Good afternoon and good morning in North America. Thank you for joining Tekna's presentation of the third quarter interim results. With me are our CEO, Claude Jean, and CFO, Yves Lemoyne. We have about 20 minutes of presentations followed by a Q&A session. During the live webcast, questions can be submitted directly through the chat feature integrated into this video player. To access the chat, simply click on the chat icon in the top right corner of the player. Over to you, Claude.
Thank you, Arina. Welcome everybody for joining us this morning or this afternoon. I'm pleased to report a very good quarter again for Tekna. Next slide, please. First, let me start with presenting Tekna briefly for those that are less familiar. At Tekna, everything we do is based on inductively coupled plasma technology, which is that we call ICP.
What it does, ICP generate an extremely hot gas stream that are used to produce metallic powder, also to simulate harsh environment that the space rocket are going through when they come back in the atmosphere. In the business, we operate two business area. The material business area use our proprietary ICP atomizer to produce high performance, highly spherical metallic powder. While we produce material like aluminum, tungsten, and tantalum, most of our revenue are derived from titanium.
We really focus on the most difficult material to make, which titanium and refractory are good example of. This business area is really a growth engine of the company. We're now standing at about CAD 32 million trailing 12-month revenue with contribution margin above 50%. In the system business area, we sell our ICP equipment for new material development or production. Typically, university, R&D, corporate R&D, research center.
But we also sell it for people that want to use it to produce spherical powder, but non-competing with our titanium business. The system business area is more lumpy by nature when it comes to revenue and order intake, but it provide extremely healthy contribution margin above 60%. We see a lot of opportunity to grow this business beyond the current level. Both business operate production and R&D in our headquarter in Sherbrooke, Quebec, Canada.
We currently stand at about 138 employees, and we have 95 active patents. Next slide, please. Now let me explain where we play in the value chain of additive manufacturing. At Tekna, in the powder, in the material business area, we procure raw material either in the form of wire or angular powder that are approved and fully traceable sources, which is very important because we sell to a customer in a highly regulated market.
Then we use our ICP technology to turn those material into highly spherical powder that are needed for additive manufacturing. What we do is really based on more than 35 years of expertise and development of our ICP technology. Our technology can produce the highest quality powder when it comes to sphericity, density, size control, flowability, and especially purity. Then we ship worldwide.
We have capacity to ship worldwide, either direct to customer or through distributor. We ship to service bureau, we ship to a printer company, or OEM. As I said, we really focus on the most demanding material, the highly regulated and sticky market, particularly aerospace and defense and medical. Next slide, please. Now let me comment more specifically about the additive manufacturing market.
According to AMPOWER 2026 report, additive manufacturing is forecasted to grow at 18% CAGR between now and 2030. More specifically, the material segment that we play in is forecasted to grow at 16% CAGR, currently at CAD 1.2 billion, actually in 2025, to CAD 2.5 billion in 2030. Within the material segment, titanium and refractory that we focus on are the fastest growing market and the highest value material. Now, there are several reason why manufacturers are switching to additive manufacturing.
First of all, you can manufacture nearly any type of shape that cannot be done with traditional manufacturing. When it comes to part performance, when it comes to weight, by being able to only put material where you really need it. You can significantly reduce the weight of a part. Part consolidation also is extremely important.
Rather than getting 100 or sometimes 1,000 different sub-components from all over the world, you simply put powder in the printer and you print the part. It's much more flexible. Of course, you can get much faster turnaround time, and you can even have distributed production. You can put printers close to the point of use. The adoption of additive manufacturing is also really accelerated by several megatrends that we're observing. Of course, geopolitical development and reshoring of manufacturing plays a big role there. Digitalization of supply chain.
Again, just putting powder in the printer, downloading a part layout in the printer, and then printing it is much more straightforward than getting parts from all over the world. If you look at all the drones development in Ukraine, they're making a lot of use of additive manufacturing, and also space exploration and increased defense spending is also another trend that is pushing adoption of additive manufacturing.
We clearly see that in the demand that we're experiencing this year. Next slide, please. Now let's dive into the highlight of the two business areas. Next slide. Okay. Again, Tekna is reporting a very strong quarter across the board in the two business areas, with revenue of CAD 13.4 million, up 61% year-over-year. EBITDA reached an all-time high at CAD 1.9 million compared to CAD 0.3 million same quarter last year. Adjusted EBITDA reached CAD 2.9 million.
Yves will explain later the adjustment. The inflection point that we talked about already five quarters ago is definitely holding. Contribution margin was 50.7%, again, impacted by a one-off inventory write-down that we'll explain later also. Adjusted contribution margin sat at 55.2%. Order intake doubled year-over-year at CAD 10.6 million, really on the back of increasing demand of material.
Our total backlog remained very strong at CAD 25.5 million compared to CAD 18.2 million a year ago, and it's really providing much better visibility on revenue getting into 2027. Free cash flow really stand out for the quarter at CAD 5.6 million compared to negative CAD 0.5 million in the same quarter a year ago. It's really supported by strong EBITDA and net working capital reduction. As you will see later, we have a very healthy balance sheet. It remains extremely healthy.
As you can see there on the right, not only quarter-to-quarter, year-over-year, but we also see sustained progress quarter-to-quarter. As you can see, our revenue keeps going up since Q3 last year, as well as our EBITDA number. That is very encouraging, very positive overall. Next slide. Okay. As I alluded to earlier, we have decided to look at our strategy execution and really focus on strengthening our platform, making sure that we focus on the core business.
As a result of that, we have decided to discontinue the Nano Nickel/MLCC, multi-layer ceramic capacitor, that we have been developing for several years. Despite the very good technical progress that we have made with our powder, we have realized that the path to commercialization would be much longer than anticipated, and probably the volume also would be lower.
We have reviewed our strategic portfolio, and we have concluded to discontinue this program. As a result, we are announcing a CAD 3.8 million impairment, and it will really allow us to focus on our core business. I will talk about where we have redirected our R&D resource since we made that decision. On another end also, over the past few years, we have been reducing our fixed cost base, streamlining our operation, reducing our footprint.
We have significantly reduced our footprint in Europe, in Canada, as well as in Asia. We are changing the structure in Asia. As a result of that, we have done an inventory write-down of CAD 0.6 million because of that, and also we have incurred restructuring costs of CAD 0.4 million. We expect that those measures will allow us to realize about CAD 1 million per year recurrent cost savings starting in 2027. We are now positioned to be much more leaner, much more efficient, much more focused on our core business.
Next slide. Okay, now about the two business areas. First on material, revenue was CAD 8.4 million, up 20% year-over-year, driven by continued strong demand in aerospace and defense. On a trailing 12-month, we are now at about CAD 32 million. Contribution margin was 50%. It is in line with our target. The lower, the fine particle that I will explain a bit later in the course are weighting a bit on our margin, but we are still in line with target. Order intake was very strong at CAD 9.3 million, up 80% from last year. Our backlog increased to CAD 17.1 million.
After the quarter end, we announced two big order in the medical market totaling CAD 2.8 million, one from a European distributor and one from a U.S. contract manufacturer. It is really confirming our momentum in this very important market for us. We also see good development for the coarse powder in Asia and North America, from non-regulated application. It is highly diversifying our customer base, which is very good.
Next slide, please. Now, on the system side, sorry, I lost my Okay, on the system side, the quarter was really driven by execution. Revenue was CAD 5 million, mostly due to the big order that we announced at the end of Q2. It is a very high revenue quarter for the system business area. Contribution margin at 52%, but that include also a CAD 0.5 million one-off inventory write-down.
If you adjust contribution margin for that's 62.6%. It's above our 60% target. Order intake was CAD 1.3 million. As we explained several time, order intake and revenue are a bit more lumpy in the system business area, but our pipeline is still very good, particularly in the PlasmaSonic segment.
The pipeline keep developing, so we're expecting more order to announce in the next quarters. The backlog is currently at CAD 8.3 million. It's five time higher than a year ago. Also procuring much better visibility in our 2027 revenue. Next slide. That's covered the two business areas. Now let's turn to Yves for the financial review.
Thank you, Claude. Hello, everyone. Beyond the contribution margin of our two business areas, we have also worked on building a more efficient indirect cost base. Our efficiency program has now reached maturity, and the savings are here to stay. Indirect personnel costs were CAD 3 million this quarter. It's 32% below peak levels. Headcount, it's down by 32% since Q2 2024, from 203 to 138 employees.
In Q3, we took further targeted actions as part of the simplification. These are restructuring costs mentioned earlier. That means it's simple. As revenue grow, more of it now goes straight to earnings. Next slide now, please. Adjusted EBITDA reached a record CAD 2.9 million. That's up CAD 2.4 million from last year. System led the way with excellent project execution and a 63% adjusted contribution margin. Material had further growth through a higher volume.
Reported EBITDA was CAD 1.9 million after CAD 1 million of non-recurring items. This record result shows that with our leaner cost base, we can generate higher earnings as revenue grows. Next slide, please. Now cash, which is the highlight of the quarter. Operating cash flow reached CAD 5.7 million, including a CAD 3.8 million working capital release, driven by our customer prepayments on system project. CapEx remained very limited at CAD 100,000 for maintenance and intellectual property.
This confirms that with our past investments, we are really well positioned to meet growing market demand. Cash rose by CAD 4.5 million in the quarter to CAD 22.5 million. Next slide, please. Our balance sheet has now been stronger, never stronger. We now have CAD 17 million in net cash, 73% equity ratio, with a little debt.
We are a solid and resilient company and a reliable partner for our customers. Net working capital is now 25% of revenue. This shows our discipline. We need less capital to grow, and more of our growth turn into cash. In total, we have close to CAD 28 million of liquidity. We have everything we need to fund our growth. Claude, back to you.
atomization process. Can you change the Yeah. If you look at how our atomization process works, the atomization process, and it is the same for every powder producer, produce a particle size between approximately five micron and 105 micron. The prime powder, what we call prime, that is in very high demand, sits between 20 and 53 micron.
It is used by the most demanding application in aerospace, medical, and defense, by laser powder bed fusion particularly. Since our process produce particle between five and 105, we produce what we call residual from production. So we produce what we call the fine, below 20 micron, and the coarse, above 53 micron. The story is quite different between the two. If you look at the coarse powder, that present very, very good value creation opportunity.
Specifically in laser powder bed fusion, they are using 20 to 53 micron because they are basically printing the part layer by layer. It is about 50 micron thick. As the printer become more bigger, more laser, more powerful, they can actually use coarser powder and thicker layer, such that the printer become much more efficient, much more productive. Those coarse powder are used in some of the advanced laser powder bed fusion, mostly today in non-regulated application.
It is also used in the electron beam powder bed fusion for medical, and also used in directed energy deposition for aerospace. We see very good value creation out of it, and we are launching new powder specification in order to be able to create much more value with those coarse powder. On another end, the fine powder are lower value. There is less opportunity with the fine powders.
They are mostly used for metal injection molding, for consumer good, mostly in Asia. Also used a bit in defense and medical, but although in lower volume. There, our strategy is to work with our R&D resource that we have freed up, when I was talking about the Nano Nickel and MLCC, in order to be able to reduce the amount of fine that we produce.
We have several project on the way to be able basically to transfer this production into the prime powder that sell for a much better ASP. Overall, we see very good traction on both side, either reducing the fine or getting better value from the coarse. As I explained earlier, the demand for the prime is so high that we have to produce at a high rate.
When we produce at a high rate for the prime, of course, we produce the residual, what we call residual, and the challenge is to make sure that demand for the residual grows as fast as the prime. We are making very good progress there. Next slide. On the outlook, the observed material order intake and increasing order size, coupled with market trend that we clearly observe, support our long-term ambition of double-digit growth toward 2030 and 15% to 20% EBITDA.
I think we are showing sustained progress in that direction. Reshoring and localized manufacturing bolster additive manufacturing growth. Increased defense spending offer positive opportunity in both business area, not only material, but also system. Our innovation effort, they are really, really focused on our core business and expanding our addressable market, improving our yield, et cetera, again, in both business area. Next slide.
To conclude, we are extremely happy and encouraged by our solid financial performance with record EBITDA, solid contribution margin in line with our target in both business area, cash flow at a record high, solid balance sheet, very healthy backlog that is providing good visibility for revenue getting into 2027. Our pipeline for sales of system is healthy, and the most promising opportunity are progressing well.
As Yves explained, we have the capacity and the fund to fund our growth with limited CapEx investment. We are in extremely good position in a growing market. That conclude our presentation. Now turning it to Arina for Q&A.
Thank you, Claude. Indeed, now it is time to answer some questions from our investors and viewers. You can submit your questions directly to the chat feature in this video player. If you look at the top right corner, there is an icon that you can click, and you can communicate directly with us to give us the questions. Let us start with the first question I have received, which is for you, Yves. It is about materials. Can you clarify why the contribution margin for materials was so much lower versus the third quarter 2025?
Yes, of course. Thank you, Arina. Essentially, if you remember for Q3 2025, we have already mentioned that the contribution margin was very exceptional, over our target at 50%. Essentially, it is the mix of the sales and material sold. This year, we are at 50%, so really, for the long term, it is our target to stay and to be at 50%.
Okay, so that is really the number to keep in mind for our investors. We are aiming for that 50%. Then I have another one for you. This is about the adjustments that we keep doing to the EBITDA. Is this impairment really the last one or the last time that we are doing an adjustment?
That's why we have specified that we did a very good assessment and survey of our strategy and our entire assets we have. Of course, this is the adjustment we can see today, that the last one we can see. We don't plan to have other adjustment in the future.
Indeed, going forward, we're going to be reporting more on EBITDA than EBITDA adjusted.
Exactly. This is the plan.
I guess the next question that is following from our 22% adjusted EBITDA, when can we start expecting net profit or dividends, perhaps?
Yeah, here, that could be very excited, but we still stay with our discipline of our costs and our group. We have a strategy plan in place, we execute that, and we follow our plan. For right now, we are focusing more on our strategy than to disburse any dividend right now.
Okay. Thank you. Part of the question was also net profit, but I do not know if you can comment on that.
For the profit, it is the same answer at the end. As you saw the last five quarters, we sustained a very nice growth of the EBITDA. The next step is the EBIT. On the last quarter, we are start to be break-even, and this quarter, we are very close to break-even with the adjusted. We are on the good way to meet that.
Yeah, it is very great to see how quickly we are progressing on this. I have one for you, Claude. It is on the MLCC. Regarding the impairment on materials for microelectronics, is it really over for that project?
Well, I think that since we went forward with this impairment, it is because we think that there is very little value left in that. We still own the IP, and the powder that we make, frankly, I insisted on the fact that we have made very good technical progress. It is really about commercialization path. So we still have a very good technology, very high-quality powder that we think would be competitive in the most advanced MLCC.
Of course, we are always trying to find ways to monetize this IP. We own it. We are not going to give it away. We are actually always have some discussion with potential customers interested in buying equipment, for example, rather than selling the powder, selling the equipment to produce the powder. The answer is no, it is not dead. We are always looking at opportunities. We own the IP. We are not going to let it go.
Okay. So it is almost fingers crossed, or wait for the market to be ready for us.
Yeah.
Okay. Well, I have not received any further questions, also not on the website or on our inbox, so I think that is it for now. Thank you for joining us today. Recording of the webcast will be available on the website shortly after the conclusion. Perhaps any closing remarks, Claude, before we sign off?
Yeah. I just want to come back to the solid quarter that we had. It's not coming without effort. Of course, a lot of good news from our sales channel, very strong backlog, strong EBITDA, strong cash, and it's all due to our employees. The Q3 was solid on execution, extremely solid on execution. That's the reason why we're able to post such convincing results. Thanks to our employee, because there was a lot of effort behind that. I'm extremely proud of the team effort over the last quarter.
Yes. Thanks to everyone. All right, just one more comment. If there are any questions, please go to our IR website, which is ir.tekna.com. There's a Q&A section there where people can ask questions, and we will make sure to answer you, and the answers will be available to everyone then.