Hello everyone, welcome to Tekna's second quarter results for 2023. My name is Luc Dionne. I am the CEO of Tekna. I am joined today by our CFO, Mr. Espen Schie, who will share the financial content of this presentation, and by Arina Van Oost, Tekna's VP for Investor Relations. We have prepared material for approximately 30 minutes, and we will follow with a Q&A session. If you have any questions, you can post them in the chat during the presentation. Slide 3, please. Before going into detail, let me share a brief overview of the company. Slide 4. Tekna is a world-leading provider of advanced materials and Plasma Systems solutions. The company was founded in 1990. The headquarter of the company is in Canada, and we are listed on the main board of the Oslo Stock Exchange since July of last year.
Tekna has just over 200 employees working globally. We have 3 production facilities, 2 in Canada, 1 in France, as well as sales offices and distributors strategically located in Canada, USA, France, China, Korea, India, and Japan. If we look at the distribution of our sales on the left side, the revenues generated in 2022 were distributed quite evenly in North America and Europe, with a small difference in Asia, where the COVID-19 pandemic lasted longer than in the Western countries. Business activities are now returning to normality in Asia, which which is a great news for our staff and customers in that part of the world.
On the middle section, we can see that a third of our sales originate from the aerospace industry, 20% from 3D printing machines manufacturers, 10% from the medical implant industry, and the remaining 35% are generated from other sectors, such as academic research. We can see here on the right side, the quality of customers we are supporting and developing. For years, our company has been dedicated to building a reputation for delivering quality products and being a dependable supplier. We have consistently prioritized establishing trust in every aspect of what we do, from outstanding customer interactions and unparalleled product quality to our unwavering commitment to timely deliveries. The relationship we have forged with our customers stand as a testament to our success in achieving this mission. If we take a closer look at our market segments, slide 5, please.
Tekna Holding is engaged in four segments, organized under two business units: Systems and Advanced Materials. As you can see on the left, the growth of these segments is driven by mega trends, having significant impact on consumer behavior worldwide: space exploration and space tourism, de-globalization and climate change, digitalization and connectivity, as well as demography and healthcare. Today, we have sales generated from two of these four segments: R&D Plasma Systems and PlasmaSonic, which account for 30% of our revenues in 2022, and Additive Materials at 70%. We are venturing in two promising segments. First, in microelectronics, we're actively collaborating with potential customers in developing new products. I'll say more on this later.
Secondly, in the energy storage sector, we have developed a breakthrough technology that produces Silicon nano powder, a game changer for enhancing electric vehicle and other powered electric device performance. We're just setting our foot in this market, so there's plenty of exciting progress ahead. Slide six, please. Let's have a closer look at Q2 performance highlight. Slide seven. I am pleased to report our all-time high quarterly revenues, a trend that continued into the second quarter of 2023. Our total revenues reached $11 million, representing a growth of 45% compared to the same period last year. This growth was fueled by an impressive 66% increase in systems revenues and 37% increase in materials revenues. These increases have been driven by strong demand, numerous successful bids, and a successful capacity expansion in our materials division.
We are also proud to report a significant improvement in our EBITDA, closing near breakeven at -$600,000, compared to -$3.2 million for the same period last year. This financial performance reflects our continuous revenue growth, improved contribution margins generated from the systems business, and the clear effect of our organizational efficiency and cost control measures. Looking at our backlog, we see an increase to $22 million, 19% above Q2 of 2022, with an order intake of $6.5 million. This is a slightly lower order intake than in Q1, but it's within the normal variations we see from quarter to quarter. This said, our backlog continues to support our previous guidance of revenue growth and margin improvement in, for 2023 in both materials and systems. Slide 8, please.
Now I'll say a few words about our Plasma Systems division. Since the start of the year, we have successfully converted a strong pipeline into firm orders for eight plasma machines, totaling $6.2 million in sales. At the end of June, the order backlog stood at $11 million, and we have added an additional $2 million in July. We have also made great progress with opportunity PlasmaSonic segment, with over $110 million in budgetary quotes delivered to industrial and academic research centers. We are now witnessing a segment that is strongly re-energized following three years of COVID-19 restrictions. Tekna Plasma Systems have a wide range of applications, including research and development of materials and coatings in the field of energy and space exploration, medical implant, and small-scale production of high-value materials.
More importantly, the system, the, the, the segment provides knowledge and technology that allows us to continuously improve our Advanced Materials segments. Well, now let's move on to Additive Materials. Slide 9. We continue to see a strong demand for Additive Materials. Tekna recorded order intake for $5 million in Q2, in line with previous quarters. The order backlog reduced partly due to normal variations and also because of the increased machine output that reduces delivery lead time. We expect the demand for Additive Materials to remain strong in 2023, with average selling price 3%-6% above 2022. We are very happy to report that the titanium metal powder production factory has proven reliable throughout the quarter, operating at 70% more output.
New atomizers are scheduled to be commissioned on Tekna's main selling materials by the end of the year. The increased output and new machines will further increase our capacity, translate to higher material availability, and ultimately increase sales. Slide 10, please. On this slide, I would like to highlight two cases. When combined with metal additive manufacturing, these cases hold the potential to capture sizable market share from traditional milling machine part production. The first case pertains to the binder jetting process. Through a collaboration effort, TriTech Titanium Parts, a United States company, was able to develop the world's first titanium binder jetting printing process. This achievement was accomplished with Tekna's titanium powder, and it is at the proof of concept for now. The second case involves a significant order we have received.
In this case, the customer intends to use Tekna's titanium powder for metal injection molding to manufacture at scale, components for personal wearable electronics, such as smartwatches. The value of the order received is $1.7 million, and we have started to deliver on it in June. The growth potential for binder jetting and metal injection molding is significant. They allow for the manufacturing of smaller and more intricate components at a much higher rate and lower cost than traditional milling process. Now that we have covered our two current segments, Systems and Additive Materials, I will update you on progress achieved in developing our position in the multilayer ceramic capacitors, commonly known as MLCC. Slide 11, please. MLCC devices are these tiny little components that are just a few millimeters small and used in everyday electronic devices.
There could be up to 1,000 of them in a cell phone and up to 10,000 in an electric vehicle. The nickel powder, such as the one produced by Tekna, is applied in very, very fine nanoscale layers, with over 1,000 layers stacked one over another. It's because of the fine size of these layers and the required purity of the nickel, that very few companies have the ability to this material, and we will see why this is important in the next few slides. Slide 12, please. The MLCC market is quite exciting. The demand for these very small devices is growing exponentially, and it's driven by major industries such as consumer electronics, electric vehicles, 5G networks, and connected objects.
The industry analysts estimate that this market will grow 10% every year, reaching $1 billion by 2020, 2030. There are just a few companies that have the competence to either manufacture the MLCC devices or to develop the manufacturing methods for producing them. Tekna. Tekna is diligently working with the top six of them, who control 100% of the high-end MLCC device market, and the logos of these companies are shown here on our slide. Over the past two months, we have delivered our latest generation of nickel samples. These companies are at different development stage, either conducting technical assessment of our material or running R&D scale trials on actual MLCC devices.
Another interesting fact about this industry, and perhaps I could have started with this one, is the fact that there are today companies, including Tekna, that manufacture, that master the technology and industrial know-how to produce the very pure and nanometric-sized nickel powders required by this industry. The two other companies are shown here. One is located in Japan, Showa Chemical, and the other, Guangbo, is located in China. The context for Tekna making significant inroads in this industry could not be better. In addition to being one of the very few having abilities, global supply chain issues and geopolitical tensions create the necessity for these companies to secure alternate sourcing options. For all these reasons, Tekna sees this market as a significant potential upside for our business case. Let's go to our comments on the financial performance, Espen, on slide 13.
Good morning, everyone. Let's look at the financial results for Q2. I'm happy to report that our, our revenue increased 45% year-over-year to CAD 11 million. This is another record level for Tekna, beating Q1, and I would like to congratulate the Tekna employees for yet another strong achievement. The materials revenue was CAD 7.6 million, a 37% increase over the previous year. Our systems revenue was CAD 3.4 million, a 66% increase year-over-year. This growth reflects execution on our strong order backlog. Our EBITDA was negative CAD 0.6 million, yet a significant improvement from previous quarters. Year to date, the EBITDA was negative CAD 1.8 million. That's an improvement by CAD 4.2 million year-over-year. We continue with strong focus on profitability and cash improvements. Slide 15, please.
When comparing this quarter to Q1, I'm pleased to report that we have achieved several improvements. First of all, our revenues have improved from both systems and materials, which had a positive effect on our financial results. Secondly, our margins were stable overall and with strong improvements in materials, while systems were lower compared to Q1, which reflects the assembly phase of a significant projects we have in the backlog. Thirdly, we have again increased productivity and organizational efficiency. Some of this gain was, however, partly offset by a loss on effects this quarter. To summarize, we have improved revenues and productivity with scaling all along our cost control efforts. This remains a balancing act of controlling cost and achieving growth. Thank you for your attention. Back to you, Luc. Slide 16.
Thank you, Espen. Moving along, the concluding remarks, starting with the market outlook. Slide 17, please. The systems segment is strongly re-energized. We see a growing global interest in developing, testing, and manufacturing novel materials for new emerging industrial segments and products in space tourism, satellite internet, and networks, strategy, defense, and so on. In the PlasmaSonic segment alone, we have built an opportunity pipeline of nearly $300 million. We have delivered budgetary quotes for these opportunities, adding up to $110 million, where half of them either have their budget approved or are in the process of budget approval. The Additive Materials segment is seen growing at 30% annual average until 2030, with an increasing number of customers operating at industrial scale.
Without a doubt, the breakthrough mentioned earlier, using titanium powders in production for metal injection molding and binder jetting applications, offers significant potential for large-scale manufacturing. With the capacity expansion achieved in Q2, coupled with the new machines set to be commissioned later this year, we are ideally positioned to further grow our sales this year. Slide 18, please. To conclude on our performance, I am absolutely thrilled to share again that our revenue grew 45% in Q2, and our adjusted EBITDA improved a solid $2.6 million compared to the same period last year. Our target for the capacity increase of titanium materials has been reached, and our top priority remains, of course, to leverage these new volumes available and increase our sales. We have recorded order intake of $6.5 million, with several significant wins, especially on the system segment.
Like last year, the summer vacation in our main markets will affect the company's revenue in Q3 compared to Q2. Nevertheless, the order backlog we have is supporting a significant revenue growth, and we are reiterating our guidance for a substantial improvement of margins in 2023 compared to 2022.... On these notes of a strong top line growth and bottom line improvement, I want to express my most sincere gratitude to Tekna's employees and business partners. The performance we have seen from the start of this year is phenomenal, and you should be proud of what we have accomplished as a team. Thank you again for attending this presentation and for your kind attention. We will now open for questions. To you, Arina, for the Q&A session. Slide 19.
Hi, good afternoon, everyone, welcome to the Q&A session for Tekna Holding ASA. My name is Arina Van Oost. I am responsible for investor relations at Tekna. We've received quite a few questions, let's get started and see how far we come with the questions today. First question is for you, Luc. Do you see the demand slowing down?
Good question. No, we don't see the demand slowing down. We keep we have a very strong backlog, roughly $11 million for each segment. No, the demand stay strong. The pipeline for both systems and powders are very, we have a very high confidence on those pipelines, and actually, we expect to make some future announcement for systems later this quarter.
We have a follow-up question on that. Can we give some flavor on what we expect for the rest of 2023 and 2024 in terms of order intake?
Well, we don't guide on the future orders intake. However, we certainly reiterate our previous commitments of increasing the revenues for 2023 and improving our margins.
Thank you. Of the current backlog of CAD 22 million, how much do you expect to convert into revenues for the rest of 2023?
Very good question. It's right now, roughly, I would say, difficult to guide for the rest of the year, but what we can say definitely is that the revenues from this year are expected to increase over last year, as well as, as I said earlier, improving the margins.
We have a question about our relationship with significant aerospace players like Boeing and Airbus. What is the actual relationship that we have with them, and how will we achieve substantial and recurring revenues from these two companies?
Well, first thing, with Airbus, we've previously announced that we have a supply agreement with this company. We also previously announced that we, with Boeing, we have been selected as their supplier for Additive Materials. Both of these companies are working on developing products, qualifying products, and we do have some regular sales to them since those announcements were made to them or to their suppliers. Well, I don't know if... Did I answer the full question? It was a long question.
Yeah, it's, but it's really when, when do we expect to have substantial and recurring revenues from these two companies? When do we expect them to go to industrial scale, I suppose?
I think, we cannot make any commitments on that. Those are the customers' information, but definitely we have recurring orders delivered to both of these companies.
Thank you. Tekna is collaborating with TriTech. This is referring to our announcement of this quarter. When will this product be ready for market and result in significant revenues?
Wow, thank- I like that question. Well, I think I just want to reiterate how major this announcement was with developing a process using titanium, Tekna's titanium powder, to qualify- to do the proof of concept for using titanium powder in a binder jetting process. That's the key message here. However, this is still at the very early stages of the development. We don't have any schedule for or sizable orders with the, this process. I also want to add that we also mentioned about metal injection molding, which is another technology that is used to that is using Tekna's titanium powders, and that, for that segment, we are having regular sales and deliveries.
We've made an earlier announcement of a $1.7 million size order for one single customer, which means that this is an actual industrial-scale process, and we expect to have others of those deliveries in the future.
Just to have a follow-up question on that. So how long does it take for a proof of concept to become an industrial, an industrialized technology, let's say?
A great question. It depends on the application. If it's a medical application, it can be 2 years. If it's aerospace, it can be 3 years. If it's, I would say usual, day-to-day use product with no specific standard, it can take just a few months. You know, it's depend on the end application, so there's not a precise answer for that.
Okay, the Tri-Tech solution could go quite fast then?
It could go fast if it's day-to-day application with no specific standards to respond to, to meet.
Understood. We have a question about PlasmaSonic, because we're talking about a good pipeline, but when are we expecting a next order for PlasmaSonic?
Well, we are currently fulfilling one major order. I think we've had announced that above, an order above $8 million, announced, that was announced last year. We don't have any other orders scheduled for 2023. Those, those are large, very significantly large orders. Typically, the cycle goes from one to three years, by the time the customer, identify his needs, develop some requirements, go through the bid cycle, so it can take, between one and three years. We did not make any announcement yet or give any guidelines on when this could happen, but we're very confidence in- confident in the pipeline we have for these large orders, and hopefully, we can, close one, next year.
Thank you. A very general question: What can you say about 2024 and your expectations on the different segments and overall? Maybe for microelectronics and energy storage, that's probably the general direction.
Well, the general direction is that, you know, the, the industry that we are operating are all growing. I mean, microelectronic is growing, aerospace is growing. The needs for additive manufacturing doesn't stop. There is a clear transition of manufacturing meth-- of you applying additive manufacturing as a new method for manufacturing parts. The, the mega trends that we are surfing on are still there. Nothing has changed in the fundamentals of our business case. In our, in our view, 2024 is going to be, another year that will- that should follow the same trend as 2023.
Okay. Do, do, do you want to say something specific about microelectronics and energy storage?
Well, microelectronics-
And-
Well, in what sense? In the sense of the market?
For next year. What, where, what do we expect?
I mean, right now, microelectronics, definitely this is a product that is under development with some customers. We are in a iterative development cycle with them. It is taking more time than we had expected, not just because of technicalities, but also because of all the, you know, the pandemic we've been through. That has slowed down a lot of development last year. The good news is that right now we are working with the top six leaders for the last two years with them, developing in this iterative development cycle. We're confident that this relationship will continue until we have qualified at least one customer. We're not giving any guidance on when this could happen.
You know, we've, we've did it in the past. We had some... Like, based on customer information, we had some reasonable motive to give some guidance, but now we are more cautious about that.
Do you want to say something about energy storage, or, for now, that's off the table?
Well, energy storage, I can say that we have developed a good process using silane gas. It's quite unique in the world right now. The way that we are able to produce Nanosilicon, which is below the threshold of, sorry for the technicality here, but below the threshold of 150 nanometers. At below that size, you don't have any swelling issue, so it's a great product. However, at this point in time, we're just, we're focusing on our current segments, systems and Additive Materials, and also developing the MLCC or the microelectronic segment. We are still open. If customer calls for Nanosilicon, we will listen and discuss with them, but for now, focus is on current segments and microelectronics.
Thank you. We have a financial question, so I guess that's for you, Espen. We received a loan from Arendals Fossekompani of CAD 25 million, and in the question, it assumes that that is for increasing our production capacity. Can you explain what the loan was for, or what we're using it for?
Yeah. The loan generally then is, is for all the, all the needs, it's not only for the production capacity, but to answer that specifically, that is, we do expect in 2023 about CAD 10 million of CapEx, of which that would be around half or between half and two-thirds, for production capacity.
Okay. Thank you. I think we have one last question, either of you can take the question. What do we mean by the seasonality of sales that we have referred to for Q3? I don't know, Luc, do you want to take it or?
Well, basically, what we intend to say here is that the in the U.S., the market slows down for the full month of July, basically, and the same thing happens in Europe in August. Both of these months are typically lower activities in it, either deliveries or orders. And last year, I think we had we had informed the market about it, but after the fact, and this year we just wanted to be more open on what's, what, what this could be for Q3.
Excellent. I think that concludes the questions that we have received so far. With that, this also concludes the webcast for Q2. Thanks, everyone, for attending and for the good questions, and we'll look forward to meeting you in one-to-one meetings later today, or in Q3, which will take place in November. Thank you.
Thank you.