Welcome, Marcus, to this call, CEO of Bawat. Let's look through some of your Q1 results and get a little bit deeper into it, and I guess both on the capital raising side, it has been a very busy quarter. I think I'll hand over the presentation over to you, and you can take us through some of the results, some of the achievements you have made in Q1 here.
Thank you very much, Michael, and thank you very much to the audience listening in today. I will go through a couple of slides, as Michael said, with the Q1 results, including a couple of highlights as well, and then Michael and I will take some Q&A between us. First of all, just quickly summarizing up on what Bawat is. We do ballast water management solutions, both for ships and mobile systems, with a low OPEX. They are one-pass, they work in all water qualities, and they are free of filters, chemicals of any kind. The ship solutions, of course, goes into ships, and the mobile solutions can be used among many different ships, or they can be used from quayside.
That actually leaves us with three legs to stand on from a business point of view. I've mentioned the two first ones, the top ones here, the last one is what we call BaaS, so Ballast as a Service, where we are actually selling the service to receive untreated ballast water for ship owners that for some reason cannot treat it themselves. Particularly in the U.S., we are seeing a pickup of this type of business, but also in Europe, we'll come back to that later in the presentation. The highlights for the Q1 2023 is stated here in bullets and also on the right. I have to say before we start, that there are no comparison figures for Q1 2022, because we were not listed at that point of time.
Going forward, during 2023, we will, of course, have quarterly comparison figures, but right now, as the presentation here, we are comparison, so you just so you can see it, against the full year of 2022. Order intake for the first quarter was SEK 9.3 million, all reported in Swedish krona. We had also reported a gross margin of 21.6%, above the 20% mark that we have targeted initially, and we are targeting long-term the 30% mark. The reason for this increase is both due to product mix, but it also because we are getting better at purchasing and executing on our projects.
We are quite pleased that with a company with our age, that we already now can have this type of gross margin and keeping it steadily growing. The sales of Q1, SEK 4.2 million, it's more a timing issue rather than anything else. We have a conversion rate, approximately six months for our projects, so we will convert all order intake into sales as we progress through the year. We are still on a high, similarly high quoting ratio, as we saw in the closing quarters of last year. We quoted more than SEK 75 million in the quarter, and we are quoting both on retrofit, also a lot of new builds, and we are also seeing an increase in quotes on our mobile systems.
I'll come back to that, as we have also, just after the closing of the quarter, released a term and signed a term sheet with a big partner called Damen. We have done, as Michael said, a lot of capital raise and work on that. I'll come back to that. As the last point on this slide. During the quarter, we also shipped our test mobile system to the Great Lakes, and it has since arrived in Duluth, Minnesota, and we are just gearing up for the first test. This is of course, a super interesting project for us, as the Great Lakes in the U.S. so far have only tested one system that actually works in the lakes, which is ours.
There is a large potential for mobile systems into the American Great Lakes to treat ballast water there. Also, on the mobile side and on the BaaS, so the service side, we have in the quarter signed two non-exclusive contracts with operating partners in the U.S., one in Texas, one in Alabama, where we are, you know, together with these operating partners, they are supplying hands and feet to operate our equipment so we can sell our service into vessel owners and vessel operators.
Just for the information, this Ballast as a Service is so far not part of our guidance for the year, neither on order intake or on gross profit. We have expectations that before the summer, we will start to sell the first commercial jobs. Once we have a better feeling for the volume and the pricing of this, we will include it in our guidance going forward. Overall, with the way the quarter has started in order intake and also how we are seeing, active quoting and customers that we are in active dialogue with, we are supporting our guidance for the full year in the range of SEK 40 million-SEK 60 million in order intake.
To talk a little bit about the quote activity, Marcus, you know, the IMO rules, you know, when this needs to be implemented is 2024, so it's running out. Are you seeing some increasing quote activity due to now people needs to apply to those rules? Is that your expectation that it will actually go up?
... I'm not sure it will, I'm not sure it will go up. I think, as the IMO rule starts to come closer in September 2024, I think a lot of people have taken a decision, at least the larger owners. What we are quoting on, we see a lot of vessel owners with, you know, fewer vessels or maybe specialty type of vessels.
Mm.
Those are the ones that we are quoting. I think it looks pretty steady for us on retrofit, and what is keeping our quote level high is on the new build, as well as the mobile systems. We are seeing, which I have said for a long time, that we're actually seeing quite a lot of quoting activities coming from ship owners that has installed equipment that is not working. We are actually seeing a little bit of a retrofit on retrofit. Early adapters that maybe installed systems five years ago and would have very bad experience, and they've basically now written it off their books, they are coming back and looking for something different. It's quite a mixture of how our quote book looks like.
Overall, we are active in all segments. Of course, as we approach the IMO deadline, the retrofit in principle should disappear, but I'm quite sure that we will see, as I said, retrofit on retrofit or people getting extensions. Right now we are not seeing a deterioration on quoting activity as a general.
Perfect.
Yep. That's, I think, are the financial highlights. I mentioned I wanted to come back on the capital raise. We have in Q1 and later in April, we have from the Nordic Environment Finance Corporation, called Nefco, we have received the final approval from their board on a SEK 25 million loan disbursed this year and next year. It's in two tranches, 15 now and 10 later. 15 as a loan and SEK 10 million as a convertible. We have to match it from forward side in equity, one to one, we have thus been out and conducted a directed share issue that was done here in April, where we have raised SEK 18.8 million in a directed share.
We have done that, so we have now fully matched the first tranche from the Nefco loan. We can then later in 2024, decide on whether we want to take the second loan and raise the remaining equity needed in order to match it one to one. We are very pleased in a difficult capital market to have been able to raise both a good loan and done a directed share issue to match that.
Yeah, you raised it actually without any discount right now. That's a little bit impressive. Just to make it 100% clear, you get SEK 15 million now, then you have matched by the SEK 19 million. To get the last SEK 10 million, then you need to raise SEK 6 million more, and that's that.
That's correct.
... Is that what you are saying, that if you conclude those final packages, then you expect this to be give you a run rate until you are cash flow positive, and thereby under normal circumstances?
Under normal circumstances, and based on the budget we have from 2023 and 2024, that should bring us hopefully into a cash positive environment or cash flow positive environment.
Environment.
That's the idea.
Perfect.
That's the idea on the amount that we have raised in this capital round. We are very pleased that we have been able to raise it, and I think it once again shows a lot of confidence, both from current shareholders but also from new, that the Bawat technology is one of a kind, and it has a large role to play in the forward market in ballast water treatment.
Yeah.
And that-
A last point on it, because if I understand correctly, a part of this was actually raised by someone from the industry, right?
Exactly. There are two, larger industry, ship owners that are involved in this, as well as our own current owners. It's heavily, let's say, blue industry influenced, so it's people with knowledge about the market.
Yeah.
Speaking about knowledge of the market and trust in the Bawat technology, we just after the closing of the quarter, we have signed a term sheet with Damen, you know, European Yacht Group, with yachts across the globe, where we are combining between Damen and Bawat our forces on mobile systems. Damen have had their own system called InvaSave, that they are now stopping manufacturing, and together with Bawat, we are now putting, let's say, the Bawat technology inside a Damen container. We are joining sales forces. We are using Damen as our muscle to assembly and manufacture these mobile systems so we can scale up fast as our budget looks like.
Together with Damen and Bawat, we now have what we believe is by far the best and most reliable system to the market. Good for Damen, good for us, and we have thus made a 50/50 joint venture going forward.
You mentioned the sales muscle, of course, you also use Damen on the ship side, so that's of course important. Is there also some financing side, and how is this in connection with the BaaS?
Yeah
... your Ballast as a Service, just to get a little more clarification on this agreement?
Good question, Mike. This agreement, in principle, is a joint venture on the manufacturing and the sales of these mobile systems. Whether we sell them to our own, you know, BaaS companies that does the service, or we sell it to owners that want to use a mobile system for themselves, this joint venture is now the vehicle to sell and execute on these projects.
Okay.
Damen has inside, and this is part of the agreement, they have something called Damen Financial Services. We can also now be able from for customers, be able to finance these containers for the customers if they can, if we can see a cash flow. It's primarily for our own service operations, where we can see a current cash flow coming in from the service, that we now have a financing possibility also from Damen.
Perfect.
It comes in both ways, which we are very pleased about. The last thing I wanted to say is that we have, of course, a lot of happy customers, but one of them is particularly happy because they've had a Bawat system for more than three years now. They've installed it on a smaller feeder vessels, and here they are basically coming out and putting statements to what we have claimed always when we sell our equipment is that, you know, the Bawat system simply just always works. There's no filter that doesn't clog up. You know, it's super reliable, it's independent of the water quality.
What these owners also find out, you know, once they have it installed, they basically operate it at zero OPEX, which is, for the long investment, what is really also part of the investment case when you install a Bawat system on your ship. We're very pleased with this feedback, and it's already on our website and on our LinkedIn profile for people to follow and read in details.
Perfect. Marcus, we had the pleasure of your CEO, I think, on one of our-
Yeah, Jacob, correct.
Yeah. You know, he spoke a little bit positive about the possibilities for mobile solutions in the European ports, you know, some of the bigger ports as a starting point. Can you tell a little bit more about that? Are you seeing any interest? Are they beginning also to show some interest?
They, they are definitely seeing interest, and I would say particular, in Holland, we are seeing a pickup of request for quotation, where customers are coming to us. Yeah, it's a combination of both the barge owners that are coming in with barges, where they in former times simply will dump the water that came in, but now they have to treat it. We're also seeing a, you know, quite a few quotations, and I would say it's probably on a weekly or bi-weekly basis. We're now getting requests from customers where they're coming in with ships or vessels where the system doesn't work, and then they need to de-ballast, and they need someplace to do it with. I would say there is a...
You know, even though the US is our prime focus, together with Damen, we are now also putting a lot of focus on Europe. We are in the process of establishing an entity in Europe that will be called Euro West Ballast, that will deliver the Ballast as a Service. I'm quite sure that before the end of the year, or even sooner, we would have supplied our first service jobs into European ports. My guess is that it will be Holland that will be the first place.
Triggering this, I know it's a customer request, and you mentioned this, that you are testing in U.S. Is that just for the Great Lakes or is that a test that might give you some results that you can actually convince somebody with? You know, that's the question of some triggering, you know, when you have tested-
Yeah.
-somewhere, and being able to use or showcase the first kind of product being-
I think-
-profitable and so on, or actually working this ways and this way.
Yeah.
A little bit about, what is your hope?
Yeah, what's triggering? No, that's a good question. Just... I mean, what we're doing in the U.S. and the Great Lakes is, you know, only focused on the Great Lakes. We have done, you know, service jobs and testing globally, so our technology works. We don't need to... You know, the technology works, that is proven beyond any doubt, also in our type approvals and on all our installations. We have, you know, all ships that we put in play with our systems needs a commission test, where they test the water quality, and they always pass in flying colors. What we are doing in Europe and what's driving it in Europe is primarily regulation from the authority side.
There, you know, as we are approaching the IMO deadline, the authorities are also running out, to a large extent, of excuses of not to test the water quality anymore. We are seeing more and more, you know, fines being given for people who are dumping untreated ballast water. I think the whole industry is slowly coming to a recognition that, you know, if you have a challenge with your system, or you believe that the water is not living up to the discharge criteria, then you rather report it and see if you can call and buy a service, rather than to do something, you know, and ask for an exemption or just dump it.
I think it's a combination of that we are getting closer to the deadline, and that the authorities are also understanding that we are now closer to the deadline. This is also what we're seeing in German ports, where they are, especially in Hamburg and Bremen, where they are looking to have something installed and working when the deadline is in force. That means that they are now actively looking at how do they make sure that these installations are up and running by September 2024. We're also seeing it outside Europe.
I would say some of these port projects are all based on mobile system, and this is also why we have said in our guidance that it's difficult really to guide because they could have a very large influence, both negative and positive, because the timing of these are somewhat difficult to judge.
Can you remind me the size of a mobile solution for something like a port? What is that in, in the expected revenue in a wide range? I know that could differ, but.
That could be in a wide range, anywhere between SEK 4 million and SEK 8 million or SEK 10 million.
Yeah.
it comes in-
1 system is 10% of your guidance, so.
Or even more. That's why they... that's why the fluctuation is high. But we can see that both for private customers, for our own service jobs, and also from public and private ports and yachts, there is a drive for this. That's why we have expectations for this.
Also, I think you speak more and more about the mobile side, and you speak more about the Ballast as a Service. That's how you're involved as a company. I will not make any adjustment or over-interpret you there. Will we at some point in time see, you know, the business case, you know, for a Ballast as a Service somewhere in the U.S. has run for a year and show the profit? I guess you can both scale up, but you can also sell it to other running it. We could see that. Is that in the drawing, or how is it running in the U.S. with your service there?
Could it show that you running this one can showcase a very profitable case for the one-
That is.
buying a system and running it?
Yeah. That's we have one system running in the U.S. There is one on the way that will come after the summer. Actually, the system that goes into Great Lakes will, once the Great Lakes goes into winter, we are transporting that down into the Gulf of Mexico. By the end of the year, we will have somewhere between three and four systems that we expect to be operating and generating cash flow. Of course, still early days, still to be proven.
Yeah
We are, you know, committing hardware into the U.S. market.
Perfect. I think that was the question I had. Thank you to you, Marcus, for taking us through your Q1 results, and congratulations on the capital raise in tough markets.
Thank you very much, and thanks for listening in.