Earnings call transcript: Edda Wind Q4 2024 sees strong revenue growth

Edda Wind ASA (market cap: $197.45M) reported significant revenue growth for the fourth quarter of 2024, with a 76% increase year-over-year, reaching NOK 20 million. The company also posted a positive EBITDA of NOK 5.9 million, a substantial improvement from the negative NOK 1.1 million in the same quarter of the previous year. Edda Wind’s stock price saw a slight decline of 1.13%, closing at NOK 17.7, reflecting cautious investor sentiment despite the positive financial performance. According to InvestingPro analysis, the stock appears to be fairly valued based on its Fair Value estimate.

Key Takeaways

• Edda Wind’s Q4 revenue increased by 76% year-over-year.
• The company achieved a positive EBITDA of NOK 5.9 million.
• Stock price decreased by 1.13% despite strong financial results.
• The company secured a new contract with a Taiwan client.
• Edda Wind expects to have 12 vessels by the end of 2025.

Company Performance

Edda Wind demonstrated robust financial performance in Q4 2024, with a significant increase in revenue and a positive swing in EBITDA. The company continues to strengthen its position in the Commissioning Service Operation Vessel (CSOV) segment, with 81% of its 2025 vessel capacity already booked. The delivery of the Vestry Enabler vessel in November and a new contract with a Taiwanese client further underscore its operational progress.

Financial Highlights

• Q4 Revenue: NOK 20 million, up 76% year-over-year.
• Full Year 2024 Revenue: NOK 70 million, an 80% increase from 2023.
• Q4 EBITDA: NOK 5.9 million, compared to a negative NOK 1.1 million in Q4 2023.
• Full Year 2024 EBITDA: NOK 19.7 million, up from NOK 7.4 million in 2023.
• Vessel value: NOK 641 million.
• Equity Ratio: 47%.

Outlook & Guidance

Edda Wind is optimistic about 2025, expecting to have 12 vessels by the end of the year and 13 by 2026. The company has already secured approximately 50% of its 2026 capacity, positioning itself for further growth. The market outlook remains favorable, with limited yard capacity for new vessel deliveries until 2028, potentially leading to higher contract rates. Analyst consensus from InvestingPro strongly recommends buying the stock, with revenue growth forecast at 76% for the current year.

Executive Commentary

"We therefore enter 2025 with a strong platform, which will enable us to take advantage of a growing and improving market," said Hermann Herwoli, Interim CEO. He emphasized the company’s strong track record and openness to potential market consolidation and growth through acquisitions.

Risks and Challenges

• Potential market oversupply risks could impact contract rates.
• Operational challenges related to the integration of new vessels.
• Macroeconomic pressures may affect client demand and contract renewals.
• Supply chain disruptions could delay vessel deliveries.

Edda Wind’s strategic focus on expanding its fleet and securing long-term contracts positions it well for future growth, despite the slight dip in stock price following the earnings announcement.

Full transcript - Edda Wind ASA (EWIND) Q4 2024:

Hermann Herwoli, Interim CEO and CFO, Edawin: Hello, and good morning, and welcome to Edawin’s presentation of the q four result. My name is Hermann Herwoli, and I am the interim CEO and CFO of the company. I will later be joined by Mr. Lars Stubbeho, who’s the VP Finance. Following the presentation, there will be a Q and A session.

And please feel free to post questions as we go along. 2024 have been an interesting and challenging year for Edawin. And I’m glad to see that the positive development we have seen in Q3 also have continued in Q4 and that were able to utilize the learnings achieved in the beginning of the year. During the quarter, we also took delivery of Vestry enabler, which went straight onto our contract. We completed takeover of vessel management and are now operating all our vessels in house.

Revenue continued to increase and came in at around 20,000,000 for the quarter, whilst EBITDA was just below NOK 6,000,000. As highlighted earlier, revenue has continued to increase as we have now more vessels on the water and improved rate environment. Revenue for the quarter was 20,000,000 compared to 11,000,000 for the same period last year, which corresponds to an increase of almost 76%. For the full year, the revenue was almost 70,000,000 compared to 39.5% or 39.4% for 2023, which then corresponds to an increase of almost 80%. EBITDA of 6,000,000 compared to a negative EBITDA of 1,100,000.0 in the corresponding period last year.

For the full year, EBITDA of almost 20,000,000 compared to 7,500,000.0 for 2023. Although EBITDA in Q4 is marginally down compared to Q3, we see that the positive operational trend is continuing, and we look forward to welcoming more vessels into our fleet during the next six months. Towards the November, we welcomed our eight vessels into the fleet when we took delivery of Vestry enabler. This is the third vessels in the Salt series from Gundan, with the last vessels, five zero four, being expected or is expected to being delivered during Q2 this year. Following delivery, the vessel went straight onto a contract for NNG, where we expect her to be working until the May.

As mentioned earlier, during the quarter, we successfully took over management and operations of the remaining vessels in our fleet. And all our and the new builds will be also run by our in house organization when they are delivered. We have over time built up a competent organization of highly experienced personnel and we’re already starting to see the benefit of having the operation levered during Q2 this year, we expect to be able to further improve performance and drive economic efficiencies. As said earlier, 2024 have in many ways been a challenging and interesting year for Edawin, whereby we grew the fleet from five vessels at the beginning of the year to eight vessels on the water at year end. We addressed operational challenges that we saw in the beginning of the year and have now seen a significant improvement in performance and are a bit and have taken and have, yes, have been able to utilize the learnings that we achieved during that challenging period.

We have ramped up our organization and moved all vessels in house. We have secured contracts for several of our new builds during the year. So now that we go into 2025, we have eight vessels, and we expect to take delivery of four more during the year. We have 81% of open thank you. We have 81% of open vessel capacity already booked for the year.

And we continue to focus on performance enhancements and expect to see even further improvements of this. So we therefore enter 2025 with a strong platform, which will enable us to take advantage of a growing and improving market. Now over to the market. The market outlook for our vessels remain favorable. This is also something that we see in our day to day operations where we see increased continued increase in tendering activities and specific vessel inquiries.

Rates for the shorter term contracts in ’twenty five appeared to be at similar levels as we saw in ’twenty four with rates ranging between 40,000 to €50,000 per day. In 2024, we have continued to see an increase in newbuilding prices. And there are limited yard capacity being able to deliver vessels prior to ’twenty eight. In ’twenty four, about 20 Tier one vessels have been ordered, but these are scheduled for deliveries well into or delivery schedules for these vessels are stretching well into ’27 and even ’28. According to our market intel, about one third of these orders have been ordered against the long term contracts.

With this increase in fleet size, we believe that track record fleet size and flexibility will be very important when charterers look to secure tonnage. We therefore believe that we, with our fleet, are well positioned to take advantage of the continued growing and strong market. I will now leave the word over to our VP finance, who will run you through the financials before we return with the Q and A session at the end. Thank you.

Lars Stubbeho, VP Finance, Edawin: Thank you, Hermann. On this slide, you will see an overview of our vessel and vessel specific contract status. For 2025 as a whole, we have solid coverage and some open capacity for selected summer campaigns. Commenting on changes from Q3, we start on the Nordre enabler. Nordre Enabler ended its first project at Vestas in December 2024 and is now working as a substitute vessel for Guellu Enabler.

Guellu Enabler has been at the yard having its permanent gangway installed and is now on the way back to France for final testing and will then be replacing Nordli with its permanent gangway in the April. Following that, it will be working at the Sampriere Wind farm until 2028. Post the swap for Nordri Enabler, Nordri Enabler will commence its second part of the Vestas contract, which is expected to start up in the April. Moving on to Sudre Enabler. Sudre Enabler is currently working at the Dogger Bank for Demna.

She’s expected to work at that project until end of Q1 twenty twenty four, and it will then transfer onto the onto project for Vestas, which is expected to start in June year. For those of you comparing it to ’20 or to our Q3 presentation, the Vestas contract was in our Q3 presentation situated with our new Building 965. But now following updated and narrow delivery window for the start up, for the Vestals contract, it has now been nominated to the Sudri enabler. This is a testament and proof of our ability to shuffle around on contract and vessels in order to prioritize and kind of improve client satisfactions and making sure that the vessels are delivered on time and in the right manner. And it also limits and minimize the white gaps in our backlog.

Moving on to Vestry Enabler. Vestry Enabler is currently working at the LNG wind farm. And as Herman mentioned on the previous slide, it’s expected to operate at the LNG wind farm until May. Post the finalization of this presentation, I’m also glad to announce that we have signed a new contract for a Vesto enabler for a new Taiwan client with expected start up in June. I’ll revert to this on the next few pages as well, but the contract has a firm period for approximately three months from June.

No figures, backlog or anything related to this contract is included in the presentation, but I’ll gladly remind you on that on the following slides. But that will take obviously, that will increase the backlog for Vestry Enabler and increase the visibility on this vessel. The C-five zero four, as previously indicated and as announced in our previous report, will be operating for a Tier one client from Q3 this year. Delivery is expected to be in late Q2. And the contract status as previously announced was a twelve months fixed period and a twelve months option period.

Following updated schedule, the option period has now narrowed to half a year, which will take the C504 for a firm period of twelve months from roughly July and then well into 2026. With the swap of the Vestas contract from Newbuild965 to the Sudri enabler, then Newbuild965 will be our first vessel, which will have open capacity for this year, and we will look forward to the delivery of that vessel. Moving on to the monetary effect of the previously mentioned slides. We have a strong backlog with solo counterparties and a total backlog of SEK412 million as of Q4, of which in those 04/1497 is firm, leaving the option period at the as of end of Q4 to €115,000,000 We have eight vessels currently operating and with the delivery of the four vessels this year, we will have 12 vessels expected in operation by end of twenty twenty five. With the last delivery in 2026, we will have 13 vessels under our fleet.

I’m glad to see that our backlog is spread among solo counterparties and also glad to see that our universe of the clients is expanding also with the latest announcement on the Vestry enabler. Again, note that the Vestry enabler contract is not included on this slide, so we will increase our backlog with the three months. Looking at booked and open capacity on a quarterly basis. We have no open capacity prior to the summer campaign as previously mentioned, and we have approximately 80% covered in 2025. As for 2026, we have approximately 50% covered as of today.

Hermann Herwoli, Interim CEO and CFO, Edawin: The

Lars Stubbeho, VP Finance, Edawin: commenting on changes from Q3, there are no significant changes in open days and fixed days due to the fact that the vessel is not included. But we see a small drop in total days in Q2 twenty twenty five, of which fixed days are down approximately 30, mainly due to amendments to the expected start up date on the specific contracts as nominated by the charterer and approximately forty days reduction in open days, mainly due to amendments and expected delivery schedules within Q2 for the four newbuilds in total. Again, if you add the Vesti enabler contract, which I previously mentioned, that will add approximately three months of fixed days from or split between end of Q2 and Q3 this year. So in total, we are comfortable with the number of booked and number of open days that we currently have and ready to take advantage of the strong market and also evidenced by our latest announced contract. Moving on to the financials.

Also referring to our report as published on NewsLab and on our website, which highlights it in more detail. Total (EPA:TTEF) operating revenue for the quarter came in at roughly $20,000,000 for the quarter, up approximately $9,000,000 year on year from the same quarter last year. That takes the full year 2024 operating income to SEK70 million, up approximately 80% from SEK39 million in 2023. Q4 ’20 ’20 ’4 EBITDA came in at SEK5.9 million, up from a negative figure in Q4 twenty twenty three of negative 1,100,000.0. That leaves the full and takes the full 2024 EBITDA to 19,700,000.0, which is up from 7,400,000.0 in 2023 as a whole.

Operating expenses includes approximately SEK 500,000.0 in one off costs related to vessel management takeover, which we completed in the Q4 twenty twenty four. Moving down to the financial income and on expenses. Net financial results for 2024 is positively affected by an adjustment of capitalized interest of approximately NOK8 million due to new interpretation of the IRS twenty three borrowing costs. I’ll revert to this on the next slide when it comes to the balance sheet as well, but note that this is an accounting measure. It will have no cash effect and $20.23 figures have been restated.

On the balance sheet, the value of vessels including newbuilds grows up to SEK $641,000,000. It’s in line with the newbuilding program and also expected to increase in line with the newbuilding program going forward. Vessels and newbuildings are affected by an adjustment, as I said, of the capitalized interest due to the new interpretation and following the IFRS regulation. Again, it’s an accounting measure and will have no cash effect on the balance and in the cash flow. Accounts receivables up from Q3 twenty twenty four of approximately SEK3 million coming in at end of the twenty twenty four at SEK18 million.

The kind of increase in accounts receivables are naturally following vessel deliveries and also something that we expect to see as we will have four new vessels coming onto water during the course of 2025. Cash position came in at million and then taking that into account on the gross interest bearing debt, which equates to million, we have a net interest bearing debt of million as of the end of twenty twenty four. The equity ratio for the period sums up and equates to 47%. Lastly, on the financing side. Following the announcement that we made in our previous presentation where we announced the financing of the last vessel to be financed, the C-five zero four, we still have a fully financed fleet and there are, as such, limited updates to the financing side as for now.

The point to mention here is that we, as on the company, will have no debt maturity in the near term future, save for a potential million RCF at the end of this year. There’s a mix in these figures of fixed and floating interest rate, where a large portion, as Stan mentioned, is fixed at attractive rates. For further comments and questions related to the financial, feel free to reach out or also referring to the report as displayed on the newsfeed and our website. So with that, I will leave it back to Hermann for the summary and conclusion.

Hermann Herwoli, Interim CEO and CFO, Edawin: Thank you, Lars. The fleet growth that Adavan have seen in ’twenty three or ’twenty four with three vessels being delivered during the year will continue and accelerate in ’twenty five with four vessels being delivered during the year and the last vessel, which we have an order, being delivered in next early next year. EWE, Edawin continues to be the leader in this market, and we plan to remain the leader in the CSOV market. We have a strong and ever improving track record. Our backlogs remain solid, and we have demonstrated our ability and capabilities of adding to this in the shorter term market.

The market outlook remains positive. We therefore believe that we’re very well positioned to take advantage of this and continue the path forward for Edawin. So with this, I thank you, and we’ll move over to the Q and A session.

Lars Stubbeho, VP Finance, Edawin: Lots of questions. Thank you very much for sending in questions. We know there’s a slight delay from the live, so we’ll keep open for a few minutes. And feel free to comment as we go along. First question from Thomas.

Thank you. Referring to our revenue of $20,000,000 for the quarter and comparing that to our previously announced 22,000,000 as disclosed for the backlog in our Q3 report and ask for the drivers and the miss in revenue. I can comment on that first. The miss of obviously rounding off and the total NOK 2,000,000 is, as mentioned, in the Q3 or sorry, Q4 report. One, due to obviously the utilization, we had a utilization of 96% for the quarter.

Obviously, forward looking figures always based on 100% basis. So part of the miss is due to the 4% in reduced utilization as well as a start update for the investor contract at the NN (NASDAQ:NNBR) G. As mentioned in the presentation and in the report, forward looking start updates are always based on management estimates and subject to change and an exact nomination by the charterer. So Vestri enabler went on to contract approximately 01/2024. Moving on to the EBITDA.

EBITDA margin decreased during the quarter. And from our side, also referring to the figures that I just went through. Part of kind of the explanation of the kind of decrease in margin is driven by one off costs. Obviously, it’s both on the EBITA basis and the one off costs, small in absolute terms, but large in terms of percentage. Approximately 500,000.0 in the cost into Q4 twenty twenty four is related to one off costs.

As for expected scale benefits going forward, maybe you can comment on that,

Hermann Herwoli, Interim CEO and CFO, Edawin: Camon? Yes. There will be efficiencies due to the kind of constant or moving all the vessels in house. And those efficiencies will also kind of evolve over time as the fleet grows. So yes, we expect during the next twelve months and going forward to reap some benefits, but we have not quantified those benefits yet.

Lars Stubbeho, VP Finance, Edawin: Thank you, Thomas. Moving on to Peter. Thank you also for sending a question. Question related to our newbuilding program and how much we have in remaining installments and CapEx for our newbuild. Again, I’m referring to our Q4 report where we state that we have approximately 90,000,000 in yard specific installments for our newbuilding program.

In addition to this, we have approximately 15,000,000 in other costs in connection with training, financing as such for our newbuilds. So in total, just above NOK 100,000,000 in total CapEx expenses over the next year and a half. Yes. An important note on this point as correctly commented by Hermann, all future newbuilds will be met one on one with additional drawdowns on our debt facility, again referring to our financing slide on the in the presentation where our fleet is fully financed and also the full newbuilding program is financed. So we expect no equity installments in connection with the yard installments.

Next (LON:NXT) one from Jonas. Could you give some insights into new billing deliveries and potential risk on the timing? I think this question also came in before I went through the presentation. Nevertheless, as mentioned a few times, all new billings are expected to be delivered in Q2, same as reported in our Q3 report, but we have a slight reduction in available days, mainly driven by amendments to the expected deliveries scheduled, but nothing material and no changes to our figures as disclosed in that Q3 presentation. With regards to risk, you can comment.

Hermann Herwoli, Interim CEO and CFO, Edawin: Yes. There’s always a risk with as you have seen in other segments and other markets about for vessel deliveries. We’re, of course, doing our utmost to minimize this risk. But again, there’s always a risk of vessels being delivered later than what is expected.

Lars Stubbeho, VP Finance, Edawin: Thanks, Jonas, and thank you also for following up. Could you give some more details around the new contract? As said, new contract with the new Taiwan client, so happy again to see that our client universe is expanding, 90 approximately ninety days fixed, a few number of days with option, but not material. So mainly a fixed contract with commencement in June. Rates reflect what we see as a strong market and also a peak season.

Hermann, we’ve asked about right about consolidation on your slide. Are you active in any discussions? Question from Jonas. Yes.

Hermann Herwoli, Interim CEO and CFO, Edawin: If you look at kind of the ownership profile in this segment, you will see that it’s the market is ready for some concentration and consolidation. This has been said about other segments before, and I think that we are open to take an active part in our consolidation. But we’re I can’t comment nor are we in any active dialogues regarding consolidation.

Lars Stubbeho, VP Finance, Edawin: Moving on to Pingla. Thank you for sending a question. Do you see a risk of oversupply in coming years? In case of a soft market, is there any alternative use of your vessels? What is the most important going forward, growth or consolidationM and A?

Hermann Herwoli, Interim CEO and CFO, Edawin: Lots of questions.

Lars Stubbeho, VP Finance, Edawin: Lots of questions. You discussed on the market specifics, Hamon?

Hermann Herwoli, Interim CEO and CFO, Edawin: Yes. So of course, there’s if you look at kind of the delivery schedule and the order book, there’s a lot of vessels being delivered. At the same time, there’s also a strong anticipated growth in demand for these types of vessels. Most analysts focus their demand specifically on the wind sector, but we believe that some of these vessels will also be absorbed by other markets. So yes, to your question, Inglad, there’s always a risk, but we don’t see that risk to be high and we expect that the market will be able to absorb this order book over the next couple of years.

Lars Stubbeho, VP Finance, Edawin: As for growth and or consolidationM and A,

Hermann Herwoli, Interim CEO and CFO, Edawin: I can comment on that one. You’re going to comment on that one, Amor? Yes. I can comment on that. Of course, we have stated before and that we are looking to grow, but we have a pragmatic view on how and when we grow, whether that will be through kind of consolidation or acquisitions.

If you look at kind of newbuilds, the timing or delivery slots that are available from yards are way into the future. So for us, I think the priority would be for towards consolidation and acquisition. But of course, we’re always open to explore opportunities in other places as well.

Lars Stubbeho, VP Finance, Edawin: Thank you, Ingela. Again, a comment on dividend as I can take that as we have previously comment on that one. Referring to our previous comments regarding dividends, refer to our kind of policy back from the IPO, where we have 50 of last year’s net income. And we’ll address that question if and when the time comes. Obviously, with the current cash flow and projections, we will be in a good position in the years to come.

Looking at a similar question as previously, but I’ll still take it in order to get a different view. It seems that the supply of new CSVs will outpace the demand in the next couple of years. Are you looking for long term contracts to avoid lower

Hermann Herwoli, Interim CEO and CFO, Edawin: utilization? Yes. Then you refer to commercial utilization, I presume. We have already taken measures to improve technical utilization of our vessels and have delivered strongly on that. Yes, as stated several times before and is embedded into our backbone is that we are looking for a balanced contract portfolio and we are of course evaluating longer term contracts all the time.

But we also have to balance that protection against how the market outlook looks for us. And currently, we’re seeing a lot of interest for both shorter term and medium term contracts. But the strategy of having a balanced contract portfolio, that remains.

Lars Stubbeho, VP Finance, Edawin: Last question here from Jonas. How should we think about the Taiwan contract and how to think about the Taiwan contract with regards to local contract, etcetera, etcetera? With the Taiwan contract for other viewers and listeners, that’s related to our September contract sorry, nine sixty seven newbuilding, which is expected to be delivered in Q2 in Vietnam and then expected to move to Taiwan for our first contract in Asia. It’s a shorter term contract, so there’s no requirement to local contact local content, etcetera. Should we stay in Taiwan over a period of time?

It’s obviously something that we will look into and follow-up with in due course. So with that, I think we have concluded all questions, at least for now. We’ll keep it open for a few more seconds. But thank you all for listening in, and thank you for good questions. Feel free to reach out to any of us post the presentation.

Always welcome to speak to current investors and potential new shareholders. So feel free to reach out.

Hermann Herwoli, Interim CEO and CFO, Edawin: Yeah. And also analysts.

Lars Stubbeho, VP Finance, Edawin: Of course. Thank you very much.

Hermann Herwoli, Interim CEO and CFO, Edawin: Thank you.

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