Hi, welcome to Hexagon Purus' Q1 2023 presentation. My name is Mathias Meidell, and I'm the Director of Investor Relations in Hexagon Purus. I will be moderating from the studio in Oslo today. From the studio, I'm also joined by Group CEO, Morten Holum, and Group CFO, Salman Alam. The agenda for today includes highlights from the quarter, a company update, the financials, and the outlook. We will end the presentation with a Q&A session, so please feel free to enter your questions via the function on your screen, or alternatively, send your questions to ir@hexagonpurus.com. With that, I will pass over the word to you, Morten, who will take us through the highlights of the quarter.
Thank you, Mathias. Good morning, everyone. Thanks for dialing in to our webcast this morning. We've had a great start to the year. It's been both positive and eventful, so I'm excited to share the Q1 highlights with you. Besides the fact that we continue our growth and our strong commercial momentum, there are four highlights I'd like to mention this quarter. Number one, we signed a commercial agreement with Hino to deliver battery electric heavy duty trucks. This is a big contract, up to 20 billion NOK. Number two, to shore up our supply chain of battery cells, we signed a multi-year agreement with Panasonic for the supply of American-made battery cells. This is a big deal, very important for us.
Number three, in March, we deepened our strategic partnership with Mitsui and raised NOK 1.3 billion, where Mitsui not only contributed a significant amount, but where they also declared their intention to contribute additional capital in the future. This is also a big deal for us. Finally, we successfully transferred from Euronext Growth onto the main list of the Oslo Stock Exchange. It's maybe not that big a deal, but it's something we put on our to-do list already back when we listed the company back in 2020. It's good to be able to cross it off the list. Let's start with the revenue development. On the left, revenue in Q1 was NOK 244 million, up 53% from Q1 last year. This was a bit lower than planned, actually.
We had some deliveries that were pushed across into Q2, but it's not something we're concerned about. In the middle chart, LTM revenue has now crossed the NOK 1 billion line for the first time and is now standing at NOK 1,049 million. The order book is currently at NOK 1.2 billion, of which 90% is for delivery this year. The demand risk for 2023 is very limited. I'm really happy to see that we continue to successfully execute on our plans and deliver on the planned revenue growth. As expected, and similar to previous quarters, the main driver for revenue growth was hydrogen infrastructure. This is a business that keeps growing, and the nice thing about it is that we have an offering which is in the money for the customers that are in the business of selling hydrogen.
Don't forget that hydrogen is a sizable existing business. There's around 90 million tons of it sold every year. It's so far mostly gray instead of green, the molecules need to be transported. This is a business where our distribution modules not only are relevant, but also more cost efficient than the traditional transportation solutions. Of course, now we get the significant growth of the green hydrogen business on top of that. We're actually growing in both directions, higher market share in the already existing traditional business and the new business that's strongly growing, markets driven by decarbonization and the energy transition. Because of that, we expect our infrastructure and distribution business to continue to grow strongly in the coming years. Just as a reminder to our statement in Q3, our capacity is fully booked for this year.
As part of the ongoing investment program, we're significantly expanding our assembly capacity for distribution modules, more than 2x in the first stage. The new addition is already under construction and will come online in Q4 this year. Outside of distribution, most of the other infrastructure and mobility segments have not yet reached the commercial stage. Volume will be a bit up and down between the quarters depending on timing of project deliveries. For this particular quarter, we had somewhat lower volume in the aerospace business compared to last year. That's purely driven by delivery schedule and not by demand. There is underlying profitable growth also in the space business, even if it's a relatively small niche markets. Overall, the Q1 was broadly in line with expectations, so it's so far so good towards our target for the year.
In the beginning of March, we raised total gross proceeds of NOK 1.3 billion, NOK 800 million in a convertible bond and NOK 500 million in equity. As an integral part of this deal, we entered into a deeper strategic partnership with Mitsui & Co. This is a very attractive solution for us, both for us in Hexagon Purus and for Mitsui. For us, the partnership gives us broad access to Mitsui's global network. They have deep expertise and competence in many relevant areas for us, and they have long-standing high-level relationships with many of our existing and potential customers and suppliers worldwide. This enables us to capture industrial and commercial synergies. From Mitsui's perspective, they have invested in several other companies in the hydrogen space and are building positions across the hydrogen ecosystem.
For them, Hexagon Purus is an ideal partner because our capabilities and storage solutions support and strengthen most of the other investments Mitsui have made in this sector. We play a key role in their hydrogen ecosystem, so this is truly a win-win relationship. In terms of capital, Mitsui invested NOK 500 million in the convertible bond at this junction. More importantly, as part of the deal, they signed an MoU where they intend to commit further capital to Hexagon Purus and act as an anchor investor in future capital transactions with a total additional amount of NOK 1.5 billion on top of the NOK 500 million they invested in March. Needless to say, we're extremely happy with this solution and this transaction.
It gives us sufficient capital to fully execute the ongoing investment program, and it puts a solid and supportive structure in place to help us develop and grow the company further. At the end of March, we successfully transferred Hexagon Purus from Euronext Growth to the main list of the Oslo Stock Exchange. This was a milestone that we set already when we listed the company on Euronext Growth back in December of 2020. I'm pleased that we were finally able to complete it. It's not gonna be a major change for us operationally since we have rigged ourselves for this and have operated the company as if we were on the main list from day one. Being on the regulated market does give us access to a broader investor universe. We continue to have good traction commercially.
In March, we signed an exclusive distribution agreement with Hino Trucks for the supply of battery electric heavy duty trucks in the US with a potential total value of approximately $2 billion or up to NOK 20 billion. This agreement replaces the binding LOI that we received in Q1 last year, which was for the supply of battery systems for a similar type truck. The new agreement goes beyond just delivering the battery system, now we will build the entire vehicle just like we've done for other customers in the past, like Daimler. We'll get a rolling chassis with a cab on it from Hino and then integrate our proprietary drivetrain components onto the truck.
The auxiliary module, which performs the low voltage and balance of plant functions normally driven by the diesel engine, the battery system, the power module, which is the central hub that distributes power between the battery and the e-Axle, and also the vehicle level functional software, the software that actually controls the truck. This will actually be a Hino truck with a Hexagon Purus drivetrain. The agreement foresees up to 10,000 of these Class 7 and 8 trucks to be built and distributed through Hino dealers between now and 2030. This is a really big deal for us, the largest that we've ever had. Here's a picture of an actual prototype that we built for Hino.
This truck was displayed on the ACT Expo show in Los Angeles last week, the largest clean transportation show in North America, and it received a lot of attention. We're really happy with this one, which highlights not only our battery systems competence, but also our leading vehicle integration capabilities. I'm also happy that we were finally able to convert the binding LOI from last year into a firm contract. To support our customer programs in the battery electric business, including the Hino contract, we signed a long-term agreement with Panasonic for the supply of battery cells in North America. This is another big achievement for several reasons. First, the market balance for battery cells have been challenging during the past few years, as almost all passenger car OEMs have decided to transition their business away from internal combustion engines and onto electric drivetrains.
With everybody doing this at the same time, it's been difficult to source battery cells, particularly for a scale-up company like Hexagon Purus. Second, we have quite specific and quite high performance demands, which requires very high quality battery cell. And three, we need these cells to be produced in North America to be USMCA compliant and to benefit from the incentives given through the Inflation Reduction Act. Panasonic meets all these three requirements. Panasonic is a pioneer in the BEV market. They were actually a key enabler of the transition to electric vehicles in the first place through their support of Tesla, and is still one of Tesla's main suppliers. They were very impressed with our battery module technology, and we were well-aligned on other key principles for Panasonic as well, such as safety.
We were able to secure capacity from their new battery facility in the U.S. that will come online in 2026. It's hard to overstate the importance of this agreement to us. As you may remember, we lost one of the nominations we got from a truck OEM last year because we were not able at the time to guarantee cell supply through the life of the program. With this deal, we have secured sufficient cells for the programs that we currently have on our plate. We're extremely happy with that. The regulatory environment for clean mobility continues to be supportive. In California, the Advanced Clean Trucks and the Advanced Clean Fleets regulations will result in significant growth for zero-emission vehicles in the coming years.
The Advanced Clean Trucks Act is directed towards the manufacturers of trucks, mandating that a certain % of the trucks and OEM cells will have to be zero-emission. The recently approved Advanced Clean Fleets Act is directed towards the user, mandating that new additions to high-priority fleets need to be zero-emission. The selected high-priority fleets are drayage operations, which is traffic in and out of ports, and publicly owned fleets, both federal, state, and municipal. When these fleets need to buy a new truck, it has to be zero-emission, ensuring that diesel trucks will be phased out over time through the fleet replacement cycle. Together, these two pieces of regulation become very effective as they address both the supply and the demand side of the equation at the same time.
This will result in significant growth for zero-emission vehicles starting next year in California and in 13 other states that adopt similar regulations as California. We also continue to see increased hydrogen adoption in the transit space, where we were selected as a supplier to New Flyer, which is one of the largest bus manufacturers in North America, for the 3rd consecutive year. Transit is an ideal application for hydrogen, and it's in the early commercial stage. We expect additional growth here also in the coming years. The capacity expansion program that we're running is well underway. In January, we opened our new cylinder manufacturing facility in Westminster, Maryland, which will support our North American mobility and aerospace customers.
The 60,000 sq ft facility is up and running. Since we moved out of an older and smaller existing facility, we already have a fantastic team of highly skilled and experienced engineers and operators that is ready to grow the business. We have space there to install additional capacity as customer demand increases. In April, we opened our new building in Kelowna, Canada. This is a state-of-the-art greenfield engineering and manufacturing facility for battery and hydrogen storage systems. This is where we will manufacture the initial heavy-duty battery systems for North America. The equipment will be installed now during the next 12 months. The factory is more or less sold out already. We will be operating at fairly high capacity utilizations right from the start.
Now we have opened 2 of the 5 facilities that we are building this year, and the remaining 3, 2 in Germany and 1 in China, will be opened in the second half of the year. So far, all the expansion projects are proceeding as planned and on schedule. With that introduction, I will hand the word over to our new CFO, Salman Alam, who will take you through the financials. Salman?
All right. Thanks, Mathias Meidell. Good morning, everyone. Thanks for tuning in. I think for the ones following the presentation, we're on page 18 right now. We'll start it off with the P&L. Please note that all the numbers that we report are in Norwegian krone. Revenue in the Q1 of 2023 ended at NOK 244 million, up 53% from NOK 159 million in the same quarter last year. As Mathias Meidell already mentioned, the main driver for growth this quarter was hydrogen infrastructure applications, such as hydrogen distribution, and hydrogen mobile refueling systems. Total operating expenses ended at NOK 356 million in the quarter, up from NOK 252 million in the same quarter last year.
The increase mainly comes from continued investments in organizational scale-up, leading to higher payroll and SG&A costs, as well as higher cost of materials. Materials cost are impacted by inflationary pressure on certain input factors, as well as product mix and higher proportion of preassembled third-party components for our infrastructure business in Germany. Note, however, that materials cost in Q1 of last year, so 2022 were extraordinarily low due to certain one-off effects related to balance sheet inventory movements, which makes a direct year-over-year comparison not particularly meaningful. Other operating expenses in the quarter was significantly down year-over-year, mainly due to lower spend related to engineering and technical development, as well as a reduction in other SG&A.
Adding up revenue and total operating expenses, EBITA ended at minus NOK 112 million for the quarter compared to minus NOK 93 million in the same quarter last year. Depreciation ended at NOK 28 million in the quarter compared to NOK 22 million in the same quarter of last year. The increase is primarily driven by our larger base of property, plant and equipment and the right to use assets given our ongoing capacity expansion programs. EBIT for the quarter ended at minus NOK 140 million versus minus NOK 115 million in the same quarter last year.
Moving down to the share of profits or loss from investments in associates, which reflects our minority shareholdings in Cryoshelter, Norwegian Hydrogen, and the Systems joint venture company in China, ended at minus NOK 2 million in the quarter versus minus NOK 1 million in the same quarter last year. Net financial items were minus NOK 13 million in the quarter versus minus NOK 3 million in the same quarter of last year. Currency movement has had a significant impact on the financial items in the quarter. Other than that, finance income mainly relates to interest received on bank deposits, and finance expenses mainly relates to interest in debt and lease liabilities. At the group level, we are not in a taxable position. Tax expense in the quarter was minus NOK 0.6 million, versus minus NOK 1 million same quarter last year.
Loss after tax then ended at -NOK 154 million, versus -NOK 118 million in the same quarter of last year. Moving on to the revenue split by end-use application on page 19. Sales to hydrogen infrastructure related applications such as hydrogen distribution, mobile refueling systems and stationary storage made up about 66% of the revenue in the quarter. Of those 66%, distribution made up 90% of the revenue. Distribution is then our 40-foot distribution trailers that can transport hydrogen from point A to point B. Customers in the quarter for the hydrogen infrastructure vertical included Linde, Everfuel and Lhyfe to mention a few.
In the mobility segment, we continued shipping pre-production cylinders to Nikola for their Nikola Tre fuel cell electric vehicle, and we expect serial production on that program to start later this year. We also delivered hydrogen storage systems to transit bus OEMs such as Solaris and NesoBus, and hydrogen storage systems to Alstom for their hydrogen-powered commuter train. The last bucket, the industrial gas and other bucket, mainly consists of storage solutions for storage of so-called air gases, which are oxygen, nitrogen, et cetera. That business was fairly stable in the quarter, while aerospace was somewhat down due to timing as Morten already mentioned. Moving on to the balance sheet. There's been quite a big increase in the balance sheet quarter-over-quarter.
Total assets ended at just shy of NOK 4 billion in the Q1 of 2023. The main change compared to the balance sheet as of end of last year was the March capital raise, where we raised NOK 500 million in gross equity and placed NOK 800 million convertible bond. Consequently, our cash position stood just shy of NOK 1.4 billion at the end of the Q1. Non-current assets such as property, plant and equipment also increased quarter-over-quarter due to the ongoing capacity expansion programs as Morten has mentioned. Our buildup of inventory was up about NOK 71 million quarter-over-quarter, but overall net working capital change was relatively low as the inventory increase was offset by customer prepayments.
The weak Norwegian krone has also had an impact on the euro and dollar-denominated balance sheet positions of our subsidiaries, which explains part of the balance sheet increase quarter-over-quarter. Moving on to the equity and liability side. Our equity was further bolstered through the already mentioned NOK 500 million gross equity raise. The convertible bond that we raised in March is recognized as a compound financial instrument under IAS 32, and is therefore split in a debt and equity component. It had a total carrying value at the end of the quarter of NOK 778 million, where the equity component had a value of NOK 270 million, and the debt component had a value of NOK 507 million. Our equity ratio at the end of the quarter was 60%.
Moving on to our cash flow. Looking at the main elements of the cash flow statement. We in the quarter had a loss before tax of minus NOK 155 million and depreciation of NOK 28 million. The increase in inventory of NOK 71 million already mentioned was almost entirely offset by an increase in prepayments from customers while accounts receivable stayed fairly stable year-over-year. We invested about NOK 110 million in the quarter, where NOK 95 million was related to property, plant, and equipment. The remainder was product development and funding of Cryoshelter for the ongoing development of cryogenic hydrogen storage.
Our cash flow from financing was NOK 1.2 billion in the quarter, and the remaining items were more or less netted off against each other, resulting in a cash balance at the end of the quarter of NOK 1.366 billion. I think with that, I'll hand it back to Morten to walk us through the outlook and the Q&A.
All right. Thank you, Salman. Over the past two years, we have focused on building market positions in key verticals with a particular emphasis on the early adoption applications. We collected a significant number of customer agreements with OEMs and industrial gas companies, both multi-year agreements, serial contracts, and a portfolio of recurring business. This has given us improved revenue visibility for the coming years, and consequently much higher comfort around our ability to meet the 2025 targets. We're comfortable on the demand side of the equation. As I mentioned earlier in the presentation, the capacity expansion program is well underway. Two sites already completed, three more to be completed in the second half of the year, all three of them on schedule. With the capital we raised in March, we have sufficient funds to complete these construction programs.
Adding the sourcing activities, things like the Panasonic supply agreement and other similar agreements in the making, we're also fairly comfortable on the supply side of the equation. We have delivered on our revenue targets every year. In 2022, our annual revenue was 5 times larger than in 2020. In 2025, we expect to be 5 times larger than we are today. At the end of last year, we had around two-thirds coverage of our 2025 targeted revenue. With the additional business picked up now in Q1, most significantly the Hino distribution agreement, we have significantly de-risked the path towards 2025. We have line of sight to the 2025 revenue target. The outlook for 2023 is the same as we communicated as part of the Q4 reporting.
We expect to grow revenue by at least 50%, and we expect the EBITDA loss to widen by around 10%. The revenue target for 2025 remains unchanged. We target NOK 4-5 billion, and at that revenue level, we expect to have sufficient operating leverage to break even on EBITDA. That concludes our presentation for today. Before we go to Q&A, I'd like to give some short closing remarks. The significance of this quarter, it's not really in the financials. It's more that you're now starting to see the results of what we've been trying to communicate during the past couple of years. We have patiently, but still with high sense of urgency, laid down the foundation brick by brick, and it's now starting to come together. We've secured a significant collection of customer agreements.
The production footprint is starting to be completed, and we have shored up long-term supply of key materials, all while executing on the revenue growth as planned. Next year, we will enter the final stage of our 2025 journey. That is when the serial contracts will start to kick in, which entails a significant increase in volume. Again, this is what's gonna give us the necessary volume and expected operating leverage to reach break even on EBITDA. We're optimistic and excited about 2025, and we will continue to patiently, yet urgently, execute the remaining part of our business plan. With those closing remarks, we will now open it up for Q&A. Mathias?
Thank you, Morten. Thank you. I guess we can just jump straight into it. First question, I guess we can, you Morten, you can take that. You made this BEV truck agreement with Hino. Do you believe more in BEV trucks than in fuel cell electric vehicle trucks?
I think it's has been clear to us for a while, and I think it's becoming increasingly clear for the market overall that you will need both technologies. You will need hydrogen, and you will need batteries to store energy on vehicles. The reason for that is that there are different duty cycles, and there are some duty cycles where battery storage is perfect. Battery, you know, storing energy in the battery on the truck is the most efficient use of energy. As long as you can do that's what you should do. The problem with batteries is that they are heavy, and they take a long time to charge, which creates problems for a lot of the duty cycles. We believe that, yes, there is a certain segment.
We have focused on the segment with back-to-base operations, where the trucks can also trickle charge overnight, so you're not dependent on having massive amounts of fast chargers, which are challenging to build out. We have focused on that segment for battery electric trucks. But for the, you know, more continuous use, longer haul, heavy haul type trucking, you will need hydrogen. That's where we focus on the hydrogen electric segments.
Thank you. A sort of a follow-up question on Hino as well. What is the financial risk Hexagon Purus is taking with the Hino deal? Salman, I guess you can take that.
I would say the liabilities that we're exposed to as part of the Hino deal is not significantly different than other type of liabilities we have with similar programs or similar vehicles we've done in the past. Obviously now it's at a larger scale, we will look into getting the appropriate insurances, et cetera, ahead of start of production.
Yeah. Thank you. Over to the Panasonic agreement. Morten, I guess you can take that. Is the current supply agreement with Panasonic sufficient to cover the current expected battery cell volumes from 2026 and onwards?
Yeah. That's significant enough. I mean, that's how we've calibrated the volume off of that agreement is to cover the agreements that we have on our plate and with a little buffer also to that. There is plenty of room in that agreement.
Yep. Thank you. A question on China. When will the JV with CIMC Enric be running? When will we see the first revenue from it, and will it really ramp up?
Yeah. Yeah, we are constructing the buildings as we speak, and the machinery will come in, you know, in the second half of the year, and then we will have to go through all of the regulatory and approvals for the site. By, I think, mid-2024, we should be up with volume production at the site in China. In the meantime, we're still delivering some smaller volumes out of the systems joint venture. Cylinder production will not be operating fully until, yeah, mid-2024.
Yeah. another question on the Hino. Where will you produce your four components for the battery electric trucks?
Yeah. We have just constructed the new facility up in Kelowna, so, that's where we will produce the initial, you know, the battery packs. We are producing some of the other components, partly in Kelowna, partly in our existing site in Ontario. As, you know, we are working on other similar agreements as well, at some point, it's gonna be necessary to expand capacity for that. You know, to cover the first years of this contract, it's a combination of Kelowna and Ontario that will be manufacturing facilities.
Thank you, Morten. I guess, another question for you as well on competition. Can you talk about competition and especially the automotive equipment companies investing a lot in hydrogen storage systems? Projecting beyond 2025, how do you see your market share relative to, auto equipment specialists?
Yeah. First of all, you know, I will say that for the next 10 years, competition is not gonna be a major issue in this business. That's my prediction. You know, it's, you know, demand will be higher than the capacity of the industry to supply. But having said that, we so far have seen that there are players interested of going into this space. We have been very successful with customers also in competition with the kind of players that you mentioned, Mathias, we are not particularly worried about that.
I mean, we, you know, our focus has been, as I mentioned earlier, to, you know, we have a long history in what we're doing, so we know how to do this in volume, and our strategy has been to get on the early, volume business, and get capacity up, and get capacity utilization up and ride down the cost curve, as quickly as we can. So far that's a strategy that's served us well. Yeah, I think we're confident of being able to compete, also in the future.
Thank you, Morten and Salman. That wraps up the questions we have received from the audience today. On behalf of the Hexagon Purus team, I would like to thank you all for spending the time with us this morning, and we look forward to seeing you soon again. Thank you very much from Oslo. Thank you.
Thank you.