Welcome everyone to our Q1 trading update. This call replaces our regular call, which was scheduled for next week, to present you our Q numbers. Reason for that is that we have executed last night a successful private placement in the amount of NOK 550 million. Eirik will touch on that in a moment slightly. I'm happy about an oversubscribed private placement, and that shows great trust into Hexagon. Thank you, our investors, for this trust. This cap raise enables us to have a stronger balance sheet and improved financial flexibility. Financial flexibility due to a renegotiated finance agreement with our lending partners, which really substantially reduces the leverage risk and covenant risk which we had, and some of you brought up multiple times during the course of the last year.
One aspect is asking for the fix of our balance sheet. The other is walking the talk, and what is the management, the company, doing. We have executed a significant restructuring over the last 12 months. And one testimony, one walk the talk is what Eirik will show you in the Q1 numbers. We have a leaner cost base, and we have tightened cash discipline. This leads to a significant improved EBITDA breakeven point. This is also supported by restructuring in one of our markets in Europe, where we are consolidating and moving a production from Poland to our facility in Germany, which will lead to operational leverage in the second half of this year. This will mean that we have implemented cost action with retained capacity to scale.
We are the market leader in all our fields, and we are able to scale it up when the market comes back. When the market comes back, we are extremely well-positioned for market recovery, and we see first signs of this market recovery. Let's take one is the natural gas adoption for heavy-duty, long-haul vehicles, as explicitly in the U.S., where an increased fuel spread will lead to a shorter payback, good signs from ACT Expo, which is a show in the U.S. where fleets can experience alternative drivetrain solutions. You can go online, see the reports there. CNG has taken the stage there, and that's promising for me for the way ahead. Besides that, one area which struggled in, yeah, the last 12 months is Mobile Pipeline. We really see within the distributed energy solution sphere, new segments evolving.
We spoke about this before, and one aspect there are data centers, and I will touch this later in the presentation. Besides that, we also see demand due to geopolitical uncertainties in the world driven by the Iran war about energy independence, energy security. We see interest and really fast-growing interest in geographies like Latin America and the Middle East in our products. This is also an indication for market recovery at some point. We have entered, and we spoke in the last quarterly call about this, entered aerospace, commercial space exploration with our cylinders. We have another order in that space as well. This is a testimony for what I've said, that we want to diversify this business, go into other markets, and make us more resilient.
This makes me feel cautiously optimistic, and we are positioned to capture profitable growth in the years ahead. With that said, I would like to hand it over to Eirik, who gives you insights into our Q1 numbers, but also touches on the refinance agreement and the CapEx. Eirik, please.
Okay. Thank you, Philipp. Good morning, everyone. Thanks for dialing in. As announced yesterday, we have reached an agreement with our lending banks to amend our existing facilities. Under this amendment, we will reduce the total exposure to NOK 1.6 billion by repaying NOK 300 million on the term loan and also settling a cross-currency swap on our balance sheet with a nominal value of NOK 200 million by the end of first quarter. We further extend the maturity of all our facilities from year-end 2027 until Q2 2029, as well as extending the runway for the leverage covenant until Q4 2027. Both of these provide us with additional flexibility to steer through an uncertain market while also reducing the imminent refinancing risk.
As you can see on the right-hand side, based on pro forma numbers as of Q1, our net debt after this transaction is expected to be around NOK 740 million, and our available liquidity around NOK 600 million. We should be in a pretty good shape also from a liquidity perspective after this transaction. All in all, the combination of the amended bank agreement and new equity will significantly improve our financial flexibility and position the company well through this transition phase and for a market recovery. Before we get into the numbers, just a quick note for housekeeping.
I wanted to point out that from Q1 onwards, we are reporting the Polish business acquired through SES Composites in 2025 as discontinued operations following our decision to close that, the plant down and consolidate our footprint in Germany, as Philipp just alluded to in his introduction. Consequently, we have restated our Q4 2025 numbers for easier comparability with the ongoing operations. Moving into results for the first quarter of 2026, which was another step in the right direction for us. NOK 669 million top line, around 5% lower than Q4, adjusting for currency effect. As you would know, Q1 is typically a seasonally softer quarter for us. We did see better activity levels than expected, especially in the transit segment of our fuel systems business.
Refuse, which had a record year last year, held up relatively well in the first quarter. While the truck segment remains relatively low, we see a fairly good product mix with higher content of sleeper configuration, which carries a higher sales price. I also wanted to specifically point out that we have shipped our first batch of specialized aerospace cylinders in the first quarter, which notably only comes one and a half months after being awarded the contract. That's a great accomplishment by our engineering team and our operations team in the U.S. In Mobile Pipeline, we delivered on par quarter-over-quarter with better sales in the Americas, including to new customers, encouraging development in Latin America and Brazil specifically.
Profitability-wise, we delivered an EBITDA of NOK 57 million, which corresponds to a healthy 8.5% margin. This marks the best quarter for us since the record quarter we delivered in Q4 2024. In the quarter, we really enjoyed favorable mix effects, better volumes from Mobile Pipeline, North America. I mentioned the high-value sleeper truck configurations in the truck side. Also, the highly engineered, specialized aerospace products contributed to a strong contribution margin. Further, in line with previous quarters, we were also able to realize favorable materials prices and production cost for the quarter. All in all, we delivered a relatively healthy profitability and a significant improvement both compared to Q1 last year and also Q4 last year.
Looking at the cash flow, we had NOK 30 million change in accruals and working capital in the quarter. On the right-hand side, you will see a breakdown of the working capital. Worth noting is that our inventory reduced by close to NOK 100 million in the quarter, which is in line with expectations and also previous guidance. This was partly offset by an increase in accounts receivable, which we expect will be converted to cash in the coming quarters. In addition to that, we had cash outflow related to timing effects of annual bonus payouts in Q1, which further impacts the total number for the quarter. The underlying trend is considered positive as we see the effects of our inventory shrinking in line with our ambition.
Deducting CapEx interest payments and leasing payments, we ended up with a total net cash flow of -NOK 33 million for the quarter. We expect, as already guided, cash flow to improve in the coming quarters. Brief look at our balance sheet. Net debt by the end of Q1 stood at NOK 1.061 billion. For the avoidance of confusion, this is excluding the cross-currency swap, which is a derivative instrument that we refinance in this transaction. After this transaction, total net debt all in is expected to be around NOK 740 million, as mentioned. Equity ratio, as you see in the middle, is 48% by the end of Q1, expected to be 58% after the transaction.
Available liquidity stood at NOK 528 million, which would then correspond to around NOK 600 million on a pro forma basis, based on the Q1 numbers after the transaction. To summarize the very brief finance section here, we delivered a significant step-up in profitability in Q1, which is a direct result of our cost program and the progress we have achieved on making our business more resilient. Also with our actions, as announced yesterday, we also have in place a stronger balance sheet and more financial flexibility, which better sets us up to capitalize on the opportunities we see in the short term and mid-term. With that, I'm gonna leave it over to you again, Philipp, to take us through some of these opportunities.
Thank you, Eirik. Let's come to the commercial update and to the market fundamentals. As we have said in the past, if you see our business, we have more or less four pillars. Two of these pillars are relatively resilient, and two pillars are more or less cyclical. The more resilient ones are aftermarket, refuse, and transit. The ones who are more cyclical are truck and Mobile Pipeline. Also, these two bear or have the opportunity for us for the biggest growth in the future. Let's touch on these two step-by-step. Let's go to truck, and we spoke about this before. CNG adoption was impacted by the feel of the diesel-like experience. This diesel-like experience, or diesel performance on range and total cost of ownership, is now in place with the new Cummins X15N engine and our fuel system on board.
This closes the efficiency gap to diesel. The diesel-like experience for torque, power, et cetera, is now given. It's not an excuse anymore. We know the refueling infrastructure is in place and is consistently improving. You know, with our partner Pioneer, we have leasing offerings now in the market explicitly for CNG-powered vehicles. As we have spoken in the past, with EPA 2027 NOx emission rule in place from January 1st, 2027 onwards, there will be requirements on diesel which CNG can fulfill. Let me come to the next slide, which shows you one big aspect for U.S. fleets is the profitability aspect besides the emission aspect. What we have seen over the past, also in the years, and we spoke about this over the last years as well, is in diesel we saw a lot of spikes, like kind of a fiber curve going up and down.
Natural gas stayed relatively flat or flattish here. Why was this the case? The case is in the composition of the fuel at the pump in itself, we try to give you an illustrative explanation of why is this the case. If you take diesel, the pump price of diesel is, with a majority impacted by the refining aspect and the commodity price of diesel. More than 50% of the pump price of diesel is impacted by these two aspects. If you take CNG, the commodity price is significantly lower, or less than 30% or whatever. That's kind of an indication where it is. If the commodity goes up, diesel goes significantly more up than CNG.
That leads us to significant better paybacks, and you will see this in the appendix, and I invite you to dig through our vast documents which we have provided you with the private placement. That what you currently see with the spike of the diesel prices, explicitly in the U.S., you will see for fleets who have CNG trucks, a significantly better payback. We didn't even encounter in these numbers two to five years what we have currently seeing and where currently the diesel price is trending towards. This is a real alternative and saves fleets money. If you come to the next slide. What does this mean for us? For heavy-duty, long-haul trucking in the U.S., and we have shown this before, the industry aspiration for adoption of Class A trucks to CNG is 8%-10% all along.
This would mean in a normal year of 300,000 heavy-duty Class 8 trucks, a potential of 30,000 trucks. For us, with our current market share would this mean revenue opportunity capacity of NOK 1.5 billion. As we spoke before about, we have a lot of pilot customers out there trying the X15N engine with our fuel systems on. If they all would convert similar, like a UPS converted their fleet, this would mean for us, just for us, with the current market share, a revenue potential of NOK 750 million, which can be served with our installed revenue capacity, which we have in place. The potential is there. Now we need to see to tap it and turn this around. Let's come to the other growth area, and we discussed this a lot, is Mobile Pipeline.
We have, and you see it here, TITAN cylinders, the largest composite cylinder in the world for mobility or transportation applications. It's 75% lighter than steel. It provides 2.5 times the capacity compared to steel. It has a value proposition, provides you as a gas distribution company, a competitive advantage. We have more than 2,000 modules in operation globally for gases like CNG, RNG and helium. Our newest products, which were launched, like the TITAN 510 just in May of this year, we are moving forward in this direction. We are not stepping back. We are moving forward and developing our products further.
What is true is that, when I came on board in 2025, this market had a significant impact by higher or lower oil prices, a reduced shale activity and we suffered this, and as Eirik mentioned, we took action and restructured the business without taking capacity out. What we currently are seeing is there is interest for utility resilience. There's interest for energy independence in growing market, like in the Middle East, but also in South America and in Africa. What we also see is really rapid deployment for power for data centers, which are in sometimes don't have access to pipeline gas or have no access to high-voltage grid infrastructure or awaiting permanent infrastructure solutions. This is supported.
By the next slide, you will see that one of our customers, Certarus here, who is owned by Superior, announced a deal with a data center to supply this data center with natural gas. They explicitly spelled out that just this one data center has a potential for 200 additional CNG virtual pipeline modules, meaning mobile pipeline units. Certarus has currently a fleet of 880 trailers. You see the impact for them and the potential growth there. In this market in North America, we have a market share of 50%. We've an average deliver 200 Mobile Pipeline units and modules per year to this market. We would be able to step into this market and serve this market.
If we move on to see what we did as well is one aspect which I elaborated a little bit at the beginning, is really differentiate us going into different opportunities. We announced the $7 million U.S. dollar order in the last quarterly call, I wanna inform you that we got another from another commercial aerospace customer, another order of approximately $5 million U.S. dollar, delivering cylinders for commercial space explorations. We are actively evaluating follow-on opportunities in this space. This is a testimony, as Eirik said, about our capacity, about our capabilities within our technological know-how, and how fast we can turn these very demanding requests and projects around. This is a testimony for us, and I'm happy that we are driving this industry forward. We have been the pioneer and composite cylinder manufacturers dating back to the 1960s.
We have a unique system design in integration competency. We have deep relationships with key alternative fuel fleets. We know them all. We know the market. Our team is every day on the road talking to fleets, trying and solving issues for them proactively. This leads, for me, what I feel, to potential in the future. We have proprietary testing and recertification technology. This enables us to test without destructive testing to test these pressure vessels. It's a key enabler for certified pre-owned programs. Taking into account what we have accomplished over the last years, with 600,000 high-pressure composite cylinders manufactured and in the market, there are hundred thousands and more vehicles on the roads with our fuel systems on. We have more than 17 billion miles of real-world fuel system validation.
We know the market, we know our system, and we are homologated and integrated in 29 OEM platforms. This is here unmatched. We have the capacity, we have the know-how, and we have the team behind it, and that makes me proud to look forward. With that, I would hand it over to Eirik to give you an outlook on what we see for 2026. Eirik, please.
Okay. Thank you, Philipp. If you could jump to the next page. There we go. We're seeing the underlying trends, as Philipp said, in our markets improving somewhat from 2025. Still a mixed bag in terms of challenges and drivers and opportunities. Our Mobile Pipeline segment is still in a soft market sentiment. We do see, however, improved commercial activity and interest in the Americas in particular, both in Latin America, as we alluded to earlier, but also in our core market in North America. As Philipp also alluded to, we are seeing data center as a potential source of new demand to this industry, which is very encouraging and exciting for the industry.
On the risk side, we do see energy prices impacting input costs and potentially putting some pressure on margins in the quarters ahead. We are monitoring that situation very closely. When it comes to the fuel system side, we have a freight industry that is recovering, but also now struggling with the higher diesel fuel cost, which of course we hope and believe will boost adoption of natural gas as an alternative in the medium to long term. That said, we do expect to see some diesel pre-buy activity ahead of the EPA 2027 rule, which will be implemented from January 2027, and add extra cost and complexity to new diesel trucks being delivered from 2027.
We continue to see good momentum for transit buses, especially in Europe, where we expect to see the full benefit of the consolidation of our operational footprint and consolidation of SES Composites in the second half of the year. As mentioned a couple times already in this presentation, we are looking into further aerospace opportunities as well, which we hope could materialize. Last but not least, our aftermarket business is expected to see some improvement versus 2025. On the risk side, fleets are struggling with profitability with these high diesel costs, which clearly impacts their ability to service trucks, not only diesel trucks, but also CNG trucks, and also replace parts. We do expect that softness to be offset by a higher activity on the cylinder inspection and recertification business compared to last year.
That was a brief summary. I would now like to go into how that translate for us. Based on our current visibility, we do expect revenue in 2026 to be largely in line with 2025, which was around NOK 3 billion . We are seeing positive signs that the markets, commercial activity and our quoting pipeline are building, and we hope to convert to firm orders. We have to acknowledge that the order timing remains uncertain at this point in time. We do see some pressure from higher energy cost inflating pricing on some of our key raw materials, increasing freight costs and this is obviously a situation that we will monitor closely in the months and quarters ahead.
Having the extra financial flexibility that the new bank amendment and equity raise provides us is obviously a big benefit for us in this period. In spite of this, we have seen strong progress on our operating costs, and we do anticipate a meaningful improvement in profitability versus 2025, and also a positive free cash flow for the year. As we said in February during our Q4 presentation, we are cautiously optimistic on the year. As an indicative guidance on EBITDA, we do see a minimum NOK 200 million for the year, of course, subject to market conditions. With that, I will invite Philipp back on the screen to wrap up.
Thank you, Eirik. I think what you heard today, we are well-positioned to deliver long-term profitable growth. We are the market leader. We have the market position. We are the incumbent and the technology leader. We have the capacity, the capabilities, and we are driving this business, this industry forward. We have walked the talk. As you heard, we have done our part. We have structurally improved the cost base, following the challenges which we seen from 2024 into 2025. We are well invested. We have a scalable platform with strong revenue and EBITDA potential, and we have really strong prospects for profitable growth in our core markets and adjacencies.
We see this, I said before that there's interest, we spoke about this before, that we are enabling the right fuel for the right application at the right time. Seeing what has been in, on display and being spoken about at ACT Expo in Las Vegas this week, is that the right fuel to replace diesel now is CNG, RNG, and we are the market leader for the right application, the right solution for heavy duty, long haul, and high energy intensive mobility applications. For that, thank you for your interest in Hexagon Composites and your trust in us and looking forward to your questions now. Thank you.
Thank you. Let's see. We have a couple of questions from the audience. Philipp, first question for you. How do you view Cummins' latest announcement that they're going into direct competition with you on the cylinder side?
Okay. Thank you. First of all, the announcement came up prior to ACT Expo, and we were well aware of that joint venture. It's not Cummins, it's a joint venture which Cummins has about their interest in the space. Nevertheless, what I see, we know the market, we know the technologies which are out there. As I said before, we have the technological capabilities, we have the capacity, we have the productivity in our systems built, and we have now the right cost base to tackle it.
We've been in this market since decades, and we have seen competitors come and go, and we are still here because our mission is really to replace diesel with an alternative fuel for heavy-duty, long-haul, high energy intensive mobility applications. I think we are well-positioned. Competition entering the market showing interest is a testimony that something is changing. Something is changing in regards to the adoption and the move away from diesel for these mobility applications. We've seen this also with announcements coming from Volvo and Westport, who wanted to enter the U.S. market.
These are all good signs for us for the future, paired with the support which we see in the industry, from a regulatory side with EPA 2027, to really improve or require higher NOx standards which natural gas can fulfill, but diesel needs an aftertreatment.
Thank you. A question for you, Eirik. Given you delivered NOK 57 million EBITDA in Q1, why are you conservatively guiding NOK 200 million for the year?
Yeah. No. Good, good question. I think Q1 was a solid quarter, probably on the high side of what we expected some months ago. Very pleased with the results, especially on the cost side. As said, we continue to see volatile market conditions. We have limited near term visibility, particularly in some of our more cyclical end markets, Mobile Pipeline and also on the truck side. I think our, you know, indicative guidance here reflects that uncertainty and the fact that we also see some risk related to input costs from the conflict in the Middle East, which we, as said, we're monitoring and managing very closely. It's a mixed picture.
We're encouraged by the underlying trends we're seeing in the market. We are very encouraged by the performance on the cost side. Our guidance here is intentionally prudent, and we feel relatively good about this number. Yeah, I think this allows us to manage the business responsibly, but also, you know, retain an upside if market momentum continues to build through the year.
Thank you. Continue with another question for you. What is the plan to become and when do you expect to be cash flow positive?
I mean, we're working on several levers to improve cash flow. I think we have proven in the past that our core business has strong profitability potential. We do expect higher market activity, you know, in the years ahead. We do expect more diversification, as Philipp has talked about today and as we have talked about earlier, which will drive the top line. With a linear cost base following the cost actions that we have implemented in 2025, we're better positioned to deliver more profitable growth. We are, as also mentioned, relatively well invested. We have a few years behind us now with relatively high investments.
We have also, we also have an intention to reduce our inventory and free up working capital. With the delevered balance sheet and lower interest cost, we, you know, I think that all this add up to what we believe to be a healthy cash flow generation potential over the next years.
Thank you. I have one more question for you, Eirik, on the currency swap. Can you elaborate on the currency swap and why it was not listed as part of the NIBD?
Cross-currency swap, it is disclosed in our annual report and quarterly report. It's basically a hedging instrument, a derivative we have on our balance sheet because our operating currency is in U.S. dollars, but our loan, our term loan is denominated in NOK. We've had that instrument now for five, six years, and it fluctuates with the FX rate. It expires in Q4 2027, it's a liability that has to be cash settled. For us, we wanted to, you know, reduce the refinancing risk of that and rather consolidate everything into the term loan and do the hedging through USD denominated term loan.
Of course, this is a bit detailed and technical topic, but I'm happy to take questions also offline on this for those who are interested in this.
Thank you. One more question for you, Philipp, on pre-buy of diesel trucks. Is there any signs of the fleets that have pre-bought diesel trucks for the 2027 EPA deadline switching their orders to CNG trucks after the Iran shock?
It's a very good question. It's like what we see currently, the U.S. has a very differentiated, or North America trucking has a very differentiating picture. If you take orders are currently outstanding, indicating that fleets dealers are securing build slots later in the year. On the other hand, we see sales numbers who are to some extent below of last year's numbers. What we see is that currently coming also out of ACT Expo and talking to my team and reviewing the commercial activity, that we have increased quoting activity. This makes me, as Eirik also stated, cautiously optimistic for this year.
We see that the interest in CNG to replace diesel as a base fuel for heavy duty, long haul, high energy intensive mobility applications is really there. What we see is that the uncertainty, as Eirik alluded about in the risks, is still there. We cannot neglect that, and we are now working on converting our quoting activities into orders.
Thank you. There are no further questions from the audience. That will conclude our Q1 trading update. Thank you.
Thank you very much.
Yeah. Thank you so much for dialing in