Good morning, everyone, and welcome to this Q1 presentation for Vow. As always, I have our CFO, Cecilie Hekneby, with me here today. She will take us through the numbers. My name is Gunnar Pedersen. I'm the CEO of the company. We will take you through some highlights. Cecilie will go through the numbers with you, and I will be back for a market and business update before we open up for questions.
Before we start, I would like to share some reflections with you. This quarter marks the one-year anniversary for both Cecilie and myself here at Vow. We've had the pleasure of working with a highly competent team and very dedicated, also, I would say, for a full year now. And as you can see in the report, our collective efforts have paid off. We have improved project follow-up procedures.
We have improved the financial discipline, improved transparency, and all of this leads to more predictable operational performance and also the improvements that you can see in the report. Our core operation continues to deliver solidly. This is driven by Maritime Solutions and Aftersales. They are, again, fueled by the very strong activity in the cruise market on new build, as well as an increasing fleet of vessels in operation. We are, as we speak, entering a very intensive period in terms of delivery and commissioning on new vessels. Execution discipline remains a key priority for us. Within Industrial Solutions, the first quarter has been dominated by commissioning activities. The two large projects within Circular Solutions have faced some technical challenges, and these challenges are pushing the timelines, of course, taking the necessary corrective actions.
We do see a lot of interest in our technology within the selected Circular Solutions applications, being biochar and end-of-life tyres. As an example, a revised Phase 2 agreement for the Follum project has been signed after Q1. The timing of further funding investment decisions remains somewhat uncertain. Let me turn to today's presentation and take you through some more details. First, the old disclaimer. Feel free to read it at your own. I'm going to start off with an executive summary. We have been implementing a new operating model. It's streamlined, where we have the three business units. This has resulted in very clear accountability and also better control. For the group, we see year-over-year revenue growth. Also, we see strong improvement in profit, and this is mainly driven by the cruise activities. Maritime Solutions is our main growth engine. They deliver high volume.
Also, we see an uplift in the margins, partly caused by the reduced share of legacy projects. Aftersales revenues are, again, record high. This comes from a growing installed base, and also the profit remains strong. For our Industrial Solutions, they deliver, I would say, largely in line with the revised assumptions. Overall, for the group, we see strong order intake, and our order backlog supports good visibility. Vow obtained a waiver for the covenant breach in Q1, and new covenant structure has been agreed from Q2. Now, Cecilie will take us through some of the numbers in more detail. Thank you.
Good morning. I will give you an update on the financial numbers for the first quarter, starting with the key financials for the group. The reporting currency is Norwegian kroner. The high activity level from Q4 continued into the first quarter. Reported revenue ended at NOK 284 million, as you can see on the graph on the left-hand side.
Revenue in the Maritime Solutions segment was the main growth engine, although negatively impacted by foreign exchange rate effects following the strengthening of NOK, while the Aftersales segment delivered yet another quarter of all-time high revenue. Revenue in the Industrial Solutions segment declined in the quarter, primarily explained by the two large Circular Solutions projects now progressing into the final commissioning-intensive phases, which also is the main driver of total Q1 revenue, to end at a lower level than Q4 but up 16% from Q1 2025.
Moving on to the graph in the middle, we see that operating performance continued to improve with adjusted EBITDA for the quarter of NOK 23 million, up from -NOK 3 million one year earlier, and showing a positive trend from Q4. There were no non-recurring items in the first quarter this year. The graph on the right-hand side shows the development of the order backlog. At the end of the quarter, the order backlog amounted to NOK 1.8 billion, providing good visibility. Let's look into the details of revenue development. Total revenue in Q1 of NOK 284 million was up NOK 39 million from Q1 2025. The 16% increase was driven by strong performance in Maritime Solutions and Aftersales.
Revenue in the Maritime Solutions segment of NOK 162 million was NOK 59 million up from one year earlier, following increased delivery volumes to shipyards and progress on large new building contracts, although negatively impacted by the strengthening of NOK in the period. The currency impact was mainly related to legacy contracts without contingency for currency fluctuation.
The share of revenue from new contracts with revised terms and conditions is increasing and amounted to 74% in the quarter. Aftersales continued its positive development and reached, again, record heights with revenues of NOK 66 million in the quarter, up NOK 7 million from first quarter last year. The 12% increase in revenue reflects steady growth from an increasing number of vessels in operation with Scanship equipment and continued growth in sales of chemicals and spares. Revenue in the Industrial Solutions segment of NOK 57 million was down NOK 27 million from one year earlier.
The periodic decline in revenue is primarily explained by the two large Circular Solutions projects now progressing into the final stages. As these projects approach completion, the revenue mix shifts towards commissioning and testing activities, which typically carry lower revenue intensity than earlier execution phases.
Moving on to the operational key figures, we can see that the positive revenue development translates into gross profit of NOK 83 million in the quarter, up NOK 23 million from one year earlier, and higher margins. Employee expenses adjusted for non-recurring items are down NOK 1.4 million from Q1 last year, reflecting a leaner cost base despite higher activity. The Q1 2025 numbers included a NOK 3.8 million in one-off management change cost. There were no such items this quarter. Other operating expenses were down NOK 1.5 million, supported by ongoing cost-saving initiatives. The profit improvement program continues to deliver results.
Following the adjusted organization and streamlining of administration and support processes, a downsizing process impacted nine FTEs, and this was initiated in the quarter and implemented in Q2. There will be some non-recurring items related to the downsizing process in the Q2 report. The annual financial effect of the downsizing process is approximately NOK 12 million.
To secure future growth, we will, however, strengthen the organization with some operational and project execution roles going forward. Adjusted EBITDA improved to NOK 23 million in the quarter, up from -NOK 3 million one year earlier, driven by the solid growth in gross profit and cost discipline. Let's review this table showing the financial performance. Revenue has increased with NOK 39 million from Q1 last year. EBITDA has increased with NOK 29 million, and the result before tax is up NOK 30 million. The bottom line is, however, negative, and we still have work to do.
I'm pleased to see that the turnaround is in progress. Depreciation and amortization in the first quarter are broadly in line with the same period last year. The CapEx intensity reflects the high investment levels from prior years. Reduced interest expense contributes positively, but other financial items are negatively impacted by foreign exchange movements, weighing down the financial result.
The majority of the effects movements are unrealized effects, meaning that they reflect accounting adjustments rather than actual cash impact. Vow reports in Norwegian kroner, but most of the contracts are in euro. A significant share of the project costs are in the contract currency and is a natural hedge. Large fluctuations in foreign exchange rate, as we see this quarter, have had an impact on the financial result, and we are looking into how to reduce and mitigate this risk. Let's move over to the balance sheet.
As you can see in the table, cash has decreased. Available liquidity consists of a cash balance of +NOK 13 million undrawn credit lines amounting to NOK 67 million at the end of the quarter, down from NOK 136 million at year end 2025. The decrease reflects timing effects between outgoing and incoming payments in a period of very high project activity.
In the first quarter, we have had high delivery volumes to shipyards, with milestone invoicing towards quarter end and collection subsequent to the quarter, leading to increased trade receivables, although lower than one year earlier, following improved debt collection processes. Liabilities to trade creditors have been normalized with previously outstanding balances now significantly reduced. Interest-bearing debt has increased from year end due to higher use of overdraft facilities to support the project deliveries, but is significantly lower year-on-year, driven by term loan repayment and stronger working capital management.
Debt is now reclassified to long-term, following the waiver for Q1 in the quarter and the new covenant structure from Q2, which was agreed before quarter- end. The term loan matures in August 2027, and we have, subsequent to the quarter, initiated a refinancing process. Liquidity improved significantly towards the end of 2025 following large milestone payments, and we started the year with NOK 136 million in available liquidity and ended the quarter with NOK 67 million. As I informed about at the Q4 presentation, we did expect to see fluctuations in liquidity during the quarter, driven by high project activity, with payments to supplier and milestone invoicing in the quarter and collection subsequent to the quarter. The high activity and timing differences tie up working capital in receivables and payables but support stronger future operating cash flow.
Working capital requirement was managed through increased use of overdraft facilities alongside continued focus on improving working capital efficiency. We monitor working capital closely and have worked diligently the last year, improving our tools and processes for forecasting liquidity and assessing working capital needs. Now, in May, we have all-time high delivery volumes to a maritime project, causing a peak in working capital requirements for the next two months. To mitigate the situation, we have agreed with our bank to increase the overdraft facility temporarily during the summer. Liquidity is expected to normalize from July, when installment payments will be received and improved through the remainder of 2026 as profit improvement measures continue to materialize. This was a walkthrough of the key financial development in the quarter.
Before I leave the floor to Gunnar, I would like to share some reflections on the financial development in Vow the last year. When I presented the Q1 results in May last year, I was just two weeks into my new job. It became clear quite soon that managing liquidity, covenants, and secure, consistent, and precise reporting emerged as my top priorities. I am pleased to see its positive development and how we now manage working capital, the improved processes for collection, and how this now is embedded in the way we work across the group. We have had close and constructive dialogue with our bank, and the new covenant structure that we have agreed on in the quarter is a positive step forward.
I am very proud of the finance team that have worked diligently on improving the quality of the financial reporting to get control and provide insight. The profit improvement program has started to deliver tangible results with a leaner cost base and ongoing restructuring. At the same time, we are rebalancing capacity, strengthening project execution to support future growth. We are transitioning from restructuring to our most stable, profitable operation, but we have still work to do. It is great to see everyone in Vow pulling in the same direction, building a healthy and profitable company step by step. The turnaround is in progress. Now, I will give the word to Gunnar.
I am just going to fix my mic. I almost pulled it off here. Now, for a business and market update, and I am going to start off with Maritime Solutions and just follow on what Cecilie said.
Impressive work by the team. In Q1, as you can see on the lower left-hand side, the pie chart for Maritime Solutions, there was a revenue of about NOK 161 million, which means that it accounts for about 57% of the group revenue. In the center matrix, you can see both strong growth in revenue for Maritime Solutions. You can also see a strong growth in profit, as I said, following a sharp decline in the legacy share of revenue. You can also see there is a solid order intake and a very robust backlog. The cruise industry is continuing to perform well.
I think it's fair to say that we are performing well, also with very high volumes, but also at the same time, increased delivery precision from our team. Cruise business is still growing. They are continuing to build new vessels.
On your right-hand side, you can see an example of that. That is the Norwegian Luna that left the yard, so taken over by the cruise line in Q1 this year. Looking at the contract development for Maritime Solutions, in Q1, we signed a contract valued at EUR 27 million. It's a contract for four vessels. The deliveries will start in 2027 and go through 2029, I believe, for these vessels. The total backlog for us is now about NOK 1.6 for Maritime Solutions. If you look at the graphics on your top right-hand side, you can see the expected distribution of that revenue from the backlog. On the bottom right-hand side, you can see the expected future development in share of new versus legacy contracts as of Q1. In Q1, about 74% of the revenues came from new contracts.
For the remainder of the year, it's going to hover around 30-some percent until fourth quarter, where it takes a step further down. We are a trusted technology provider to all the major cruise lines and the big yards. If you look at the left-hand graphics, you can see that we have delivered so far main systems to seven vessels in Q1. There's in total 13 vessels planned for 2026. Most of them enter operation sometime in 2028, 2029, with the exception of Hurtigruten at the very bottom, which is a retrofit that will come earlier. Commissioning activities are really high, and they are peaking as we speak. One vessel was handed over in Q1. You will remember the Norwegian Luna. In total, there are 10 vessels to be handed over through the year, and many of them now before summer.
In the center graphics, you can see the main European yards. These are our contract partners. They are really busy, both building vessels and also preparing, finding suppliers, and so on for future vessels. We'll get back to that. On the right-hand side, I forgot to mention, there is a little bit of activity in Asia as well in terms of cruise, but not a big activity yet. On the right-hand graphics, you can see that we have now 34 vessels under contract. I believe that is the same number as last quarter. There are seven options, also I believe the same number. There's 53 being actively bid for, slightly up from last quarter.
As you can see, estimated delivery of the last of those is in 2044, believe it or not. By that, I think we will shift into Aftersales.
Aftersales had about NOK 65 million in revenue in Q1, makes up about 23% of total revenue as shown on the pie chart on the lower left. This means that Aftersales is now around 50% or close to 50% of new sales in cruise. Aftersales, the number you see here, they are all related to maritime, and they are made up of consumables such as chemicals and filters and so on, spare parts, and services. As you can see on the right-hand graph, we had record sales in Q1 with 14% year-on-year growth.
The margin has improved also year-on-year, slightly below in Q4, partly due to the mix of activities, but also some extra costs related to trade shows that occur in the Q1 numbers. As new vessels enter the operating fleet, this will continue to provide structural growth in this segment.
This is repeat business and typically has healthy margins. For Industrial Solutions, as I said, largely performing in line with expectations. As you can see on the lower left, it's NOK 56 million in revenue in Q1, which is about 20% of the group revenue. Food safety and heat treatments of the traditional industrial parts make up about half of this, whereas the two big Circular Solutions projects represent the other half. The improved margin in Q1 is mainly driven by our heat treatment activities. As I said, both the Circular Solutions projects have faced some technical issues, and these are causing delay. For Follum, all the mechanical and programming adjustments required are expected to be completed in Q2. I certainly hope that as we speak here today, they are just about to start production again.
The Rhode Island project, for that, we have close work now with a customer and supplier of some downstream technology that has caused some issues. Both these projects are first-of-a-kind configurations. Obviously, then, you do have close collaboration both with your customers and with the suppliers. Issues are to be expected, but I feel confident that we will solve them and move on. Of course, the financial exposure from incidents like this is closely monitored. We do expect to conclude the two Circular Solutions projects in 2026 in line with our expectations. For new projects in the future, we do expect to see improved margins and also lower risk. Contract development for Industrial Solutions. The heat treatment market is still a bit soft, especially if you compare to the boom in 2022-2023.
There was an electrification boom in the European industry following the very high gas prices at that time. For Circular Solutions, the activities we see, they really confirm our revised focus on biochar and end-of-life tyres as the first applications. Arbion has reviewed their Follum Phase 2 project and signed a revised contract. Now, this means that they have reconfirmed their intentions. The revised Phase 2 agreement is also well aligned with our revised strategy, focusing, as we have said earlier, on our core equipment and our process expertise. Murfitts Industries, for those, the positive development continues.
They have performed small-scale trials with end-of-life tyres. They are now preparing a final investment decision for what they call a single-line commercial-scale demonstration plant, the timing being still a bit uncertain. Looking forward, completion of the two Circular Solutions projects will provide a platform for future opportunities.
The very close collaboration with Arbion Industries continues. We believe this in itself poses a very strong opportunity for us. For heat treatment and food safety, the cycle times are shorter and also contracts smaller. New orders don't really add a lot to the backlog. In total, we expect to see some reduction in our backlog before picking up again. For a summary, when we have had conversations with all the big yards, the big cruise lines, they all confirm the very strong market development within cruise. Based on this high activity level and, of course, our very strong market position, we do expect to see the positive development for Maritime Solutions to continue. The share of legacy projects will be fairly stable through 2026. For Aftersales, the structural growth will continue as we feed new vessels into operation.
The completion of the two Circular Solutions projects will demonstrate technology at industry scale. This will give us a lot of opportunities in the future. In short, executing our revised strategy in a disciplined way is driving profitability and reducing risk. By that, we end our presentation, and I thank you for your attention. I do believe we are open for questions.
Thank you. We have received quite a few questions. Some of them have actually come in before the presentation, so they might already have been answered or at least commented about. Let's start from the top. There is a question about the cruise industry and the contracts there. What is the average contract value per ship for the vessels that are currently being bid? Historically, what has been the average win rate on those tenders?
That's a big question. The size of the contracts varies depending on the size of the vessels, whether it's like some vessels that we have contracts for, 1,500 people on board, to the large one, which is in total close to 10,000 people on board, 9,970 to be precise. It's a large span somewhere from NOK 100 million-NOK 140 million, I would be just from the top of my head on that. The second part of the question, would you repeat that, please?
What was your success rate, typically?
The success rate? Well, from what we when we do the math based on some public information at the end of the year, it seems like we are somewhere between the 66%-70% market share. We have a really good hit rate on the projects. I should mention, though, that for the very small vessels below 200, 300 passengers, we do not really operate in that market. That's not in the numbers.
There are several questions about Follum, the Phase 2 with Arbion. Some very specific. One is concerning the contract value. The question goes, should we expect a contract value contribution to how broadly similar to Phase 1 for Phase 2, i.e., around NOK 335 million?
For the Phase 2, I believe earlier there has been some made public the value of the contract. It was originally a change order for the Phase 1. That has been renegotiated now. The scope is slightly lower than what we have in the initial contract, following our new and more focused strategy.
In the event that no major Industrial Solutions contracts are awarded over the next couple of years, would engineers from the Industrial Solutions segment be reallocated to Maritime Solutions projects then?
Obviously, we put the resources where we need them the most and where we have the best effect of them. Right now, they are busy, and they will be busy at least through the year with the ongoing contracts. We do expect to see more contracts. Yes, we will move the resources wherever it makes sense for us.
Another question on Industrial Solutions. They report a negative EBITDA this quarter. When do you expect a positive EBITDA in this segment?
The two Circular Solutions contracts were agreed on several years ago. Our focus now is on completing them. We will, of course, put resources to make sure that we do that. Our target is, of course, that we will also hit green numbers in the Industrial Solutions. We are looking into how we can do cost downs in that segment. Our main focus is actually to complete the obligation that we have with the best possible outcome, and that will be a good foundation for new projects and new revenue from that.
If I may add to that, as these are the first deliveries of these systems, it is quite obvious that we also will sort of go down the learning curve, make improvements to the projects, work with the supply chain, and so on, to achieve exactly what Cecilie said, a cost down on these. For future projects, we do expect both lower prices in the market but also improved profitability.
A couple of questions regarding, say, corporate strategy. You mentioned last time that you started a strategic review of the food safety business. You didn't mention that today. What is the status on that?
The status is that it is ongoing.
There's a reference to, I believe, rumors or speculations that have popped up, maybe in chat forums, about the potential spinoff of Scanship. Do you see any increased interest from, for instance, Kongsberg Maritime in that regard?
I still haven't had any conversations with Kongsberg Maritime on the topic, no. We did mention that we are following our new operating model and the new organizational structure. We are splitting this a little bit. This will make it easier for us in terms of reporting financial numbers and following up the results.
There are quite a few questions about liquidity and cash position. You state liquidity should normalize from July as milestone payments are received. Which milestones are the key drivers, and what happens if they slip? What would you consider the normalized level?
Yes. We have a large number of deliveries to yards this quarter, and it's peaking now in May. I believe we have like 500 items to be delivered. Payments follow 30 or 60 days after delivery. Of course, we pay the suppliers before delivery. That leaves this peak in working capital requirement. It is about NOK 100 million that we then need to pay upfront before we actually can collect the cash. We will collect in June and July. The progress is going as planned. Due to that, we now really can forecast quite detailed how liquidity will progress for the period ahead. We could start discussions with the bank to see how can we solve this. We see that we have a working capital issue. That's why we then had this increase in the overdraft.
It is very positive to have such high activity. For the way we are right now, we didn't have the capacity in the working capital. We are with the cost improvements that we are doing to follow our strategy. It is important that the working capital allows for such fluctuations. The liquidity will fluctuate, yeah, with a normalized level. I mean that the working capital allows for these fluctuations in project deliveries and that it has a comfortable headroom to the covenants.
A somewhat related question, starting with the fact that equity has declined from more than NOK 500 million to around NOK 200 million within a relatively short period. Equity ratio now is below 20%. What specific covenant levels or lender requirements must the company maintain to avoid renegotiations or the need for additional equity?
We had an impairment at the end of 2025. That is, of course, the main driver in the decline in equity. The covenant level is 15%, which is also stated in the annual report.
You don't see any immediate need to raise any more equity?
We are working to improve the performance and to avoid the need for that. That's the priority.
The company has now returned to a positive EBIT, yet still report losses after financial items. What is management's concrete plan to reduce the net interest-bearing debt, and how sensitive is the current capital structure to continued high interest rates?
Well, obviously, the net interest-bearing debt is impacted that we had to use the overdraft facility and with the debt collection after the quarter. Net interest-bearing debt was obviously impacted by that. We are paying quite heavily down on the term loan. That will increase quarter for quarter. By managing the liquidity, that will also impact very positively on that.
We have a couple of more questions. We encourage the audience online to, if there are any final questions, please post them now, while we do the last two. Do you think it's possible to achieve an EBITDA margin of around 20% in new maritime contracts, or are those levels competitors take away or at those levels, would competitor takes the contracts away?
I don't think it is possible in today's market with a 20% EBITDA in the contracts. I think if they all read our annual report, then they will be really mad.
Okay. There's one final question, which you might already have commented on, but just to be safe. Are you working on further improved working capital management to avoid similar liquidity squeezes in the future, for instance, through higher prepayments, or do you see further?
That is also a tool that we actually had dialogue with suppliers for this situation, now this summer. We are working all the tools we can to improve the working capitals, reduce prepayment, and also delayed payment towards an interest, for instance, to make sure that we can manage through in a good way.
There is one final question that just came in. Total non-current assets remain high relative to the company's current market value and equity base, particularly within intangible assets and goodwill. Does management see any risk of further impairments or write-downs if profitability, cash flow, or order intake do not improve as expected?
Well, we had a very turbo process at the end of 2025 that also then led to an impairment. We have taken a much more prudent approach to how we expect the order intake and margin development then for the 10-year period going into that model. Yeah, it's hard to comment on that question. We did take a very prudent approach in the impairment that we did. Of course, as a listed company, we have to review each quarter. There are no indications of that now.
Okay. I think that concludes the questions from the audience online. Back to the presenters for any final words.
I think this is all from us. Thank you, everyone, for watching. Our report is available for you to download and read. Thank you, and have a good day.