Hello and welcome to today's webcast with Freemelt. Here, CEO Daniel Gidlund and CFO Martin Granlund will present the Q4 interim report for 2023. After the presentation, there will be a Q&A, so if you have any questions you can send them in via the form to the right. With that said, I hand over the word to you, Daniel.
Thank you. Hi and welcome to our webcast regarding our interim report for the fourth quarter of 2023. My name is Daniel Gidlund. I'm the CEO for Freemelt, and with us today as well, we have our CFO Martin Granlund. So what we will do, we will share some highlights and the key areas of interest from Q4. And in the end of the session, we also open up for some questions as well. So let me quickly recap on who Freemelt are, if we have some new people joining today. So the company was founded in 2017 by six founders with extensive knowledge of the additive manufacturing industry. We are currently around 40 full-time employees, mainly focused on the technical side, but we move more to the commercial side as well. The first machine was developed and introduced to the market only two years after the company was founded.
This is a research machine. Since then, despite the fact that we had a bit of a bumpy start with the pandemic, we have sold as many as 23 machines globally. We have 15 in Europe and we have eight in the US. Our ambition, though, is to take a stronger position, actually take a leading position within this specific electron beam powder bed fusion, which is called, where we're currently on number two. In our 2030 strategy that we launched last year, we aim to become the number one, and also then it should generate that we have a turnover of EUR 100 million. The industry or the technology that we are in, it's a growing, substantially growing industry. It's a CAGR of 25% until 2027, and it has been for many years.
I think it's also important to highlight that this is a very fragmented industry with just a few common standards and too many, maybe, closed ecosystems. So Freemelt's DNA, I think it's also important to highlight, is really true open source. And we believe that collaborations between both peers and customers are important to bring further value to the end users and therefore accelerate the growth further within AM as well. If we then zoom in on Q4 2023, it was a very intensive, exciting, and also rewarding quarter for Freemelt. So let's zoom in on a few of the highlights. Freemelt has, for I would say the past three years, worked closely then with two industrial partners to really make sure that the industrial offering that we are developing also then meets the expectations, and especially when it comes to the mass production application.
So therefore, it was very pleasing and also rewarding to the team to see that a Fortune 500 company really gained trust in Freemelt's unique technology, which we call eMELT. And this is a customer that will use eMELT for serial production of tungsten components for various applications. So very exciting and a key milestone for the company. The next key event was also then a launch of our third machine since 2019. So again, as I said, we have a lot of focus on technology development. We now have a complete offering, all from material research to application development and mass production. So this was the eMELT iD, which is for application development. So also a critical milestone, and this will launch during Formnext, which is the largest exhibition during November last year.
Then, as I mentioned before, if we're going to really make a change in this transformation that the industry is going through, I mean, we can do as much we can ourselves, but we really need to collaborate. This is also the intention with putting the research machine out first. I think this is a good example with Texas A&M, so a U.S. university that also invests a lot of time and competence in tungsten, but also titanium. Here we have agreed an extended collaboration where we together support Texas A&M to industrialize additive manufacturing for the U.S. industry. It's, of course, also a good recipe, I think, when we start to get repeat orders. IHI Europe, we actually have had as a customer for quite a few years.
It's a Japanese company, global company, and they do a lot of research now within titanium aluminide applications for aerospace engines. Here they have added their second machine to really intensify that research work as well. So also good to see that we can meet the industrial side of research demand as well and expectation. During Q4, we also intensified, I would say, our market intelligence really to build up a more strategic pipeline also regarding our industrial segments. Now when we have two machines that will be ready for the market now from Q2. So that's something, of course, now that we zoom in on specific then segments that we have a focus on valid for the materials that we work in within tungsten, within copper, and within titanium. And then last but not least, I think it's also very pleasing to have Viktor Valk on board.
So as a company, we're trying to move more into the commercial side as well and to establish an empowered, let's say, operating model where we have a regional sales service and application responsibility that is close to the customers and therefore can make the right kind of decisions depending on their respective situation in the region. Viktor has a long experience from the industrial side as well. If I would then deep dive a bit about the breakthrough agreement that we had regarding eMELT. So as I mentioned before, it's a large company. It's also a very experienced company in regards to additive manufacturing, which I think is also important for us. It's important that we start to work with companies that really have tried out additive, have set up a production process based on additive as well.
This company is specialized in tungsten, which I would say that Freemelt we have done extremely good progress during the past couple of years. I would say that we have a leading position in regards to tungsten and how to print tungsten from productivity, but also from a quality point of view. The main reason for this customer, which is already using additive, is to increase their productivity and to then, of course, optimize the cost per printed part. And at this stage, I mean, we have started this collaboration and engaged in this agreement. And what we are doing as we speak is really now to integrate our eMELT technology into their manufacturing process to really optimize this setup that eMELT can then deliver the maximized value for the client as well.
As I said, we had a high activity during Q4, which also has started to pay off already in Q1. So some major events after Q4 also, I think, are important to highlight. I think it's very pleasing also after just launching the eMELT iD during Q4 at Formnext that we already in Q1 got the trust from an Italian competence center called Weaream. We also got an order from one of the most experienced universities in regards to electron beam melting, which is the University of Sheffield. So this is a Freemelt ONE. And as I said initially as well, I mean, we're trying to really collaborate with all our customers. And as more customers we get on board, and we're also trying to emphasize that they should collaborate between themselves.
We also then, of course, will identify new kinds of opportunities for this kind of technology for the industry. What we also have done during Q1 is also to strengthen Americas' organization on the commercial side. North America is a key market for us. It's a lot of activities happening there within those key segments that we focus on. And then last but not least, coming back to what I just said about collaboration, we also had our second user forum, so Freemelt ONE users. So I think this is also quite unique that you collect all different kinds of users that you have from different companies and they openly share their kind of success and progress from an electron beam powder bed fusion perspective and Freemelt as well. So also something really unique and highly valuable to take part in.
If I should just quickly then zoom in, as I just mentioned about this eMELT iD customer, Weaream. Important to highlight that the northern part of Italy has been a pioneer for many years in regards to innovative manufacturing. So they were actually, I would say, the forerunners if you go back maybe 15 years ago to really start to print in orthopedic implants, for instance, or even in the aerospace engines, turbine blades. So there is a lot of experience when it comes to additive here. Weaream, their role now in the Italian industry, they will work closely with industrial customers in Italy to really identify new kinds of opportunities to be even more innovative how to manufacture metal parts.
They also do have a lot of experience when it comes to electron beam powder bed fusion as well, which I think is also extremely helpful for us in this case. And then together, we will then engage toward the end users. So Weaream will work with more the application development and we will then provide the systems that can then mass produce those new applications that have been developed and identified with Weaream. So with that said, I would like to hand over to you, Martin, and zoom in on the numbers.
Thank you very much. So it's a pleasure for me to deliver my fourth quarterly update and my first year-end results update for Freemelt. I've been here since March of last year. So looking back on the fourth quarter in terms of sales, the black line on the right-hand side, it's more or less flat from the last quarter, slightly down. And as you can see, it's been quite volatile for the last five quarters. And this is, as we've talked about in the past, that it's difficult to predict and to plan for when different orders come in, as Freemelt ONE is most of the time part of a tender process. And tender processes can be quite lengthy and cumbersome and difficult to predict. So it's large deviations between quarters. But sales have recovered since Q2 and onwards.
We've seen currency headwinds in this quarter as the Swedish krona strengthened. We sell our products mainly in euros and U.S. dollars. Most of our costs are in Swedish krona, with some costs in foreign currency as well. Net, net, it's a negative in the quarter. We book these currency gains and currency losses in other operating income and other operating costs. There's also an effect from the revaluation of cash balances in foreign currency that we carry. Looking at the inventory side, the gray bars, inventory has come down. It's down 8% year-on-year and 16% quarter-on-quarter. It's about SEK 1.5 million lower value. We still have, this is, of course, due to deliveries in the quarter.
The inventory is service inventory, but it's also machine inventory where we have the capability to deliver at least a few machines on short notice if the customer wants a fast delivery. We see the green line, which is the order book value. This is orders received but not yet invoiced, so future revenues for the company. It's at an all-time low since we started following this number since Q1 2023. This is because we delivered on most orders up until the end of the year. There's SEK 1.8 million of non-invoiced orders left. On the next one, yes, cash flow and operating results. We see a very strong recovery in operating cash flow. That's the black line, you see on the right-hand side. We've had positive cash flow in Q4 of 2020, sorry, Q1 2023.
We've been around zero in Q4 2022 and around zero in Q4 2023 as well. So three of the last five quarters, the operating cash flow has been positive or from zero, which I think is quite an achievement. The drag is, of course, the green line, the investments, which continue to be significant. And we have high-paced investments for eMELT, which is according to plan, of course. So if you look at the total cash flow, it's basically all investments then, which carries the cash flow into the negative, as we see operating cash flow. If we look at the operating results, sorry, one back, please. The operating results, the gray bars, we want to highlight that there's about SEK 13 million in each quarter of non-cash items. It's goodwill write-downs mainly. So if you deduct those, there's an operating result of about -SEK 6 million for the quarter.
It was about the same for the third quarter in 2023 as well. And then on the balance sheet side, we have a 94% solidity. That's because we have no external debt on the balance sheet. We raised equity capital in Q1 of 2023, as you can see with the gray bars. So cash at bank was raised to a significantly higher level compared to Q4 2022. And then you see then the investments that the company has had mainly, which is a drag on the cash flow. And we end the year with cash at bank of SEK 34 million, which is about SEK 13 million less than what we saw at the end of the third quarter. So I'll stop there. Thank you.
Thank you, Martin. Okay, just to wrap up on the Q4 then. So once again, I'm really pleased to see that we start to increase our commercial activities as well. So it was really intensified during Q4. One big part of that was also due to Formnext, this huge trade show where we had the opportunity to meet a lot of customers and, of course, potential customers as well. And as I mentioned before, we have also now started to work more practically with market intelligence, mainly for the industrial side as well. The big milestone for this company, of course, was the breakthrough agreement for the industrial side. And then in this case, for serial production of tungsten, so the eMELT iM.
That we also, during that intense time that we had of finalizing the IM machine during last year, I mean, the team also made a fantastic job to also then finalize the development and launching of the ID machine, so the application developer machine, which is highly valuable to our offering. Then that we continue to add commercial resources. In this case then, Vicor Valk as the Regional President for EMEA. Then just after Q4, so then I think it's just worthwhile to repeat the great achievement also to get on board our first customer on the ID, so from an application development perspective, with the important Italian market with the client Weaream. So with that said, I open up for questions.
Thank you so much for the presentation here. We got a couple of questions, so I think we jump straight ahead here. During the quarter, you signed a breakthrough agreement with a Fortune 500 technology company. Can you tell us which one? And can you tell a little bit more about the agreement?
Good question. And I'm also very eager to share who the customer is. Unfortunately, at this moment, we are not allowed to share the name of the customer, but we definitely hope that sooner than later we'll be able to do it. Just to maybe repeat a bit what I said before, I mean, this is, again, it's a Fortune 500 customer. It's an extremely experienced customer when it comes to additive. It's in the area of tungsten, which, of course, is one of our key focus areas where we have a very good position. So again, the intention of this agreement is really to integrate eMELT for serial production, mass production of tungsten components, to just simplify it.
Thanks. During the quarter, you started a strategic collaboration with Weaream, where you will implement an eMELT iD machine to be installed. Is there a possibility for more installations if it's successful?
Also good question. Yes, I hope so. With that said, I would say that Weaream, they are not setting up for mass production. They will mainly work with application development. Maybe they will also work with product certification and some small-scale production. So maybe before the demand of the mass production of the applications to come on board, they can start to do some sort of low-scale production. And in that case, definitely we hope and expect that we will see a few more eMELT iD machines in Weaream. But again, just to be clear, Freemelt will sell the IM, so the mass production machines, to the end users in the end. So that's really how the, let's say, collaboration and the, if you call it, business model will look like.
What is included in the order book figure of SEK 1.8 million? Is it future lease payments for the lease Freemelt ONE?
Maybe Martin, you can answer.
Yes, exactly. So as you might recall, we have an agreement with IHI where they pay over time for one machine that we delivered during the fourth quarter. And this is an agreement which extends over a little bit more than two years. And this is the main part of the figure that you see in the SEK 1.8 million.
Thank you. Other external costs were higher due to increased investments in the quarter. Could you elaborate on what portion of the increase is recurring versus temporary?
On the external cost, we have elevated costs. This is due to the investments we do in our products, and especially in eMELT. The costs are activated in the balance sheet. So you also see a positive number on the revenue side. So please be aware of this. So the elevated costs are then neutralized by the elevated income, and it's activated in the balance sheet. And as the eMELT project sort of finalizes, we should see all as equal, that costs will come down.
Thank you. Considering the workload required during the initial phase of processing an eMELT order, what is the current capacity like? How many orders can be effectively managed simultaneously?
I think it's also difficult to say like that because I think it's really depending on where the customer is coming from. And also on the other note, I would say what's important to highlight, that we will be a bit, let's say, cautious now when we start to penetrate the market with eMELT because I think it's extremely important that we start off in a good way and don't, let's say, overdeliver and underpromise to the customers. So of course, in the end, we need to make sure that the machines that we put out there in the market, that we can give them the full attention and care because I think we just need to, of course, admit and understand it will be a lot of feedback on the first machines as well. And then we need to attend to that in a good way.
So I think during 2024, let's say we will be able to deliver at least, I would say, let's say, between five and 10 machines, not more. And that's a careful decision made around that as well. But again, coming back to answer your question, I mean, it's difficult. If you have a customer coming from, let's say, a traditional technology, and then they have a process set up for the traditional technology, then it requires a bit more adjustments to set up the additive process. If you have a customer with laser machines, then it's a bit short kind of process. And if it would be a customer that do have electron beam powder bed fusion technology, then, of course, it's a shorter process to get in as well. So again, it's really depending on the starting situation there.
Thank you. The order intake for Freemelt ONE in 2023 was lower than the one in 2022. Could you elaborate on the primary reasons for the decline?
Sure. As Martin also alluded to in his section as well, I mean, these are all universities, research institutes. It's quite a long sales cycle. It's public tenders. And therefore, it's quite an erratic sales. And it's difficult to really forecast as well. With that said as well, I think we should be honest to highlight that, I mean, we are coming from being a very technology-focused organization. And now we're becoming more and more commercial. So we definitely, as I said, in Q4, have invested much more time and effort to try to establish more of a strategic pipeline as well that we can execute on. And I think it's also important to highlight that during last year, we did not lose any, let's say, opportunity. It's just the fact that it's been delayed.
Hopefully, we see some good improvements during this year when it comes to Freemelt ONE.
Thank you. What strategies have been implemented to enhance the order intake in 2024?
I mean, the strategies, again, maybe I'm repeating myself, but to become more strategic when it comes to pipeline or leads management. So again, we have used market intelligence during Q4. We have also then really tried to build up much more of a pipeline to harvest on now. And then secondly, I mean, we need resources to harvest on this. So of course, it's to invest in commercial resources so we can knock on more doors. And we can also introduce Freemelt as a company to the market. We're still a fairly new and unknown company in some markets. So we need to really market our brand and also educate the market about the benefits with E-PBF as well. So I mean, the strategy really is to intensify the commercial side of the business during this year.
And then, of course, I mean, coming to volumes, I mean, the big volume business for us will be the industrial business because if you take the research side, I mean, from Freemelt ONE, it's a very transactional business. You sell one machine, and it can take everything from six to 18 months to get one deal. And then it's pretty much no aftermarket. When it comes to the industrial side, first, it's volumes of machines. And then it will also be a recurring business in aftermarket.
Thank you. Are you currently working on any more collaborations?
We definitely, I mean, collaborate a lot with our universities, so our Freemelt ONE customers. We, of course, are seeking for the right type of partners as well to collaborate in both various, I would say, segments, but also various geographies as well. So that's definitely something that we are looking into.
Thank you. What sets the eMELT iD apart from the other models in the eMELT family?
eMELT iD, so eMELT iD is actually developed based on eMELT iM. So to really simplify, I mean, it's the same core technology. And the main difference is that eMELT iD does have one build chamber. And eMELT iM has four build chambers. So eMELT iD is mainly for application development and also call it small-scale production. But I would say it's the one build chamber that is pretty much the only difference to eMELT iM.
Thank you. Moving on to the last question here. What milestones should investors look out for in the coming quarters?
Yeah, good question. I think we are turning now into more commercial activities. So again, coming back to what we have really intensified during Q4 to build up this pipeline. So I would say it should be to zoom in and focus on to see some sort of results from the harvest on the pipeline.
Thank you so much for the presentation here today. Thank you for asking all questions. Good luck going forward. Thank you all for tuning in.
Thank you.