Hexagon Purus ASA (HPURF) Q3 2024 Earnings Call Highlights: Record Revenue and Strategic Growth Amid Challenges

Hexagon Purus ASA (HPURF) reports a 43% revenue increase and strategic partnerships, while navigating profitability challenges and market uncertainties.

Summary
  • Quarterly Revenue: NOK544 million, up 43% year over year.
  • LTM Revenue: Increased by 39% to over NOK1.8 billion.
  • EBITDA Margin: Minus 9% for the quarter, improved from minus 30% last year.
  • Operating Expenses: NOK595 million, up from NOK496 million in the same quarter last year.
  • Cost of Materials Ratio: 56% in the quarter, compared to 62% last year.
  • Payroll Expenses: NOK196 million, up from NOK160 million last year.
  • Loss After Tax: Minus NOK149 million, compared to minus NOK197 million last year.
  • Cash Position: NOK269 million at the end of the third quarter.
  • Order Backlog: Over NOK900 million, with 56% for execution in 2024.
  • Equity Raise: NOK1 billion raised in October.
  • Hydrogen Mobility and Infrastructure Revenue: NOK514 million, up 35% year over year.
  • Battery Systems and Vehicle Integration Revenue: NOK50 million year-to-date, up 61% from last year.
  • Operating Cash Flow: Minus NOK115 million for the quarter.
  • Capital Expenditure: NOK128 million in the quarter.
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Release Date: November 28, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Hexagon Purus ASA (HPURF, Financial) reported a record quarterly revenue of NOK544 million, marking a 43% year-over-year increase.
  • The company successfully raised NOK1 billion in equity, providing financial runway until achieving positive EBITDA and cash flow.
  • Hexagon Purus ASA (HPURF) signed multiyear agreements with major bus OEMs, Gillig and New Flyer, strengthening its market position in North America.
  • The hydrogen mobility and infrastructure segment reported positive EBITDA for the second consecutive quarter, indicating improved profitability.
  • The company has completed its capacity expansion program, allowing for significant growth without major new capital investments.

Negative Points

  • The EBITDA margin remains negative at minus 9%, despite improvements, indicating ongoing profitability challenges.
  • The order backlog is lower compared to the previous year, raising concerns about future revenue visibility.
  • There is uncertainty surrounding the impact of Donald Trump's election on renewable energy policies, which could affect the company's market environment.
  • The battery and vehicle integration segment is still in a ramp-up phase, with limited revenue generation and high costs.
  • Working capital has been a significant cash drain due to inventory buildup and prepayments, impacting cash flow.

Q & A Highlights

Q: How will the Canadian import tariffs impact the profitability of your BEV business with battery system manufacturing in Kelowna, Canada? Do you have any pass-on mechanisms for potential tariffs under the framework agreement with Hino?
A: Morten Holum, President, Chief Executive Officer, Board Member: It's still unclear what the tariffs will be, but we have the ability to produce modules in the US and access key raw materials there. We are prepared to adjust to whatever tariff environment develops.

Q: How do you consider your chances of getting any replacement work for the lost contract with Daimler?
A: Morten Holum, President, Chief Executive Officer, Board Member: We have ongoing dialogues for other opportunities, which are progressing positively. These negotiations take time, but we hope to provide more clarity soon.

Q: Besides the uncertainty, do you see any chances for changes for Hexagon Purus with President Trump in 2025?
A: Morten Holum, President, Chief Executive Officer, Board Member: It's hard to predict the outcome, but Trump's focus on US manufacturing could potentially bring more business to us. We are preparing for all scenarios.

Q: Can you provide more information regarding the China joint venture and the status of hydrogen cylinder certification?
A: Morten Holum, President, Chief Executive Officer, Board Member: The joint venture is progressing, with equipment in place and acceptance testing ongoing. Certification timelines are uncertain, but we are confident in our competitive manufacturing facility and technology.

Q: Could you shed some light on how you expect working capital to develop with better payment terms?
A: Salman Alam, Chief Financial Officer: Working capital has been a cash spend source due to revenue growth and inventory buildup. We expect normalization as the group enters serial production and improved payment terms with suppliers will reduce working capital tied up.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.