Welcome to the PowerCell Group Q1 2026 Report Presentation. During the questions and answers session, participants are able to ask questions in the chat below the player. Now, I will hand the conference over to the CEO, Richard Berkling, and CFO, Anders Düring. Please go ahead.
Good morning, and thank you very much for joining us. Also today, we have our CTO of PowerCell, Andreas Bodén, joining in to give you a presentation and an in-depth look at the technology of PowerCell. Before we go into the quarter, let me briefly frame the environment that we're operating in at the moment. We are now seeing an increasing demand of energy in society and in the world, both when it comes to energy resilience, but also the fact that the energy demand in society is accelerating quite drastically. We see interesting surge in the industry that we're operating in. At the same time, we are operating in a very uncertain time, geopolitical issues that we are all affected by. We see capital discipline, but also some lack of infrastructure that is creating a headwind towards the increased demand that we see in energy.
For PowerCell, this is the reality that we're navigating in. Our commitment as management is to make sure that we have an action readiness and we're prepared for a variety of outcomes because we are going to navigate in uncertain waters for quite some time going forward. Today, we will keep this presentation focused and structured because we have a lot to share. We will start with the technical foundation of our systems, giving you an update on what we have spent the last three years doing here at PowerCell, both internally at PowerCell, but also with our industrial partners around the world. We are also giving comments to the quarter, the numbers from Anders, and then an outlook on what is happening in the marketplace and how we are framing PowerCell's opportunity going forward.
First, let me say for quarter one, for me as the CEO, the quarter one did not meet the expectations. At the same time, this is in line with the volatility that we predicted in quarter four report. We have said previously that 2025 was somewhat of an anomaly with more stable revenue over the quarters, where 2026 most likely more will resemble 2024 and 2023, where we have a more project-driven sales, which will give volatility and uncertainty over the quarters. More on that when we go into the financial side and also the market prediction. Before we go into the financial, I would like to start then with the foundation of our business and also I would say the heart and soul of PowerCell.
Over the past years, we have invested in industrializing our technology, strengthening our product portfolio, and also building the process required to deliver demanding real-world applications. Everything we do, both commercially, strategically, and financially, is built on this foundation. To give you an in-depth view on that one, I hand over the word to Andreas Bodén. Let me now change the slide. Here we go.
Thank you, Richard. PowerCell builds on different layers to build reliability in real application. The foundation of our company and technology and products are the fuel cell stack, and I think we have talked about this over the years. The last six years, we have matured this stack and industrialized this together with Bosch. If you look on the bottom section, you can see that the cycle for a stack development is between five to seven years from start to full validation before we go to an application. This is the key.
It takes a long time, and we want the stack to be mature and predictable, because on top of the stack and around it, we build a system architecture with pumps, fans, sensors, et cetera, to both protect the stack from the application, but also to create the environment for the stack so it can perform and operating over time in the application as good as possible. Then, of course, on top of that, in a system, we now have a control system and software that we can frequently update to recalibrate depending on application or recalibrate depending on live experience from the real application. This is the three layers that build our foundation in our system product development, and it's the core.
As you can see, they have different cycle time. For the system, we spend one-two years for an iteration, and software we can do between weeks and months. In real application, when we have a defined hardware, we can update them continuously to improve performance and enhance durability over time. If you take the next slide, we go a little bit deeper into technology and lifetime. Lifetime is determined by the operating profile, how the system is used in the application, and not by a single test by itself. What affects the fuel cell is basically how it's operated, like load transients, if we cycle it, start to stop it a lot, and also the load level for the fuel cell, if we operate it on half load or 70% load, and in some applications, we even run it a lot on the max load.
In this graph, which is a little bit technical, you can see degradation rates on the Y-axis and operating hours on the X-axis. The key thing here is it's not the single test result that determines how long a lifetime. It's the combination of experience and how we have designed the system, but how it's operated. We have tests that have been running over time, that show in a marine environment with different operating profile, we can have between 24,000 and 43,000 hours of operating before we need to change stack, mostly due to it has lost performance, so the hydrogen consumption is increased. It makes financial sense to swap the stack to lower the hydrogen consumption. The stack is fully operational still, but just on a lower efficiency.
This resembles degradation in batteries for electric vehicles, et cetera.
Exactly. It's the natural behavior of when a fuel cell or battery is used in an application. It loses performance. How do we test? How do we stress our technology? We have, in EU-funded project, together with industry partners and institutes, developed a stress test which finds the key spots where the fuel cell is not treated as well to provoke that this performance degradation can happen. This cycle was developed in this project, and this is the cycle then we use to do our testing, both on stacks and system. This is far more harsh and aggressive than any fuel cell system we'll see in real application. All the test results that we get from this test has then a lot of margin in the real application because there are more softer in transient, and also the load levels are normally not as high.
We don't do aggressive start and stop, like the peak you can see at the end of the cycle. We have conducted a PowerCell marine durability test according to this accelerated stress test. The first test was 20,000 hours on the old generation stack, and the latest stack generation now, which we have industrialized together with Bosch, we have done over 5,000 hours of testing. What we can see is that the performance of the old stack generation and now the new industrialized stack generation with Bosch are the same. Which we can also rely on old data when predicting performance and durability in application.
On top of that, together with Bosch, we have over 200,000 hours of test data in total with different operating cycles in different environments, giving us a solid foundation on how our stacks behave in different conditions. Which then we can use to build a system around it and predict the durability and performance over time in real application. On top of that, there is also 500,000 hours of field data available for stacks together with Bosch.
Just to reiterate, the 20,000 hours of accelerated stress test, that is done on one individual test object to really find the boundaries and prediction of performance.
We could actually run the test longer afterwards.
Yeah.
It was not finished. We go to how do we build a system architecture? As I said initially, the system is there first to make the performance as high as possible for the stack, so it's predictable both initially but also over time. Also there to protect the fuel cell stack from the application. We don't get events that affects the stack over time. By the system, then we control temperature, pressure, flow in humidity, which is important for the stack to perform as good as possible. It also defines the operating window that we don't need to load the fuel cell too quick up and down. It's smoothing it out.
On an individual system, we have over 1,600 hours of accelerated stress test according to the same cycle as we had for the stack, where we can see that the performance and aging properties are the same as when we do the stack test in a single stack test. Which means then we can rely on the system testing and the stack testing because they are compatible with each other. We have also built a lot of systems over the last years. We have over 1,300 hours of total test time here on multiple objects to see we can have a really stable performance from system to system, which is also important in the application to have that they are repeatable. This is due to the industrialization we have done over the last years.
On top of that then, we have developed over the last year a software layer. We have two layers of software. The first layer is the one that controls the individual components in the system, matching the airflow with the hydrogen flow and cooling flow. We use different calibrations for different applications to enhance performance and predict performance over time. This is really important because it's not a static calibration that will be the optimal over time. We don't just do one calibration from start, but we need to update it continuously over a life cycle of a system, which is key here. The other thing we need to do is also that we can balance the load between individual systems.
In an installation where we have 10-20 systems, some systems will perform better over time, and some will be fresh because they are maintained. This distributed master controller that we have developed balances the load sharing between these systems so they are always operating at their best. This means we can predict performance and durability over time of individual, even though we have updated and maintained individual systems in an installation. This is also really important because by doing that, we don't stress systems that are close to maintenance more than necessary by unburdening them for the fresh systems.
Summarizing this, we have a really solid foundation of over 200,000 hours of in-stack testing together with Bosch. We have individuals that we have operated over 20,000 hours. We can by, u sing all this data we have gained, we predict that in marine operating environment, we have somewhere between 20,000-43,000 hours in real operation using this accelerated stress test as the foundation. We have predictable performance and predictable durability in our application. Most of all, it depends really on how the fuel cell system is used and not by a single test in the lab.
Looking at the technical foundation and how we have been working, there are some elements that are worth highlighting. One is actually the design philosophy, because the decoupling strategy is extremely important when you work in a technology shift. Because you will have layers of technology that are updated both internally in our R&D and innovation, but also from suppliers and other part of the value chain, that are upgrading performance, quality, and price.
You need to decouple in order to get stability. Just reiterating, the stack platform, we have massive testing both at PowerCell and together with Bosch. The stack is the core component giving performance, it gives robustness and also reliability over time. When you have that one, you have a very solid foundation, and we are sharing technology with Bosch that they are using in their applications for automotive purposes. The automotive test cycle is also more aggressive than our primary segments in marine and power generation because you have much more load transients from the increased start to stop that you have in our more stable environment.
On system architecture, both individual testing on test objects to get reliability testing and then broad testing on the fleet to see that we have a repeatable behavior also in production. On top, we build margin from the software and control. We know that when we introduce the products to the market and we do the commissioning and integration with the customer, there will be adaptations. Because we are creating installations that are system of systems, which means that you need to optimize when you do the installation. You need to find the right balance point between the installation of fuel cells, the battery part, and the power management system. That is just part of doing technology development.
When you operate in a technology shift, you need to have risk margin. The fact that we have tested and accelerated stress testing beyond the life expectancy is the margin that we have for our customers. Does this mean that we will have no issues when we go to market and we introduce this? No, of course, because technology always comes with risk of having quality issues, disturbances, and issues with integration. We're well prepared for that one. We have also selected partners and customers that have a readiness for this and have redundancy in their DNA. We feel that we have a very strong offering to the market, that we are standing on very solid ground, and we're quite proud over the achievements done at PowerCell over the last year. Also the collaboration we have with Bosch as our really solid industrial partner.
With that, thank you, Andreas. We now hand over to Anders for the financial update.
Thank you, Richard. I think the numbers in this report is quite a bit flavored of the heading. It has been slow, and we have had a conversion situation that I'm sure we'll go into further on in the presentation. If we look at the quarter as such, I think there are at least two things I'd like to highlight for you. Part of the reason why the decline from last year is obviously the decline in IP and royalties in this quarter, which has a direct impact not only on top line, but on the bottom line as well. You also read, if you have so far in the report, that there are some FX effects, but those we have all the time, and they are different in nature at different point in time.
The most important underlying difference from last year is the difference in IP and royalties revenues in this quarter. When we go to the next page.
Let me support you with this. There we go.
I have the rolling 12 number. You may find out here that the sales are about the same level. Gross margin is higher at this point in time, for the reason of the deal we had in June 2025 with Bosch on the IP. When we go to the net profit and loss, you see there are small differences. You need to remember that in the second quarter of 2025, we had a conversion of a loan into revenues. That has been explained before. I just want you to remember that when you look at that from that standpoint, because that obviously tweaked the numbers from a rolling standing position. That was SEK 30 million for those that didn't remember.
Apart from that, I think it's, for me, important as a CFO to underline what Richard said, that if he mentioned, and in the light of the presentation from Andreas, that we have a strong technical platform. At this point in time, I'd like to also share with you that we feel comfortable with the balance sheet we have. We feel comfortable with the revenue streams we see ahead of us, and we have, at this point, a very high trust in that we are a robust company also from a debt standpoint. I think you've recognized that in this quarter, for the first time, we had a project financing of SEK 28 million that we have reported. That is the only debt we had, which is directly connected to a particular project with the revenue stream and gross margin that will well cover to repay or amortize that debt.
Other than that, we have the revolving credit facility that has been unused so far during the first quarter of SEK 50 million, in case that wasn't clear. With that, I think in this case, the first quarter is, from a financial standpoint, a brief quarter. I'll hand it over to you again, Richard.
Yep. Thank you. You have the calendar for the remaining year, the AGM, May 11th, and the quarter two report on July 16th. If we look at the market development, we have seen commercial progress with signed agreements in quarter one, accruing to roughly SEK 50 million. Activity both across marine and power generation, which is also what we see in the pipeline. We see also progress in the marine sector for existing customers, where we are delivering according to contract and progressing well in that sense. We also have signed agreements on engineering projects for the next generation, which is also good because we see that we have a value also long-term for industrial partners, which is actually a very good sign because this industry, it is a marathon.
Being part also actively in the next generation of technology systems is really valuable to PowerCell. In power generation, we completed the first customer deliveries of the new 190 system, which is a very attractive proposal to the market. It fits really well into the increase in demand of power generation, primarily driven by, we hear a lot about data centers, but also auxiliary power and backup power in society, construction sites, et cetera. I will come more over to that. If we look at the different segments, I will give you a brief update on what we see. Marine is still the growth driver for us. There is interesting activity in the market because the notion from the industry is that fuel prices will not come down. Over the coming years, there will be an increase.
We reported last time that from 2024 to 2030, fuel prices in marine will double. The increase from 2030 to 2035 will be an additional 50%. The underlying driver is there. We also see a pipeline of discussions that is stronger than we have seen before, but it takes time to make a decision. That is also related to the uncertainty that we see in society. Because when we sign an order with a marine customer, that is part of a much larger investment decision. They're building a ship, they're finding an operator. We see a delay in those, but the underlying trend is strong, both when it comes to passenger vessels, ferries, but also then bulk carriers, which are operating on defined routes where you can have bunkering and infrastructure for refueling, which creates a very solid pattern for them.
Interesting activity in marine. We hope to come back and report on progress on that one. The new segment for us, power generation, has been really interesting since we made the product launch in quarter four. We immediately signed a number of orders, although small, but the interest and the timing for this one was quite strong because, as we said before, demand in society for energy is just increasing drastically. 3% year-over-year, from IEA, which is a massive increase. We see in certain markets, especially driven by the data center, that availability of energy is very limited. So far when it comes to fuel cells, it's been the technology of SOFC because they're running on natural gas, which is an advantage for them.
What we see right now is a strong interest of using natural gas with steam reformers to produce hydrogen on site. That is, if you have a carbon capture, that is blue hydrogen. If you don't have it's gray hydrogen, not as good from an environmental perspective on CO2 emissions, but it's better than running on conventional fuels. Also it gives availability of energy that is not there otherwise. It can also build in the U.S. on existing infrastructure where you have pipelines of natural gas. While SOFC technology and fuel cells was the dominating force in especially data centers so far, we now see a rising interest, and we have ongoing dialogues that are quite interesting. Also by the sheer fact that delivery time for SOFC fuel cells to data centers are right now around three years.
Also if you want to have a gas turbine, the supply time is between three and four years. When others can't deliver, they go for alternative solutions. The PEM fuel cell that we are operating is very good for peak shaving and backup power because you have a dynamic characteristic of it. Although SOFC will be more prevalent in primary power, we see that the PEM fuel cells that we are representing is really, really good complement when you are setting up your facility where you might have grid power for part of your operation, but then you have additional power sources like conventional internal combustion engine, but also green solutions. Off-road is something that we're following. We see initiatives, but that is primarily regulatory driven.
In London, they have a huge investment around the new highway where they have demanded that part of the operation is done by hydrogen. We know that there will be both excavators, wheel loaders, haulers, and other equipment that will be running on hydrogen. They will also use backup power units, power gen sets with fuel cells to power battery-driven excavators and haulers. Where you see that regulatory push, off-road is still a potential market, but it's not a segment that we see as a primary segment. Aviation, we have a lot of engineering projects together with customers there. We see an increase in demand in that one as well.
Longer time to market. Some interest in specific applications like drones, also driven by the new geopolitical environment. Aviation, as we said before, it is our innovation segment. We use it to push boundaries, to secure and validate technology, to build robustness and safety knowledge because aviation is the most demanding segment that you can be operating in. It's also funding a lot of the activities that we then transfer to different segments.
I will actually go through this quite rapidly now. If we look at the general market dynamics, we see some really, really strong drivers. Energy resilience in society is becoming more and more a hot topic for both companies and governments. We see energy demand where data center is actually crowding out and is capacity hoarding, which is affecting society in general. The geopolitical uncertainty is actually a driver, but as you can see on the opposite side, it's also a constraint. The uncertainty that we're operating in is the new normal that we need to adapt to. We still have a strong driver and demand to get rid of pollution and emissions. The regulatory side of things is creating some push for us.
The constraints and the headwind, a lot of capital discipline, we don't see investments in general. People are waiting on decisions, and the decisions made are quite often in the same way as you did before. You don't take risk at the moment, which is affecting us. Infrastructure is still not in our favor. We have not built out the refueling system. We saw both Daimler and Volvo commenting this. We saw the chairperson of Bosch go out and comment that Europe needs to invest much more in infrastructure. In China, that is a different story. They are investing heavily into hydrogen infrastructure, and there we also see that they are improving their deployment.
If we then summarize. PowerCell, we're quite proud of the company that we have established. We are structurally a much stronger company than we have been before. We have really competitive industrialized product portfolios, purposely designed for both marine and power generation. We have also built a resilient company. We are prepared for a wide variety of outcomes. Our obligation as CEO and CFO is to defend break even if we see a lower scenario going forward. At the same time, we need to have the ability to act and deliver on the high-end scenarios. That is the balance point that we need to control every day. We have created a company that we have said before is asset-light, so we can scale up without significant investment.
The fact that we are debt free when it comes to our operations and industrialization means that we are not burdened by the same investment that needs to be depreciated in the same way that some of our colleagues in the industry. We have had a very disciplined execution, and we can continue to do that on the current activity levels. Focus is cost control. It is to leverage the existing product portfolio, but at the same time, do the investment and timing on when the next generation of innovation will be industrialized and introduced to the market. We are also positioned to scale when demand converts, but we will also, as we said, protect bottom line. That is the balance point. We're convinced, that's why we do this, that hydrogen will be part of the energy mix going forward.
We know that energy demand is increasing in society. None of us can really predict with precision if the growth in hydrogen and offtake in society will happen in 2026 or 2027. We are prepared for both an outcome where demand is increasing, but also to defend profitability and PowerCell at lower levels. With that, we conclude the presentation. We know it was long this time. We don't have too much time for questions, but it was important for us to convey the situation and the company we are right now.
We then go to questions. One question from Albin is, "Why is the Bosch royalty so low when they have seemed to start up in China with some deliveries and start in serial production?" China is an interesting market. Hydrogen was part of the new five-year plan from the government. We see massive investment, but we also know that part of the value chain have stocked up on inventory. Although we know that Bosch is deploying more installations and Bosch customers are deploying more trucks and other vehicles to the market, that doesn't necessarily translate to new orders every quarter. There will be delays and some volatility between the quarters. China is a really interesting market, and to some extent they are inspiring us, but also frightening us because what they do is going to shift, I think, the power balance in also this technology sector like they did with batteries if we don't really protect ourselves in Europe and U.S.
"Do you have any information on how large your customers that are operating in the defense sector?" At the moment, we have no customers operating in the defense sector. We know that there is a demand from the geopolitical situation. So far we have not had any dialogues or ongoing customer discussions with that. That was actually all the questions that we have seen so far. With that, we conclude. Let me see here. We got a very specific question from Kanye. We mentioned milestone payment being invoiced in quarter one, but cash arriving in April. Roughly how large are these payments? I'm not sure if you comment those details.
Yeah, I think we don't do predictions on Q2, so you'll wait and see.
Yeah, also a follow-up question from DB Kanye. We mentioned measures to improve efficiency and control and flexibility. Can you specify what actions have been initiated and where you see the largest saving potential? Should we expect that these cost measures result in invisible OpEx reductions already in quarter two, or is the impact more weighted towards second half of 2026? We don't comment to that detail. What I can share with you is that the fact that we have manufacturing also outsourced to Bosch, we have not the same exposure on a fixed cost like many others have or we could have. In essence, I would say that the primary value that we can do is to smoothen out the investment in innovation. We have a core technology that Andreas presented based on the S3 stack. That is a very, very competitive and potent component.
We are now doing new tests on pushing the boundaries to see that we actually have performance that is better than we thought. In aviation, we can operate on higher temperature, which means that some of the investment in next generation might be postponed because we can work and live on the existing technology longer. That balance point is something we evaluate, and that will also be part of it, because then you can postpone some investment both in equipment, in machinery, et cetera. We will come back to you when we have a more clear picture on this one and also when we know what we want to share.
We have one question on election. We have election in Sweden this year. Do we see that countries and societies are vulnerable and dependent on fossil fuels? We try to stay out of politics. I don't think that there is a government anywhere in the world that is not affected by what is happening at the moment. Energy and availability of energy will become an even more important security issue. We see strategies to have more local production of energy. Solar will be one of the, I think it will be the dominant source of power in a few years, because it gives availability of locally produced power. That is a trend that we think will continue. Regardless of government in Sweden, I think that we will see more focus on energy, more focus on energy resilience, and more focus on energy independence. That will be in all countries.
With that, we need to conclude. Thank you very much for this one. You can always reach out with questions, or if you want to come and visit us, we can arrange that one. Thank you very much for this, and see you next time.