Thank you. Good afternoon. I'm Mike Canario, President and Chief Executive Officer of Norsk Titanium, and today I have with me Ashar Ashary, our Chief Financial Officer. We are here to discuss the company's first half 2023 report, which was released this morning. I do wanna note, please note that the presentation and all commentary that we make today is subject to our standard disclosures, which are available on our website at norsktitanium.com. Thank you for joining me. Next slide.
Our vision at the company is innovating the future of metal. We are industrializing a new resource-efficient and environmentally friendly process for manufacturing structural titanium components. We call it rapid plasma deposition, and it's designed to be used within the existing metal manufacturing supply chain as a direct replacement for titanium block, casting, or forging.
We offer better economics, better lead times, with significant benefits and downstream processing for our customers, and we offer a real positive environmental benefit. Existing titanium parts made via RPD will consume up to 75% less raw material and require 50%-75% less machining, and as I'll explain in a minute, that's critically important in today's environment. Next slide, Ashar.
We've been very busy this year. First, today, I'm very excited to announce that we've entered into a strategic collaboration agreement with Allegheny Technologies, otherwise known as ATI. They are a $4 billion leader in the aerospace and defense materials business. We're gonna work together to accelerate the adoption of RPD technology. This is great news for Norsk Titanium, and I believe it's great news for ATI. We're truly excited and have already started work.
Though our recurring revenues have not met our expectations, the activity level of the company has expanded significantly in the first half. We have many new parts in development for transition to production, and we have added several new customers. We've also started our first funded part project on a nickel alloy. It's a very large part opportunity with a U.S. DoD customer.
I can't describe too much more in detail, but we are very excited about this opportunity. In our first half report, we introduced some new metrics to hopefully give better insight into how our current activity supports our mid- and long-term goals. The first one is easy. How many parts do we have in sustained serial production? You can see we added one part number so far this year. The next metric is actual parts numbers in development.
These are parts that we are in the process of transitioning to production. You can see we had 9 part numbers at the end of last year, and now we have 20. Of the nine from last year, so far, only one has gone into full production. The other eight are in some stage of approval. We've also started work on 12 new parts.
Next, you can see the annual full production rate revenue represented by the parts currently in full development. There has been a large increase in this metric so far this year. This is a reflection of the size of the parts we're working on and the quantity per aircraft that we are currently working. This is a significant move for the company. Finally, the development engagements metric measures the number of long-term pursuits the team is working on.
I believe these metrics show the significant progress Norsk Titanium is making in our transition to production, and we will continue to report on these metrics going forward. Next slide.
Though we are on track for our mid- and long-term goals, clearly we are behind on recurring revenue growth in 2023. The main reason is a delay in our formal Airbus approvals. Airbus has requested that I don't share details. However, I can say we are not aware of any technical issues, and to the contrary, a significant part of the increase in the metrics on the previous page is Airbus-related activities. We have also announced our activities with Northrop Grumman and General Atomics, and they are both progressing towards near-term production. We are in the production phase with Hittech.
Revenue was slightly down due to some production challenges as we moved to full rate, but we're accelerating that efforts right now. In addition, back on the, on the defense side, we have several additional new customers that have been added this this first half. We're not at liberty to disclose those those specific opportunities, but we are working very specific production opportunities. Next slide.
I wanted to show a slide on the commercial aircraft, commercial aerospace recovery cycle, as this is our largest market opportunity and the principal focus of our business plan. As you can see, commercial aerospace traffic and the OEM build rates are both growing back to pre-pandemic levels. Frankly, the biggest threat to this growth is the industry supply chain's ability to support this demand. I talked back in April about the dynamics of the titanium supply chain.
That hasn't changed. Norsk Titanium's RPD process offers a solution to the titanium scarcity challenge. We are the right technology at the right time. Now, I'm gonna turn it over to Ashar to talk about the financials.
Thank you, Mike. In the first half of 2023, we recognized $1.1 billion in revenue, which was an increase of 19% year-over-year. Revenue in this half was comprised of $200,000 from sale of production parts and $700,000 from development engagements. Other income made up the remaining $200,000, which is mostly recognition of grants.
Operating expenses for the first half of the year also increased by 19% to $13 million as we ramp up production and additional customers with development activities. Overall, EBITDA loss was $11.9 million for the first half of the year. Net loss was reduced to $5.9 million-$5.2 million, excuse me, with the gain on net foreign exchange. Okay, I'll move on to the next slide, the cash flow slide.
We continue to adopt a disciplined approach to our expenditures to address customer opportunities and remain within our targeted cash burn rate. Our average monthly cash burn rate increased to $1.9 million from $1.6 million year-over-year, which was a similar increase of 19% we saw in operating expenses. With a growing level of customer activity, we increased inventory purchases and operation space to deliver on customer engagements. In terms of financing, we completed an equity offering in April of 2023, which gave us $7.7 million of additional capital.
With this, the company has sufficient funds to operate through August 2023. We are also engaged in discussions with potential investors for new funding to extend the financial runway and also exploring strategic alternatives.
While we continue these discussions, our two major shareholders have provided a bridge loan to continue operations and execute on the growing engagement with customers. At this point, I will turn it back to you, Mike, for concluding remarks. Mike, I think you're on mute.
Sorry, I didn't mute myself. Thanks, Ashar. As I pointed out with our metrics, we are tracking to our outyear revenue targets of $120 million of parts sales and $30 million of other opportunities. Parts sales is driven directly by the qualifications at the various customers, and we have received significant interest in development opportunities for specialized application machines, as well as alternative alloys.
Margins will grow as we get volume leverage, and the ops team at Norsk Titanium has a go-get plan to execute on some continuous improvement projects. Next slide. Our vision at Norsk Titanium has always been to foster long-term adoption of additive manufacturing in structural applications. In other words, innovate how the world produces large metal parts.
The way to deliver on our goal is to provide our customers with the exact same material they procure today, but faster, cheaper, and more environmentally friendly. I'm actually very excited about where we are from a commercial standpoint. I believe we are truly at the inflection point for the company.
Clearly, we have a challenge, and we need to get our financing arranged, but the current shareholders have provided us an additional window to continue working our efforts, which are multi-pronged. And at this point, I'm gonna turn it over for questions. I see we have a few on the list, and happy to talk about it. Can you indicate how material will the ATI cooperation be for your revenue line?
Would it be a major revenue driver, or do you expect Airbus to drive the revenue line? And when do you expect the first revenues from the partnership? That's a good question. The efforts with ATI are multi-pronged. We are looking at the potential to transition parts that ATI currently manufacture, via forging or casting, over to RPD. We are looking at ATI is a significant supplier of titanium raw material, in addition to very specialized alloys for other applications.
We're looking at the potential to convert some of those specialty materials into RPD components, non-titanium. And we're also looking at opportunities to jointly pursue new aircraft opportunities, so much more longer term.
In terms of the revenue potential, they are all parts that we would see as going to a Airbus, a Boeing, a Northrop Grumman, and General Atomics. They're all going to similar customers that we're already talking to. It's just we would be doing that jointly together. So I would say it's the opportunity to solidify our revenue plan and potentially accelerate some of the revenues that we've got there.
I don't anticipate real significant revenues directly to ATI for specific development work. This is more about driving the opportunity base for Norsk Titanium in the areas that we targeted and potentially looking at new things. One of the other questions is: When do you expect first orders from Airbus? Are we talking in days, weeks or months?
What I can say is we are supplying to Airbus today. We do have purchase orders from Airbus to supply to. We are not in a position to make announcements around the specifics, but as far as significant increase in recurring production components, I think it's gonna be early in 2024 before we'll see significant revenue growth.
But I do anticipate that we're clearly working a variety of different parts that are in the process of transitioning to production. One of the other questions we got: Can we provide details around the funding? Will ATI invest in the Norsk Titanium equity raise, and what happens if we don't secure more funding? I can have Ashar comment here in a second.
We're working on multiple potential revenue paths, or excuse me, multiple potential financing paths. We have the C4 process running that is looking at debt-based financing. We're talking to a variety of people about equity support in the company, both current and potential new shareholders. And then we're also talking to strategics about larger opportunities in potential business combinations or opportunities that are more significant. We're pursuing all of those.
The board has us evaluating a variety of different approaches. You know, as far as the. We have the financing to support us through the end of September. We anticipate that we can get resolution by then. If we can't, clearly we'll be talking to both our most significant shareholders and working with the board on alternate financing to support ongoing operations. At this point, we are confident in our ability to execute on a potential financing. There's a question about, "Can we talk about military contracts and when we can expect the first revenues?"
I can tell you, we have had development revenues from military contracts already. As far as production revenues, we're working with a variety of components today that will transition either by the end of the year or early in next year into serial production. I don't think we will probably ever break out the specifics on the specific revenues, but it is part of our revenue growth plan.
It's in those metrics that I shared earlier in terms of the recurring rate, annual recurring revenue rates. A component of that is military components. There's a question about why we can't say more on Airbus. I think the easiest way to say that is Airbus is a very large organization with many different folks in it. I will point you to, if you do some searches on DED, wire DED, additive manufacturing in Airbus, you can find comments from Airbus folks that are out there in the public.
We've been asked not to repeat those for the reason, you know, the real reason is Airbus wants to control the communications around the adoption of this technology, and as our biggest potential customer, we're following them. Clearly, they will allow us to communicate when they want. It hasn't changed our approach in terms of the commercial approach. We are still working on the parts that we had anticipated working on at the beginning of the year, and we're progressing forward and in dialogue with them every day. Let's see. Where else? Ashar, what question. Do you see some more questions?
I do. Here.
I see one. One of them was, "You have tried to raise financing for a while now and not succeeded, despite you claim that you are at an inflection point with regarding revenues. What are the pushback you received from these investors that you have met?"
I think the biggest comment that we received from investors is, they wanna see the recurring part contracts. That, that's been the, I think, the biggest single question from folks. And it's a tough one for us to answer because we don't control when the customers will release the actual production contracts. I can tell you they're imminent, but I can't. You know, at the beginning of the year, I would've, you know, and I said this, I anticipated that we would have several of those by this time.
We don't, yet, but that hasn't changed in terms of the parts aren't gonna go into production. The parts are still going into production, they just haven't been released by the customer for us to move forward. This is, you know, there are a lot of people involved in approvals, for the first sets of parts that we're working, and it's with multiple people in the supply chain. So we have our direct customer, we have the end OEM folks, we've got the certification folks at the end OEM, and then you've got the regulators. Then they all have, you know, a process that they're all working through, and this is the first time, you know, sort of through that process.
I think the challenge that investors have when they look at that, and I'm sure you all as well, is: When is that going to happen? I can't answer that for you. You know, I can tell you based on where we're at with the processes, we are building parts that will go on to airplanes, and they will be part of serial production. We're building those parts today. That's what those metrics are designed to show you, that the parts that we're building today represent over $20 million of annual revenue, and we're building the production version of those parts right now. When they go into production is not in our control, unfortunately.
I would add to that, Mike, that you know, we continue to be a leading technology for these OEMs. And we are far ahead of any competitors who can provide the economics that we provide to these OEMs. So there is incentive. It's just a process, an industry process that we have to work through.
Yeah. There's a couple of questions in here about ATI, and is ATI gonna invest, and et cetera, and also, why do we think 30 days is enough time? Well. I can't talk specifically on ATI or any specific potential investor. I can tell you we're talking to multiple people. We believe that the 30 days of financing that we have received from the existing shareholders is sufficient to, for us to get to that financing point. Clearly there are pluses and minuses with a variety of different options that are on the table. And it's, you know, it's not lost on, you know, it's not lost on us that the criticality of getting things accomplished.
I do think it's a pretty significant data point in terms of the strategic collaboration agreement that we've signed with ATI. That is, you know, a definitive statement of support of the company. And we do anticipate we'll be able to get there.
I see a question from, I see a question from Morton. "What is your new estimate of liquidity needed until cash flow positive?"
Well, what I can say is our estimate hasn't changed. The way we went into the market to raise $45 million, we are still—it's still $45 million to cash flow positive. We still expect to break even end of 2025. These near-term revenues, if you recall from our earlier presentation, are not meaningful from the perspective of getting to a cash flow break-even point. But we still expect that to be early 2026, and we still are going to need about $45 million-$50 million to get there.
Right. There's a couple of questions about Boeing. What I can tell you, as if you follow the news, Boeing still has quite a few engineering challenges that they are facing in terms of, and particularly right now on the 737. The level of engagement with Boeing has increased significantly in the last month. Not in a position to talk about specifics, but we are back working with them on parts that could transition to production in the near term. None of those are included in the metrics that I've shown you thus far. I hope to add those to the metrics before the end of the year if we can get those discussions further down the path.
So we are back engaged with Boeing, and looking at real parts and real opportunities that are in the more near term. There's a question about we don't communicate very much in terms of new contracts. What I can tell you is we communicate what we're allowed to communicate. Our customers are incredibly sensitive about discussing part transitions and things that disrupt their existing supply chain. And almost. Well, in fact, in every interaction we have with our customers, they're under non-disclosure agreements, and so we have to get their specific approval.
I can tell you, I mean, Ashar can give you the first half report. We had to have vetted by multiple customers the exact language that we approved, that was included in there in talking about our customers, and the draft that you guys see is significantly different than what we started with. And so I apologize that we can't communicate more, but you know, we're under obligations with our customers in terms of what we can and can't say.
Yes, and I would reiterate what Mike is saying. The reason we put those metrics in this report is to deliver a message to our shareholder community on, you know, the progress that we're making, but we can't actually communicate that at this point in time.
I think, you know, again, there's a couple more questions around the bridge financing and how is it gonna help the company. You know, we are very, very active on the financing side, and from the perspective of the company, and for anybody on the phone that's from, you know, listening in that's from the company, we are very focused on our efforts to transition parts into production. We have a tremendous amount of work going on in the company. People are working incredible amounts of hours. We have significant opportunities that are near term, and we have to stay focused on that.
And so the financing that we've got allows 99% of the team to focus on that, while, you know, the senior leadership spends some time out trying to get the financing side of things done. You know, I wish we didn't have to do that, but we do. And we anticipate that the 30 days will give us the time that we need to complete that.
And the folks in the rest of the organization are gonna stay focused on delivering for our customers, because frankly, we have some very, very tight timetables that we have to meet here in the next several months to transition some parts into production, and our team has to stay focused on that because we're talking about real revenues and real opportunities that our customers are expecting us to deliver on. Ashar, anything else before we sign off?
No, I think we've covered most of the questions or at least touched most of them. So I think we're good.
I think with that, if you have additional questions, please reach out to Ashar or myself. We'll let you know what we can, and I thank you for your support. Again, to the employees of Norsk Titanium, I thank you for your dedicated service to the company, and please stay focused on the activities that we've got ongoing.
Well, we've got some customers that are absolutely begging for us to finish some projects and get some things across the finish line, and I thank you for your support in advance. And to all our shareholders, I appreciate your patience. I wish we could communicate more openly about the activities that are going on within the company.
It is very, very exciting from the commercial standpoint, and I hope to reward you as we move forward. So thank you again. We'll look forward to talking in the near future and providing an update, as soon as we can on the financing efforts. Thank you very much.