Hello everyone, and welcome to Tekna's third quarter result presentation. My name is Luc Dionne. I am the CEO of Tekna, and I am joined today by our CFO, Espen Schie, and by Arina van Oost, Tekna's Vice President for Investor Relations. I will share the company's business highlights, while Espen will walk you through the financial results. Arina will manage the Q&A session at the end of this presentation, so, as usual, if you have any questions, you can post them in the chat during this session. Slide 3, please. For those who are joining us for this first time, let me briefly introduce you to Tekna before going into the details of Q3. Next slide. Tekna is a world-leading provider of Advanced Materials and plasma Systems solutions. The company was founded in 1990.
The headquarters 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 three production facilities, two in Canada, one 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 Western countries. Business activities are now returning to normal, normality in Asia, which is a great news for our staff and customers in that part of the world. Next slide.
Tekna 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 megatrends, having significant impact on consumer behavior worldwide. Space Exploration and Space Tourism, Deglobalization 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 accounts for 30% of our revenues in 2022, and Additive Materials, which accounted for 70% of our revenues. Next slide, please. Now, let's have a closer look at the financial highlights. We are pleased to report the results for the third quarter, with total revenues of CAD 9.1 million, increasing 53% over the same period last year.
This performance was driven by the System segment, growing more than 120% and Materials growing 25%. We had previously guided on a softer quarter for materials. We actually ended up slightly better than expected, and our year-to-date revenue growth continues to outpace the Additive Manufacturing industry with a 35% increase year- to- date. At the Adjusted EBITDA level, we are reporting a significant improvement of CAD 2.2 million over Q3 last year, closing the quarter at CAD -1.7 million. This progress is consistent with the increase in revenue we have recorded, the improved contribution margins, as well as the reduction and control on our cost structure. Looking at the order backlog, on September 30th, the backlog reached CAD 23.7 million, increasing by 58% from the same date last year.
The backlog increase was driven by an order intake of CAD 10.4 million, up from CAD 6.5 million in Q2. So many, many thanks to, and kudos to all of Tekna team members for achieving these results in Q3. Next slide, please. We can see the graph here on the left, the trailing 12-month revenue development of the last six quarters. The blue-green bars represent the materials trailing 12-month, and the light green bars stacked the Systems trailing 12-month. On the right-hand graph, we have the trailing 12-month adjusted EBITDA, with the trailing 12-month EBITDA margin over the revenue for the same periods. Both revenues and adjusted EBITDA improvement trends are consistent with the increased deliveries and margins generated from sales and operational cost control reported since the beginning of this year. Now, let's look at how each segment has performed, starting with our Systems segment.
Next slide, please. As a reminder, the sales of our Plasma Systems are addressing two important needs in the world of research and development. The first application for our Systems is a configuration that enables the development of novel materials for Energy and Space exploration, as well as a small-scale production of high-value materials. The second application is the PlasmaSonic segment here on the left. This unique configuration of our Tekna plasma technology is used by original equipment manufacturers and academic research centers to simulate, measure, and characterize the behavior of Spacecraft Thermal Protection Materials in atmospheric re-entry conditions. So let me share the highlights of Tekna Systems segment performance this quarter. Next slide, please. We're seeing continued and strong growth in Systems orders and revenue.
In Q3, Systems order intake was CAD 2.6 million, with an order backlog at the end of September of CAD 10.2 million. We have received new orders for nine plasma machines so far this year, for a total value of CAD 8.1 million, confirming again that the research industry of Advanced Materials is re-energized, and very importantly, I should say, in all geographic areas we are developing. The contribution margins for Systems year-to-date average 64%. So this is quite a turnaround when we compare it to last year's 39%. So these results are confirming the strategic importance of the Plasma System segment for Tekna. For one, it's an important cash contribution supporting our corporate development ambitions.
The Systems segment benefits our in-house Material manufacturing operations with technological improvements, and not least, the vertical integration that spans from Systems manufacturing all the way to powder manufacturing enriches our global offering. It strengthens our brand's international outreach, and it enhances our value proposition for customers having a high priority on securing their supply chain. Next slide, please. So we're now looking at Additive Materials, order intake, and backlog. Firstly, in Q3, we recorded an order intake for Additive Materials of CAD 7.6 million. This is up 108% from the third quarter last year and 52% up from the second quarter of this year. We see the effect of the order intake here on the graph, with the backlog returning to the levels we saw earlier in the year.
To keep the momentum going, a new atomizer is scheduled to be commissioned by end of this year, and this machine will immediately focus on Tekna's main selling materials. We are also planning on implementing an additional atomizer in the first half of 2024. So we had a good rebound in the order intake this quarter, and that was driven by materials for the consumer electronics industry, as you have read in our press release earlier today. So let me say a few words about our latest development in this specific market. Next slide, please. Over the last two quarters, Tekna aterials have marked a significant advancement, recording two consecutive orders for powders designed for the manufacturing of consumer electronic components.
I'm just very proud of this achievement, and this is a market segment we had been focusing on for a few years, but you know, the progress was delayed by the pandemic. So big shout out to our sales and engineering team, who have persevered on this task and supported our customer in this effort to qualify our titanium powders for this super exciting and promising application. Examples of the components manufactured with Tekna's powder are shown here on the right side. So we can see a mobile on the up, on the left image, on the top of the left image, actually, you can see mobile phone cases, you can see smartwatch cases and other sub-components. So these components are manufactured using a technology called Metal Injection Molding, or in its short form, MIM.
MIM and Metal Injection Molding materials other than titanium have been used for many years already. But in the recent years, we have seen an increase in the demand for titanium materials. Titanium materials, such as those produced by Tekna, for large-scale manufacturing of consumer electronic components, like the one shown here in the images. In Q3, we recorded our second order for this market at CAD 2.9 million, with deliveries scheduled in 2024. A similar order was received from the same customer earlier in May this year, but this time valued at CAD 1.7 million. It should be noted that these orders will be fulfilled mostly from material that is readily available in our inventory. This, of course, not only streamlines the delivery process, but also has a favorable impact on our cash position.
The orders were captured at a competitive price, allowing Tekna to secure a position in the Asian market. As we continue this trajectory, we anticipate our margins to improve with the global increase in demand for this product. Lastly, it's important to highlight that this order is for material consisting of the smaller particles generated from our existing powder production. And why is this important? We'll see on the next slide. This is important because metal powder production processes naturally yield a distribution of small to large particle sizes. Although this range may be skewed differently from one supplier to another, all powder producers face the same reality. For Tekna, the small and large sizes have the same high quality as the mean size, and they all have the potential of addressing high standard industries.
So we have worked closely with a wide range of customers and applications to secure sales of Tekna's entire production output. Next slide, please. We're very close to qualifying our powders for application that will utilize 100% of the full powder distribution. We can see on the bell curve here, how each powder size matches with a relevant industrial application. 3D printing was the first market developed by Tekna. We can see it at about in the middle of the curve here. This industry, this 3D printing industry actually uses the small, mean, and large powder size. As you well know, this is the market that generates today the most sales for Tekna. Metal injection molding is the latest applications we have qualified, and as discussed in the previous slide, MIM uses the smaller powder size.
Binder Jetting, Direct Energy Deposition, and Hot Isostatic Pressing are at earlier development stages for Tekna. Hot Isostatic Pressing or HIP is of particular interest as it uses the full breadth, as you can see on the curve here, it uses the full breadth of the powder produced. It's nice to see that quality of our powder can address a wide range of applications, and that we're getting closer to qualifying market outlets with enough volumes for all sizes. Next slide, please. Here, we have a few examples of parts produced with the methods described on the previous slide. Metal Injection Molding, or MIM, on the top left, you can see again, the smartphone and smartwatch casing. On the top right, 3D printing, you can see multiple repeats of the same aircraft elevator.
And then on the lower side, image, you have impellers and spindles produced with the Hot Isostatic Pressing or HIP process. And finally, on the lower right, a capability demonstration part for a rocket exhaust nozzle manufactured with a Direct Energy Deposition or DED process. So we have now covered our current segments, Systems, and Additive Materials. Now, a quick overview of the Development segment, Microelectronics. Next slide, please. As we had highlighted in earlier presentations, the expansion of the MLCC industry players is evident through continuous investment in new production facilities and capacity relocation. Building on that, I'd like to share that over the past six months, our management board and technical staff at Tekna have been proactive. We've visited several key producers in Asia.
Through these interactions, not only are we gaining a better understanding, but we are also confirming the producer's supply chain priorities, understanding their materials specification, and grasping the rationale behind the need for qualifying new supply source. Now, it's important to note that despite a reported slower demand for smartphone in 2023, and that's mostly in Asia, we are very positive about the MLCC industry's outlook, especially with the increasing sales in electric vehicles, smartphones, and other electronic devices. So, on this, I'm passing the microphone to Espen for a detailed overview of our Q3 financial performance. Next slide.
Thank you, Eric. Good morning, everybody. Let's look at the Q3 financial results. Next slide, please. I'm happy to report that our revenue increased 53% year-over-year to CAD 9.1 million. This is a strong achievement for Tekna, despite the impact by vacation seasonality in July and August, and a great achievement by all the Tekna employees. Year-to-date revenues were 47% over the same period last year. The Materials revenue was CAD 5.2 million, a 25% increase from the previous year, and our Systems revenue was CAD 3.8 million, a 121% increase year-over-year. This reflects a strong execution on our order backlog.
Our adjusted EBITDA was CAD -1.7 million, a significant improvement of CAD 2.2 million from the same quarter last year, and a CAD 6.3 million improvement over year-to-date last year. We continue with strong focus on profitability and cash. Next slide, please. When comparing this quarter to Q3 last year, 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 have shown a strong improvement, particularly within the Systems business when compared to the same quarter last year. Thirdly, we have increased productivity and organizational efficiency. We have implemented several measures to optimize our operations and indirect costs.
Finally, we have maintained our cost control efforts while scaling revenue and managing inflationary cost increases. This remains a balancing act of controlling costs and achieving the growth. To summarize the Q3 financial results, we have improved revenues, margins, and productivity, all along with our cost control efforts. Thank you for your attention. I'll now hand back to Luc. Next slide, please.
Thank you, Espen. So now, let's move on to the concluding remarks, starting with how Tekna is positioned to thrive on exciting megatrends along three different themes: Systems, Additive Materials, and Microelectronics. Next slide, please. As feedback from the market has shown, our unique IP-protected technology is highly relevant and attractive. And as additive manufacturing is gaining ground in an increasing number of industrial applications, we continue at Tekna to sell more Systems for R&D and production of Advanced Materials in segments which are not competing in Tekna's current Materials segments. Our plasma technology has also proven extremely relevant for customers involved in hypersonic and space industry, which is expected to grow substantially going forward, providing steady business for Tekna.
Our ability to deliver reliably high-quality materials positions us well in the relation to the Additive Manufacturing market, which is expected to grow significantly over the next years. Our ambition for this part of our business is quite simple. Our target is to at least follow the industry growth and keep our market share. So both our Systems and Additive Material businesses represent a good, solid foundation for Tekna's growth ambitions going forward. And in the longer term, we believe Microelectronics will become an even stronger lever for Tekna. As already mentioned, we consider ourselves well-positioned, as we are in dialogue with the major MLCC players, and they all predict exponential growth and demands towards 2030. We will be there to support them. Let's see now how this translate into business opportunities in the short to medium terms for Systems and Advanced Materials. Next slide, please.
For Systems technology for R&D applications and PlasmaSonic wind tunnels, from the basics of a form, the basics of our offering. The global interest in developing, testing, and manufacturing novel materials has been re-energized in both industry and academia. We are seeing new industrial segment emerge: Space Tourism, Satellite, Internet, & Networks, and Strategic Defense. There's need for better performing products enabled by novel materials, is driving an increase in demand for Tekna's research-scale plasma unit. Part of the strong pipeline we have seen has already converted to backlog, carrying through 2023 and into 2024. As informed before, we have identified CAD 300 million worth of PlasmaSonic prospect over the next 10 years, and the pipeline of potential PlasmaSonic orders for 2024 continues developing according to plan.
For Materials, we see a growing Additive Manufacturing market with an increasing number of OEMs now operating at an industrial scale. A further large potential for large volume manufacturing is opening with a breakthrough in use of titanium powders in production for Metal Injection Molding and B inder Jetting Applications. And for Tekna, our increased factory output rate will continue to translate into increased sales throughout the year. So all in all, we keep a very positive view on the opportunity for our technology and products in the short to medium term. And as mentioned on the previous slide, we believe we are well positioned to continue growth also for the longer term. And now it's time to sum up and conclude. Next slide, please.
But before we move on to the Q&A session, I'd like to take a moment and share again the highlights of the strong revenues and improved profitability we have seen so far this year. We report revenue growth of 53% and an adjusted EBITDA improved by CAD 2.2 million compared to Q3 2022. Our order intake in the quarter was CAD 10.4 million, with several significant wins in Systems and especially in Additive Materials, where we have recorded a CAD 2.9 million order issued by our main customer in Asia. The order backlog, just over CAD 23 million, is supporting a significant revenue growth for 2023, and by Q3, year-to-date. Revenue is already up 47% compared to the same period in 2022.
Finally, we are reiterating a substantial improvement of margins in 2023, which have improved by CAD 6.3 million year-on-year, supported by increased revenue and organizational productivity. This concludes our quarterly result presentation. Thank you for your time and attention, and we will now open for questions. To you, Arina.
Good afternoon, and welcome to this live Q&A session with Luc Dionne, our CEO, and Espen Schie, the CFO for Tekna Holding ASA. Let's start off with the first question. We saw some social media posts in relation to Formnext this week. How is this important show going for Tekna?
Yeah, well, well, first of all, Formnext is the largest Additive Manufacturing trade show, you know, with visitors coming from all over the world. It's a, it's a great showcase for Tekna. We have, like, a fantastic booth, located at the main entry, the main entry door of one of the largest hall. So it provides us with great visibility. And but, you know, if I had to sum up this trade show for Tekna today, I would maybe say in one word, it's industrialization. So what we're seeing here in the mainly with regard to the printer manufacturers, we're seeing a larger number, a growing number of larger printers. You know, printers that would use about, you know, for each run, about one ton of, of...
Could use one ton of material. So that I would say it's, you know, the buzzword around the trade show this year is industrialization. And another thing that we find out very interesting from a powder producer perspective is that, you know, there's no new powder producer of any significant size showing up. So for us, it's also telling us that, you know, this sort of quality product and positioning we have been developing for the last 10 years is still sticking to that industry. So it's, and we also hosted 3 of our distinguished board members during the trade show.
So it's, you know, it's, all in all, it's very positive for Tekna and for the industry as a whole.
That is excellent. Can you say something more about the particle size distribution? Is this new for Tekna?
Yeah, well, I think that's a very good question, and I'm happy to elaborate a little bit more on it. So first, you know, we need to understand that we see that this industry, and I'm talking about Consumer Electronics alone, that's an industry for Tekna that we see growing profitability, profitably. You know, the demand for Consumer Electronics devices, or the powders for this industry, Consumer Electronics, will outgrow the supply by an order of magnitude. You know, to give some examples, you know, one single customer's needs in the next five years is estimated to be above 2,500 tons for these powders. So that's, you know, we see that the demand for these materials are growing.
For Tekna, in this specific case that I have described today, it was a strategic decision to go and capture this order with this single customer. We had the inventory available. We were prepared. We had, for those who've been following us for a few years already, you were aware that we had started to qualify with these, with some of these suppliers in Asia, almost three or four years ago, so maybe a year before the Covid hit the planet. It was like a, you know, this unique opportunity. The customer already had his own contract signed, so we were sort of, you know, cut into a framework, and we made the decision to take that order.
And there we go. We have our, you know, it provides us with a great way to further prove, you know, the fit of our material with the needs of that industry. But there's another thing we need to mention here, Arina, is that, if we look at it from a broader perspective, we're not only, you know, for this full scope of powders that I have shared in an earlier slide, you know, we're not looking just at Consumer Electronics. We're looking at a much broader range of applications for Tekna's powder, and here I'm talking more about titanium, but we also have other powders for which we are also looking for a growing number of applications.
You know, I've mentioned Binder Jetting, Direct Energy Deposition, but of course, you know, 3D printing alone is a huge growing market, as I mentioned earlier, that is gaining a lot of traction from an industrial angle or perspective.
Okay, thank you. That helps. Then, in 2021, we've announced a contract with Airbus. How is that developing?
Well, the contract with Airbus, so yeah, so that was announced just after the listing of the company in 2021. So, well, honestly, you know, we have all have large, huge expectations, but for us, we've seen that developing a little slower than we would have hoped or expected at the time. But, nevertheless, since that announcement, we had- we have already started to supply back then, back in 2021, 2022, w e had already started to supply materials to some of the tier suppliers of Airbus, who are actually conducting work for this great company.
And I, you know, this is like, I would say, we have NDAs with this company, with Airbus, so there's not too many details that I can share, but I can say that there's been a supply chain qualification process going on with Airbus and their suppliers. Of course, we were part of that qualification, and we know today that, of course, this powder, our powder is approved for Airbus, and it, it's moving on. I think it's for us, it's we're just at the sort of a beginning or expanding this relation with Airbus.
Okay. So it's early days in the contract-
It's the early days of the-
Yeah
... initial phase. Yeah.
Thank you. I have a couple of questions for Espen. What is your expectation for 2023, and also more interestingly, 2024?
Yeah. Thank you for that question, Arina. Revenue and EBITDA for 2023 are expected better than 2022, as we have guided. For 2024, we will come back with a much more meaningful update at the next quarter, but I would like to remind the audience that Tekna is positioned in strong underlying markets, and we expect that to continue favorably for Tekna in 2024.
Can you maybe also comment on the quarter-on-quarter development in revenue and backlog?
Yeah
-compared to the earlier quarters this year?
Yeah. Thank you. That will, so revenue and backlog development for Q3, if you look at this quarter-over-quarter, is due to typical seasonality that we see. So, despite the strong growth we experience, we're still small enough to be impacted by summer vacations in July and August, as our main markets today are North America and Europe. So that's effectively 2/3 of the months in the quarter.
Mm-hmm.
Keep in mind also that it was the same last year and probably the same next year.
Thank you. Can you add some flavor on the lower gross margin within powders compared to the last quarter?
Yeah. Thank you for the question. So we have the margin is a matter of a product mix, and it's also a scaling effect that we have as a total.
And then, Luc, a little follow-up question. Did you say 2,500 tons of titanium powder for one customer in Consumer Electronics? Is the-
Sorry, Arina, I cannot hear your question. Maybe you need to speak up a little bit.
So we got a follow-up question from someone on your comments around Consumer Electronics.
Yeah.
Did you say 2,500 tons titanium powder for one customer?
Yeah, that's what I said. Yeah.
And the price is-
That's, I'm gonna say, I want to state something on this however, you will not find that number anywhere in any documentation, so that's private discussions going on. But I think it's useful to, you know, to understand here, and this statement was to illustrate the magnitude of this market. You know, to, you know, we show some watches, we show some or watch cases, we show some cell phone pictures, but what does it mean in terms of powder size, you know, and in quantity?
So, the idea here is not to stick to the 2,500 tons, but to have, to understand that it's a huge market, when you look at, you know, almost every person on the planet carrying a cell phone and a smartwatch. So that's, you know, that's the idea we have to understand here, and it's, it, it serves the purpose of, of, supporting the idea that the demand will outgrow the supply, for these materials at one point.
They have a reconfirming follow-up question: Is the price in line with traditional titanium powder?
Price for these materials typically sell for a little lower than traditional materials.
But just today, though?
Today, yes. But of course, we expect that it will catch up.
All right.
Maybe I can add to that, great question, you know. You know, I was mentioning earlier that we're looking from a broader perspective, you know, there's not only for Tekna, there's not only Consumer Electronics that are using this specific powder that we're selling to that industry. 3D printing alone is also using the fine-sized powders that we have delivered, so of course, you know, we expect that the sales of these powders will also increase in 3D printing, not only Consumer Electronics. So, globally, the margins for that very specific size are meant to grow as we develop in the industry.
Okay, that helps. I think that clarifies it. All right. I have not received any further questions at the moment. So, Luc, back to you, any closing remarks for the quarter?
Yeah, well, I, I think, you know, it's been a great year so far. You know, we've, when we started the year, we, we already had this vision of, improving our revenues and improving our margins. But these things don't happen alone. There's a lot of people behind this, fantastic team at Tekna. I want to thank them, especially for all the hard work, that was done this year. We're, you know, we're, we're keeping up with our, ambition, growth, objectives. Well, also to, maybe, I know we have some customers and suppliers listening to us, so, I think we have great business partners, and this is why we're able to, you know, to achieve these results, today.
Of course, our investors, thank you for, you know, continuing and believing in Tekna. Thank you for the quality of the questions you're bringing every time, and we look forward to the next quarterly report. Thank you very much.