Good morning from Oslo. We are ready to announce Nel's third quarter 2025 results presentation. My name is Håkon Volldal. My name is Håkon Volldal. I am the CEO of Nel. With me today, I have our CFO, Kjell Christian Bjørnsen, and also Vilhelm Flinder, our Head of I R, Communication and Marketing. We have the following agenda: Nel in brief, highlights from the third quarter, a short commercial update, a short political update, and a short technology update. We will, as always, end the session with the questions and hopefully answers. Nel is a fully dedicated electrolyser technology company. We have been listed on the Oslo Stock Exchange since 2014. We have sold more than 7,000 electrolyser stacks across the world. I think if we do the count, it's now more than 80 countries, and we have been in business since 1927.
We have 1.5 GW of manufacturing capacity, 1 GW here in Norway, and 0.5 GW in the U.S. for PEM. We are about 350 employees. At the moment, we are investing heavily in R&D to develop next-generation platforms. We have a global sales and office network. We have become a preferred partner with industry leaders such as Samsung, Reliance , and General Motors. We have NOK 1.8 billion in cash reserves. Our value proposition is based on a long track record, what we call an arrival track record. As I just mentioned, we can trace our history back to 1927. That gives us decades of experience, more than any other electrolyser OEM today. We also have a large installed base that we can learn from in terms of performance and energy consumption and degradation and all the important things that customers want to know. We claim technology leadership.
We have multiple technology platforms, both what we call the alkaline platform and the PEM platform. We have guaranteed and proven performance, and we have game-changing next-generation solutions. That brings me to the third leg of our value proposition: cost and scale leadership. We have been front-runners in cost reductions, starting with automated manufacturing and also full-scale plants together with partners to bring down the total cost of ownership. We have market-leading production capabilities, including one of the most advanced and fully automated assembly plants for electrolysers here in Norway and now also in the U.S. The finance department has aggregated the numbers, and here are the results.
On the top line, revenue from contracts with customers, NOK 303 million, EBITDA -NOK 37 million, order intake in the quarter, NOK 57 million, order backlog, NOK 984 million, and we ended the quarter with a cash balance of NOK 1,757 million. Not a lot of press releases or news in the quarter. Among the highlights and subsequent events, we can mention a follow-on equipment order from a customer in Switzerland called H2 Energy for a containerized 2.5 MW electrolyser. We signed a FEED study for a 100+ MW project in Northern Europe, and we also signed a pre-FEED contract for a 100+ MW project in Southern Europe. Let's study the group financials a bit more carefully. Revenue from contracts with customers, NOK 303 million. That's a decrease of 17% compared to last year, while it's up 74% quarter on quarter. Compared to the second quarter, a strong rebound.
Total revenue and income, NOK 349 million versus NOK 391 million last year. That brings the year-to-date to NOK 633 million versus NOK 974 million in 2024. Obviously, a bit tougher markets in 2025 than in 2024. We've done what we can to improve performance by managing our cost base and also improving execution capabilities and marginal deliveries. You can see some of the results here. EBITDA in the quarter, -NOK 37 million compared to -NOK 90 million last year. Also, improvement when it comes to EBIT, pre-tax income, and net income. Just one remark regarding the cash flow from operating activities, which is weaker than in the third quarter of 2024, despite a higher EBITDA, and that has to do with the payment milestones.
We had recognized, or we had not recognized, we had collected cash from customers on some of the work that we recognized as revenues in the third quarter prior to doing the work. We tried to stay cash positive on projects, and that meant that in the third quarter of 2025, although the results are good, we have been repaid for the work that we did. Hence, cash flow from operating activities is a bit weaker than the EBITDA should signal. Still a healthy cash balance at the end of the quarter. Turning our attention to the alkaline financials, we can see that the third quarter represented a strong rebound from a slow first quarter and second quarter. You can also see that in quarters where we have solid revenue, the alkaline business is EBITDA positive.
We have proven that on multiple occasions, but we need the revenue to be around NOK 200 million + in order to balance the books. With high utilization of our factories and with the high revenues, we also have a profitable business. I.e., the business model for the alkaline segment works. The challenge is to fill the factory. For PEM, it's slightly different. We still lack the top line to turn a profitable or to have a positive EBITDA. We reported a 15% decrease in revenue compared to last year. A lot of the revenue in the quarter was driven by containerized electrolysers, delivery of containerized electrolysers. EBITDA fairly flat in the first quarter, second quarter, and third quarter.
In general, we would say that product and project margins are up due to better project execution, but we also have some heavy investments going into the next development or next-generation development of stacks. Order intake in the quarter, NOK 57 million, and that meant that a lot of the revenues we recognized in the quarter came from our order backlog, which now stands at NOK 984 million. The breakdown of the NOK 984 million, roughly NOK 600 million on the alkaline side and NOK 400 million for PEM. The order backlog is subject to risks such as delays and/or cancellations, and we have given further information on that in the notes to the quarterly report. Cash burn rate is important. What this slide tells you is that we have a cash burn rate which is coming down.
We spend less money on operations and on investments than we did in the past. We're still talking negative numbers, but compared to 2022, 2023, and 2024, the cash burn is significantly down. That is important in a market which has been slightly slower than we anticipated and expected to control the expenses. We are down from a peak staffing of 430 one year ago to down to 354 at the end of the third quarter this year, and it will continue to go gradually down. Personnel expenses down year-to-date almost NOK 60 million. The slight uptick in the third quarter is due to periodization and payment of vacation money in Norway. The trend is that the number of employees is coming down, and we do that in order to, of course, reduce the burn rate and extend our runway. We're still set up to conduct significant R&D work.
We are working on very exciting developments both in alkaline and PEM. I'll get back to some of that later. This is predominantly adjusting our manufacturing capacity and also project execution capacity in the wake of a slower market. On the commercial side, the pipeline is indeed large and increasing. We try to keep our pipeline up to date by canceling or removing all the projects that will not move forward, but actually, the pipeline is growing. However, final investment decisions continue to be pushed out in time. Several target projects in the 20 MW- 150 MW range are expected to take final investment decisions during the next quarters. We are currently involved in more than 500 MW of paid FEED studies for large-scale systems, and our EPC partners are involved in additional studies.
Two examples in the quarter: we signed a FEED study with a reputable European company for a 100+ MW Northern European project. We also signed a pre-FEED contract for a 100+ MW project in Southern Europe with a reputable company. The quality of the FEED studies or our FEED study partners is very high. I would be surprised if none of these projects would materialize. For a lot of the FEED studies, Nel is conducting exclusive work. That means if the project takes FID, Nel will be the partner that will receive the purchase order. One highlight after the close of the third quarter was an additional purchase order for a containerized PEM system, what we call it MC500. This actually represents the third purchase from H2 Energy in Switzerland. What you see on the picture is the second installation we delivered to them.
It's under a beautiful bridge, and the electrolyser is in the middle of the picture. It's hard to see it, and that's good because it proves that the footprint isn't that big to produce hydrogen. It's a rather neat, compact installation. The third unit that H2 Energy will buy will be installed in Switzerland and supply hydrogen for mobility and industrial applications. We're proud of this order because it's a repeat order, and it proves that Nel's customer satisfaction is high. It also, I think, documents our track record when it comes to delivering working electrolysers around the world. Short political update. We have sent a letter together with other leading European OEMs to the European Commission, and we ask or urge the European Commission to adjust the hydrogen regulations.
Less than 1 GW of capacity has been deployed in Europe compared to the 6 GW target that was initially set for 2025. The industry promised to establish annual manufacturing capacity close to 10 GW. We have done that, but demand is still not strong enough. We believe part of the reason is that the current rules and regulations are delaying project realizations and also undermining demand. We need a more pragmatic way of regulating the market. We need to extend exemptions for the front runners and also more flexibility in how hydrogen plants are regulated. We believe it's possible to do this within the context of the legal framework that has been established. We remain hopeful that by changing some of the rules and regulations in the current framework, it's possible to speed up hydrogen adoption across Europe.
It's a broad push for this, and I think the E.U. has also, in the past, shown that through the omnibus process, they can indeed work with existing frameworks and speed up and simplify, remove some of the red tape in those quite fast. Moving on to the technology update, one of the more important things we are working on is the next-generation pressurized alkaline system. I have presented this many times in the past, but just to highlight sort of the key selling points of this, why are we spending a lot of time perfecting this and why are we bringing this to market shortly? It is because we reduce the footprint by up to 80% compared to our existing system. That's important because in Europe, which is indeed a very important market for clean hydrogen these days, you don't always have the space to do whatever you want.
You're constrained by existing landlots and properties. You have brownfield sites where you don't have the opportunity to just expand your hydrogen plants in all sorts of directions. You need to limit the footprint of the system. This is a very compact footprint. It's less than 230 sq m for 25 MW of capacity. Along with that comes a significant reduction in investment cost, and not just for the Nel part, but for the entire system. We're talking about a total system CaPex reduction up to 60%. It will be more energy efficient than anything available in the market today, we believe. The system energy consumption will be less than 50 kWh/kg of hydrogen, which is a significant improvement versus what is available today. That's why this is important. What you see on the right-hand side is a real picture. It's not a PowerPoint.
It's a picture from Herøya, where we are building half of what you saw on the previous page. It's a pilot or prototype. The mechanical installation is done. The cold commissioning is done. We're entering hot commissioning, meaning we will produce molecules very shortly. We hope to do that in November. We hope to take FID on a new production line before year end 2025. We hope to validate this as a running installation, producing gas hour after hour, day after day in 2026. We hope to also commercially launch it in 2026 and deliver at scale, meaning hundreds of megawatts in 2027. This is not a PowerPoint concept anymore. It's real. We remain very positive that this will be a way for our customers to actually move their respective projects along at a faster pace and with much more attractive financials behind them.
Unless we can enable our customers to have positive business cases, we cannot sell our equipment. I think with this, we have looked at all the different aspects of building a hydrogen plant and how you can do that in the most cost-competitive way, taking the customer's point of view and not only focusing on the hardware cost, but focusing on the total project cost where things are modularized, standardized, brought to site. It's quick to assemble it, and it involves limited engineering and limited construction time. More on that in the coming quarter. We will also, in the coming quarter, give a more detailed update on our next-generation PEM stack. That's what we had for today. I will be joined now by Kjell Christian Bjørnsen, our CFO, to answer any questions you might have. Vilhelm, you have the usual text you need to read before we start.
Thank you, Håkon. Some general information before we kick off the Q&A session. The ones that want to ask a question, please use the raise hand function, and we will call up the name and activate the microphone to the one next in line. Please also make sure to activate the microphone on your end as well, as it will likely be muted. Please also keep a maximum of one question per person due to time constraints. If there's more time, you can always go back in the line. If we have time, we will also take written questions submitted through the Q&A function. If there are questions we don't have time to answer, please reach out to us on ir@nelhydrogen.com. A reminder, we will not comment on outlook-specific targets, detailed terms and conditions on specific contracts, as well as questions on specific markets.
Modeling questions we will also appreciate are taken offline. Let's kick off. First question comes from Elliott Geoffrey Peter Jones. Please go ahead, sir.
Morning guys. Yeah, congrats on the numbers. Just a quick question on the backlog. Obviously, you had a nice customer milestone payment this quarter. Could you give us any kind of insight as to how the backlog looks going forward, and if maybe you're expecting, you know, similar payments in the coming quarters, or is the backlog now looking a bit more kind of longer term in terms of milestone payments? Any kind of color on that would be very helpful. Thanks.
Thank you for the question. You know, we would then point to the notes to the report where we split out what is currently planned for delivery in the rest of 2025 and what's planned for 2026 and later. Finally, what is at significant risk of delay or cancellation. There you will have some of those details. I would really want to point out that what is planned for the rest of the year should not be seen as guidance. There are huge shifts from, you know, sometimes month to month, week to week, where something might just not come in one quarter and then skip into the next one. We will not give an update during the quarter on what is in that table when it comes to the rest of the year. I hope that answers your question.
Got it. Yeah, thank you.
Thank you, Elliott. Next question comes from Arthur Sitbon. Please go ahead, sir.
Hello. Thank you for taking my question. Just trying to think about revenues for the next quarters and next year. What I realized is that in that table that you just talked about, actually, the amount for potential cancellations has not changed for several quarters in a row, I think. I was wondering if on that you think the worst is now behind you. Also related to that, you talk about potential FID in next quarters for projects. I was wondering, at the earliest, when do you think you can get order intake linked to those potential FIDs? It's just to try to better understand the sequence of revenues for coming quarters and years. Thank you very much.
If I could start with the past and then Håkon can take the future. You are correct. We have had a backlog of large projects signed a couple of years ago that have been delayed and/or canceled, and some of them are still in the process of negotiating basically a workout with the customer. That is why the risk figure there has been unchanged for some time. I would highlight that there is significant risk with those. Based on the current contractual situation, there is an obligation for the customer to take that. We believe the worst there is past us, also because we have delivered so much of what was not on that list. There is always some minor risk on the PEM side, but that is typically smaller orders on what we call the industrial series. Håkon?
Yeah.
It is notoriously difficult to predict when FIDs will be taken and what the time gap will be between an FID and a purchase order. I would say our current pipeline is spread out from today until the end of 2026. We have opportunities that could materialize and result in equipment orders for Nel in the fourth quarter, in the first quarter, in the second quarter, in the third quarter, and the fourth quarter. All of the 500 MW that we signal that we are doing feedwork on will not happen in the same quarter. They will be spread out. Some of them might not lead to any equipment orders. I would also like to say that the feed phase is prior to reaching FID. That means the feed, what we have said, 500 MW in feedwork will potentially lead to FIDs and equipment orders in 2026.
Some of that might drag into 2027. The feedwork we have already done in 2025 and also in 2024 might lead to equipment orders from today and throughout 2026. I think it is super hard to say something generic about this, but based on our current pipeline and what we can say or see about the maturity of these different projects, we can have equipment orders, significant equipment orders in every single quarter going forward.
Thank you very much.
Thank you, Arthur. Next question comes from Skye Landon. Please go ahead.
Hi, good morning. I was just wondering, on the FEED projects that you're working on in this 500 MW, are you able to comment whether this is, you know, it's basically based on the new alkaline technology, or is this more around the old alkaline technology? If it's on the old stuff, when do you think the new stuff will kind of start flowing into your pipeline? Thanks.
The FEED work we're currently conducting is for what you refer to as the old or the current alkaline technology. That's important because we have an inventory of equipment that we need to sell, and this is what is available. When I refer to possible equipment orders every single quarter from now on until the end of 2026, it will most likely be for what we already have. The new equipment will not, we will launch that commercially next year, but we haven't started to take orders for that equipment. We have a soft launch towards certain customers that would like to know what we can offer in 2027, 2028, 2029, but we will not launch it commercially until next year and start building the order backlog for that new equipment in 2026.
Thanks. Maybe you could give a comment or an update on partnerships with General Motors and updates on kind of like the push forward you're making with the PEM product, and also collaborations with Samsung and Saipem and so on and so forth. It would be good to get an update on that. Thanks.
We should almost have included an additional slide then, Vilhelm. I would say we have a handful of strategic partners. Reliance Industries, India's largest private company, I think announced during their annual meeting that they will build a huge electrolyser factory in India, 1 GW initially, and then moving that to 3 GW. That will be based on Nel's technology. That's according to the previously announced technology licensing agreement, which will be very beneficial for Nel. It will give us a revenue stream from the Indian market when Reliance starts to produce electrolysers in India. I think the timeline indicated for that is that towards the end of 2026, they want to have that 1 GW line in India up and running. We are working closely with Reliance to make that happen. It's a team from Nel working with a big team from Reliance.
Samsung, a very important strategic partner, handles some of the large projects in parts of the world where it's difficult for Nel to have local representation. They're especially strong in the Middle East, in Asia, but also have projects in Europe and in the U.S. It's a global partner that gives us credibility and can provide turnkey plant solutions. They deliver a full working hydrogen plant with performance guarantees on system level. The same goes for Saipem. They've also developed a turnkey solution package they can deliver with Nel inside, as we call it, and are involved. Both of them are involved in multiple potential projects around the world and working closely with Nel to win those potential contracts. They're not included in the 500 MW of FEED studies that we refer to. What they are doing with their clients will come on top, just to say that.
With General Motors, we have had a joint development agreement in place for several years where we have benefited from General Motors' decades of experience with fuel cell technology. We've taken their learnings and know-how and applied that on the electrolyser side to make a PEM electrolyser that will revolutionize how PEM electrolysis is done. Just to sort of give that away, we are now building a short stack in full size of that electrolyser. It's very exciting. Cost CaPex targets and OpEx targets are extremely attractive, and we will finalize that work and continue to work on that in 2026. It's slightly behind what we call the pressurized alkaline platform. It will take more time to mature that. There's still a relationship with GM. Although as we move forward, we will gradually have to take over and do the industrialization ourselves or with other partners.
Perfect. Thanks.
Good. We have received one written question as well. As a reminder, if you want to ask a question, please use the raise hand function. There's a question from Nicholas Legrand . What do you consider to be the main regulatory barriers in Europe that are currently hindering the development of hydrogen production solutions? How is the company addressing these challenges? Thank you.
Yeah. I think that was what I referred to as the letter that Nel, together with the major other electrolyser OEMs, including thyssenkrupp nucera, Siemens Energy, John Cockerill, and others, sent to the European Commission. The legislative framework that we have in Europe is actually not bad. It's quite good, but it's very strict.
It makes it hard to start up projects because the grace period until you need to comply with quite strict rules on how you source your energy, where you source your energy, and how that energy is made up to give you the full benefit of producing clean hydrogen is very difficult to deal with. The first movers need a bit more flexibility. Maybe they need a grid connection. They can't get to 100% wind or solar. What the current regulation says is that every single hour that you use energy, it has to be renewable. I think to give them a bit more flexibility on what kind of energy they can source, where they can source it, does it have to be local, or can it come from somewhere else? Can they sell a surplus energy back to the grid?
All of that needs to be relaxed in order to make the business cases fly for the early movers. As we approach 2030 and halfway into the next decade, it's possible and I think reasonable to comply with the E.U. regulations. It's just that it's very strict for the first movers. It's the framework that is almost taken for granted that we will be successful. We need to create success before we introduce all the rules and regulations that they have. For the ones that are familiar with the regulations, it's what we call the three pillars of what's it called again? Help me out.
Additionality and.
Additionality. Yeah. The three additionality principles and temporal correlation and geographic correlation and whatnot. There are very sort of specific rules that we would like to be relaxed for the next two, three, four years. The delegated act is what I wanted to say. The three pillars of the delegated act, they should be relaxed.
Very good. It seems we are, there's no further questions. I think we end the Q&A session there. I'll give the word back to management for any final remarks.
Yeah. Thank you for joining us. I think the numbers in the quarter were promising, or at least satisfactory compared to first quarter and second quarter. It was a nice rebound on the revenue side and also good EBITDA performance. It's not positive EBITDA, which we ultimately want, but it was a step in the right direction.
We have said that we remain cautiously optimistic about equipment orders in the coming quarters. There are opportunities out there. The opportunities have a higher quality than in the past. They are with reputable companies. We have good partners that we're benefiting from. I think when we meet next in February, we will give a more detailed update both on the market and on the technology plans we have for the pressurized alkaline and the next-generation PEM. I hope to see you back then, also with some interesting events to talk more about then.
Thank you.