Marcus Hummer, CEO of Bawat. You have just released your Q2 or half-year figures yesterday. A pretty busy quarter, I could see of the numbers, not just on the result side, but also on the achievement side and everything else next to that. Let's dig a little bit into the numbers and on the achievements, so I will leave the stage to you, Marcus.
Thank you, Michael, and thank you to the audience for listening in on this Q2 report. You are absolutely right, Michael, it has been a busy quarter, both from an operational point of view, but also from a financing point of view. If I just skip, step into the next slide here. I'll start a little bit on the operation, speak about financing, and then also I'd like to spend some time speaking about what's called BaaS, which is Ballast as a Service, which is, we can see that is picking up, which we have also made some work and, and thoughts on in the, in the quarter.
Top-line wise, we have an order intake for the second quarter of a little bit more than 11 million SEK, which, together with our first quarter, gives us a little bit more than 20.5 million SEK in order intake for the first half year. That supports a repeated guidance for the year, which we have been, been out saying is between 40 million SEK-60 million SEK for the full year, but it will be influenced by orders from our mobile orders, either negatively or hopefully positively, based on the timing and the volume. I'll come back to that, why that can have a quite significant effect when I speak about our service business in the coming points. The gross profit for the quarter was actually above our long-term projections of 35%.
If I look now for the, for the first- half year, we are at more than 28%, which is in line with actually our long-term guidance of 30%, pending our product mix between ship installations, mobile installations, and service. We are hitting this high gross margin for two reasons. First of all, because we have a quite large percentage of the, of the conversion into sales on, on mobile systems, but also because all old systems are now out of the, out of the backlog, and we are only working with a backlog that we execute on, which is new systems where we know exactly what we are doing.
Even if we are a young company, we now shows that what we do, we actually do quite well, and we are quite sure that we will hit the 30% product mix come very soon going into the future. Sales on the Q2 is a little bit more than 4 million SEK, and it's lower than last year, and it's lower than the projection for the full year. It also, it simply reflects just the timing on conversion. We have a couple of large mobile systems that in Q2, or sorry, in Q3, will be finished, and there we will see a lot of sales coming in. We also have in the backlog, things that we cannot execute until next year, so this is why the sales figures looks as, as they do now.
As I said, with the gross margin percentage that we have, we are more focused on the order intake line than actually the timing on conversion. In general, we are converting in a four to six months range.
Let's, let's dig a little bit into the gross margin, because normally, if you see a company that has a revenue of $4 million, then there's such a cost overrun that, that the gross margin will be very negative. Yours are exactly opposite. You are trending above your, your long-term projections. Can you explain a little bit about this? Is that, that you are solely outsourced all your production and, and a little bit about this product mix? Is it because it's much higher margins in, in, in, in your mobile solutions?
It, it's, it's the combination of much higher margins in the, in the mobile solution. Don't forget, we are an engineering company, we don't have an overhead to absorb in both in hardware manufacturing, in storage facilities, and the like. That's why we can have a gross margin percentage that, that looks like this. Because we have now standardized quite a bit on all our equipment and on all our deliveries, that means also that we, the organization that we have now, can deliver and can deliver more, and that, of course, also increases the gross margin.
You, you're very comfortable, and, and, and I think that makes it very reasonable to focus on the order intake. Last question: Are you seeing the same prices in, in, in that order book you're, you're getting in? Is that why you're so comfortable with that, that you are now hitting a good gross margin?
We are, you know, we are still price competitive, but we have improved our able to execute, and purchase, and design, and that's why we are very comfortable on our project mar-, sorry, our gross margin also going forward.
Perfect. Thank you, Markus.
The quarter also brought in a nice large fleet order for a European customer. It's 10 plus vessels. We are now on the first one, and we will convert that order here in 2023 and 2024, before the final deadline in September. It's a nice confirmation once again on our technology, and it's and it puts, you know, even more oomph to our reference list. We are pleased to see that. A couple of points regarding our Ballast as a Service, and this reflects also our guidance for the full year. Because we have seen in the quarter an increased activity-...
for customers asking for not only mobile system, but also if we, as a service provider, can deliver the service simply to treat the ballast water, and we keep the mobile systems on our books. This is why it's, it's somewhat difficult to predict the, the full year guidance, because sometimes a customer comes and say, "I'd like to buy a mobile system," but sometimes they say, "I'd like to buy the service." And for us, that has a impact on, on the full year projections. We can see, the quoting activity, as I say, is increasing, which also the quarter where we put in the first long-term committed contract for a, for a U.S. customer.
It's a, it's an interesting contract where we are actually we have treated some of the ballast water, and then we are standby on shore for, for, let's say, contingency purposes for the client. We are standby with a four weeks notice period, that means that the equipment we have standby, we can actually use to service other clients in between. That's actually the, the best for, in, for both worlds for us.
Yeah, because when I read that in, in your report, I was a little bit baffled on how I should understand it. Does, does this client, does that take up this, the whole, the whole system, you know, one?
Yeah
... they pay for the whole system, and then actually you could use it other where, is that how I should understand it, that you have actually sold the system?
What they, what they actually do is they, they pay for the for the availability of the system, which is quite common as on service contracts in this business. They pay for the availability, and then they have a call-out period, for four weeks, because they know in advance if they would need it or not, and in that four-week time, we are allowed to, to use it. That means that, we of course, need to be ready if they call it out, but as long as they haven't called it out, we can use it on other customers.
On other customers.
Yeah.
Again, going a little bit into it, you say there's, of course, there's an uncertainty on your guidance. Either you will get it as service revenue, or you will get it as selling, a system. I guess one of the, the, the first part is more profitable but also takes up more capital. Do we have sufficient capital to run a lot of those models, or are you hoping in the future to, to sell more into, to, to this segment?
We are, we, we have, right now we have systems that's coming in production and coming into our service. We are also working on at a, at our service level with partners that would bring in capital and buy some of this equipment, and then return part of the service value back to us.
Right.
That's definitely in the books. This is also, you know, that brings me into the, the next point, that the quarter also saw us signing a term sheet agreement with Damen Green Solutions, a large Dutch yacht group, globally, where we are actually joining forces, on the mobile systems, both in terms of, of assembly them in the, the Damen will assembly them for us, but also using their sales network to sell them. Damen has, in the past, had their own technology, which they are now putting at rest, and then together we are using the Bawat technology in a, in a Damen assembly and sale perspective. That means that we can scale fast, and we have a quality partner with a global footprint.
Mm.
That will basically increase our ability to deliver both fast and with quality, these mobile systems, both to customers but also into our own service network.
Perfect.
The last point on the graph is on, or sorry, the second last point on the graph is on the financing activities that we've had for the quarter. I think we already in Q1 report and on subsequent events, reported that we had approval from Nefco, the Nordic Environment Finance Corporation, where they are, you know, committing finance for EUR 25 million in a one-to-one equity match from our new and existing shareholders. We had done, carried out a directed share issue, we have raised close to EUR 19 million in the directed share issue. We have more than matched the first tranche from Nefco of EUR 1.3 million. We have an ability to call the remaining funds from Nefco before the summer next year, and based on the one-to-one match.
We are short of 6.2 SEK million that we can raise in order to fully call the financing from Nefco. That puts a, hopefully an end to the capital raise into Bawat. That brings us into profitability by the end of 2024, that we have predicted and reported lately also.
Yeah, let's bring a little bit into that, because when I read the report, your order book is- I know it can differ, but your revenue should be much less last year. If I look at your cost side, under the gross margin, which looks good, it looks pretty flat if you look away from the Swedish Crown. To me, are you able to execute much in 2024, a much higher expected order book, with the around the same cost base? Is that how we should look at your company going into 2024?
I think that's ex- that's exactly how you should look at it, Michael. I think we have established a cost base now, both from a sales but also from a engineering and project management point of view, that can execute on both the current order book but also on a, on a future growing order book that we see into 2025. This is especially because we are, with, with Damen, we need less resources on the mobile systems because they are now executing the purchasing, the assembly, on, on, let's say, on volume, on mobile systems. That means that we, we have more power in our own organizations to focus on the, on the ship solutions. We have also now standardized our mobile systems.
That means from a purchasing and execution point of view, it's a simple way for Damen to, to purchase assembly and and get them out of the out of the, the yard that we are manufacturing on.
That makes sense.
We are at a, at a cost level today where we, you know, can do what we do, but we can also take more through the books without increasing our cost. Last but not least, we have received both from European Patent, but also from the U.S. Patent Authorities on our port-based patent, the Intention to Grant, which is called in Europe, and the Notice of Allowance, which it's called in the U.S. Once again, it, you know, puts, it underline also our IP strategy, that we are protecting our, you know, our place in the market, not only by our type approval, but also with IP protection on our, let's say, very innovative green solutions on how to treat ballast water.
All in all, a very busy, very productive, Q2, and we're looking into the rest of the year so far with a positive eyes.
Perfect. I have a question. It's regarding, you mentioned in your report, you don't have it on this slide, but you mentioned in your report that you are seeing retrofit of systems that is built in for a couple of years ago and are not working. You know, that could be interesting on the ship side, not on the mobile side.
Yeah.
Have you seen any orders from that? You know, the proof in the pudding that you always talk about this is when the IMO rule says everybody should have it. How long, how big and how long is your market-
Yeah
afterwards that? It could actually maybe prove to be bigger if, if, if, if something that has already been built doesn't work and, and yours work. Have you seen any orders actually coming in from such a ship?
We are still to see the first order. We have quite a lot of quotes out with customers where they have actually installed competitor systems three, four, five years ago, and are now looking to replace them based on either performance or mostly lack thereof. I'm quite sure that we, within the next two quarters, will see those type of orders also coming into our book. You know, we have preached all along that there will be a retrofit on the retrofit, and we still believe and see that it's coming. We also hear it from our competitors, and also our service business is also very much built on, you know, non-performing equipment that is out there.
We can see that simply by the quoting activities on our service, where customers are coming to port, and they have a faulty system or system that is not approved, and they cannot de-ballast, so they need a service. It, it all points in the same direction from our perspective.
Lastly, a question. Last time we spoke, and also with your chief, I think it was chief scientific, you had very high expectation from some European ports. You know, some of the large European ports actually starting to wonder whether they should have this mobile system installed. Any more thing materializing there? I know it's not come in as an order, but anything materializing, something getting closer there?
Yes, we have established our first subsidiary in Western Europe with a focus on European ports, and are now actively sourcing equipment into that company to make sure that we can service that, the requests that we are getting. I think the next two quarters will show material reporting on those activities, which we also wrote in our Q2 report, that once there is significant volume, we will of course report it. Right now it's difficult to guide on it due to due to timing. We are actively increasing our ability, and I'm quite sure that over the next half year, we will be able to tell much more on that traction.
Perfect. Thank you, Marcus.
Thank you very much, and thanks for all listening.