Good afternoon and welcome to this investor presentation prepared in relation with the Q3 results that we have published today, as well as the rights issue that we published two weeks ago. With that, we start the presentation, and I hand over the word to Claude Jean, our CEO.
Thank you, Arina. Hello everybody. Thank you for being with us today. It's my pleasure to present the Q3 results. Before going to that, if you can go to the next slide. I'd like to come back to some of the slides that we have presented two weeks ago when we announced the rights issue. Basically, why invest in Tekna? First of all, Tekna is a world-leading provider of advanced materials and systems. As you've seen, we've reached profitability in Q3, and I will elaborate more on that in the next slide. We are very well positioned to capture growth, mostly growth in additive manufacturing with our powder, and where we finally can contribute with a very significant contribution margin, as you will see in the numbers. On the systems side, also a very attractive contribution margin.
In the next five years, we are targeting double-digit growth and 15%-20% EBITDA margin toward 2030. As you will see, post-transaction, post-rights issue, we'll have a fully funded business plan until 2030. We have identified the opportunity to do even better than the number we're talking about today. It is a very exciting period for Tekna and for me, joining just recently, joining six months ago as the new CEO of Tekna. Next slide. For those of you that are less familiar with Tekna, we're going back to 1990, and everything that we do is based on inductively coupled plasma, what we call ICP. This technology is used, we have two business areas, used to manufacture spherical powders that are used especially for additive manufacturing.
We also sell plasma systems under the system business, where we cover two lines of products. One line of products serves material development. People are using it at university, research center, or corporate R&D use it for developing new material. We also develop a line that we call Plasma Sonic, where people use our plasma system to basically recreate the kind of environment that the space shuttle, for example, encounters when they come back to Earth, or the hypersonic plane experience when they go above sound speed. As you can see on the right there, on the material side, we have posted solid growth, year-over-year growth, basically driven by additive manufacturing growth. I will talk in more detail about the two business units in the next slide. Next slide, please. The company, we're headquartered in Quebec, in Sherbrooke.
In Quebec, we have two facilities, one for systems, one for materials, where we do both production and R&D. We have several patents. As I said, our ICP technology is the core of what we do. A lot of highly qualified personnel, which are very important for the type of business and product that we develop. As you can see, the revenue on the material side has been growing steadily over the past year at about 12% CAGR. Systems has always been more lumpy. As I said, we sell systems for material development and Plasma Sonic application. On the Plasma Sonic side, those systems can sell to like CAD 10 million each, but they do not come every year. We are working on this business unit to make it more adaptable to the revenue fluctuation. On the material side, as I said, steady growth.
The good thing is that we have finally reached a point where we have very, very healthy contribution margin, close to 50%, basically. Combined together, we think that we can progress, as I said, 10% CAGR and healthy, 15%-20% EBITDA toward 2030. Next slide. If you look at on the material side where we sell our powder, aerospace and defense is definitely the biggest market for us. As you can see on the graph there, if you look at AMPOWER forecast, defense, space, and civil aviation together that we put together in aerospace and defense will be growing significantly. Mid-scale also is a sector that will be growing significantly and that we want to make to gain more market share. AMPOWER is predicting that the number of printers will double between 2024 and 2029.
Since the new printers have much higher throughput, they will consume more powder. Powder consumption will more than double over the same period. Tekna is, as I said, 50% of our sales is in aerospace and defense. We are already extremely well positioned in this market, serving several OEMs and Tier 1. As you can imagine, those are long qualification cycles. Once you're qualified, you're designing. It lasts a long time. It's a very sticky business by nature. We've been there for a while and solidly implemented in the aerospace and defense market. Next slide. Again about AMPOWER, they predict 18% CAGR for additive manufacturing between 2024 and 2029. For material, it's growing even faster than that. What is good is that Tekna has invested in production capacity on the material business area.
Between 2020 and 2030, we will have tripled our production capacity. Based on system installation and based on some KPI improvement like overall equipment efficiency, yield, throughput, and things like that. We have enough capacity to capture the growth that we see ahead of us and the 10% to double-digit CAGR that we're talking about. We have enough capacity to capture that. It has been already invested. Next slide. Again, on the material side. This slide is showing very well the traction that we have in terms of moving customers from development to recurring production. Back in 2020, about 21% of our sales, of our customers, were buying more than $100,000 per year. Now we're up to 36%. 36% of the customers buy more than $100,000 per year. As you can see on the right, the average went up to $153,000 per customer per year.
2025 will be posting similar growth again. That is showing that our customers are moving from development to recurring production. Next slide. If you look at our plan again for the next five years, we're looking at double-digit CAGR, mostly driven by material sales in additive manufacturing. We've been quite conservative on the system side. We're looking at slower growth. As I said, we're working on making it much more adaptable to variation of revenue year- over- year. Also, we're looking at several opportunities where we could sell more of those systems such that we would stabilize revenue year- over- year and potentially post a stronger growth. If you look at the contribution margin, the system business has been providing very healthy contribution margin year- over- year, about 60%. Again, material, a lot of growth potential there, a lot of different opportunities.
Now that we have posted much more solid contribution margin, mostly based on better selling price for the small and large powder that in the past were not selling for a very good price, but we are finding much better opportunity for those powders. It is driving combined better contribution margin. Very importantly, also, the system group provides a significant differentiator to the material group because we develop our own plasma system that we use to make our powders. Our customers very highly value that differentiator that we can develop our own equipment to develop even better material, higher performance. Next slide. I turn to Espen for the Q3 report.
Okay, great. Let's take a look at the financial highlights from Q3. First of all, we had a positive quarter, the first since IPO, driven by strong performance in materials and cost reductions, driving adjusted EBITDA to $500,000. We had record third quarter materials revenues as well as year-to-date and trailing 12-months order intake. The order intake for materials in Q3 was 78% higher than last year. With a profitable quarter in Q3, we also had a solid cash flow development with a positive cash flow from operations on a trailing 12-months basis. I encourage you to take a look at the cash flow graphs we have in the charts section of this report. Let's take a look at this box on the right side.
On October 22nd, Tekna announced a refinancing plan, including a fully underwritten rights issue and a new credit facility agreement with one of the leading Canadian banks, Scotiabank. This transaction will give Tekna a solid financial platform to fully capture the value that Claude spoke about. Expected with high growth in demand and will give us flexibility in pursuing upside potentials. The key items of the transaction are a NOK 300 million or CAD 42 million fully underwritten rights issue by the majority shareholder, Arna S. Voss company. The subscription price will be announced the day before the EGM, scheduled 13 November . This will be depending on the trading of today’s 29th October to 11 November . The subscription rights will be offered pro rata. They will be tradable, and we will be open to oversubscription. This way, we ensure equal treatment of all shareholders.
We will, with this capital, repay the shareholder loan and interest to AFK of about NOK 205 million or CAD 29 million, which will take Tekna's net debt position at the end of Q3 from CAD 27 million to become net cash positive of CAD 15 million on a pro forma basis. The remaining proceeds are then about NOK 95 million or CAD 13 million. This CAD 13 million plus the CAD 7 million cash we currently have leaves us with CAD 20.6 million cash Q3 pro forma, plus the new borrowing base facility with Scotiabank of CAD 6 million. We would have available liquidity of about CAD 26 million-CAD 27 million. The next key dates to keep a look at for here is the EGM, which will be held on November 13, and the subscription and trading rights period will commence on November 18. Next slide, please.
Let's take a look at the profitability for the quarter. First of all, the revenues are up 9% year- over- year to CAD 8.3 million. This was driven by a 28% increase in materials. Very, very good for Q3. We had total contribution margin ended at 58%, up from 45% last year. This includes a solid development on the contribution margin on the materials business, which increased from 33% to 58%. Mind you that this is very important for scaling profits. I'm also very happy to report successful execution on our cost improvement program, driving OpEx reductions with sustained savings, as you may see through the bridge. Next slide, please. Let's take a look at the cash flow for the quarter. There's a message here very important to take away. First, operations were positive when considering that the working capital here is temporary.
We expect to reduce working capital further over time. We have been able to do this over several years now, and we expect to continue with that. Next, for investments, we invested about CAD 300,000 CapEx in the quarter. This is in line with the normalized range going forward. Lastly, the changes in loans in the quarter were for cash management purposes, namely FX holdings in the quarter. If you look post-transaction, this rights issue, then being cash positive, the financing costs will be negligible. To summarize here, profitable operations should cover normalized CapEx needs. We have a new bank agreement in place to handle working capital. Financing costs will be limited, tending towards nil. The message here is that the cash flow going forward is looking really great and gives us a lot of flexibility in executing our strategy.
Lastly, in October, we signed a credit facility agreement with Scotiabank for a CAD 6 million borrowing-based facility, giving us additional liquidities, CAD 4 million letters of credits and guarantees, and CAD 500,000 for credit cards. With that, I will give the word back to our CEO, Mr. Claude Jean.
Okay, so again, concluding remark, we are in a very good position. Currently with the market that we are in, the position that we have in our market and post-rights issue will be in a much more solid financial position to tackle that. If you go to the next slide, Arina. Some last word on the tariff side. As we have been reporting, we have not been affected by the tariff given the USMCA agreement between the U.S., Mexico, and Canada. In the current context of uncertainty, we can be cautiously positive about the rest of the year and the beginning of next year, especially that we have record backlog on the material side. We are looking for some potential significant order coming in the next few months on the system side. As you can imagine, the.
Increased defense spending will be playing in our favor as well as the reshoring trend. We think that we should be in a position to benefit from that. One last word on MLCC. Some of you know that we've been developing nanonickel for a multi-layer ceramic capacitor for several years now. We keep making progress. We are under qualification with some major MLCC supplier, and we're expecting to reach full qualification in 2026. I think we can go to Q&A, Arina.
We can't hear you, Arina.
Apologies. I was so enthusiastic. Again, thank you for the presentation of the highlights of the quarter and of the rights issue. A few general questions. Claude, so let's start with you. Can you talk about the key differentiators of Tekna?
Yeah, good question. I think that the key differentiator, first of all, when it comes to material, we've been one of the first movers when it comes to selling spherical powder for additive manufacturing more than 10 years ago. We've been there for a long time. We know what it takes to make those powders work well in the printers. We can reach customer specifications, which are sometimes very stringent. Plasma atomization is really the way of making powder that can make the highest performance powder. Sometimes, especially in aerospace and defense, and also about quality systems that we have, we reported NADCAP certification, which is also very high value for our customers. If you put all that together, quality, performance, services, and unique technology, I think that's what distinguishes ourselves. On the system side, again, ICP technology that we have protected with patent.
We have a very unique technology that sometimes even Tekna is the only one that is able to serve. If you look at Plasma Sonic, for example. Our systems are pretty unique in the world. There are not too many companies that can provide those systems. We have unique technology both on the plasma side and on the material side.
You mentioned NADCAP, and obviously, we're very proud that we were the first in the world to have that certification. Can you explain why it's important for a powder business to have this?
Yeah, this is really a certification that you need to have. For aerospace to provide those materials. We worked together with NADCAP to develop the standard over the years. Obviously, all the big OEMs in that sector will require that you get this certification. We are very, very proud, and kudos to the team at Tekna because it was a lot of hard work. We are quite happy that we are the pioneers there being the first.
Yes, absolutely. Okay. You have informed us over the past three, four years that we had a partnership with Airbus and Boeing. What is the reason we have not succeeded in achieving significant sales volumes with these companies?
I think that it's all positive with those companies. We remain deeply involved with them. Again, this is a very, very long development cycle business. You can imagine that those guys, they don't change aircraft engine model every year. It takes a lot of time. We're making a lot of progress. They are demanding customers, but we see real traction. If you look at all those big OEMs, they're putting more and more parts that are made with additive manufacturing, not only on the engine, but also on the structural part. We have to be patient. We're posting constant growth every year. As I've shown, 50% of our business in the material business area is with aerospace and defense customers. We need to be patient. Once those guys start running recurring production, it will be a very sticky business.
Yes. We have a question on the Plasma Sonic system order that was announced early 2025, and we have still not received it. Can you say something about when we expect that one?
Yeah, we think that the engagement with the customer, which is a research institution in the U.S., is still as solid. We're still deeply engaged with them. As you can expect, this is based on government funding. With the U.S. government being shut down, there's not too much progress right now. We're quite confident that once the government reopens and the government machine starts running again, our customer should be awarded the grant and should be able to move forward. We're still highly confident. Tekna is still uniquely positioned to serve this need. As I said, there's not too many options, and we provide excellent technology for that. Again, we need to be patient given the U.S. government situation right now.
Yeah, of course, it's a bit out of our hands. Apparently, the comment about microelectronics at the end of the presentation was not entirely clear. Can you maybe talk about that a little bit more on why it's taking so long, I guess?
To go back a bit, Tekna has developed very small, very tightly controlled nano-nickel powder for the most advanced MLCC device. Where we differentiate ourselves is really the small powder, for the very advanced MLCC. We've seen that the MLCC manufacturers have delayed the launch of their next generation of MLCC by a few years, actually. Throughout the year, I think that we have finally, based on the results that we got so far, we have finally met all the criteria that the customers are looking for. They currently have powder in their hand. They're making MLCC with those powders right now. We're expecting feedback early 2026, confirming that we should have met all the technical criteria for those powders. If that's actually the case, then 2026 will be a qualification period because those devices take quite a lot of time to qualify.
We're still quite positive on our capability to deliver those powders. We think that we are one of the very few potential suppliers of those very small powders for the most advanced MLCC. We still have to confirm qualification. We're very confident that we're getting there.
Okay, great. Obviously, your improvement in contribution margin has not gone unnoticed. Is the 58% sustainable?
Fifty-eight percent contribution margin on material is somewhat of a stretch right now. It has to, the planet needs to be perfectly aligned. We think that 50%, we think that we got to 50% thanks to several process improvements, KPI improvements, and also much better opportunities for selling the small and the large powder. We've been working on it for quite a while, and it's finally paying off. I think that 50%, of course, we will have some quarter at 58%. I hope so. As an average, we should be talking about 50%.
Okay, that's our target. Espen, one for you. Can you explain a bit the thinking behind the rights issue? Obviously, you've addressed it a bit in the presentation, but it will be good to.
Yep, very good. The rights issue, of course, the transaction is quite significant for Tekna. It does give the company a very solid financial platform. We have so many exciting things in portfolio and opportunities to chase. It's important for the company to have the flexibility to be pursuing any upsides that we consider worth chasing. Of course, we will be very selective on this. We do have a very strong financial platform to do it. We have flexibility. We have the possibility to capture all the demands that we foresee. Of course, we have a new bank coming in here too. It's important that we are able to support a change of a bank as well and becoming solid on the balance sheet basis. Thirdly, of course, these loans that we are repaying, they would become, they are due less than 12 months.
The most part of it. This is also an opportunity for us to clean up and streamline our balance sheet and become net cash positive at this point. This will support our strategy very strongly going forward. I think that's it.
Yes, very clear. I think. We'll be solidly financed by the end of this rights issue. I don't see any further questions coming in. Claude, maybe to you for some concluding remarks, including our priorities going forward.
Yeah, so yeah, again, thank you for joining us today. As I said, given our record backlog on the material side, I think the priority is focus on execution. We spoke about contribution margin. We still have some work to do there. Ambition is to keep increasing it. We will be focusing on execution, delivering on the backlog, securing qualification with the main customer that we have both in aerospace and defense and medical, because we did not talk too much about that, but we have several medical customers under qualification, and we want to grow market share there. We will be highly focusing on execution, on the opportunity that we have. Trying to secure more order on the system side and also cautiously exploring the opportunity that we have to do even better than the number that we have been talking about today.
We have to study those opportunities carefully and make sure that we invest at the right place where we will have the highest return on investment. I guess those are the priorities for the coming months.
Okay, I think there's still possibility for people to send questions. Please keep them coming. We'll add them to the Q&A section in Investor Web, and we'll answer them online. That way, we'll make sure that everyone's questions get answered. I think with that, we conclude the webcast for today. Thank you, everyone, for joining us.