Nel (Oslo:NEL) Q3 2026 Earnings Call

0:00 Good morning from Oslo and welcome to Nell's third quarter 2026 results presentation. My name is Håkon Voldahl, I am the CEO and I will be joined today by our CFO Kjell Christian Bjornsen to answer difficult questions that I don't want to answer and also Wilhelm Flinder, Head of Investor Relations, Communications, Marketing and everything else. We are ready to Start and let's get to it. We will cover the following agenda topics. We will skip the NEL in brief section. Most of you probably know NEL already. And if you don't, feel free to read through the first introduction slides.

0:46 We will have the Q3 highlights, commercial updates, technical updates, and of course, as always, end with a Q&A session. On to the highlights. In the third quarter of 2026, we delivered 112 million NOC in revenues. Our EBITDA ended at negative 93 million NOC. Our order intake was 253 million NOC, which gave an order backlog at the end of September of 1.314 billion NOC. Our cash balance at the end of the third quarter was close to 1.1 billion NOK.

1:32 In terms of the highlights, we had some nice order wins. We booked a 20 million US dollar order from Collins Aerospace for Navy stacks for the US, UK and French submarine programs. We entered a framework agreement with a supplier in the UK as an integrator of our PEM electrolyzers. We signed an MOU with Reinmetall for decentralized synthetic fuel production for defense applications. And subsequent to the third quarter, just a few days ago, we also booked a $12 million purchase order from a US technology company for three MC500 products.

2:22 Group Financials revenue decreased by 63% year on year due to a soft quarter in our alkaline division. PEM revenues, on the other hand, increased by 65% versus same quarter last year. EBITDA, 93 million knock negative, a reduction of 56 million knock compared to a rather strong Q3 last year. Cash flow from operations minus 200 and that gave a cash and cash equivalent of 1.078 billion NOX, still a solid cash position.

3:10 Alkaline financials, as I said, soft quarter revenue down 91% year on year on the back of few orders in the past two years. and that also means EBITDA came in at minus 41 million NOG despite cost reductions. We have secured some paid studies for large-scale projects and these activities and the launch of new pressurized alkaline technology will lay the foundation for future orders and hence higher revenue bookings. We have adjusted our cost base both in terms of variable costs in our production and fixed cost in terms of support and project and technical resources.

3:58 PEM had a good quarter, revenues up 65% compared to the same quarter last year and mostly driven by larger scale or let's call them megawatt type contracts that we delivered. EBITDA improved by 10 million NOC compared to last year and also quarter 11 million NOC up. Product and project margins are in general up compared to previous quarters due to better project execution and standardization of our deliveries, which gives a better margin and also more predictable margin. This quarter included 23 million NOC in research and development expenses compared to 27 million NOC in the third quarter of 25.

4:54 Looking at order intake and backlog, we had a strong third quarter compared to last year. I think it was up 340% almost year on year. for 253 million NOC in the quarter, predominantly or almost exclusively PEM orders. And we do see that it's our containerized PEM series that really drives the order intake. With most of the order intake coming from PEM, you can also see the composition of our backlog has changed quite substantially over the past quarters. It used to be predominantly alkaline, now it's predominantly PEM. and also please notice that the order backlog has increased by 330 million NOC compared to the third quarter in 2025.

5:53 Some more details on the commercial side. We do continue to see several promising smaller projects. Smaller projects can be in the Let's say 1 to 40 megawatt range. And we also have some larger projects in the 50 to 150 megawatt range that are expected to take final investment decision over the next quarters. We have especially seen a strong demand for containerized PEM solutions and the reason is that projects have become smaller initially they often start with the first build out phase in the 10 to 50 megawatt range which fits nicely with our containerized PEM systems and if this first phase is successful projects can then add new stages and add capacity over time That makes it easier for customers to balance the capacity installed and the capex invested with offtake that will generate income over time.

7:01 Multiple containerized PEM systems can offer a good setup because it's a proven, efficient and standardized alternative to customized solutions. So instead of spending a lot of time and money on engineering, putting together different modules, You just go for standardized building blocks. And yes, there will be some redundancy, but because it's an efficient delivery, you may more than make up for that compared to doing a turnkey plant where everything has to be customized and tailor made. Significant capex reductions, at least on our side, combined with a growing list of references, have also increased our competitiveness in this specific market segment.

7:47 We do receive concrete interest in our new pressurized alkaline concept, and there are several active dialogues with customers ongoing, but it's still early. Remember that we launched this product commercially, meaning we would engage with customers in the spring this year. So we still need some time to mature the concept together with customers. Europe is our most active and promising region at the moment. But as you can see from the latest announced orders, we also have activity and make progress in North America. And we do have opportunities that we pursue in the Middle East and Asia through partners. One of the highlights of the quarter was this contract, a $20 million contract for Navy stacks from Collins Aerospace.

8:40 So this is not the first contract we have received from Collins. It's one out of many that we have booked over the past 15 years and basically extends a long standing collaboration and cooperation built around reliable Oxygen generation for demanding submarine applications. So this is life support. It's a backup system for life support to provide oxygen to people on board submarine vessels. It does reflect a growing interest in using electrolyzers in the defense sector. and especially these proven systems that have been out there in the market and shown again and again that they are reliable and work because that's what the military needs.

9:27 They need reliable operational resilience and long service life. So in an environment where failure is not an option, the continued trust from Collins Aerospace underscores Nell's engineering track record, and it also confirms Nell's position as a dependable partner for critical life support systems. We entered a framework agreement with Hydrosun as a European integration partner. Hydrosun is based in Scotland and we onboarded Hydrosun. as an integration partner for our containerized PEM series. What that means is that we will retain PEM stack production in Wallingford and then Hydrosun will integrate these stacks into the containers, what we call the balance of plant and the complete turnkey containerized systems.

10:23 So this Aberdeen capacity improves Nel's delivery flexibility, scalability and supply chain across Europe. Our current integration partner is in the United States. That gives us a cost advantage and also local content in the Americas. But in Europe, we don't have it. So having HydroZone on board means that Nel can deliver systems specifically to the UK markets and meet local content requirements, for instance, in HAR 1, 2 and 3. And it also means that we can avoid a lot of the freight costs connected with the transporting containers from the US to Europe. Talking about containerized PEM products, we received a nice $12 million order from a US technology company. Would I love to disclose the name because it's a Household name that you are familiar with.

11:24 But there is some secrecy around what this will be used for. So we cannot do it. But it's a very prominent company in the US that ordered this equipment from Nell. We continue to see strong momentum for this platform. And this specific customer is a rather demanding customer with the high technical and operational requirements. So we're quite proud to have landed this. It underlines the quality and also the maturity now of our containerized platform. We have sold more than, I think we're getting closer to 30 containerized units and the confidence in this platform is increasing day by day.

12:12 We announced a partnership with Rheinmetall on their Giga Power2X project for decentralized synthetic fuel production. This is motivated by the energy security that is increasingly becoming a strategic priority as countries seek to reduce dependence on vulnerable fuel supply chains. In case of war, you need diesel, marine diesel and SAF, to basically operate planes, vessels, and artillery and vehicles. And with, as we can see now from the war in Russia, a vulnerable infrastructure.

12:58 And Ukraine, of course, the infrastructure around energy is vulnerable. Most of the refining is done at a few large refineries, especially in Europe. If these are taken out, it will basically harm the entire ability to defend Europe as a continent. So the idea behind this is to have a cluster of decentralized smaller production plants where you use renewable energy. to produce synthetic fuels. Synthetic fuels means that these fuels coming out of this setup involving hydrogen from Nel and CO2 and other things that you need will be exactly what is used today.

13:47 So that is diesel, marine diesel and SAF. We will not produce hydrogen per se, we will use hydrogen to produce the synthetic fuels, the fuels that are needed to continue to operate aircraft and vehicles and ships during a war. So this combines NELS electrolyzers with the Rheinmetalls concept to basically set up a network of synthetic fuel production sites. And we will jointly assess the technical and commercial feasibility, including potential sites, infrastructure requirements, Renewable power access, sustainable carbon sources and priority use cases in close collaboration with local armed forces and defence governments.

14:41 Technology. We continue to advance our pressurized alkaline system through testing and customer discussions. The prototype we have at Haarøya provides valuable insights. We continue to test it to cover different operating modes, different test protocols and of course to do further optimizations of the plant design. We are in advanced customer discussions for early adoption of this platform. But it will take, as I said initially, a few more months, at least before I think we have the first customers announcing that they will test this concept. As part of the process to mature the concept and make it, let's say, more available to end customers, we have worked with Samsung E&A to develop what we call the COMPASS H2A+, which is a 100 megawatt system concept built around our pressurized stacks. And it's a full system, including everything you need on the balance of plant side to build a complete hydrogen generation plant.

15:57 We also this year celebrate 30 years of PEM innovation. In 1996 Proton Energy Systems was founded with the ambition to make hydrogen available where it was needed by producing it directly from water and electricity. So what began with a relatively small team in Connecticut working out of a garage would grow into a technology used across industries and countries around the world. The next chapter will be built on everything we have learned from the people that founded this company 30 years ago and that Nell acquired some years later and on the people who continue to challenge what PEM technology can become.

16:42 What we are envisioning and maturing is the next generation PEM stack. The work builds on years of research and also years of collaboration with General Motors combining experience in electrolysis, fuel cells and automotive manufacturing. It's designed for increased efficiency and reduced production cost as well as mass production. Currently, close to 3000 hours of subscale stack testing has been done and we're taking steps towards full scale testing. Full stack testing is expected to commence in 2027. And the design principles or the design goals for this are More hydrogen generated so more than 1200 kilos per day and that means we go from a one and a quarter megawatt stack to a three megawatt stack.

17:45 The important thing is to get the cost down and if we compare the cost of the new concept with what we currently have which by the way has been cost reduced over many many years we're talking about a 70 percent cost reduction so that's massive. Higher efficiency, 48 kilowatt hours per kilogram of hydrogen at stack level compared to 52-53 on the current platform. That's also close to a 10% improvement in efficiency, which will translate into lower OPEX for the customer. And of course, to achieve all of this, the complexity also has to come down. And that means fewer parts. We are working on now a design that has a 50 percent reduction in components used, which will, of course, again, dramatically reduce the assembly time and also the complexity involved in putting stacks together.

18:44 That's it from our side. I will now be joined by our CFO, Kjell Christian Bjornsen, to answer any questions that you might have. So Wilhelm, you will do the usual script.

19:01 Thank you, Håkon. And as usual, before we start the Q&A session, just a few practical points. If you would like to ask a question, please use the raise hand function in here in Teams and we will call your name and unmute your microphone. And please make sure to unmute yourself on your end as well. If there's room at the end. So to manage time, we ask you to limit yourself to one or two questions at a time. And if there's room at the end, you're welcome to rejoin the queue after that. We also take written questions through the Q&A function if time allows. And if we don't get your question, feel free to reach out to us at ir at nelharjan.com.

19:47 And as a reminder, we will not comment on outlook, specific targets, detailed terms and conditions for individual contracts or questions about specific markets. Modeling questions are all the best handled offline. And with that, let's get started. I see we have one question already from Skylanden. Please go ahead. Hi, good morning all and thanks for the presentation. A couple of questions from me on the orders and partnerships that happened post the quarter. Apologies if you went over some of this in the presentation, I joined a bit late. The 12 million purchase order for Pemstax from a large US tech company Can you elaborate on what the use case for the hydrogen will be in that contract?

20:41 That's the first one. And then the second one on the MOU with Rheinmetall, obviously you're the second OEM to kind of have a partnership with them following ITM. How do you see this kind of very large I think I cannot comment on the use case for the 12 million dollar contract, because then you might be able to figure out which company

21:12 it is. As I said in the presentation, it's a household name. Large US technology company. We're extremely proud of becoming a supplier to this company, but unfortunately we're not allowed to disclose it also because the secrecy surrounding some of the things they are doing. So I cannot specifically comment on the use case for that, unfortunately. On the Rheinmetall order or MOU, I think Rheinmetall is targeting decentralized fuel production across a number of European countries and essentially all of NATO. And that means there's quite a number of production sites that will have to be built.

22:15 I don't think any single supplier can handle all of it and we also have different relationships with the end customers being armed forces or the marine and the air force in different countries so I think the more the merrier it gives It gives the initiative a chance of succeeding because there's not one company that can do all of this. We need to be several partners in this. So happy to share the spotlight with other OEMs. I think together we can mature this and ensure that we have a decentralized fuel production across a number of European countries and not only in the UK or in Norway.

23:05 That's great. Thanks, guys. Thank you, Skye.

23:12 Next question comes from Helene Kirhaug Brønbo. Please go ahead. Please activate your microphone on your end as well, Helene. Hope you can hear me now. So I have a question related to your backlog at risk, which has increased quite a lot over the quarter. So I was wondering if you could comment on why it has increased by this much related to the HIDS project. And I'm also wondering if there is a chance, is there any more backlog related to that project that is not yet classified as at risk?

23:59 So to take that, if you just compare the notes from second quarter to this quarter, what you will have noticed is that we have moved one of the two sites in second quarter to two of the two sites at risk. So there's nothing more to be put into the at-risk budget bucket. We would of course have loved for this project to move out quickly. The same goes for the customer. But due to continued delays, we think it's prudent to signal to the market that this may not come as a delivery in 2027. Thank you. Thank you, Helena. Next question comes from Anders Roslund.

24:51 Please go ahead. Hello, and with the picture. Could you split the backlog in the alkaline segment in equipment and service revenues and already installed equipment?

25:12 To give the very quick answer, about half of it relates to future milestone payments under a technology licensing agreement. And the rest is small and many orders. Thank you. Thank you, Anders.

25:34 It seems there's no more questions from the audience. I think we can leave the Q&A session there. If anything comes up after the call, you're always welcome to reach us at ir.nellhodgerton.com. There's one more question it seems like from Anders. Let's take that one as well. Thank you. The equipment that you repossessed, I don't know, it was last year or whatever, Have you sold any of that equipment to or resold any of that equipment as of today?

26:27 Well we do have continuing smaller deliveries to service and aftermarket and of course some of the you know projects we signed some time ago so we haven't produced anything new since start of last year so what deliveries we have we sell based on that equipment Okay, so that's actually the equipment that you sold. Okay, thank you. And just a final word for me, Håkon, I wish you best of luck in your new job. So thank you for spending the time with us.

26:59 Thank you, Anders, and thanks for following Nell. You're welcome.

27:06 Thank you, thank you, Anders. It seems like we will end the Q&A session there. I'll bring the word back to management, and hopefully in particular your last quarterly results presentation.

27:22 Yeah, so it's been a roller coaster ride joining in 2022 when hydrogen was almost like AI today, you know, a buzzword and everybody wanted to get involved in hydrogen. Almost a hype to, you know, experiencing Large scale orders and a lot of optimism and then over the past couple of years that has been replaced with pessimism, order cancellations, terminations, etc. We've had our fair share of I would say obstacles in the road and headwinds, but I continue to believe in the hydrogen sector.

28:13 I did hope that we would actually be able to live a bit longer on the previous generations that we had. But I think it's fair to say that what the market has told us is that We need better solutions in order for hydrogen to become big. We need cheaper solutions, both in terms of capex and in terms of opex, whereas capex is by far the most important at the moment. Opex will become more important over time. And I also think the maturity of the solutions have to improve. So that is what we have put our hearts and minds into over the past couple of years. Not sticking to the old platforms and saying that, well, the market might come and we will just sit here and wait for the market to bounce back.

29:09 We decided to take a proactive approach. We have invested a lot of money. Some will say maybe too much money, but we have invested at least what is required in order to develop leading platforms for the future. You have seen the pressurized alkaline concept. I'm proud of that. I hope that will give Nel a nice bridge for some years until the next generation PEM technology is ready, which might be the holy grail of electrolysis, combining both a very low capex with a very low opex. Thank you very much.

30:15 to have a leading position. We have also, in addition to that, spent a lot of time figuring out who's in this market for the long term and who's not. And we have some very strong partnerships with Reliance, with Samsung and with others, technology leaders, suppliers, customers, et cetera. And I think we also can harvest from those relationships going forward. So I'm leaving now. Having experienced a lot, some highs and some lows, I think we are through the worst and I think the future will look better than what the past couple of years have looked. And I think Nell is well positioned to benefit from that. I'm sure that Nel will be in capable hands and of course I will continue to root for Nel from the sideline and although I skip now to a completely different industry, I'm still convinced that hydrogen is something that the world needs and I'm convinced that Nel will be among the leaders in that industry. So thank you for watching the third quarter presentation and thank you for bearing with me over the past four years and good luck to you and to also of course Nell going forward.

31:42 Thank you.