Welcome to the Tekna webcast for the fourth quarter results. With us are Claude Jean, CEO, and Espen Schie, CFO of Tekna. We expect the presentation to take about 20 minutes, followed by a Q&A session. So without further ado, Claude, the floor is yours.
Thank you, Arina. Thank you, everybody, to be with us today to listen to our Q4 earning call. Next slide, please. Okay, before jumping into the Q4 numbers and highlight, I would like to spend a few minutes explaining Tekna a bit for those of you that are less familiar. So Tekna comes back to the 1990, and everything that we do at Tekna is around ICP, that is stand for Inductively Coupled Plasma technology. And it initially started with a system provider for nanomaterial and spherical powders. And eventually, in the year 2000, our customers started using our plasma torch to recreate or simulate the harsh environment that the space rocket experience when they come back, they reenter the atmosphere.
And also another example is when the hypersonic plane fly at very high speed, they experience the same kind of environment. So our system are excellent to recreate those environments. So universities and corporate R&D are using those plasma torch to simulate and test new material for thermal protection system, and we call this product line PlasmaSonic. In the year 2010, Tekna started using its own ICP technology to develop spherical metallic powder for additive manufacturing. So since we started so many years ago, we were one of the first mover in this market back then. So as you can see on the graph on the right, we have been experiencing steady growth in selling spherical powder for additive manufacturing.
So we are in a very well position, given the fact that we were one of the early adopter of that technology. Next slide. So, fast forward from 1990 to 2026, so we have finally reached profitability inflection point. In Q3, Q4, we posted the positive EBITDA for the first time, and it's a result of a multi-year of investment in development, either system or powder, in production capacity and customer qualification. So, we are in a position now, a world leading provider of advanced material, for manufacturing. And we are in a position to capture a good share of the growth of this market with LT contribution margin. On the system side, we have very attractive unit of economic, very healthy contribution margin.
It's a business line that is more lumpy, so we get less regular order, such that we have managed, we're managing costs, such that we can adapt to the lower order period. So in both business area, we're in a good position to execute on our plan, which is grow double-digit toward 2030, and achieve 15%-20% EBITDA, also toward 2030. In a market that is forecasted to grow at about 20% rate, if you look at the manufacturing market forecaster, we're a bit more conservative on the top line growth because we're focusing a line on growing the bottom line also. So we're focusing on the highest quality revenue. And as Espen will show, we now have a very robust balance sheet, thanks to the refinancing that we went through in Q4.
We see additional revenue opportunity also on top of the plan that we have presented, so we are studying those opportunity. I will talk a bit about that in the next few slide. We go very carefully, making sure that we invest in the one that will provide the best ROI. Next slide. Okay, about the highlight for the fourth quarter, our revenue increase by 2% year-over-year. We had excellent performance in the material business area. We achieved overall 60% contribution margin, with 59% from the material business area. And if you couple that with our cost reduction effort that we have implemented in the past two years, we have achieved a record EBITDA at CAD 900,000 or 9% of revenue.
Order intake also were very good in Q4, CAD 12.2 million, 27% higher than the same period last year, such that we enter into 2026 with a very healthy backlog at CAD 20.5 million. Seventeen point four million of it is for material. And as you can see on the right there, on the material business unit, we throughout 2025, we experienced a steady growth on revenue and contribution margin. As I said, on the system side, it's a bit more lumpy due to the fact that the orders are not coming regularly, but we had a very good order in Q4 for the system view also. Next slide. Okay, so now I turn it to Espen for the detail numbers.
Great, thank you. So hello, everybody. So first, let's dive into materials business. So materials business delivered a record quarter, revenue reached CAD 8 million, driven by aerospace and defense demand from established OEM customers in North America and Europe. Order intake, CAD 9.1 million, bringing a full year order intake to also a record. Backlog grew to CAD 17.4 million in materials, which is up 46% year-over-year. We had two notable orders in the quarter, a CAD 2 million and a CAD 1.3 million order, from tier one aerospace and defense customers in the U.S. and Europe. This is exactly the type of larger strategic orders we are building towards. On margins, we reached 59%, up 21 percentage points from 38% a year ago. This reflects an improved product mix and increased sales of larger particle sizes.
I also want to highlight two important milestones in the quarter that we attained Nadcap accreditation for metal powder production, which is a key quality standard in aerospace, and we established a strategic partnership with Burloak Technologies to supply materials for the MDA AURORA satellite program. Next slide, please. So these slides illustrate the commercial momentum that we are building in materials. First, on the left, you can see that the average revenue per customer has been growing steadily. More and more customers are increasing their annual consumption, moving from development and qualification into recurring production. Back in 2020, only about 21% of our customers bought for more than CAD 100,000 per year. That share has now grown consistently to now 37%.
On the right, we see that the share of larger customers continues to increase, and this is a result of our positioning upstream in the value chain. Once customer qualify our powders into their production processes, their relationship becomes very sticky, and we prioritize this type of scaling. So we are seeing this, play out in practice, with customers placing larger orders and growing our recurring revenue base. Next slide, please. So let's look at system business that improved both margins and bookings. Revenues was CAD 1.8 million, down 16% year-over-year. This is a more volatile business, and the past year has been impacted by U.S. government shutdowns, budget funding delays, and tariff uncertainties, affecting overall project timelines. That said, order intake in Q4 was CAD 3.1 million.
We secured three new systems orders in the quarter, and the sales pipeline continues to advance, with some orders anticipated in the first half of 2026. Margins were strong at 62%, up from 51%, driven by the type and size of the systems that we delivered. I should note that the full year margin was impacted by a CAD 400,000 tariff expense that we had in Q1 2025, which we do expect to recover during 2026. Meanwhile, we do have cost containment measures in place. Given the lower activity level in this business, we are also managing this business prudently while the pipeline develops. Please, next slide. This slide shows the results of the efficiency program that we initiated in 2023. The graph is clear.
We have brought indirect personnel costs down by 24%, reached a level that we expect to maintain going forward, with more than CAD 1.2 million reduced quarterly when compared Q4 to Q1 2023. So last year, headcount was reduced from 222 to 258, a 29% reduction. And in fact, if you analyze the total salary cost savings, so this will be including direct staff and indirect staff between the end of 2023 and 2025, so now expanding to two years, the reduction would be CAD 7 million compared the two points to each other. Importantly, these are not one-off measures. Many of these reductions have recurring effects, and this is a structurally leaner organization.
We have simplified the operation, reduced complexity, and positioned the cost base at a level that supports profitable scaling. Next slide, please. Next slide, please. Yep. So here we go. So, let's talk about profitability. So we had a second consecutive EBITDA positive quarter, adjusted EBITDA, like Claude said, of record CAD 900,000, an improvement year-over-year by CAD 2.3 million. Revenues were up 2% to CAD 9.9 million, mainly driven by materials. The margins were very strong. Contribution margins reached 60%, up from 41% a year ago. The materials margin improved from 38%-59%. There was the result of a more favorable product mix, and systems recovered back to 62%, back to expected levels. On the cost side, operating expenses continued to come down, reflecting sustained savings of our efficiency program.
Personnel and operating cost reductions contributed positively, as you see in the, in the two green bars in the graph, and partially offset by timing effects on the grants, which is presented as other income, and also some negative effects from FX. So the message here is we are delivering profitable growth, expanding margins, and a cost structure in place to support continued improvement. So with that, next slide, please. We will have a quick view on the cash flow for the quarter. So the big picture here is that we ended the year with a cash position of CAD 17.4 million, up just above 10 million since last quarter. A strong position following a successful refinancing in Q4.
So if we start with the operations, the cash flow was negative with CAD 1.2 million, but working capital was positive contributor as we reduced inventory, following, among other things, the sale of this large materials fractions. The negative PNL reflects also some one-off realized FX losses and costs related to the equity raise. On investments, CapEx was limited to CAD 300,000, in line with a lean maintenance approach. Going forward, we expect 2026 CapEx to be in the range of CAD 1.5 million-CAD 2 million, which remains limited and also timing flexible. And yet we still have ample spare production capacity, even beyond 2026. On financing cash flow, this is where the quarter was transformative.
So we raised CAD 40 million through an equity offering and used almost CAD 29 million of this to repay a shareholder loan to Arendals Fossekompani ASA. This eliminates debt financing costs, and it simplifies the balance sheet, which brings us to the next slide, please. The balance sheet. So this story you probably then know. We completed the refinancing, CAD 41 million, which at the time was announced, NOK 300 million . Net proceeds were about CAD 40 million, so about CAD 1 million in costs, and minus the CAD 21 million that we used to repay the shareholder loan. So then we see that the transformation is visible.
The equity ratio went from 28% to strong 77%, and we moved from about CAD 27 million in net debt to almost CAD 12 million net cash positive, with a cash position of about CAD 17.4 million. So now we have a very strong and clean balance sheet and additional liquidity expected of about CAD 6 million once the new credit facilities with Scotiabank are up and running. But Tekna is now fully funded and with financial flexibility to execute on the strategy. Thank you for following, and please take it from here, Claude.
Thank you, Espen. So now, regarding the outlook, as we explained, we have observed excellent performance in the material business area with revenue growth, record backlog, very improved contribution margin. We think that we are in a very good position to execute on our plan. As you can see on the top right on the graph, regarding future growth, we're counting a lot on the material business area. Our growth plan is mostly based on the material business area. There's some growth plan in the system business area that is more difficult to plan given the lumpiness of the business. Again, this business provide very healthy contribution margin and we are managing costs such that we can go through the low period.
We think that we, in terms of geopolitical situation, of course, there's some risk, but we also see some opportunity. The reshoring trend is very favorable to additive manufacturing. And as I said, we are one of the early mover in additive manufacturing. We have been qualified with several customers in aerospace and defense and medical. So once you get qualified, it's a very sticky business. And of course, the trends of increased defense spending is also very favorable in both business area. And we also look at other opportunity, nanopowder for microelectronics, for multilayer ceramic capacitor is one example. We have been working for many years on that development. Still in Q4, we made significant progress with our customer, which is one of the main MLCC manufacturer in Asia.
So we keep working on it, we keep progressing, and as I said, in both business area, we are looking and, you know, starting to work on some opportunity to increase the role, the growth rate even more. Next slide, Rina. So as a summary, very good Q4 continued margin expansion since Q3. Very high order intake in Q4 in the material, and also it was the best quarter in the system business area in terms of order intake. And the effort that we made to reduce the OPEX spending will continue moving forward. In terms of CapEx, we're expecting CAD 1.5 million-CAD 2 million. As Espen said, we have ample production capacity established, and we're in a good position cash-wise.
So we think that the macroeconomic factors are supporting the growth moving forward, and we're in a very good position in the market that we play. That complete the presentation. I think we're ready for Q&A.
Yes. Excellent. Thanks for the sharp and concise presentation. We did receive already a few questions, so let's, well, let's start with you, Espen, since you had the time to rest your throat. Now that we have a net cash position, how are we thinking of deploying the capital? Is it an expansion, R&D, M&A? What's the plan?
Okay. So for the, I think just a backdrop, keep in mind that we are still in a developing industry, so, it's, this, this will not be a straight line upwards. We, we will, we have to expect some, some variation with a positive trend. First, we, we want to have a strong balance sheet. We're, we're not expecting to need it for this reason alone, but it's, it's preferable that we have, a solid, balance sheet. We continue with disciplined capital management also going forward. We will do some investments in production efficiency, which, yet remains somewhat, somewhat limited. And, we also want to have, flexibility should there be opportunities that rise, then we are also ready, to invest, in, in the right opportunities with, with appropriate ROI.
... Okay, excellent. Thank you. Just, for our viewers, of course, you can, during the live, Q&A session, you can ask your questions in the comment section of the chat or in the Q&A section, as well. So, keep them coming if you have questions. Claude, for you, to what extent are larger strategic customers negotiating volume discounts, and how may this affect our gross margins?
Yeah, that's a very good question. Actually, of course, there's always some price negotiation when you see a customer growing their demand, but so far we've been able to manage that pretty efficiently. We have to be mindful of our margin and our customer understand that, so cost does not necessarily scale down with volume. And as we explained, you know, once you get qualified with customers in aerospace and defense and medical, it's a pretty sticky business, where, you know, it's very expensive for our customer to re-qualify another supplier. They cannot just play a supplier against the other for every single order.
It's a much more stickier business, and as you have seen, you know, we've been growing customers order in the past few years, and especially in the last year, and we have been improving contribution margin at the same time very significantly. So far, that's something that we've been able to manage quite efficiently.
Yes, exactly. Another question on supply chain risk. Should our investors be aware of any dependency of certain raw material, energy costs, or anything else that could squeeze the margins?
Well, that's... Yeah, that's something that, you know, we're mindful of. You know, we're... You know, we can buy our, especially when it comes to titanium raw material, we can buy it from, you know, quite a few countries. But of course, you know, everybody know that wire from China are, are less expensive than any, other place in the world. So, it's certainly a risk that we have been talking about in the past presentation, something that we are managing with, you know, firm supply agreement with our supplier. So, so again, so far we've been able to manage that quite efficiently, but we always have to have a plan B. So we have several customer qualified, several supplier-
Suppliers
... qualified when it comes to raw material, especially, titanium wire, because we use wire for our, our atomization process. Yeah, of course, it's a risk that we're actively managing by qualifying several suppliers.
Okay, excellent. Is there a recurring revenue or service model that could work for the installed systems base? For you, Claude.
Sorry, I haven't heard Arina.
Oh, sorry. Is there a-
Yeah
... recurring revenue model, or service model that we could apply to our installed systems?
Yeah, it's, yeah, very good question. And in the, you know, in the other revenue opportunity that I have been talking about, this is something that we are seriously looking at. I would not like to disclose the exact example at this stage, because, you know, we want to study that carefully and make sure that we capture the opportunity, before anybody else. But, yes, this is something that we are looking at, especially on the system business side, where we see some opportunity in providing some services on top of the hardware, that we provide to our customer.
Okay. So we'll have to wait a little bit for that. I think for our investors, we have about 250 systems installed at the moment, so that frames a bit the potential of that as well. Then one question that we got here, which is more R&D-oriented: Is Tekna expanding its plasma atomization capabilities toward novel iron-based or multi-element alloy systems for additive manufacturing?
Yes. So in terms of new alloy, right now our plan is really to focus on what we are good at, titanium, aluminum, and refractory metal. Part of the, you know, organization simplification that we've been talking about is that we try to be laser focused on what we do, making sure that we don't do too many things at the same time. And since we are really, really good at those materials, we're looking at developing new alloy, but new titanium alloy and new aluminum alloy. One thing to take into account is that since we do plasma atomization, we need to make sure that we choose the right alloy where we can really differentiate ourselves-
Mm-hmm
... and be competitive. Because, you know, we compete against EIGA and VIGA and other atomization technology that are, you know, better for some type of metal, and in our case, we need to focus on the one that we are really excellent at, and that's what we're doing right now.
Yeah. Let's keep going with that. So I think that those are the questions that I've received so far. I don't see anything else coming in. So perhaps any concluding remarks from you, Claude, before we go?
Yeah. Thank you very much, everybody, for listening. So again, we're very proud of the performance that we have posted in the fourth quarter. And thanks to our employees, because it's not only about market demand, it's not only about market position, but it's also about excellent execution. So we've been able to deliver, you know, in all aspects during the fourth quarter, and you know, it's all to the merit of our team across the world. So thank you very much, and thank you, thank you very much, everybody, for listening.
Thank you, everyone.