Earnings call transcript: Soiltech sees Q1 2025 revenue jump, stock rises 2.32%

Soiltech ASA (market cap: $39.27M) reported a record revenue for the first quarter of 2025, marking a significant year-on-year increase. The company’s stock saw a 2.32% rise following the announcement, reflecting investor confidence in its robust financial performance and strategic initiatives. According to InvestingPro’s Financial Health assessment, the company maintains a FAIR overall rating, suggesting stable but measured growth potential.

Key Takeaways

• Record Q1 revenue of NOK 85.6 million, a 53% increase year-on-year.
• Adjusted EBITDA rose 84% to NOK 18 million, with a margin increase to 21%.
• Soiltech’s stock price increased by 2.32% post-announcement.
• Solid waste handling now accounts for 40% of total revenue.
• New projects expected to generate approximately NOK 100 million annually.

Company Performance

Soiltech ASA demonstrated strong financial performance in the first quarter of 2025, with revenues reaching NOK 85.6 million, representing a 53% increase compared to the same period last year. The company’s focus on innovation and expansion in waste management services has been a key driver of this growth. Soiltech’s strategic investments in personnel and technology have bolstered its competitive position, particularly in the Norwegian market, which contributes 87% of its revenue.

Financial Highlights

• Revenue: NOK 85.6 million, up 53% year-on-year.
• Adjusted EBITDA: NOK 18 million, up 84% year-on-year.
• EBITDA Margin: 21%, up from 18% in Q1 2024.
• Profit before tax: NOK 6.7 million, up from NOK 3.1 million.
• Equity ratio: 48%.

Market Reaction

Following the earnings announcement, Soiltech’s stock price rose by 2.32%, reflecting positive investor sentiment. While the stock has gained 12.61% year-to-date, it’s down 21.52% over the past year. The stock’s last close value was NOK 51.8, and it remains within its 52-week range of NOK 42.3 to NOK 64. The market’s reaction underscores confidence in Soiltech’s strategic direction and growth potential. Discover more detailed analysis and insights with a InvestingPro subscription, including exclusive ProTips and comprehensive financial metrics.

Outlook & Guidance

Soiltech is targeting an EBITDA margin of 25% and expects gross margins to exceed 40%. The company anticipates generating approximately NOK 100 million annually from new projects, with potential for international revenue growth. These projections highlight Soiltech’s commitment to expanding its market footprint and enhancing profitability. Analyst consensus from InvestingPro suggests a positive outlook, with a price target of $6.58, indicating potential upside from current levels. The next earnings report is expected on May 28, 2025.

Executive Commentary

CEO Jan Erik emphasized the company’s strong industry track record and growth opportunities, stating, "We have managed to build a solid track record in this industry." He also noted the company’s ongoing efforts to innovate in waste reduction, saying, "We are always looking for how we can reduce the waste."

Risks and Challenges

• Market Saturation: Increasing competition in waste management could pressure margins.
• Project Mobilization: New project setups may temporarily impact margins.
• Recruitment Costs: Ongoing investments in personnel training and recruitment could affect short-term profitability.
• International Expansion: Challenges in entering new markets may pose risks to projected revenue growth.

Q&A

During the earnings call, analysts inquired about the potential extension of contracts with Equinor and the impact of new projects on revenue. Soiltech confirmed that new projects are expected to generate around NOK 100 million annually, highlighting the company’s strategic focus on expanding its service offerings and market reach.

Full transcript - Soiltech ASA (STECH) Q1 2025:

Yuklai, Moderator: Yes. Good morning all, and thank you for joining this presentation of Soiltec’s first quarter results for, ’25. Soiltek announced a strong quarter with strong performance across all key financial metrics. And presenting today will be Almeric Tietros, the CEO of Soiltek, and joining him, Tov Wessley, the company’s CFO. My name is Yuklai, and I will have the pleasure of moderating this session.

Please note that if you have any questions to the management, please use the chat function at the bottom of the screen, and then we will get back to them during the Q and A session after the presentation. So with that said, I’ll leave the word over to you, Jan Erik and Tove.

Tova Wessley, CFO, Soiltek: Hello, and good morning, everyone. Before we begin, I would like to remind all parties that some of the statements we will be making today are forward looking. These matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements. Our comments today also include non IFRS financial measures. Additional details and reconciliation to the most directly comparable IFRS financial measures can be found in our first quarter press release, which is on our website.

With that, I will turn the call over to Jan Erik.

Jan Erik, CEO, Soiltek: Thank you, Thora, and good morning to everyone. First of all, I will start to say that business is going well. 2025 will be a good year, and we are optimistic about the years ahead as well. We are very busy, which is a good sign. So let’s have a look at this quarter.

We start with the the numbers. And if you look at the revenue side, we managed to get the highest revenue ever in a quarter. We surpassed the level of q four where we had 80,000,000, and now we we are at 86,000,000. We remember those who remember the third quarter last year, we had we managed to get above 70 for the first time. So we are in the period with quite rapid growth.

We got adjusted EBITDA of 18,000,000 and a profit before tax of 6,700,000.0. Tor will review these numbers compared to last year, etcetera, later in this presentation. So if I can then go over and and summarizing what contributed to these numbers, I would say that, you know, we’ve had a strategy for complementing our fluids treatment business with solid waste handling or cutting sanding business for some years. It takes some time to get into this market. But now I feel that we have managed to to start gaining a strong foothold here in in that segment, and we have we are starting to build a track record, which is important in relation to the clients and and future opportunities.

So this quarter, we had all the soil based handling business was 40% of the total sales, which is a steep increase from previous quarters. We have developed a system which we call a Zotix smart transfer system, which means that we are tailor making the solid waste containment and transfer solutions on the rig to each rig. And this has been very well received by clients, and think it’s one key reasons that we are we are getting contracts in in these segments. We’ll come back to that a little bit later on too. We also, all the time, chasing new segments within the the offshore and onshore waste handling.

And we managed to also grab into one segment that we did not do so much before, which is the onshore waste handling, and that also contributed well in in this quarter. And, basically, what onshore waste handling is is that once the the the the waste arrives onshore, we are taking care of it, and we are containing it in in transport carriers or or skips, and we are delivering it to the onshore waste treatment facilities on behalf of the client. This is an interesting add on business, which we hope that we will get more off in the future. Also, we were very concerned also focused on the uptime of our our projects, and we have we had a % uptime across all projects, meaning that we get a % of the revenue that we could earn according to a contract. So, again, yeah, a good quarter for the for the operating organization in Salt Lake.

So and then moving on to the new contracts that we have that we did announce in the last quarter. These are key contracts because they are are are quite large, and they constitute, for some of the projects, the the whole range of services that we have. And due to to the preparations for these contracts, we we saw in in this quarter, there was a high activity related to mobilization activities and also the hiring of field personnel for these new projects. We need to make sure that we have the right people to operate these projects. It’s solid waste handling and cuttings transfer on rig is different than fluids treatments.

You need people with experience not only from fluid treatment, but also from solid sanding. And you need to to to capture these people ahead of projects. And there’s a lot of training activities also on ongoing associated with this. So we are investing in some costs and people in this phase while we are growing and while we are starting up new projects. I think this is important for investors to be aware of.

So a quick look at at the three contracts we announced in the last quarter. The solid waste handling operations on Grana for Equinor, they they started during the first quarter. And, also, I’m happy to inform that the translation balance in the for OV started now in in the second quarter, and it’s all going well. And we are also in very active when it comes to installing the equipment on the bolster, Deep Sea bolster, which traveled from Namibia via Las Palmas and now is in Norway preparing for contacts here in Norway. This is also active, and we have a lot of people on on the rig or had has had to install our equipment.

So summarizing a little bit the atmosphere in SOTEC, we we feel that we have a very solid momentum. We continue to gain market share, which is our target. We see that the pipeline with the leading counterparties is is growing. We we we are active on on the tendering side and also in the approaching our clients with proposals. And I would say that, no, we have only managed to have a full service delivery, all services across the segment of of tailings waste management.

This this has given us opportunities and will give us opportunities going forward. Alright. So that we can go to the next slide. I thought we should just highlight some of the things which are important for SORTECH at the moment, which they because they they are complicated projects. They contain most of the services that we have, and they are not, at least also, strong cash flow contributors, to Soltech.

When’s they start up? Testosterone bonds, we talked about. It has started up. It has the full portfolio of our services. It’s fluid processing.

It’s cuttings containment on transfer on the rig, and it’s also transporting our cuttings on on to shore on the PSV supply boat. So and then if you look into look at the picture to the left, you you have a a little picture of how big this operation is. You can see the tanks with SORTEK name on it. We have on on PSV, single PSV, we have 16 of these tanks. And we also have personnel on board to make sure that the handling of the waste transfer of of the waste from the rig to these tanks are going well.

If you go down to the picture below, you see a picture from Deepsea Bolster, which a project that hasn’t started. But what’s interesting here is that you see these green frames. Inside there, you see the cuttings holding tanks on the rig. So when when these tanks are are filled up, the cuttings is being transferred from these tanks via a hose over the side of of the of the rig and into the tanks that you see on the above picture. So all of these tanks that we have on rig is also on by SOTEC.

And you can see the piping beneath, which is the piping that connects all the tanks, but also is is is going to the to the shaker, you know, and and collecting the waste there, and it’s being pumped by our system with very strong vacuum systems into these tanks, and they out again in into these rigs. And sometimes the rig also has a skip and chip system, which is another system, and you might wanna have some backup when you are doing a drilling operations, backup in terms of cutting storage solutions on the rig. Because if you get into bad weather, you need to be able to to store the the cuttings and not stop the operations if you cannot, for some reason, offload the cuttings, onto the PSC. So I can also happy to say that we had a successful delivery here with with our first offloading to to the PSV and delivering the the waste onshore then. So that’s transition balance.

Moving on to the Deep Sea Ball Star contact with Northern Ocean for Equinor. It’s it’s well underway. It’s scheduled to start in in February ’25. We have the same scope here except that we do not have the scope for the transfer on on the PSV. This is it’s a long term contract.

It’s a two years plus five, one year option. So this will be an important, contact for Salt Lake once it starts and it it’s in it’s, on on track. Also, I would like to give you an update on our activities in in Saudi. We I would like to to mention there that we have transported our cutting treatment unit, the CTT unit, to our yard that we we operate together with EssoDama in Saudi. And what we are doing now is that you can see it on the the right hand side there.

It’s a picture taken in in our workshop in in at the. And now we are in the process of of splitting it up. It’s more or less ready. We’re gonna do some last fine commissioning on it, and then we are going to start with our own testing of cutting volume in the yard, which is very interesting. This is is a new technology compared to the technology which is used in the market today, which is a thermal technology you using a heat, you know, to to kind of burn the the cuttings and and take out all.

What’s what’s new on this one for Salt Lake is that here we are doing a treatment of the cuttings, meaning we are taking out out the oil of the cuttings so that it it can be safely, deep disposed of. And this is an international requirement. It’s also in in The Middle East that you are not allowed to dispose of drill cuttings with an oil on cuttings content build above 1%. So this is something if if we are successful, we’ll have a very good upside for Salt Lake. But I’d like to say that we we need to see the results of of the testing first, but we are, we’re very eager to to get started.

Okay. There is no news on the contract side since, the last quarterly presentation, so we don’t need to go into more details on this slide and and the other side. We are we’re definitely working on other prospects, and we’re optimistic that we’ll be able to increase our portfolio, but I don’t have any news here. So we can skip this slide. And, also, the next, there’s no no news at all.

So then I’d leave the word over back over to you, Tova, to do the financial review of of the numbers.

Tova Wessley, CFO, Soiltek: Thank you, Jan Erik. I’m very excited to take you through Salt Lake’s strong performance this quarter. I would also like to say that all the numbers disclosed today are presented in NOK. We are very proud to report a record high Q1 revenue of $85,600,000 which is up 53% year on year. The strong performance was driven by a significant growth in the demand of our solid waste handling services that Ferdinand and Erik mentioned.

If you look at then revenue by service, we categorized our services into four segments, with two of these segments accounting for over 90% of our total revenue this quarter. Fluid treatment with the STT accounted for 55% of the revenue, down from 62% in Q1 twenty twenty four. However, in absolute revenue, this increased from $35,000,000 to 47,000,000 Solid waste handling stood for 40% of the revenue, a significant increase from 24% in the same quarter last year. The strong performance in solid waste handling stems from a higher number and a larger scale of contracts. As Jan Erik mentioned, our smart transfer system has been very well received by clients.

Additionally, the project specific onshore waste handling, which is a part of the solid waste handling segments accounted for around 10% of the revenue in Q1. Please note that the level of activity on the onshore waste handling will vary from quarter to quarter based on the clients’ needs and our ability to sell in this service. However, we see this as a market with future potential. If we look at revenue by country, Norway accounted for 87% of the revenue, up from 62 in Q1 twenty twenty four, and the international share accounted for 13%, down from 38% last year. The reduction in international revenue reflects timing of contracts activity.

We expect international revenue to increase over the course of the year, particularly with the UMV Petron contract in Romania ramping up. If we then move on to the adjusted EBITDA, this came in with million, up 84% year on year, with an EBITDA margin of 21%, up from 18% in Q1 twenty twenty four. The adjusted EBITDA margin of 21% was slightly lower than the full year 2024 margin of 23%, primarily due to ongoing recruitment, as Jan Erik mentioned, and onboarding of field personnel and also overtime during mobilization and startup of major projects Eskana, Transorschen Barrans and Deep Sea Volstad. We expect the margins to improve in the second half of twenty twenty five as these projects reach steady state operations and the newly hired staff becomes fully trained and the operational efficiencies are realized. We had a profit before tax in Q1 of NOK 6,700,000.0, up from NOK 3,100,000.0 in Q1 twenty twenty four.

Profit before tax margin was 8%, up from 5% in Q1 last year. This is a result of the high activity in the quarter. If we then move on to the balance sheet, so if we then move to the next slide. Our equity ratio remains strong at 48%, though this will decline slightly in Q2 following the inclusion of new lease agreements entered into in 2024 and the delivery of the equipment happening now in Q2 twenty twenty five. Now turning on to the liquidity.

In Q1 twenty twenty five, we generated 8,300,000.0 of cash flow from operations. Cash outflow from investing activity was NOK 9,300,000.0, mainly for investments in solid waste handling equipment. Cash flow from financing activities consisting of interest and installment was minus NOK12 million with no drawdown on loan facilities during the quarter. Cash at the end of Q1 was NOK21.4 million. Demobilization activities happening now in Q1 impacted the cash position.

This cost will be reimbursed by client in Q2. I’m sorry. Included in the unused portion of the loan facility of 39600000.0, Our total available liquidity at the end of Q1 was NOK61 million. Net interest bearing debt came to NOK163 million at the end of Q1 compared to NOK159 million at year end 2024. The net EBITDA ratio as at the end of Q1 twenty twenty five was 2.26, down from 2.7 at year end.

This ratio remains comfortably within our covenant threshold of four. Thank you for your attention. I will now hand it back to Jan Erik for a discussion on the outlook.

Jan Erik, CEO, Soiltek: Thank you, Tova. We already touched upon the outlook early in in this meeting. I would say that we are in in a favorable position to continue the growth. We we have and this is the result of hard work from over people over over many years, not not only to to 25. But we we have managed to to build a solid track record in this industry, which is very important.

We have a lot of clients, a lot of very demanding clients, which challenges us every day in every operation. We are need to deliver clean water, which is below the the the oil content requirement requirements that we that they demand from us. We we have been mentioned on that every day. We have to be good on the rig, make sure that we can handle the waste in time so that we don’t stop the operations. We are on on a critical line when we receive the cuttings over the shaker, and we transport it on the rig and then onto the boat onto the boat.

We cannot make any mistakes. So we we put a lot of of money and time into the training of of our people. And but we have managed to get this the position that we are in. We we have earned our place in in the market for building waste management. So that give us also a very good position to work in new projects and and continue the growth that we we are aiming for, you know, going forward.

So we’ve seen the volatility in in the oil price lately. And, of course, we questions ourselves, will this have any impact on us? And it’s very hard to say if it if it will or not in the future. But what I can say is that we have not seen any impact or any signs of this, as of now. We haven’t got any signals from our clients that there is any changes, in in their plans, etcetera.

So I I think, I’ve been in this market for a long time, many years, and it goes up up and down. But I think we are quite far away from the oil price levels oil price levels yet, to have any major impact on the activities of Salt Lake, which are obviously linked a lot to the rig market activities. But we are in, a market, a very good market. We have all our activities at the at the moment in Europe. And we we the the projects that we are working on is some exploration and and and some development drilling, mostly development drilling, which is good.

It’s long term projects. We so I I would say that and also addition, not forgetting that about one third of our revenues is coming from producing assets, you know, and on the from the contract that we have with Equinor. So these are contracts that will not be impacted by the oil price. The the production there will go on. We we see that, you know, when we have been moving our way into this market, we we also we always known that we must be better or or offer better solutions, technical solutions to our clients and more cost effective solutions.

And this we have built up a portfolio and, I would say, reputation for being innovative in the market. And we are always looking for how we can reduce the waste, which we are doing in our fluids treatment because instead of transporting all the fluid waste to shore, we are treating it on the platform so it can be discharged. So this is one thing. But, also, recycling of of the waste is important. We see, for example, in in Saudi, the focus is how can we reuse the water, all the fresh water, which is being used in in the process of cleaning tanks, etcetera.

And we we’re looking for a way to see if we can contribute to the recycling there. We all I’ve already recycled brine, which is a substance which is being used in in relation to to the completion of wells. So this is a focus areas. These are things that our clients want, and we plan to take advantage of those. Finally, I would also say, you know, this, the question of dividend is is is is an issue or a question that comes up from our shareholders, which we appreciate, and we we we we’re getting questions about this and being addressed to our board.

And the the the these questions are always taken seriously. And what I I would like to to just state is what the board’s opinion is on this, and and this is that, you know, we Zortech is dividend is evaluating the dividend in context of the the growth opportunities that we see in in the market at all times. And currently, we we see strong and good growth opportunities. So we need to make sure that we have our powder dry, so to speak, that we have the retain that we have them to retain sufficient financial capacity. And having said that, the, the message is from the board is that the board will continuously consider whether a dividend is appropriate at any given time.

Thank you. That concludes our presentations. Then I will hand the the word over to Nikolay if there’s any questions.

Yuklai, Moderator: Perfect, Jan Erik. Thank you so much. So so with that, we can open up for the q and a session. As a reminder, if you have any questions, please post them through the q and a chat function, and we will try to cover as many as possible. Possible.

So starting off, what will be the revenue and profit effect from the newly started projects in the coming quarters?

Jan Erik, CEO, Soiltek: Torben, would you

Tova Wessley, CFO, Soiltek: like Yes. I think we addressed this in the last quarterly report saying that, with the looking at these projects, when they all come in steady state, they will generate more or less approximately 100,000,000 per year. And it’s a little bit uncertain yet when, as we said, Trauma and Financial Balance has started, Volstad has not yet. But when all of them are in steady state, they will generate approximately 100,000,000 in a year.

Yuklai, Moderator: Yeah. Perfect, Tove. So another question, it’s a bit long, so here it is. Trying to understand a steady state gross margin, I’d like to ask about the Q1 impact of pre hiring and training of personnel for growth projects and the impact of such in the Q1 reported operating cost. How much of the Q1 reported operating cost of NOK52.8 million relate to the revenue generating projects?

So again, the question is how much of the Q1 reported operating cost of NOK52.8 million relate to the revenue generating projects?

Jan Erik, CEO, Soiltek: I think what if if I can try and give some initial comments to that is that we we we are when it comes to the the margins, you know, we as as Thore said, if you start with the EBITDA margin, what what we’re looking at, you know, once we are in in steady state, we we we are targeting 25% EBITDA margin. And and in order to achieve that EBITDA margin, this will also roll into the gross margins. So the gross margin that we had, Togo, what what did we have during during the the quarter?

Tova Wessley, CFO, Soiltek: 38%.

Jan Erik, CEO, Soiltek: Yes. And and and last year, we were at 42. Yeah. 42. So we we are aiming at I think the best way to answer this is that we we believe we our target will be to to come up with, you know, across above the the forties in the margin and and targeting towards the the 42 that we had last year.

So I would say that if instead of if you can do the the maths, if I would say that maybe maybe three or 4% currently of the operating cost is related to this hiring and mobilization activities. Because without those, things going on, we would have been on the same margin that we had last year approximately, if that is is an answer that you understand.

Yuklai, Moderator: Perfect, Yanmarik. Thank you. And then the next question is the Equinor frame contract is now just over twelve months from expiration unless the prolongation options are used. By what time do the customer need to exercise their prolongation option? When do when can we expect to know whether the contract will be prolonged or not?

Jan Erik, CEO, Soiltek: This is is is a good question. And I can just would like to go a little bit back. You know, we we’ve had this frame contact with Equinor. We first got that in in 02/2013 for for nine years. And then we had that until 02/22 when it was renewed for another, you know, up to up to fourteen year twelve years.

So it goes until 02/24. And the way it is, it’s like you said that there is two years options that Equinor has to extend the contact. And when we signed the last agreement in in 02/22, it was only SORTECH and and one more company TWMA that got the waste management contact with Equinor. So previous, companies will will will that had it, including Halliburton and Schlumberger did not get the frame agreement. So, the way that our competitors come in is that they cannot go through this agreement.

They have to go through, the integrated services or other ways, to come in. But, definitely, this puts, Shortex in in a good position within their system. I I they have to exercise the the options approximately two or three months ahead of from the top of my head, ahead of the expiry. And under this agreement, all the contacts that you see are have different startup times. So I we are getting very good feedback from Equinor.

I don’t see any reason why we will not just to comfort you because I understand, I guess, why will we not get the extensions on this contract? So I I will not worry worry on it based on on the on the the contact volumes that we have with them, and the the the new contracts that we we have, got with them just, it isn’t it’s approved for that. We just signed up with two very large contracts in in the last quarter with Gartner and and and Statfull.

Yuklai, Moderator: Okay. Thank you. Next question. The presented numbers indicate an unlevered free cash flow of approximately NOK 7,000,000 for the quarter. Is the unlevered free cash flow expected to be positive in the coming quarters?

Tova Wessley, CFO, Soiltek: Absolutely. I think also here, we’ll highlight what I mentioned earlier that we have had a lot of mobilization expenses in Q1, which will then be reimbursed by clients in q two, which will then increase the the cash position.

Yuklai, Moderator: Okay. Perfect. And then the last question here. Are there any targets to reuse the waste generated from the new thermal process in KSA, reuse of the water, oil and solid materials?

Jan Erik, CEO, Soiltek: Yes. This is I think it’s key to this product is the possibility to reuse the the output from this process. And we are able to reuse the water. We we have already shown that in Norway that we are able to reuse it back in for reuse in the drilling process. Also, we are talking to Aramco to to use it for, you know, cleaning purposes.

They are doing that, cleaning tanks, etcetera, and and for all other purposes. So this is the process that we have discussions with Aramco now is ongoing, how that can be recycle recycled. So that’s the wet fractions. But and also the oil that is being recovered, the the what to say, the oil based mud, which is being extracted from this process is something that also we have tested before and that can be reused building new drilling fluids and drilling mud in the process. So this, we have evidence.

This is also our plan. And now finally, the we can say the the cuttings or or or or the the crushed stone, which is coming off of this is also something that if we can remove the oil on the cuttings, this cuttings can also be recycled either in in cement, what which we have tested and got positive feedback on, or in in road fields. You know? The the the using a cement, it it it’s interesting because the sand that they have in solid cannot be used in in cement. So you need to import a stone to use in in cement process.

So did this really key key for us, of course, that we would try to be successful on the CTT.

Yuklai, Moderator: Yep. Perfect, Jan Erik. I think we reached the end of the questions. So thank you all for con contributing, and thank you for letting us host your quarterly presentation. And with that, I’ll I’ll leave the word back to you, Jan Erik, for some concluding remarks.

Jan Erik, CEO, Soiltek: Yeah. Thank you very much to everyone for listening in. My my last message here is is that we are I feel that we are in a very good position. We we have a extremely good team here. This is very motivated to continue the growth story for for Soltech.

We are very motivated to get the margins up at at the level where where they should be. So and we we think that we should be able to, you know, see in more contracts coming in in in the Softech portfolio. Thank you.

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