Morten Holum: Thank you, Mathias, and good morning, everyone. Thanks for tuning in to our webcast this morning. Key developments in the second quarter. Number 1, revenue remained broadly stable compared to last quarter. Number 2, cost base has been substantially reduced. The annualized cost base in Q3 is around 50% lower than in 2024, which shows that the targeted cost cuts have been delivered. Finally, number 3, the order book visibility for 2027 has improved and is now more or less in line with where we were at this point last year. Let us look at it in a bit more detail. Starting with revenue on the left. Revenue in the third quarter was NOK 150 million. We had a positive working capital true-up of NOK 7 million related to the US divestment.
Morten Holum: Excluding that, underlying revenue in Q3 was NOK 143 million, which is down 20% year over year on a comparable basis. We had expected higher revenue in Q3, but had some deliveries pushed into Q4, partly related to customer scheduling and partly related to supply chain. EBITDA on the right was -NOK 83 million in Q3, compared to -NOK 116 million in Q3 last year. This is somewhat better than last year, despite 20% lower revenue, which is mainly driven by the substantial reduction in fixed cost. Looking at revenue composition, the revenue mix shifted a bit in the third quarter. Largest revenue share in Q3 was hydrogen infrastructure with almost 30% of the total.
Morten Holum: This is still our largest product area, but we had significantly higher share of revenue coming from battery mobility in Q3 this year, 24% of total revenue up from 7% in Q3 last year. The year over year revenue bridge is putting things on a like for like basis by excluding the effects of the divested US business. With that exclusion, revenue in Q3 was 20% lower than last year. Hydrogen infrastructure down 45%, which is a pure volume effect, and hydrogen mobility was also down by 44%, where lower volume in transit bus was only partly offset by higher volume in rail applications. We delivered the storage systems to Stadler's hydrogen train in California now in Q3. On the positive side, we had strong revenue growth in battery mobility following deliveries of eight vehicles to Hino in Q3, and we expect activity to remain high also in Q4.
Morten Holum: We have truck deliveries to Hino and deliveries of hydrogen storage systems and battery systems to Toyota North America. In other applications, there were limited changes, a bit lower activity from industrial gas and a bit higher revenue from maritime. The order book remains broadly stable from last quarter, but the visibility for 2027 has improved. Hydrogen infrastructure accounts for the largest share of the order book, 55%, while hydrogen mobility accounts for 17%. We have good visibility for battery mobility for the remainder of 2026, but limited visibility going into 2027. With an increased number of trucks now in customer demo programs and good feedback from customers, we are working on converting that interest into firm orders. As of Q3 2026, around 58% of the order book is for execution this year, which means we are going to have a busy quarter now in Q4.
Morten Holum: We are also encouraged by the strong order intake for hydrogen distribution in the quarter. As you can see on the right-hand side, 40% of the order book is for delivery in 2027, compared to 15% in Q2. The order book for next year increased by almost 3x in the quarter. The current order book will be executed on a lower cost base than the comparable quarters in 2025. The levels we are at now is not too far away from supporting positive EBITDA operations. With good execution, the anticipated revenue in Q4 provides an opportunity to approach underlying EBITDA breakeven at group level for the first time. We have made substantial changes to the size and the cost of our operation since the beginning of 2025. Most of the intended structural measures are now complete.
Morten Holum: The annualized cost base in Q3 has been cut by approximately 50% compared to 2024. This has been done partly by reducing the group's workforce by around 50%, partly by cutting other OPEX spend, and partly by undertaking structural measures, such as the US business divestment and reducing our exposure to the China JV. These initiatives will enable us to reach EBITDA and cash breakeven at significantly lower revenue. We have recalibrated the company operations to match the current market conditions. Earlier this month, we launched HyCarrier, our next-generation distribution system for multimodal hydrogen transportation. HyCarrier builds on a strong legacy of more than 650 hydrogen distribution modules already in the field and several decades of experience with safe and secure transportation of compressed gases.
Morten Holum: The HyCarrier marks an important step in future-proofing Hexagon Purus' hydrogen distribution offering, and we look forward to start delivering this new module to our customers. The first units are planned to be shipped in April next year. HyCarrier features a modular setup with optimized cylinder dimensions and system design that allows for higher payload with approximately 40% less cylinders on board compared to the existing distribution system. It is a higher payload system with capacity up to 1.3 tons of hydrogen at 380 bar working pressure, and that reduces the total cost of ownership for our customers. Compared to the existing system, the HyCarrier allows for lower material input without compromising on system capabilities and safety level. The new cylinder design also increases the periodic inspection interval from 5 to 10 years, which reduces operational downtime and inspection costs over the system lifetime.
Morten Holum: The next-gen module also features a modular design with standardized components to simplify repairs and spare parts supply. Finally, it is designed with integrated safety features, building on our in-field experience from more than 650 units that we have manufactured and put into the field. This confirms our leadership position in this space and further strengthens our competitiveness. Those were the main points for Q3. Overall, I think we had expected a higher revenue quarter, but with some deliveries pushed beyond the quarter end, we expect to make that up now in Q4, which will be a very busy quarter. With that, I will hand it over to our CFO to go through the financials. Salman?
Salman Alam: Thank you. Thank you, Morten, and good morning, everyone. Taking a step back, Q3 was broadly stable in terms of activity compared with Q2 and somewhat below what we had planned for the reasons Morten just described. Revenue amounted to NOK 250 million, with somewhat of a different mix than in recent quarters. There was a lower activity in hydrogen infrastructure and transit bus, but that was to some extent offset by higher activity in battery mobility. We ended the quarter with NOK 220 million in cash and an order backlog of NOK 508 million. As Morten touched on as well, the total backlog is broadly unchanged from Q2, but its composition has shifted. The portion of delivery in 2027 increased significantly during the quarter.
Salman Alam: From a financial perspective, the main feature of the quarter is the lower cost base, which is now more clearly visible in the P&L, which we will look at in a moment. Moving on to the P&L, revenue was down 40% compared to the same quarter last year, but that comparison quarter still includes the divested US business in the China JV, which was deconsolidated in Q1 of this year. Together, they contributed NOK 74 million of revenue in Q3 last year. Therefore, excluding that effect and the NOK 7 million working capital true-up from the US sale recognized this quarter, the like-for-like decline was 20%. The underlying picture is somewhat different than in recent quarters. Hydrogen infrastructure and transit bus were lower, while battery mobility and rail applications were higher as we made customer deliveries in the quarter.
Salman Alam: Year to date, reported revenue is NOK 701 million, up 4%, and that figure includes about NOK 141 million of extraordinary gain from the two transactions that we announced in Q1. On a like-for-like basis, excluding those gains and divested revenue, year to date revenue is NOK 506 million versus NOK 515 million last year. So broadly stable revenue development year over year to date, but delivered on a considerably smaller structural footprint. On costs, cost of materials was NOK 84 million or 56% of revenue, which is unchanged from Q2 of this year and up from 47% last year. The cost of materials ratio this quarter was impacted by high materials cost on the Hino truck deliveries in the BVI segment, which was mainly built from higher cost legacy inventory and by a NOK 5 million inventory write-down that we did in the HMI segment.
Salman Alam: Payroll was NOK 90 million against NOK 187 million last year and NOK 109 million underlying in Q2. This is the first quarter that mostly reflects the payroll effect of the headcount reductions that we have implemented to date. Other operating expenses were NOK 59 million against NOK 62 million last year and includes approximately NOK 6 million in strategic and consultancy costs related to the ongoing restructuring. Total operating expenses therefore ended at NOK 233 million against NOK 368 million last year, which is a reduction of just over a third. EBITDA was -NOK 83 million against -NOK 116 million last year, which is an improvement of NOK 33 million despite around NOK 100 million of less revenue and an improvement from the -NOK 102 million in Q2.
Salman Alam: The improvement in Q3 itself was held back by some volumes that slipped into Q4, the mix effects that I just described and also restructuring related costs. Year to date, EBITDA improved from -NOK 519 million last year to -NOK 184 million this year. When we strip out the extraordinary gain, the underlying improvement is roughly NOK 200 million or close to 40%. That is mainly the cost program then flowing through the numbers. Moving below EBITDA, depreciation was NOK 40 million in the quarter, down from NOK 68 million, reflecting the lower asset base following the divestments that we completed earlier this year. The share of loss from associates was NOK 6 million, which represents our minority interest in the China JV. Finance income was NOK 32 million, of which around NOK 30 million is currency effects and NOK 2 million is interest on deposits.
Salman Alam: Finance costs were NOK 144 million, where a large majority is non-cash. About NOK 74 million is payment in kind interest on the two convertible bonds and around NOK 8 million is interest on lease liabilities and other debt. The remaining NOK 62 million is currency effects. Tax was immaterial as the group is not in a taxable position and net loss for the quarter was NOK 242 million against NOK 365 million in the same period last year. Moving on to the segments. As a reminder, HMI is our European hydrogen cylinder and systems business produced out of Kassel and Weeze in Germany, together with our industrial gas activity. With the reductions implemented in Kassel and Weeze earlier in the year, now mostly reflected in the numbers, the segment's cost base is more aligned with the demand picture we are currently seeing, and we saw periods of profitable operation at the Kassel facility during the quarter.
Salman Alam: HMI revenue was NOK 104 million in the quarter, down 55% as reported. Adjusting for divested US business, which contributed NOK 65 million in the comparison quarter, revenue declined 38% year over year. Hydrogen infrastructure delivered NOK 41 million of revenue against NOK 75 million last year on lower hydrogen distribution volumes this quarter. A substantial volume of distribution modules is now scheduled for delivery in the latter part of Q4, especially in November and December. Hydrogen mobility was NOK 32 million against NOK 94 million last year, with the prior year figure including the US business. Transit bus accounted for NOK 19 million against NOK 92 million last year, or NOK 57 million when excluding the divested business.
Salman Alam: This is consistent with the muted expectations for bus that we have communicated throughout the year, and it is broadly in line with expectations. Rail applications contributed NOK 11 million and industrial gas came in at NOK 27 million, which is down 19% year over year. EBITDA was -NOK 34 million against -NOK 47 million last year. Year to date, the underlying improvement in EBITDA is cost driven. The run rate effect of the workforce reductions in Kassel and Weeze is now largely in the numbers, and the lower cost base and improved productivity supported periods of profitable operation at the Kassel facility during the quarter.
Salman Alam: Year to date, the underlying improvement in EBITDA is cost driven, and the run rate effect of the workforce reductions in Kassel and Weeze is now largely in the numbers. Moving on to the next page on BVI. This is then our battery systems business in Kelowna and the US in Dallas. The main customer here for this segment is Hino. In the quarter, we mainly saw delivery of battery electric trucks to Hino. The operational focus for this segment remains the same as last quarter, executing on the truck program and the hydrogen and battery systems deliveries to Toyota within the smaller organization established through the restructuring earlier this year.
Salman Alam: Looking at the financials, BVI revenue was NOK 35 million, which is up significantly compared to last year. The quarter comprised delivery of eight battery electric trucks to Hino, compared with one truck in the same quarter last year, together with sublease income from the Dallas facility. Some hydrogen and battery system deliveries to Toyota and truck deliveries to Hino shifted from Q3 to Q4, which weighed on revenue in the quarter and adds to the volume scheduled for delivery towards year end. EBITDA was -NOK 28 million against -NOK 30 million last year, and -NOK 75 million year to date against -NOK 115 million last year. The higher revenue did not translate into improved profitability in the quarter as the trucks delivered carried high materials cost from legacy inventory, and we needed additional temporary labor to support truck builds in the quarter.
Salman Alam: Executing the substantial Q4 delivery schedule while controlling production costs and cash requirements is the most important operational item for the BVI segment in the remainder of the year. Moving on to the balance sheet. Total assets ended the quarter at NOK 2.6 billion, down from NOK 2.8 billion at the end of Q2, which primarily reflects the net loss for the period and a working capital release. Property, plant, and equipment was NOK 589 million, broadly stable on normal depreciation and minimal additions. Inventory was NOK 360 million, which is down NOK 22 million as we continue to convert inventory into deliveries. Trade receivables were NOK 198 million, up NOK 18 million, mainly reflecting the higher revenue in BVI in the quarter, and cash ended at NOK 220 million.
Salman Alam: On the other side of the balance sheet, non-current interest-bearing debts stood at NOK 2 billion, primarily the debt component of the two convertible bonds, which continues to grow mechanically with the payment in kind interest accrual. Current liabilities increased to NOK 409 million from NOK 383 million, driven by higher trade payables and by contract liabilities, which is mainly customer prepayments. Total equity was -NOK 224 million at quarter end against NOK 41 million at the end of Q2 and NOK 1.1 billion a year ago. The development reflects the loss for the period, including the accrued interest on the convertible bonds, and the group now is in a negative consolidated equity position. We are in discussions with the company stakeholders on a financial restructuring, including measures relating to the two outstanding convertible bonds, with the objective of reducing the debt burden and restoring positive equity.
Salman Alam: On liquidity, the measures taken over the past 2 years have substantially reduced our funding requirements. On current forecasts, the group has sufficient liquidity to meet its obligations for at least the next 12 months. Those forecasts are obviously sensitive to volume, delivery, timing, margins, customer payments, and order intake, but that's the current assessment. Net cash flow was -NOK 88 million in the quarter, taking cash to NOK 220 million. Operating cash flow was NOK 67 million and consists of the operating loss in the quarter, partly offset by a NOK 64 million working capital release.
Salman Alam: Cash flow from investing was +NOK 9 million, where CapEx and capitalized development together was around NOK 4 million, which continues to be deliberately restrained. We received NOK 10 million from escrow release and working capital true-up related to the US divestiture from earlier this year. Financing and FX absorbed NOK 30 million, which is lease payments of NOK 18 million together with a negative currency effect on cash of NOK 11 million. With that, I'll hand the word back to Morten for the outlook.
Morten Holum: Thank you, Salman. Let's move on to the outlook then and what we expect for the time ahead. There are 4 key messages I'd like to give related to the outlook. The first one, the overall market situation has not changed significantly during the quarter. We've seen some positive signals recently, but the hydrogen market remains demanding. Order visibility continues to be a challenge for the industry, but recent data points on growth in clean hydrogen production and investments into a heavy-duty transportation ecosystem in parts of Europe are encouraging. At the same time, high costs, infrastructure constraints, and policy uncertainty continue to weigh on the speed of market development. Number 2, we have materially reduced our cost base. Alongside these cuts, management and the board are working intensively on restructuring the company's balance sheet.
Morten Holum: We ended Q3 with negative consolidated equity, and the current balance sheet position is not sustainable. We are in dialogue with key stakeholders on solutions to address the company's debt burden and establish a sustainable capital structure. Number 3, we enter Q4 with most of the expected revenue covered by firm orders and a substantially lower cost base. The anticipated volumes provide an opportunity to approach underlying EBITDA breakeven at group level for the first time. Although this, of course, remains dependent on completing a demanding delivery schedule at expected margins. Hydrogen distribution deliveries are concentrated in Q4, leaving limited room to absorb delays before year-end. The last, number 4, while we have done most of the hard work on costs, we now need to turn that into consistent breakeven performance and a balance sheet that supports the business.
Morten Holum: We will continuously assess the market conditions and adjust our operations, our cost base, and our strategic priorities as required. Our overall priorities remain unchanged. One is revenue, executing the business that we have in our order book for Q4, and build a stronger order book for 2027. On costs and liquidity, we have come a long way on costs, and that will remain a core focus topic also going forward. We continue to manage cash carefully to ensure that we maintain sufficient liquidity. On our current plan, we expect to have sufficient liquidity coverage for at least the next 12 months ahead. Finally, the balance sheet. We are now, as I said, working actively with stakeholders to address the convertible debt and restructuring the balance sheet to establish a stronger financial position for the years ahead.
Morten Holum: We are actively and diligently working our way through what is a quite demanding period. We remain focused on what we can control ourselves, managing costs and our internal operation. We are driving the financial restructuring process forward together with stakeholders, with the aim to improve the capital structure and the balance sheet. That concludes our presentation for today, and we will now open it up for Q&A. Mathias?
Mathias Meidell: Yes. Thank you, Morten and Salman. Let us start with the first question to you, Morten. HyCarrier's first customer delivery is planned for April 2027. Do you already have firm customer orders or binding commitments for the new system? What revenue contribution could it realistically make in 2027?
Morten Holum: We already have orders. Part of the order book for 2027 is also containing the HyCarrier solution, and we have a launch customer for that and other customers as well. Gradually over time, we expect more and more volume to translate over to the new solution, particularly for those customers that require the payload and have a lot of capacity that they need to move. Gradually we expect more and more volume to move over in that direction.
Mathias Meidell: Thank you. Another question for you as well, Morten. Can you confirm the current status of the Type 4 cylinder certification for the Chinese domestic market? What specific steps remain, and do you still expect approval by year-end 2026?
Morten Holum: I think we are about 80%, 90% of the process gone through. It might bleed into Q1, but we are very near the point now where we expect to have certification completed.
Mathias Meidell: Okay. This is for you as well, Morten. The 2027 order book has increased to approximately NOK 200 million. While the total order book has declined to NOK 508, how much additional firm order intake do you expect to secure for 2027, and when should we see recovery in revenue?
Morten Holum: Yeah. The position we are at now is roughly where we were last year. It is unusual for us to stand at the end of Q3 in one year and have coverage for all the next year, because the timeline from an order to when we actually have to execute and deliver is quite short. I think, as I said, we are roughly where we were last year. Of course, we are going to work intensively in the coming periods to gradually shore up and firm up more of the order book for 2027.
Mathias Meidell: Thank you. On that note, we can take a follow-up question on this topic for you, Salman. In the report, you state that the backlog for delivery next year is broadly comparable in terms of the following year backlog at the end of Q3 2025. However, looking at your reported order book at the end of Q3 2025 of NOK 974, 2026 accounted for 40%, or NOK 390. In the current Q3 2026 order book of NOK 508, 2027 accounts for 40%, or NOK 203. This suggests that the backlog for execution in the following year was nearly twice as large as the same point last year. A long one. Am I missing something here?
Salman Alam: Yeah, I think what the order book that is being referred to for last year includes the divested revenue related to the US business, which we announced earlier this year. On a like-for-like basis, if you exclude that order backlog, the backlog for execution next year is broadly similar to that of last year.
Mathias Meidell: Good. Thanks. Another question for you, Salman. What do you mean by an opportunity to approach underlying EBITDA breakeven at group level? What does approach mean in this sentence? What does underlying breakeven mean? What do you mean by group level? In other words, does it mean that you will report negative consolidated EBITDA as well in Q4, or less negative than Q3?
Salman Alam: I think it means that there is a real chance to approach underlying EBITDA breakeven as we stated in the report. What that means is that if you look at the underlying operations, there is a real possibility that we can get close to EBITDA breakeven. Whether we get fully there or not, that's I think implicitly in the way we state there is risk to that assumption. It can go both ways.
Mathias Meidell: Okay. Another one, this is for you, Salman, as well. You have a cost of NOK 6 million in strategic and consultancy costs related to the restructuring. Does this mean that you've engaged a financial advisor for the financial restructuring? If so, what timeline are you working on here?
Salman Alam: Yeah, I think as mentioned, the balance sheet restructuring is a key priority at this point in time. We're of course, supported by the appropriate advisors on that topic.
Mathias Meidell: Okay. Some questions coming in here. Okay. For you, Salman, with the cash down to NOK 220 million and operating cash flow of -NOK 67 million in Q3, how many months of liquidity do you currently have? Is additional capital needed before the convertible bonds mature?
Salman Alam: Yeah. As we stated in the report, on current estimates, we see that we have liquidity to meet our obligations for at least the next 12 months. I think that gives an indication for the cash runway, and that's the current estimate based on what we know today.
Mathias Meidell: Then another one for you, Salman. Are you comfortable with the carrying value of your balance sheet on the PPE side, on the asset side? When did you last do an impairment test?
Salman Alam: Yeah. This is a continuous consideration we have, and we're assessing the balance sheet values on a quarterly basis.
Mathias Meidell: Thank you. I'm just checking if there's any final questions coming in here. I think that concludes it. So thank you, Morten and Salman. This wraps up then the question we've had received from the audience today. On behalf of Hexagon Purus, I would like to thank you all for spending time with us this morning, and we look forward to seeing you again soon. Thank you very much from Oslo.
