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Freemelt Holding AB reported a strong order book for Q1 2025, reaching a record SEK 19,300,000, despite no machine deliveries during the quarter. The company’s stock experienced a slight decrease of 0.98%, though InvestingPro data shows a notable 20% YTD return. While the order book is promising, challenges such as negative operating cash flow and high inventory levels persist. The company maintains impressive gross profit margins of 87.4%, indicating strong operational efficiency despite current challenges.
Key Takeaways
- Record order book of SEK 19,300,000 despite no machine deliveries.
- Stock price decreased by 0.98% following the earnings call.
- Successful rights issue raised CHF 90 million, with potential for additional funding.
- Expansion into industrial markets, focusing on defense, energy, and MedTech sectors.
Company Performance
Freemelt Holding AB continues to solidify its position in the additive manufacturing industry, particularly in the EPBF technology sector. The company is the second-largest provider globally and is expanding its business model to include manufacturing tungsten parts. With analysts forecasting 34% revenue growth for FY2025 according to InvestingPro, and a record order book, the company shows promising future demand potential. Discover 13 additional exclusive ProTips and comprehensive financial analysis with an InvestingPro subscription.
Financial Highlights
- Q1 2025 Revenue: SEK 2,900,000
- Operating cash flow: -$13 million
- Inventory levels: $17 million
Outlook & Guidance
Freemelt is focusing on expanding its industrial machine sales and enhancing distributed manufacturing capabilities. The company targets increased adoption in defense and energy sectors, leveraging geopolitical tensions that are driving interest in additive manufacturing.
Executive Commentary
Daniel, the CEO, highlighted the strategic importance of local manufacturing capabilities: "With additive manufacturing, you place the 3D printer where the part is needed, and you can manufacture it locally." This approach aligns with the company’s focus on distributed manufacturing and expanding its market reach.
Risks and Challenges
- High inventory levels could impact cash flow and operational efficiency.
- Negative operating cash flow may affect the company’s financial health if not addressed.
- The lack of machine deliveries in Q1 2025 could signal potential supply chain or demand issues.
Freemelt’s strategic initiatives and strong order book position the company for future growth. According to InvestingPro’s analysis, the stock appears undervalued based on its Fair Value model, despite receiving a "Fair" overall Financial Health score. Addressing operational challenges will be crucial for sustaining momentum in the competitive additive manufacturing landscape. For deeper insights into Freemelt’s valuation and growth potential, access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Full transcript - Freemelt Holding AB (FREEM) Q1 2025:
Moderator/Host: Hello, and welcome to today’s webcast with FreeBelt. With us presenting today, we have the CEO, Daniel and CFO, Mapping. If you have any questions, please feel free to use the phone, look to the right, and we’ll take that up during the q and a. And with that said, please go ahead with your presentation.
Daniel, CEO, FreeMelt: Thank you. Today’s agenda is mainly about the Q1 result, but we always add a specific topic. And as we have many new shareholders during 2025, we actually would like to zoom in, and explain the revenue streams a bit more and when and how it’s reported. So, please raise any questions in the chat, and then we will try to answer as many as possible, after the presentation is done. So welcome.
Just to start with a recap, regarding Fremont. So Fremont, we, were founded 2017. What we do is we develop advanced three d printers for metal applications. The technology is called PBF, so electron beam part of bed fusion. The focus area we have is really related to complex and high performance materials and parts.
This is where our technology is highly suitable. Areas are typically after complex and high performance components is in defense, energy and medtech. So that is our three main focus areas. Having that said, our technology is not dependent on any specific materials, but we focus on tungsten, which is mainly for defense energy to a certain point medtech as well. Titanium, which is mainly for orthopedic implants, but also could be related to defense.
And then copper, which can actually be in defense energy as main segments. The where we try to differentiate as a company within three d printing is that we have a modular system. So the key focus is really to shorten down cycle times, which means to increase the productivity. As three d printing has mainly been successful in prototype printing, Freeman really now tried to take this to the next level and now compete the traditional manufacturing. Our customer base has so far mainly been academia, so focus really a lot on on universities, research institutes that, you know, the the reason is also that they can enable the industry to really develop new materials and and, components, that will drive value for for AM.
But also because of the fact that we our first first machine was, really related to, the academia side and our research. But now we have an industrial machine, EMET, in place, that was launched during, last year. We are number two in the world when it comes to EPBF, and we have so far sold 32 machines, globally. If we look into our, three focus areas, Sorry. Defensive and and then energy and med tech.
I will say all of them are, really, under, growth. And I would say due to the geopolitical turmoil that we’re having, I would say that defense and also energy are more impacted in in, in in a, let’s say, positive way. So I I would even say that the numbers that you see on the screen here most probably is outdated. I think now, with the EU also announcing huge ramp up in defense, I would expect to see even a a bigger growth, moving forward. Fremont, at this moment, we are exposed in in all these three areas, as you can see on the screen.
And these are publicly announced engagement, but we also have a few that we we haven’t and and cannot, expose so far. So and during end of last year, med tech, med tech is and this is specific to orthopedic implants. This is the the most mature industry that has adopted additive manufacturing, mostly. And here, of course, it it was really a great breakthrough when we signed an agreement with two orthopedic implant companies. So if we zoom in then on Q1, and to summarize, I would do it in three bullets.
So first, just to find cash for nonprofitable tech companies, that has been a challenge over the past year. So that’s why I’m very happy that we managed to close a rights issue in a successful way during Q1, CHF ’90 million in gross, so before any cost deducted for the transaction. And then we have also a potential addition of 53,000,000 in 2026 connected to this. The other part on a positive note is our commercial efforts over the past year is starting to pay off now as well. And we ended this quarter with a record high order book.
And then last but not least, and as I mentioned on the previous slide as well, I mean, after having a positive development on medtech end of last year, we saw a strong demand in the first quarter now within our two other focus areas, energy and defense, both when it comes to paid products but also when it comes to machine sales as well. Since a few quarters back, we have started to report our paid customer products as well. And as you may recall from the previous webcast, we informed also that we have started 28 projects during 2024 until now in Q1 as well. And what you can see here on the screen is a few of the active ones now that we have in Q1 and where we also can see some good progress as well. So if we start with the new projects in Q1, the first one is Fusion4 Energy.
This is the EU part in the largest fusion energy research project globally, ITER. So of course, we’re extremely pleased with the fact that we were selected to lead this study. The other part is a successful Phase one, now into Phase two, and that is within defense and that is with Saab. And also a similar situation when it comes to UKAA, so the UK Atomic Energy Authorities where we have had an engagement now for the past almost two years, very successful from starting with material qualification, and now we’re actually in production scalability. So, I think this really demonstrate that the Fremont really provides a true value throughout the Hakana process.
And on top of this, we also got the machine order from UKA. If we then should zoom in, as I I said initially, just to explain a bit more the revenue streams and how that works at Fremont. So, first of all, when it comes to our academia customers, that’s really, first of all, a transactional business. Their purpose is really to to per to do material research. So this is why it’s it’s quite rare that the university or research institute is is purchasing a project from Fremont.
So typically, they buy a machine. And in some cases, we we support them, regarding, their research as well. But, if we zoom in on the industrial side, on the projects, then we need to define this more in in a client that has no additive, operation or exposure, at this moment. Then we we typically start with a material qualification, and this we charge for. And just to average, this is around 25 up to maybe a hundred k euro that we can charge.
If it is successful, then it moves into application testing. Same kind of thing there. It’s something we would charge the clients for. In some cases, also industrial clients like IHI that we we have as a client, they would invest in a Fremont one and do the research them self. If we have a successful application testing, we move into proof of concept here.
If we move into proof of concept, the customer can either, purchase a email and do the the proof of concept themselves, or they purchase a project for from Fremont to do this. What’s new during q one as well is that specifically for Tungsten, we have got request from project customers within Tungsten, if Fremont also can support in manufacturing Tungsten parts as well, which we have decided as a company to add as an additional business model on top of selling equipment and services. If you’re industrial client in additive already, then, most of the the time you have already been through all material qualification, you have designed your your product, then you move more into the proof of concept to really, qualify the Fremont system in regards to productivity, etcetera. So here, typically, you you purchase a a machine, and do your proof of concept before you then go into volume machine orders, which then in the end will start to generate aftermarket and recurring, business as well. So I hope that that at least explains a bit better the the different kind of revenue streams that we’re having.
So with that said, I would like to hand over to you, Martin.
Martin, CFO, FreeMelt: Thank you, Daniel. Let’s have a look at the top line of 2,900,000.0 in the first quarter of twenty twenty five. The main drivers were projects and aftermarket. We continue to see a strong development in the project pipeline. The aftermarket is solid.
It’s over time, it increases, but it increases slowly. And this is, of course, in line with the increased footprint that we have with the Fremont machines in North America and in Europe. There were no machine deliveries in the quarter, which, of course, negatively impacts net sales. One machine order has quite a big impact, as you know. The small amount of machine revenue that was recognized in the first quarter is related to rental machines, where the customer actually rents the machine on premise.
Looking at the order book. So we were at an all time high, 19,300,000.0 in the order book, and the order book represents revenues sorry, received POs, which we haven’t yet invoiced. The mix is to the larger part machine orders and to a smaller extent projects, which we expect to then convert to sales in the near future. On the next slide, we’re having a look at the operating cash flow, the black line, and also the inventory, which are the dark green bars. We’ve also mapped it towards the order book, which you saw on the previous slide.
I see the time line has fallen off, but it’s Q1 twenty twenty five to the right and then six quarters back, of course. The operating cash flow is decreasing. We saw a minus of $13,000,000 approximately. And the drivers for this are, of course, the increased inventory. We are building in anticipation of POs and we are building on the back of received POs, and that increases our inventory and negatively impacts our operating cash flow in the short term.
We also see that account receivables are increasing. So that’s invoices sent, but we haven’t converted those to cash yet. So cash conversion will happen in the near future for those invoices. So the receivables increased quite a lot at the end of the first quarter. And looking at the payment schedule, I’ll talk more about it in a second, but we have thirty-sixty-ten, so 30% is typically paid at order of a machine, 60% at delivery of the machine and 10% at the a successful site acceptance test.
Then we have occasional rentals, which are also a drag on the operating cash flow as it costs a lot to build a machine, but the revenue is then stretched out over time. Inventory, as I mentioned, is at an all time high of $17,000,000 It locks up cash, but of course, the positive is that the high inventory is in should be seen in relation to the order book that the company has. So we need to deliver on those orders. I’d like to go into a little bit on the purchase order to revenue recognition, have a closer look at the order book conversion. So how does the order book convert into P and L and how does the order book convert into cash?
So typically, you’ve probably seen we press release some of the orders, bigger ones, the machine orders, and that’s when we create the order book. At order, we typically invoice 30%, as I just mentioned, so that sort of hits the order book but then goes right out, and then we have 70% left in the order book. So we have a 30% down payment. This is industry practice. The idea is to cover the costs of manufacturing the machine.
For some machine types it does. For some machine types it doesn’t, but almost, but it’s it’s an approximation. 60% is invoiced at delivery, which can be two to six months later. It’s it varies a lot, and I I think there are mainly three factors behind the varying timeline. The first one is the machine type.
The FreeMelt one, which we’ve sold since 02/2019, is fairly quick from order to delivery. We have fairly quick turnaround times on those. The new machine, the emailed ID, we have longer delivery times. It’s a more complex machine to buy. There are longer lead times for purchases, procurement for this machine, which makes the lead times extend.
And then we have the third variable, which is which is the customer site preparations. So the customer needs to do preparations on their site to be able to handle the machine and to install the machine at their site, so we’re a little bit dependent on the customer how soon they will get the premises prepared. When we have done the last part, the SAT, site acceptance test, only when we have a successful site acceptance test, that’s when we recognize the revenues in the P and L. So even if everything has been involved or 90% has been invoiced before, it’s only at the very last invoice where the net sales is recognized in the P and L together with the cost of goods. So there is quite a lag, and I think this should be the expectation looking at the order book, how soon the order book will be converted into sales.
But we should bear in mind that the order book also includes some some odd items like rentals, which can be extended extended over a longer period of time, which which blurs the picture a little bit. But this is a typical typical example. Just just mentioning something about projects as well. So the projects that Daniel spoke about before, they have very differing payment schedules, very different deliverables agreed, milestones, etcetera. So there is no typical example of a project how it’s invoiced.
It it’s very much case to case by case depending on on what is agreed. So no sort of typical example when it comes to those. But machine sales, you should expect what you see on this picture. Thanks.
Daniel, CEO, FreeMelt: Excellent. Thank you, Martin. So let’s wrap up Q1, which was one of the the most intensive, but also, I would say, most positive quarters for me personally since I joined Fremont a bit more than two years ago. I think the geopolitical situation is really changing the the winds for AM and and also for Fremont. And and especially, I would say, in two of our focus areas, which is defense and energy.
Because here, AM, so additive manufacturing, can actually play a critical role both when it comes to innovative manufacturing, so new type of materials, new type of applications that are really, demanded at at this moment, but also from a distributed manufacturing point of view. So one of the the the key risks, that sensitive parts are exposed to at this moment is that you need to source, different kind of parts, sub subassemblies, etcetera, for to getting the the the component together. When it comes to additive manufacturing, you place the the three d printer where the the part is needed, and you can manufacture it locally. During the quarter, I think we, also then managed to demonstrate that, Fremont is in a good position both in energy but also in defense, where we got additional orders, from Saab from a successful phase one, but also where we expanded our collaboration with UKAA. And UKAA is one of the the leading, parties when it comes to of fusion energy.
And, in in the end, even they they also purchased an email machine, which, of course, was, very rewarding. And also the fact that we managed to get a product order from through Fusion4Energy, which is related then to iTerm, which is the largest Fusion research product globally, was of course highly rewarding as well. And all of this led to, that we ended up the quarter strong with a record high order book, as we mentioned, of SEK 19,000,000. So last but not least, I think, this year is Freeman’s eighth year as as a company. Our ambition is to continue to execute on our, strategic growth, journey towards being a successful commercial company.
So with that said, we open up for questions.
Moderator/Host: Thank you very much, Dolly and Martin, for that presentation. And, yes, let’s open up the q and a section here. Starting with the first one. With 12,000,000 SEK in the 2024 order book plus UK AE of roughly 8,000,000 SEK and 2, 3 month 1, shouldn’t the order book be closer to 25,000,000 SEK instead of 90,000,000 even after the Q1 revenue?
Martin, CFO, FreeMelt: Thanks. I’ll answer to this one. It’s a good question, right? But so to again explain the from receiving the purchase order to recognizing revenues in the p and l. So when we receive the purchase order, that’s one moment where we recognize the future revenue in the order book And up until recognizing the net sales, we actually do send invoices, but we don’t recognize them.
So you see them in accounts receivables or in prepaid income at a later stage. So that’s where you see them in the balance sheet, and they will be converted into net sales when we have completed the site acceptance test. So look at order book plus account receivables, prepaid income, and net sales.
Moderator/Host: Thank you very much, Morten, for clarifying that. And how do you approach communication with the market regarding ongoing and future collaborations and business opportunities? And how do you decide what level of details to share, particularly concerning the phases of various partnerships but also projects?
Daniel, CEO, FreeMelt: Also very good question. I think, we have tried to be more and more transparent. With that said, we try to not, of course, overcommunicate as well. So we really try to zoom in and communicate on the all the paid customer projects that we received, but also as we show today, trying to also show progress not on all, but on the the major ones that started to progress through the different kind of phases. As we know that this, is important to to be informed about, to be aware of, as the intention is is to it should lead to sales of, machines and especially the the industrial machine.
But it it it’s a balance, and we we try to keep keep it as as much into the the most interesting projects as as possible.
Moderator/Host: Thank you for that answer. And in in q one, you strengthened your collaboration with Saab Dynamics through a second project order on the defense applications. Have you observed increased interest in your technology as a result of the current geopolitical climate?
Daniel, CEO, FreeMelt: Yes. I I can answer that. So, I would say yes. As a our technology is is, as I mentioned initially, really suitable for more complex, applications and high performing parts. And not only, I mean, defense, also energy, is to industries that really has a a high demand and and an urgent demand of of this as well.
And during this geopolitical situation, those two specifics are really, in focus. So I would definitely say that the geopolitical is is is turning from from a headwind that we’d we we had to educate our customers about the value of additive manufacturing into more tailwind, as well.
Moderator/Host: Speaking of geopolitics, have you noticed any impact from The US tariffs yet?
Daniel, CEO, FreeMelt: Not at this moment. No.
Moderator/Host: In q one, you also made significant progress in fusion energy through an email order from UKEA and project orders from UKEA and Oxford Sigma. Could you elaborate on these on how these orders are strategically important for Freemelt?
Daniel, CEO, FreeMelt: Sure. I think, as energy is, is one of our key focus areas, and also UKAA is one of the the leading parties when it comes to fusion energy development. It’s, of course, I mean, really of strategic importance for us as a company to, to have a client like UKAA. I think it has already proven that due to the the successful collaboration with UKA over over the past two years, it has also generated more interest from other parties. So I would say that some of the other product orders that we have received as well has been a lot thanks to U.
K. A. So customer references in our key focus areas is definitely of strategic importance.
Moderator/Host: Thank you for that answer. And we’ll take one final question here before wrapping up the Q and A section. After the end of the q one, you announced a new project order and a collaboration with Fusion4Energy that use organization support, ETR. Could you share more details about this exciting initiative and the specific role that Fremont will, will play here?
Daniel, CEO, FreeMelt: Sure. Yeah. So so Fusion4Energy is the, I mean, let’s turn around. Actually, ITER is the the largest, r and d product within Fusion globally. And, actually, the whole world is is contributing, and the European part is actually, hosted by Fusion4Energy.
So this specific project, we will lead. It’s about, qualifying tungsten, as a material. And it’s also, again, just to to make a short recap. So tungsten is the, the material with the highest melting point in the periodic system. So, of course, one of the the the key features is that it can resist heat.
And if you look into a fusion reactor, we’re talking hundreds of millions of of Celsius in in there and also a lot of radiation. So that’s why tungsten is is really suitable for for that type of application. Secondly, what what’s also will be tested in this product is that you can also get copper on the back of the tungsten plate. So you can also then transfer the heat out to the cooling system through copper. So really to to join the tungsten and the the copper part is also, part of this product, which we also do with our partner, Fraunhofer.
The product will be running for approximately fifty month, and and Fremont is is leading it, from that perspective.
Moderator/Host: Okay. Thank you very much, Don, Neil, and Martin for presenting today and answering all of our questions. And thank everyone who tuned in to this presentation with Fremont, and I wish you all a great rest of the day. Thank you very much.
Daniel, CEO, FreeMelt: Thank you. Thank you.
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