Earnings call transcript: HydrogenPro Q1 2025 reveals financial losses

HydrogenPro (HYPRO) reported its Q1 2025 earnings, revealing a net loss of NOK 65 million and negative EBITDA of NOK 50 million. Despite a 4.3% increase in project backlog, the company’s stock price fell 9.4% to 3.99 NOK, nearing its 52-week low. The market reaction reflects investor concerns over the financial losses, despite positive developments in technology and operations. According to InvestingPro data, the company maintains a healthy current ratio of 1.81, indicating strong short-term liquidity despite operational challenges.

Key Takeaways

• HydrogenPro’s stock dropped 9.4% following Q1 2025 earnings.
• The company reported a net loss of NOK 65 million.
• Project backlog increased by 4.3% to NOK 318 million.
• New technology validation and cost-saving measures were highlighted.

Company Performance

HydrogenPro’s Q1 2025 performance was marked by significant financial challenges, with a net loss of NOK 65 million. However, the company achieved a 4.3% increase in its project backlog, suggesting potential for future growth. Operationally, HydrogenPro completed a full-scale validation test of its Generation 3 electrodes, achieving a 12-14% performance improvement over previous models.

Financial Highlights

• Revenue: NOK 22 million
• Gross Margin: 32% (69% adjusted for specific project impact)
• EBITDA: -NOK 50 million
• Net Loss: NOK 65 million
• Cash Balance: Decreased from NOK 191 million to NOK 165 million

Market Reaction

HydrogenPro’s stock fell 9.4% to 3.99 NOK post-earnings, reflecting investor concerns over the financial losses reported. The stock’s current price is near its 52-week low, indicating a challenging period for the company amidst broader market trends.

Outlook & Guidance

HydrogenPro continues to focus on expanding its project pipeline, maintaining a target of 12-13 megawatts. The company is also exploring small-scale containerized solutions to reduce hydrogen production costs. Future guidance includes expected approval of a Lundg equity investment, pending Chinese government approval.

Executive Commentary

CEO Jarlath emphasized the focus on prioritized projects, stating, "We are focusing on bringing forward the prioritized projects." Technology Lead Odd Ann Lowrensen highlighted the company’s commitment to the green revolution, noting, "The main purpose of green hydrogen is to feed into the green revolution."

Risks and Challenges

• Continued financial losses could hinder growth.
• Uncertainty surrounding the approval of equity investments.
• Competitive pressure in the hydrogen production market.
• Economic conditions affecting project financing and execution.
• Potential delays in technology implementation and scaling.

Q&A

During the earnings call, analysts inquired about the pending Lundg equity investment, expressing concerns over its approval timeline. The company’s commitment to R&D investment was also discussed, highlighting its importance for future growth and competitiveness.

Full transcript - HydrogenPro AS (HYPRO) Q1 2025:

Jarlath, CEO, HydrogenPro: Good morning and welcome to HydrogenPro’s first quarter presentation. Today, I am accompanied by CFO, Martin Holte, who will present the financial result and Odd Ann Lowrensen, who will take you through our latest technology development and the way forward. HydrogenPro, for those who are watching us for the first time is a focused company concentrating on high pressure electrolyzer and gas separator skid, which is designed for renewable energy supply. We are addressing a selected large scale industry segments. For instance, in balancing of grid and power to gas in our two forty megawatt ASUS project.

Also in the steel production in our 100 megawatt SALCO project decarbonizing as well as other related industry for refinery and ammonia as examples. We will give you more updates on our deliveries, but reminding that HydrogenPro is delivering to two of the largest projects in the world. This puts us in the forefront position with operational projects. Customers asking for references and installations when addressing a supplier. As our two projects are among the first ones to start operation, few will have the same reference and documented performance.

Some of the highlights from the quarter. First, Andrijs was placing an order for 100 megawatt electrolyzer unit from HydrogenPro for project in Germany. Here we are still awaiting for the FID. It was awarded $2,500,000 purchase order which now is in production. The new manufacturing line of advanced electrodes in Denmark started up.

Investment is on time and below budget. And we had a successful completion of our large scale validation test, which confirmed the performance improvements. We are now in the installation and commissioning of ASUS in 2025 this year and the Salkos project in 2026. And we had an equity injection by Andrids and Mitsubishi, which was completed in January and Longye being expected during the second quarter pending the Chinese ODI approval process. Health and safety is being on top of our agenda and it is satisfying to see the good trend continuing.

The ASUS project as I mentioned is now in commissioning, in cold commissioning as we call it and will successfully now start up during the next months and quarters going into hot commissioning and full operation. On the SALCO delivery, we have delivered all components and assembly as well has started. And we will now start the production of generation three electrodes and delivered from Denmark. In Denmark, we have now produced the first electrodes at the new production line in Aarhus. And I’m glad we are on budget and although we are still optimizing the production, we see that quality wise we are having much more stable results and process control.

Thereby, we’ll achieve further improved performances on the electrodes. We are also studying the possibilities of increasing the capacity in the line based on improved efficiency without any major CapEx. Last quarter, we referred to at that time the upcoming full scale validation test. And now during March and April, we successfully completed the test. The purpose was a full scale verification of the generation three electrode, but also design improvements we have done to reduce for instance shunt currents.

Half the stack was equipped with generation two electrodes and half the stack with generation three. All results have been measured and verified with physical gas flow meters. There were also other technical parameters important to the total performance, which has been tested and verified. The stack is manufactured on our European value chain setup. The next step is now to reduce the power consumption even further on generation three electrodes.

And we are now starting the process to increase the pressure from 15 bar to 30 bar. Where other OEMs are making a point of going from atmospheric to pressurized, we are already delivering 50 bar and now targeting to be supplying 30 bar by next year. Why is this important? Well, many customers need high pressure gases and to pressurize later in the value chain adds cost both on the investment side and in operating the compressors. Odaan will come back to both the result of the test and the way forward on our technology roadmap.

And I will now give the word to Martin.

Martin Holte, CFO, HydrogenPro: Thank you, Jaller. Then I will walk you through the Q1 twenty twenty five financials. So during the first quarter, revenues came in at 22,000,000. These are now mainly related to the ongoing deliveries on the Salkos project to Andrzej. Gross margin in the quarter was 32%.

This was negatively impacted by around NOK 8,000,000 on the ASUS project. So when adjusting for this, the gross margin would be at 69% during the first quarter. Personnel expenses came in at 39,000,000, a reduction of 3,000,000 versus the fourth quarter, while other OpEx was at 18,000,000, which is a decrease of 13,000,000 versus fourth quarter last year. And the reduction is then primarily driven by lower professional services costs, travel costs, and project related cost. So then we end up with an EBITDA that came in at minus 50,000,000.

The EBIT was minus 50 5 million. And as you can see, the net financials was minus 10 million during the quarter, and that is explained then by the appreciation of the Norwegian kroner versus some key currencies being dollars, euro, and Chinese yen. So that was an appreciation of the NOK during the first quarter. So the net loss then came in at, 65,000,000. We are now ramping up manufacturing in Denmark, and the remaining share of the deliveries to to Sulcos will now be delivered, from from our factory in in Oeilsk, Denmark, mainly then during the second half of this year.

Then let’s look into the development in the liquidity position in the quarter. So the cash balance at the start of the year was 191,000,000 and it ended at NOK 165,000,000 at the end of the first quarter. So the changes in the cash position were as follows. The EBITDA was at minus NOK 50,000,000, changes in net working capital of minus NOK 23,000,000. We invested NOK 22,000,000 in the quarter that was mainly then related to the production line in Denmark.

And the investment in Denmark is now completed on time and below budget. The remaining part of then the investments in Denmark will then be reflected now in the second quarter financials. The backlog increased from NOK $3.00 5,000,000 to NOK $318,000,000, which now then includes then a purchase order, which we were awarded during the first quarter of $2,500,000 This is a slide I have presented in connection with the with the fourth quarter numbers. The market is more challenging right now, and it’s important to be conscious on on spending. It has always been key for us to have a strict capital discipline and spend our funds wisely.

But given the slow market we are facing, we’re now taking some measures to meet the situation. The cost savings program consists of four main elements, downsizing in Europe, reduced use of, professional services and external consultants, reduced cost in Tianjin and also in Shanghai. So in total, we plan then to take out more than million of costs annually. The program has been initiated and you already saw in the fourth quarter that the costs are coming down and the impact will continue now to increase during this year. I will now give the word back to Jarlath to give an update on the market.

Jarlath, CEO, HydrogenPro: Thank you. First of all, as I already mentioned, we are a focused company and we are focusing on the partnership model. In addition to the capital side of investment that the partners are bringing, having large strategic partners, we are together offering a full delivery scope. Customers are normally asking for larger scape than just the electrolyzer equipment of the plant. So a total EPC and often complete solutions all the ways from power in one end of the plant to dried and compressed gases in the other end is requested.

So HydrogenPro is then focusing on our core delivery parts marked with a number one. With partners, it puts us then in a stronger position in addressing the market, but also together developing the technology. And here I refer to the full scale test as I mentioned earlier in my presentation. HydrogenPro is focusing then developing and offering the best core technology and equipment. And the partners provide then the full scope and also sharing the risk at levels HydrogenPro would not be able to do alone.

And such partners are thereby giving us better bankability. Going up the value chain, we see that synergies can also be realized on the supply and manufacturing side together with the partners. So we are now exploring these together with our new partner, Lundg. Partners like Andrids and Mitsubishi are already preferred suppliers to customer and other verticals looking into at decarbonization and or entering the hydrogen space. Although we are focusing on the large scale market, we do see that several projects are beginning at a smaller scale.

So do not forget our partner JHK, Maybe not as large as the three other partners, but important in addressing the small application market. PAM is often addressing smaller scale projects based on solar and wind energy with load variations. Pressurized alkaline is equally responsive to load variation and fitted to a special containerized solution. JHK is now developing projects in Germany and Benelux. The standardization with prefabricated container solutions brings all the same benefits as PEM in small projects, but it is more cost effective and eliminating all use of rare metals.

Looking at the world map for IEA, we can see based on renewable energy prices where it’s important where it’s most advantageous to produce hydrogen. This without taking any government incentive schemes into account. Beside China, parts of USA and South America, Iberia, UK, Scandinavia, Middle East and India as well as Australia are recognized as attractive areas. And some of the same regions have also developed clear political and governmental policies to excel the green hydrogen economy with set ambitions of around a compounded annual growth of up to 50%. Yes, we do realize and see several, what I would call negative articles regarding cancellations and postponements of hydrogen projects.

But not all being negative, the hydrogen development train is rolling, although we would like to see it rolling faster. And looking at the map I showed based on attractiveness and where we have identified active project development. For HydrogenPro, our main focus in then Europe and USA is currently less transparent right now. Although some of the projects particularly in the Gulf area are still progressing towards FID as they are communicating to us. So we maintain our foothold.

Furthermore, we are looking into India and watching The Middle East. Based on end user sectors, we have detected eight to nine large scale target areas. And remember my first slide with the hard to abate sectors. You will recognize these in this slide as well. And also remember my slide on partnership for large scale projects.

Our three partners having already foothold with several companies within these sectors based on established business from other business areas like power and energy, decarbonization, steel, pulp and paper and so on. Our pipeline remains stable. Yes, we see some projects falling out or delayed with longer horizon, but also new coming in replacing those being pushed out in time. We are focusing on bringing forward the prioritized projects, thus increasing this pool. But in total, we are therefore remaining at 12 to 13 megawatt of prioritized projects.

So to summarize, we are basing our market strategy on solid partnerships enabling delivery power on large scale projects globally. HydrogenPro with partner developing standard small scale container solution to address this part of the market. HydrogenPro is focusing on three, four large market regions. Our offering is suited for the most attractive segments that are hard to abate and increase the number of prioritized projects getting closer to FID. And now I’m happy to hand over to Ade who will take you through the technology development.

Odd Ann Lowrensen, Technology Lead, HydrogenPro: Thank you, Jolle. As we all know, the main purpose of green hydrogen is to feed into the green revolution that is taking place. And it’s inevitable that in order to succeed, we need to reduce cost. And all the work we are doing on technology development is linked to how to reduce the cost. On one side, we want to reduce the cost of production of our products to make sure that it’s an attractive product and of course reducing the cost of operating our equipment.

On the CapEx side, see that there is a potential to reduce weight by utilizing novel design and new materials. And of course, production of our electrodes also has a significant cost as everyone else that we are working on, especially with our catalyst coating. And with better electrodes, we can produce hydrogen from electrolyzer with a lower total energy consumption. And on the OpEx side, energy consumption is the highest cost the customers are seeing. So that’s why this is so important and will be an endless endeavor for everyone who is in this business.

But last but not least, as Jarel said, higher pressure will make it possible for the customer to obtain a product with high pressure with a minimum cost. Basically, you can reduce this pressure for free in the electrolyzer. The electrolyzer contains a stack of more than 400 cells and the main performance criteria is to obtain good electrodes. And again, that is our main target to improve further. So what is making a new good electrode?

Well, it’s two things. First of all, you need to lower the voltage so that you can reduce the power consumption and you have to make it stable and robust over time, because degradation is inevitable for every electrode supplier. And in this example we have shown two graphs where the blue one is indicating the former electrode performances and the other one, the green one, is indicating the new one. And in this example we show that by lowering the overall voltage, we can produce more hydrogen for the same specific production as before, in this case doubling the production, which is very novel and very attractive of course for the customer. As Jallo mentioned, we have done testing of a full scale electrolysis with our newest technology in Poshkon, Norway.

We run the test for five hundred hours. It was a full stack with both the former electrodes we had, so called Gen two, and a prototype of the new one Gen three. This test was successfully run with good performances and we could demonstrate also the new interior design changes we have made very effectively. And the improvement we obtained was in the order of 12% to 14% compared to previous tests. To dig a little bit deeper into what I just told you, please have attention to the slide on the left.

These blue lines bars called Gen two is indicating the cell voltage on each individual cell in the stack and you can clearly see that the Gen three in the center has a much lower voltage, which again is directly linked to power consumption. However, you may see that there is some deviation between the different electrodes and that is linked to the fact that this is a prototype and it was not consistently made. So if you look at the picture to the right, it’s a magnification of the electrodes as it looks like in the microscope. And if you look carefully, can see that on the left side picture, the coating that we have is not as good as the one to the right. And the fact that we actually used the one to the left in this test, we clearly can state and I will show you later on that the results we think we will obtain in new deliveries will be based on these best electrodes and therefore with better performance.

So going to what we will now do in the coming years, just to summarize, we will continue to develop and produce this full sized net shaped electrodes in Denmark. We will continue to focus on how to reduce the cost further. And by having ASUS up and running later this year, we will gain very interesting and valuable results so we can obtain even better understanding of how to optimize the performance under different and varying operating conditions. Going further, we will develop this 30 bar solution to be offered to the customers. And we will then also get Salkos up and running together with Antritz, giving another set of performance data under quite different conditions than in the ASUS project.

And that will put us in a very novel position as a supplier not only of good technology, but also with experience from production that not that many can actually live to or compare to. And then the last step is of course to launch a new set of electrodes and therefore a new product in the end with even better performances. So what we did now recently, we collected all the data from the lab in Auryus, Denmark and we said, okay, what is potentially the best performance we can obtain today? And this graph illustrates the high one, Gen two Gen two is actually the former electrode performances, and the lowest one is what we predict from our results what could be the best performance. And as it shows, it’s a clear improvement obtained with several hundred millivolts on the cell voltage.

And also importantly to note, the stability of the electrodes are excellent. So my last slide is just trying to summarize. Even though we are very cost conscious, we realize that we need to invest a little bit more to do more efficient and at the end of the day, in total spending less money for testing. In Denmark, we have increased the capacity on lab scale testing. It has so far been only atmospheric testing.

Now we will also have testing at high pressure and we will mimic the size of one of the cells we have in Poshkun so we can do more iteration in Denmark speeding up the development for a lower cost. We will also take what we have in Poshkun and refurbish it, try to use as much as we have from before, but also expand the capacity of testing. We will also build a small scale full sized electrode. It will be much cheaper, much faster to build and will mimic most of the industrial condition we can foresee before we go to the final stage, which is very expensive and quite risky if you haven’t tested it properly in a smaller scale. And that we will do together with our partners and customers.

And that concludes the presentation from HydrogenPro. So now it’s time for Q and A, so please join me on the stage, Janne and Martin.

Moderator/Q&A Host, HydrogenPro: Yes, and welcome to the Q and A session. It seems like the presentation you just made must have been very informative and good related to the market and the company because there are just a few questions this time. But I would like to start with the first one, and that is related to Long E. And what is the status on the equity investment of approximately 1

Jarlath, CEO, HydrogenPro: The application from Lundgie to the government to get all the approvals was submitted some months ago. It’s difficult to control the process of the Chinese government as it’s in most countries when it comes to governmental approvals. But we do get very positive signals. The process is well underway, positive feedback, and we do expect it within the near future to be approved. We do not have exact date, but I’m optimistic that it will be in the near future.

Moderator/Q&A Host, HydrogenPro: You touched upon the order of 1,000,000,500,000. Could you highlight a little bit related to which customer are we talking about, what kind of project and what kind of location, please?

Jarlath, CEO, HydrogenPro: We’d have allowed to do that. But based on customer request, they have asked that for the special purpose not to go into such details. So we have to respect the customer.

Moderator/Q&A Host, HydrogenPro: You mentioned the H2GIGA project in Denmark. When do you expect the European grant of €16,500,000 to materialize in your cash balance?

Jarlath, CEO, HydrogenPro: Martin, do

Martin Holte, CFO, HydrogenPro: you want add? Sure. So I think with regards to the status of that project, we’re now currently doing some preparations. And sort of under the existing timeline, we will are now looking into taking up potential investment decision in first quarter next year. And if we carry on with that, the plant will be up and running, say, a year or so after.

And then the funds will be, call it, arrive our bank account then in the second half of twenty twenty seven. So it will be funded. These funds will then be then made available to us after the plant is up and running.

Moderator/Q&A Host, HydrogenPro: Another question related to the finances. What is the reason for the negative financial results?

Martin Holte, CFO, HydrogenPro: I think we have tried to explain that, Gould, during today’s presentation. From a CFO perspective, one thing I would like to stress and then which is sort of, call it a red line with regards to how we we spend our funds. We take a very different approach to many of the other players in the Western Hemisphere. We have, one core technology. We have a very lean setup, and we have also then a manufacturing hub in China.

So our cash burn is significantly, significantly lower compared to our other players in the electrolyzer industry in Europe and and North America, while at the same time we have the ability to deliver on large scale projects, both with our manufacturing capacity and with the strong relations we have with our key partners.

Moderator/Q&A Host, HydrogenPro: Thank you for that. Then to the market, and you talked about The Middle East India. Who is your partner for the increased focus in this area?

Jarlath, CEO, HydrogenPro: These are markets we are now developing. And we will, of course, announce that in due course. But until everything is under the roof, we remain we do not announce that. We need to have all details in place. Yes.

And we’ll also here come back to that in due course.

Moderator/Q&A Host, HydrogenPro: And then to the last question on this Q and A. You talked about the project pipeline. Can you elaborate on what projects prioritized, as you mentioned in your presentation, means concerning probability for FID and on what time scale?

Jarlath, CEO, HydrogenPro: As we have mentioned before, we do not give guidance on the forecasted, shall we say, revenues. We see positive development. Some projects are announced by partners in FID in detail engineering. They are working on several projects also not announced. So I have to leave it with that and will not speculate or give any forecast on the exact timing.

Other than we remain positive and see that these projects are moving steadily ahead. Yes, we want them to be much faster. But with uncertainties around us in the world, we have seen in the last couple of months, whether it’s trade tariffs or other political activities impacting the situation. We remain cautious about giving any indications on time and size. Okay.

Moderator/Q&A Host, HydrogenPro: It was during your answer, it popped up two more questions. I think we will take those, and then we will put a line. I guess this is somewhat related to finances. What will be the expected investment levels going forward related to technology developments and new test center?

Jarlath, CEO, HydrogenPro: Will you, Martin, elaborate on it?

Martin Holte, CFO, HydrogenPro: Yeah. Sure. I think, Odaar now went through sort of some key steps that we need, and it’s it’s clear need to to to to to invest in in a test center to to to, call it, decrease the frequency, etcetera. We have not provide specific guidance with regards to the investment level of that. But I think it’s fair to say it’s it’s not a considerable amount.

Again, we are spending our funds wisely, but it’s key for us to keep the R and D activity at a high level to be, called a front runner in this industry. That being said, we’re also then looking into applying for R and D grants, which of course is a very cost competitive setup for us if we can if we’re able to getting grants on our R and D activity. And historically, we have been and we will continue to do so as well going forward.

Jarlath, CEO, HydrogenPro: And maybe I could add, not to the cost side, but the importance of doing this development and testing. It’s only with documented and tested results we are able to give necessary guarantees to the customer, giving them comfort to invest. So the wisest way we can spend the money is to develop our technology to be in the forefront competitiveness. We are on a good way on that. We see that on many fronts, but we cannot stop.

We cannot lean back. We have to make these investments in order to, among other accelerate the pipeline that there was questions about.

Odd Ann Lowrensen, Technology Lead, HydrogenPro: And I may add that the main ambition was actually to invest a bit, but overall do more for less. So in total over years, we will spend less costly experiments but obtain more results.

Moderator/Q&A Host, HydrogenPro: And then the last question, it’s related to funding of the company. Would you say it’s likely for another capital injection within the next year or two for Hydrogen Pro given the market status?

Martin Holte, CFO, HydrogenPro: First of all, of course, we we are now in a situation where the market is is is relatively poor, as you can see. We will always be in a position where we want to develop the company, increase increase our R and D activity to make sure that we have the capabilities and the technology needed to then deliver on large scale contracts. And that requires some funding, yes. But of course, as we announced on December 23, we are, we raised a hundred and 40,000,000, where of 70,000,000 has already arrived and the 70 remaining 70,000,000 from Lundg is expected now to be also arrivals very soon. And and with that, at least, we have a big we have sold a short term cash need in a good manner.

And and pleased to want to remind you as well that we we we did that equity raise with a 22% premium of the share price. So I think we are now backed by, hopefully, then soon now three large industrial owners, which see then a more, I call it, a long term have a more long term horizon with regards to investments than we typically see with some of the more call it, more a bit shortsighted financial investors on the stock market.

Moderator/Q&A Host, HydrogenPro: Thank you. And then this concludes the Q and A session for this time. Thank you again.

Jarlath, CEO, HydrogenPro: Thank you.

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