Earnings call transcript: Nekkar Q3 2025 sees revenue drop, stock rises

Nekkar ASA reported its financial results for the third quarter of 2025, revealing a decrease in revenue and profitability. Despite the challenging financial performance, the company's stock saw a slight increase of 1.98% to close at NOK 13.10, reflecting investor optimism about future prospects. The company reported a 12% year-over-year decline in revenue to NOK 124 million and a net loss of NOK 5 million. The balance sheet remains strong with no debt and NOK 170 million in cash.

Key Takeaways

• Revenue decreased by 12% year-over-year.
• EBITDA fell to NOK 3 million from NOK 14 million the previous year.
• Stock price increased by 1.98% following the earnings report.
• Strong cash position with NOK 170 million and no debt.
• Positive outlook for aquaculture and rig automation sectors.

Company Performance

Nekkar's third-quarter performance reflected challenges in its core markets, with revenue dropping by 12% compared to the same period last year. The company reported an EBITDA of NOK 3 million, significantly lower than the NOK 14 million achieved in the previous year. Despite these declines, Nekkar's strong cash position and lack of debt provide a solid foundation for future growth. The company operates across five sectors, with defense and maritime remaining its largest markets.

Financial Highlights

• Revenue: NOK 124 million, down 12% year-over-year.
• EBITDA: NOK 3 million, down from NOK 14 million last year.
• Net Profit: Minus NOK 5 million.
• Cash: NOK 170 million, with no debt.
• Total balance sheet: $751 million.

Outlook & Guidance

Looking ahead, Nekkar remains optimistic about its prospects, particularly in the aquaculture and rig automation sectors. The company is focusing on expanding its portfolio and capitalizing on favorable market conditions. Management is targeting development ambitions for 2027, with expectations of improved performance in its Pecano project. The aquaculture market is showing positive signals, driven by new regulations.

Executive Commentary

CEO Ole Falk Hansen expressed confidence in Nekkar's future, stating, "We believe Nekkar will continue to develop its operating companies towards the 2027 ambition." He highlighted the favorable outlook for aquaculture, both in the short and long term, and emphasized the company's strong position to capitalize on growing defense spending.

Risks and Challenges

• Market volatility and economic uncertainty could impact demand.
• Competitive pressures in key markets may affect margins.
• Regulatory changes in the aquaculture sector could pose challenges.
• Dependence on project timing and execution for revenue recognition.
• Potential delays in tender pipeline awards.

Q&A

During the earnings call, analysts inquired about the timing of the tender pipeline, which is sensitive between 2025 and 2026. Management addressed concerns about the Pecano project's revenue shifts, explaining that these are expected as project phases progress.

In summary, while Nekkar faced a challenging quarter with declining revenue and profitability, its strong cash position and strategic focus on growth sectors provide a positive outlook. The company's stock price increase reflects investor confidence in its future ambitions and market opportunities.

Full transcript - Nekkar Asa (NKR) Q3 2025:

Ole Falk Hansen, CEO, Nekkar: Good morning, everyone. I am Ole Falk Hansen, the CEO of Nekkar, and welcome to this third quarter presentation for Nekkar, live from Circular Lift offices. As normal, we will round off with a Q&A after the presentation. First, I would like to remind everyone that shortly after this webcast, we'll hold our first ever Capital Markets Day here at Circular Lift headquarters in Vestby. This is a physical attendance-only event, but the slides will be available online as we start the actual presentation. As part of developing our communication with the financial markets and investors, we have now launched a new web page recently, and with it, a new quarterly slide format launched today. Last quarter, we started providing more granularity on the financials for Nekkar and our operating companies.

Now, we are also including certain additional KPI metrics with regards to our operating companies, as you will see in the later slides today, to increase operational insights further for you. As a reminder, Nekkar is a long-term industrial company builder focused on ocean-based technology companies. The Nekkar Group consists of five operating companies. There have been no changes to the portfolio so far this year, but we are having several processes ongoing at the moment to both broaden our portfolio and deepen our existing investments. The Nekkar operating companies are exposed to four main end markets, with defense and maritime being the largest. The target market revenue mix is also fairly balanced across these four end markets, providing a good diversification. Let's look at some of the highlights from the third quarter and subsequent events to the quarter.

It was a pleasure yesterday to announce that Fisk was awarded a delivery from an undisclosed leading Norwegian fish farmer for four Protectors closed containment systems. At the same time, we are now finalizing delivery of two systems to MOE, announced a year ago. For Circular Lift, we signed a $5 million contract with DMC back in July, and in addition, there has been signed a service contract with Wisec after quarter end for two years of total $40 million. This is the largest service scope per year ever experienced in Circular Lift. IntelliVelve secured deployment of rig number three for the IntelliVelve automation platform in the quarter. On top of this, additional two rigs have been signed with the same automation platform after quarter end, which includes both a fixed lump sum project and a software as a service fee throughout the contract period.

For the financials, revenue for Nekkar came in at NOK 124 million in the quarter, which is down from NOK 140 million same quarter last year. The EBITDA ended at positive NOK 3 million for the group, which is behind last year's figures, but an improvement from previous reported quarters this year. Net profit of minus NOK 5 million was negatively impacted by Fisk, who were impacted by market entry projects and investments into product developments. Nekkar continues to enjoy a strong balance sheet with solid cash of NOK 170 million, NOK 80 million in treasury shares, and no debt. The order intake was NOK 117 million in the quarter, driven by the announced orders in Circular Lift and IntelliVelve Lift. Cash flow from business was negative of NOK 32 million related to working capital.

Our third quarter revenue is similar to recent levels throughout this year and still low due to the order backlog situation in Circular Lift, as the other companies are experiencing steady growth. The EBITDA is still below our historical track record and what should be our true cycle level, but is expected to continue improving as legacy projects in Pecano now ramp up. The volume contribution from Circular Lift continues to be low as we wait for further awards in the market space. In general, we continue to see a positive underlying development in the operating companies for the coming quarters and years ahead. The order intake was $117 million in the third quarter, which was driven primarily by the announced DMC award in Circular Lift, as well as the mentioned IntelliVelve Lift awards.

The order backlog at the end of the third quarter was $740 million, which provides decent visibility for the coming quarters. The majority of the backlog is still related to Circular Lift, but more than $100 million is from other companies. Please note that Fisk is not consolidated in Nekkar's order intake and backlog. Neither is, of course, also the recent awards in IntelliVelve Lift subsequent to the quarter. Let's take a look at Circular Lift. For the market and sales side, the Indian Navy with the Wisec delivery that we commissioned a year ago have now signed a service contract, which was signed subsequent to the quarter. As mentioned, this is the largest service contract per year ever experienced, with $40 million over two years.

The tendering activity remains high and continues to be driven by the growing demand in the defense market, representing a substantial share of tendering activity. Exact timing of these awards remains linked to factors outside of Circular Lift control, such as government planning and major infrastructure decisions. As such, no larger contracts have been awarded nor lost in the quarter and also in this year, as reported on the new KPI, as you can see bottom right. For the financials, third quarter revenues continue to be at the lower level than previously, driven by the lower order intake during the last 12 to 18 months. This also impacts profitability with all past revenues to gross margins. The EBITDA of 9% is, however, somewhat up from last quarter, as we observe a favorable development in the project mix.

For operational status, ongoing projects, we see good execution and cash generation in all projects. Circular Lift has a flexible operating model with outsourced production, which enables scale-up in activity level going forward. Service business has decent activity levels with upgrade work driving favorable development. What you can see also now on the right-hand side with the last 12 months' service activities. We will continue to include these operational KPIs for Circular Lift in the coming quarters to come. We continue to see a good outlook for Circular Lift, where the backlog remains of around $577 million. We see high tendering activity in the new build and larger upgrade market. For the tender pipeline, the key change last quarter is that we have combined 2025 and 2026 in this presentation.

We did that also in the third quarter last year, and it is a reflection of the sensitivity in terms of timing with regards to calendar year. The total tender pipeline of around $7 million is fairly unchanged and represents a solid outlook. It has been a challenge throughout this year to estimate the award timing, but we have constantly updated for what we see and presented views we believe are fair. Although 2025 did not materialize so far for us on the market side as we expected when we started the year, we still expect a good market outlook for Circular Lift in the coming couple of years, with $7 million of tenders to be awarded in the marketplace. Turning to Fisk, our aquaculture company, we are proud to announce the order of four Protectors closed containment systems to an undisclosed leading Norwegian fish farmer.

This confirms trust in Fisk and the Protectors closed containment system. The Miljøflex ordering went into effect in October, enabling farmers localized in red zones to recover withdrawn biomass by converting to closed containment system. I will get back to this on the next slide, but this is a positive trigger point for Fisk in the short term. Financially, third quarter revenues came in at $78 million, up from $40 million a year earlier. Fisk's profitability is still impacted by cost for market entry projects and product development for the new Protectors design now being finalized and delivered. Operationally, our two Protectors system ordered end of last year by MOE are now being installed at location. Also here, on the bottom right side, we have included a new operational KPI for Fisk install systems.

No other suppliers are able to demonstrate this track record as Fisk is demonstrating here. As mentioned, we are proud to say that Fisk was awarded a new contract to deliver four Protectors closed containment systems to a leading Norwegian fish farmer. The design is similar to the award a year ago for the two units currently being delivered. We believe this is a company game changer in terms of continuing the development of Fisk and marking its position as the leading closed containment provider. Additionally, we are proud to say that the two orders a year ago to an undisclosed leading Norwegian fish farmer are now being installed and delivered to MOE. The two Protector systems are being installed at the moment at MOE's fish farm at Slottenes, and all major components are finalized and transported to the site.

The floating collar arrival on the vessel at the picture are now floating in the sea. MOE plans for fish in the new system by year-end this year. Slottenes is already equipped with two Fisk eco-mountain systems and will now be accompanied by two new sister installations. Let's move to IntelliVelve Lift, our industrial software and automation provider. We are pleased to see a solid market interest internationally for the new products for automation services from IntelliVelve Lift. We are very glad to say that we have now received three awards since we last time presented our financial figures in the second quarter. First, during the third quarter, IntelliVelve Lift went live with a new rig with transmission for the Deepwater Conqueror. Following quarter's end, two additional awards were secured by IntelliVelve and IntelliVelve Lift.

Financially, growth in external orders is driving positive activity development as third quarter revenues are up 40% year on year. Operationally, IntelliVelve Lift now has a strong focus on automation as the game-changing automation platform is demonstrating its potential. On IntelliVelve Lift, we have also included a new KPI to our operation reporting package. As you will see on the bottom right side, we have included an overview of installed rig automation systems. It was very pleasing to see IntelliVelve Lift, the joint venture between IntelliVelve Lift and Transocean, and IntelliVelve Lift secured two orders with Transocean. First, there was an award for providing automation services to the Transocean Deepwater Conqueror and ultra-deepwater drillship. The IntelliVelve Lift platform was installed and commissioned over a four-day period in September. Initially, automation services will concentrate on automated tripping and drilling connection.

For IntelliVelve Lift, this contract comprised a fixed sum project plus a software as a service fee throughout the contract period. This is the third deployment of the IntelliVelve Lift automation platform. Followingly, Transocean Deepwater Titan, also an ultra-deepwater drillship, will be installed in the coming quarter with the same delivery and pricing model as the previous rig. Let's move to GlobeTech, which we acquired about a year ago. We continue to observe high customer activity on the market side, with sales driven by new vessels and deliveries to existing clients. Subsequent to the quarter, GlobeTech successfully acquired FirstPoint, a maritime IT provider in Poland. The strategic bolt-on acquisition adds 23 vessels to the fleet and was done at accretive multiples. Revenues for the quarter were $23 million, up 10% year on year, with continued solid profitability of around 20% in the quarter.

As you will observe on the right-hand side, we have included a new KPI to increase operational transparency. For GlobeTech, we have included repeat business as a percentage of last 12 months' revenue to highlight reoccurring revenues, and also at the bottom right, contracted vessels. Bounding off with Pecano Ole Hansen, our offshore lifting and handling technology provider. The company continues to tender for a handful of solid leads across various sub-segments. Focus is on repeat product deliveries with known cost and risk. For the EBITDA, we see improved results, however still challenging with minus $5 million in the quarter. Progress on the newly signed projects this year is now generating a larger share of revenues. We continue to expect favorable development through the coming quarters as these market entry projects mature and are being delivered and recent award advances.

On the operational side, we have improved cost control and follow-up in all phases with new people strengthening the team. Let's take a closer look at some of the key financial details. Revenue for the quarter came in at $124 million, representing a 12% decrease compared to the same period last year. The decline is primarily due to lower activity in Circular Lift. On a positive note, the other operating companies, IntelliVelve Lift, Pecano, and GlobeTech, deliver solid revenue contributions. On profitability, EBITDA ended at the quarter at $3 million compared to $14 million last year. The same effect is here related to Circular Lift at Pecano. Q3 net financial items was minus $4 million, driven by Nekkar's share of Fisk quarterly loss. As a result, the net profit for the quarter was minus $5 million.

On this slide, you will find the key financial metrics for Nekkar operating companies. Further information is, as per last quarter, available in an Excel upload to Nekkar's webpage and is updated on a quarterly basis. Let's take a look at our balance sheet. Starting with the assets, our financial assets are primarily tied to our ownership in Fisk, which at the end of the quarter was valued at $70 million, reflecting Nekkar's share of Fisk's equity and goodwill. Working capital ended at a positive $80 million at the quarter end, which is an increase of $28 million compared to last quarter. This reflects natural fluctuations driven by project phasing. Still, the working capital is at very good and low levels. Nekkar's total balance sheet amounted to $751 million, and we remain debt-free and have a robust equity of almost $400 million.

Turning to cash flow, cash flow from business was negative with $32 million in the third quarter. This was driven by the mentioned increase in working capital. We also have a cash outflow of $17 million in the quarter related to the share buyback program. In total, net cash outflow in the third quarter was $55 million. Nekkar has a strong financial foundation, which per end of the quarter was at $170 million in cash, $8 million treasury shares of $80 million, and an untapped credit facility of $200 million. Let's summarize. We believe Nekkar will continue to develop its operating company towards the 2027 ambition and is well equipped with a solid balance sheet to also navigate inorganic opportunities. Key highlight this quarter is the recent Fisk award of four Protectors closed containment system.

Outlook remains favorable in terms of aquaculture, both short term and long term. Furthermore, IntelliVelve Lift, with its rig automation system, has seen a breakthrough in the last months with three new rigs signed up to SARS complex. Circular Lift is well positioned to capitalize on growing defense spending in the coming horizon. Thank you for listening, and hope to see many of you at our Capital Markets Day about an hour from now on here in Vestby today. Before we move on, let's round off with some Q&A. Question number one here on Circular Lift: Is the tender pipeline for 2025 merged with 2026 because it's unclear if the decision will come in 2025 or 2026? Yeah, we had the same approach when we presented the third quarter last year.

Of course, having only one quarter left this year when the pipeline was made, it is very sensitive to year-end timing. That is why we have combined 2025 with 2026. Just a follow-up question. For the phasing of Pecano Oceans Lift projects, how should we think about activity going into Q4? Will it be less for the startup projects than in Q3? Yeah, the two first projects will continue to kind of have a declining share of revenue trend as they are now moving into final delivery on the two crane awards. In parallel, the two more recent awards will gradually increase its share of revenues as we are now into the production phase of both those two crane contracts. There are no further questions. With that, thank you all for listening in.

We will come back to the Capital Markets Day for those of you which are here. Thank you.

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