in now, we have a larger order book. We have a higher order intake makes that a little bit easier than, for instance, last year at this time, where we have the same dynamism of trying to pull orders of Q1 into Q4. So whereas it's not easy, we fight for it every day, and we're confident that we can make it happen. It requires, of course, also some of those discussions with our OEMs and customers to materialize fast also in terms of revenue delivery, so shipping out of our warehouse. I hope it answers your question.

Our next question is from Chase Cohen from Vem. I hope you can hear me. Just a few questions from my side, and I'll take them one by one, if that's all right. Starting with the North American segment. So there was, I think, a bit of a slowdown in terms of sales there. And I'm curious, is that sort of tariff related? Is that based on just lumpy projects? Or is there something else that I'm missing?

Yes. Thank you, Chase. It's more about the lumpiness of the projects. So the big project in Mexico, we talked about that was last year. So that's the lumpiness. And generally speaking, the traction and the dynamics in the North American market, we see is very positive with multiple pilot trajectories for drink water projects going on for working towards bigger projects -- so generally speaking, we're very positive on the North American market. The lumpiness indeed.

And maybe to add on Nels very good. So we see our team that has been reinvigorated with 2 new salespeople. We're also recruiting for technical salesperson is that we see also there are multiple discussions for really good medium-sized demo projects that are tied to full skills. And if I look at the further 2 years ago, we see more healthy interactions with the OEMs, the first orders coming in. Some of them have been reported. And hopefully, in the coming months, we can also report the new orders. But it's looking underlying decently positive.

Okay. Yes, that's exactly what I was trying to get a grasp on. Okay. Then I'm just wondering also on the order book and the order intake. So I recognize that you don't at least I couldn't find it as sort of providing a hard or absolute number for order book or order intake. Is that something that you'd be willing to share or willing to potentially report at some point? Just to get a better grasp on sort of how many years potentially that covers or sort of the visibility you have within that large order book?

Yes. We make very -- as you can understand, very cognizant choices on what we report on every half year. And I think this type of qualitative or semi-quantitative statements on the order book and order intake is something that we could consider to bring out during those moments. No guarantee, by the way, but I do think it's interesting that we already say something qualitatively or slightly quantitatively about the order intake and the order book as any industrial technology company normally does next to revenue numbers. But we're cognizant also of the fact that we try to do that every half year, but no guarantees.

No, it's very helpful having it Great. Final question for me, and then I'll jump back in queue. Could you talk a little bit about the growth between the different technologies, so the nanofiltration, microfiltration and ultrafiltration, are they all -- did they all contribute to the growth in the first half? I presume that perhaps the gross margin came down a little bit year-over-year on mixed effects. But can you provide a bit of a commentary around, I guess, the growth rates within those 3 different technologies?

In terms of the importance of the product portfolio, at this stage, let's say, all our 3 product lines are important, let's say, for the growth in the upcoming years in the medium term, what we explained as well in previous calls. And of course, ultimately...

I think I cut it out. Please go ahead.

Sorry, I said all 3 product lines are currently important for us. And you see across all those 3 product lines that we are growing and that we are healthy margins. Of course, for the longer term, let's say, the growth engine for NX is the nanofiltration. But currently, let's say, if you look at the portfolio, then they are equally important for us at this stage.

And we see healthy growth across all 3 product groups.

The next question is from Christoph Samoy from KBC Securities.