Earnings call transcript: NEL faces revenue decline in Q2 2025

NEL reported a significant 48% year-over-year revenue decline and negative EBITDA in Q2 2025, primarily due to reduced alkaline segment activity and project delays. Despite a cautious short-term outlook driven by delayed Final Investment Decisions, the company maintains a strong cash position and is aggressively pursuing cost reductions and advanced technology development, including next-generation alkaline and PEM systems designed to substantially lower hydrogen production costs. Management remains confident in the long-term market potential, bolstered by clearer US tax credit policies and strategic partnerships, aiming for competitive $3-$4/kg hydrogen costs.

Analysis

NEL ASA is navigating a significant industry downturn, as evidenced by its Q2 2025 results which showed a 48% year-over-year revenue decline to NOK 174 million and a negative EBITDA of NOK 86 million. This underperformance is directly attributed to a slowdown in its alkaline segment, contract cancellations, and a market-wide postponement of Final Investment Decisions (FIDs), reflected in a sharp drop in order intake to NOK 71 million. Management has adopted a cautious short-term outlook, acknowledging these delays. However, the company's strategic response is centered on leveraging its strong liquidity position, with a cash balance of NOK 1.9 billion and a significantly reduced quarterly cash burn rate of approximately NOK 120 million. This financial cushion is funding an aggressive technology pivot aimed at lowering the levelized cost of hydrogen. Key initiatives include a next-generation pressurized alkaline system targeting a 40-60% system CapEx reduction and a next-generation PEM system, developed with General Motors, aiming for a 70% stack CapEx reduction. While near-term revenue visibility is low, the long-term thesis is bolstered by clearer US 45V tax credit regulations and a focus on developing market-leading technology to capture demand when investment cycles recover.

Key Decisions for Investors

• Investors should view NEL as a long-term technology play where the investment case hinges on future innovation rather than current financial performance, given the severe revenue contraction and cautious near-term guidance.
• Monitor execution on key technology milestones, particularly the validation of the new pressurized alkaline prototype in Q3 2025 and the subsequent commercial launch, as these are critical to validating the company's long-term strategy.
• The company's NOK 1.9 billion cash balance and reduced cash burn are paramount; any significant increase in burn rate without a corresponding rise in order intake or a tangible acceleration in FIDs would constitute a major red flag.
• While management is optimistic, the timing of a market recovery remains uncertain, so it is prudent to watch for broader industry signals such as an uptick in FIDs or specific large-scale orders before committing significant new capital.