Earnings call transcript: Aqua Group reports record Q1 2025 revenue

Aqua Group has reported a record high revenue of NOK 1.13 billion for the first quarter of 2025, marking a 29% year-over-year increase. The company's EBITDA margin improved to 11.1%, up from 8.6% in the same quarter last year. According to InvestingPro data, the company has shown significant returns over the past week and month, with analysts predicting profitability for the current year. The company maintains a GOOD financial health rating with an overall score of 2.82.

Key Takeaways

• Aqua Group achieved record Q1 revenue of NOK 1.13 billion, a 29% increase YoY.
• EBITDA margin rose to 11.1%, reflecting improved profitability.
• The company launched innovative salmon farming technologies, including the AirDome.
• Aqua Group's order backlog stands at NOK 2.8 billion, indicating strong future demand.

Company Performance

Aqua Group demonstrated strong performance in Q1 2025, with revenue reaching a record high of NOK 1.13 billion, a 29% increase from the previous year. The company's EBITDA margin also improved significantly, reaching 11.1% compared to 8.6% in Q1 2024. This performance can be attributed to the successful launch of new technologies and a diversified market presence.

Financial Highlights

• Revenue: NOK 1.13 billion, up 29% YoY
• EBITDA: NOK 113 million, with an 11.1% margin
• EBIT: NOK 57 million
• Order backlog: NOK 2.8 billion

Outlook & Guidance

Aqua Group has set a revenue target of NOK 4 billion for 2025, representing a 15% growth. The company plans to continue investing in sea-based, land-based, and digital solutions. A Capital Markets Day is scheduled for June 12, where further strategic initiatives are expected to be discussed.

Executive Commentary

Knut, CEO of Aqua Group, emphasized the need for new technology to meet growing demand, stating, "New technology is needed to bridge the demand." Ronny Meinken, CFO, expressed confidence in the company's performance, noting, "We consider the profit before tax of 45 million to be a good start to 2025."

Risks and Challenges

• Capacity constraints in salmon farming may limit growth.
• Traditional cage farming offers limited growth potential of 1.5%.
• The success of emerging technologies such as deep farming and post-smolt strategies is uncertain.

Aqua Group's performance in Q1 2025 reflects its ability to capitalize on new technologies and market opportunities, setting a strong foundation for future growth.

Full transcript - Akva Group (AKVA) Q1 2025:

Knut, CEO or Senior Executive, Aqua Group: Ladies and gentlemen, good morning and very much welcome to the Aqua Group first quarter financial presentation. The agenda for this morning is that I will do the introduction and the highlights. Ronny Meinken, our CFO, will do the financial performance and we will also do a run a Q and A session. And please post any questions during the presentation and our moderator will read your question. Highlights for the first quarter of twenty twenty five.

First of all, a record high first quarter revenue of slightly more than NOK 1,000,000,000, 1 point 1 3 billion and acceptable EBIT of NOK 57,000,000. Strong order intake of NOK 1,200,000,000.0, supported by the EUR 30,000,000 small contract with Zermak Chile and also the sale of shares in Abas Group to Arkus Infrastructure Partners with a net proceeds of 144,000,000 and a net gain of NOK 12,000,000, which is booked in first quarter. Also, we continue the sharp focus on further development and improved implementation of the Nootis solution. Straight to the numbers, key figures for Q1. Revenue as mentioned of NOK 1,130,000,000.00, that is representing a very good activity level, actually the highest in history for the first quarter.

EBITDA of 113,000,000. The breakdown of the CHF113 million is sea based came in at million, digital at CHF7.2 million and land based at CHF9.7 million. EBIT at CHF57 million for the group, and this is in line with our expectations given activity level. This is also representing a record if you adjust the one off of 33,000,000 in back in 2022. So this is representing a fairly good start of the year.

Diving into the development of order intake and order backlog, overall order intake of NOK1.2 billion, so that's a good number. Then going into the segments, Seabase came in at $7.84 and that is if compare quarter on quarter, this is slightly lower than the 800 a year ago. However, just to understand the underlying quality of the order intake, I have to mention that in Q1 twenty twenty four, we sold barges for million as part of the CHF800 million. As you know, barges is with a relatively lower gross margin. In Q1 twenty twenty five, we didn't sell any barges.

We expect to sell later in the year. And hence, the underlying product mix and the related gross margin is a very strong one for Q1 twenty twenty five. And this is also on top of the exceptional strong Q4. So that is leading to a relatively strong order backlog of 2,800,000,000.0. Also into land based, I forgot to mention that we also took into our books the EUR 30,000,000 land based contract for SerMA Chile in Q1.

So altogether, based EUR 1.55 for the order backlog and sea based NOK 1,100,000,000.0. In total, NOK 2,800,000,000.0 is comforting for the activity level going into Q3 and q two and q three. Then moving into strategic and operational status. First, the very high level picture. On the on the, headline is that, as such the traditional farming technology, an area like we have been doing in the last decades, that is kind of out of capacity.

So at high level, new technology is needed to bridge the demand. And what what I mean by bridging demand, that's illustrated the the delta between the orange line, which is an illustration of the potential in in in demand, the potential in consumption growth over the next fifteen years. People still like to consume salmon. It's a it's a megatrend. Whereby whereby the traditional cage farming will will likely not account for more than an uptake or growth of 1.5%.

And then you have the light blue line, which is then the delta between, the orange and the dark blue one. So in order to support growth, I think it's fair to say that new technology will be needed. And what is the menu of new technology and growth possibilities in salmon production during the next decade? Well, let's first have a 02/1930 perspective, and 02/1930 is not that far out, that's five years later, basically. And starting starting to the right here in in in this overview, which is about the traditional farming in in the fjord systems.

And we we believe what could be, growth engines, within the, current farming regions, meaning the fjords, will would for instance be deep farming. Deep farming comes with significantly lower mortality and will will then drive growth. The other the other technology to drive growth in in the traditional fjord systems will be the post smolt technology, reducing the the number of months in the sea and enhance with the volume and capacity growth potential of 30%. Come back to that a little later. Then what about closed in the fjord systems?

Well, in in the five years window, probably probably some possibilities, but but probably not the the very big volumes. Then looking at, super exposed, so called semi offshore and offshore, we think both of them will will take some times, and it will need more support from new regulation, the tax system, and and a new licensing system. So the conclusion is that it's gonna take time. And then a little comment and a quick reflection on on the new white paper, aquaculture white paper in Norwegian, Bruchs Mellningen. And we we think that what our take on it so far is that the government is trying to to regulate, in a more profound way, sea lice and sea lice levels, mortality as such, they want to to bring down mortality and they want to control it escapes a bit better.

So that's that's that's the high ground. And it is on a technology neutral basis, which, is very much supported by Aqua Group. And and we think in in the next five, ten years that technology will be fundamental for growth. Saying that, we all know that this this is, something the process with with with having this finally voted for and including the detailed regulations and and the relevant laws can easily take two, three years. But as such, the signal is very clear.

The government, and we think there is a kind of consensus there in the parliament, they want to bring down the sea lice level, they want to bring down the mortality level. So in that sense, technology like post malt and deep, farming will be very relevant in the years to come. That's our first take on it. Then looking a little bit on, real data. This is data for all the Norwegian production, taken down from Barns Watch, the public database, since 2012.

And at very high level, we can say with regards to traditional farming, open cage farming like we have been doing in The US, that that long production time in sea is driving higher mortality and production cost. So in the plot there, you see observed correlation between production time and the correlation of, of diseases. So on the horizontal one, number of months, and then you have the plot of medicine, medical lice treatment, mechanical removal of the lice, and the proven cases of PD. So, at high level, the conclusion is that there is a rising trend for both diseases and and and lice treatments as the time fish spent at the sea increases. So then what could be done with this?

Well, we think our strategy to reduce mortality is is about is about reducing the production time in traditional open sea cage farming. A post small strategy either on land or closed in sea is today available technology to reduce number of months in the sea. The other alternative to the reduced number of months in the sea is to use deep farming or protected farming to avoid sea lice treatments. So we believe that both production strategies will likely lead to reduced number of treatments, better fish health and lower mortality. One one example, then on, on the post malt, going into post malt, we think it's fair to say that the post malt concept is validated and that there are significant benefits from a post smolt strategy.

Reduced number of months, reduced time in sea means less lice treatments and improved fish health. Also, comes with better utilization of licenses, which provides improved volume with 30% or higher, which is dependent on the size of of the post malt. Then on on the deep farming concept, we we have it branded like Nautilus. We think this can solve one of the biggest sustainability challenges in aquaculture, which is semolace, or at least be part of the solution. So as you know, the concept is that you you bring the the fish, 30 meters below the surface, which is typically below the sea lice belt.

So the roof here in the illustration in the middle is 30 meters down. Also, we have this year launched, next generation of AirDome, which is new and improved. And so currently, we have around 25 active sites for time being. And the results so far from farmers running with Nautilus on a commercial basis is that they are consistently achieving 80 to 90% reduction in the number of c lice treatments. And they are on a very consistent basis, achieving 90% or higher superior quality.

So it comes with better quality and less sea lice treatments, which is positive also for mortality, lower mortality. Commercial for Aqua, we see a good momentum here, with with with the five, six key customers using this technology and we have also lined up with a with a pretty good pipeline of new customers. So good momentum when it comes to deep farming. And we consider consider this to be our total market for this specific product category of NOK 5,000,000,000 to NOK 6,000,000,000 over the next five to ten years. Then earlier this week, we also announced that we have now finally concluded the contract with Luxa.

It was announced earlier this year. It's a €20,000,000 contract for a reuse technology with Luxa on Iceland. And now they have announced that financing was completed and hence this contract now goes into execution. The long term target of Laxai is very impressively 36,000 tonnes production capacity, including a post smolt strategy as well. So this is very good development.

Newark Phase two is ongoing. Newark Phase two has been initiated with an additional capacity of 4,000 ton. We are now executing that project in the midst of that. And on top of that, between Nuwap and Aqua, there is a signed contract for phase three with an additional capacity of 12,000 ton. And the startup of that project, that will be authorized by Nuwap in the future.

Then moving on to our digital platform, our digital solutions where we are present in all the world's salmon farming markets. Observe, which is about automated feeding, there we have using AI technology and on our recurring revenue model, we have more than 100 sites worldwide. And there we are the clear leader. Aqua Fishtalk, that's about planning and control, that's a kind of ERP system for the salmon farmers. There we have a global market share of 60%.

So six out of 10 salmon, France salmon will be on our system. And AquaConnect, that's the control system. There we have also a recurring revenue model with more than 400 sites. Then closing off with our guidance for the year. Our guidance of revenue is 4,000,000,000 for the year.

We think the NOK 1,000,000,000 for first quarter is providing comfort. Q3 and Q2 and Q3 is traditional the peak seasonality and Q4 a little slower, but we should be well on track for the NOK 4,000,000,000 mark, which is representing roughly 15% growth from last year. On profitability, we are guiding on minimum 6% EBIT for 2025 and that ROAS will gradually increase as well. And then please notify, this is very important, we are inviting you to the Capital Markets Day here in at Jaren Klepp outside Stavanger. That's going to be June 12.

So please save the date and we kindly invite you to come over to our center of excellence. There will be presentation of our strategic roadmap and financial ambitions going forward, business segment presentations, site visits and stands and also ample time for Q and A, networking and social events. So we really look forward to your participation, so very much welcome. Saying that, I'd like to hand over the financial performance to Ronny. So please, Ronny.

Ronny Meinken, CFO, Aqua Group: Thank you, Knut, and good morning to everyone. So overall, we are satisfied with the start of 2025 with the high activity level and improved profitability, and I will provide you with some more details on the financial performance. So on the back of our very strong sea based order intake in Q4 last year, we experienced a record high first quarter revenue just above SEK 1,000,000,000 in Q1, which was $229,000,000 higher than Q1 '1 year ago. Profitability improved significantly due to the increased revenue and economies of scale. So EBITDA increased by 46,000,000 while EBIT improved by $37,000,000 compared to Q1 '1 year ago.

So the sale of our shares in Apus Group was completed in Q1 and had a positive impact on revenue and profit of 12,000,000 in the quarter. And last, net financial costs are low in the quarter of NOK 12,000,000 and is positively impacted by the NOK 8,000,000 increase in net in market value on our investment in Nordic Aqua Partners. So we consider the profit before tax of 45,000,000 to be a good start to 2025. And the book to bill ratio last twelve months is 106% with an order intake of close to NOK 4,000,000,000 and revenue of NOK 3,800,000,000.0. The revenue in Q1 is 29% higher than Q1 last year and also provides good support to our guiding of minimum NOK 4,000,000,000 in revenue in 2025, which is an increase of 15% compared to 2024.

The book to bill ratio in Q1 was solid of 118% and positive impacted by the RAS contract of EUR 30,000,000 from Salmac, Chile. So we believe that the order backlog of EUR 2,800,000,000.0 is forming a good basis for a sound activity level the next few quarters. On the markets, we continue to see a very positive momentum in the Nordic market and the revenue increased by 45% in Q1 compared to last year. In Americas, we had an increase of 12%, while we had a decline in Europe, Middle East of 7% compared to last year. The Sea based business is still the majority of our revenue, 79 percent in the quarter.

However, we had a really strong increase in land based revenue of 74%, sea based increased by 24%, while digital fell somewhat short compared to last year of 12%. So we consider our EBITDA margin of 11.1% to be acceptable, which is an increase from the 8.6% in Q1 last year, which is driven by the increased revenue, which provides economies of scale and also improved project margins in our land based business. EBITDA margin of 11.9% is sea based, is respectable based on a very sound product mix, and we are satisfied that we continue to see improved profitability in land based, which delivered an EBITDA margin of 5.5% in the quarter. The financial position was strengthened during Q1, primarily due to the sale of our shares in ABPUS Group with the net proceeds of 144,000,000. So available cash, including unused amounts on the overdraft and revolving facility, SEK 500,000,000 at the end of Q1, which is an increase of NOK 147,000,000 compared to year end.

Net working capital was reduced from 9.4% to 8.9% in the quarter. Measured in cash, we are at the same level as in Q4, which is good because we had a significant increase in activity level during the quarter. And last, we are satisfied with the development in the EBITDA covenant, which ended at SEK 2.47 in Q1 compared to the threshold of SEK 4.5. So this covenant was a big issue for AQUA one year ago, but is now well controlled and we have a comfortable headroom on the covenant. Net interest bearing debt was reduced by 128,000,000 in the quarter and is of course driven by the NOK 144,000,000 in net proceeds from the sale of the shares in Abbez Group.

On CapEx, we had NOK 39,000,000 in the quarter. Close to 50% is related to our three innovation agendas and another SEK 3,000,000 is related to the global ERP project, which is still ongoing. We paid a dividend of NOK 1 per share on April 15, and Board in Aqua will make a new assessment for the second half year ahead of our Q2 reporting in August. I'll continue with the financial performance in our three business segments, starting with the Sea based technology. So as we stated in our Q4 presentation, we expected the revenue start of 2025 to be high on the back of the very strong order intake in Q4.

So the NOK804 million, that's an increase of 24% compared to last year, and EBITDA improved from 10% to 11.9% in Q1 this year, which is explained by the higher revenue, which provides economies of scale and a sound product mix. With regards to the order intake, it's slightly down from SEK 800,000,000 last year to SEK $784,000,000 this year. And as Knut mentioned, this is all related to barges. So adjusted for barges, we see a positive development with regards to order intake for most of our products. So the Nordic Region had a strong increase in revenue of 36%, an increase in order intake of 10% compared to last year.

In Americas, we had increased revenue of 2%, and a sharp decline in order intake of 53%. And this decline in order intake is primarily related to our operations in Chile, which had a really strong Q1 twenty twenty four. Europe Middle East revenue at the same level as last year, while the order intake increased by 16%. So we are satisfied to see the twelve months revenue trend, both on revenue and order intake. It's clearly a positive shift the last two quarters.

And of course, we will work hard to keep this momentum going forward. Well, the backlog is strong of 1,100,000,000 and is $162,000,000 higher than a year ago. Quarter on quarter, we continue to see a positive development in our OpEx based revenue for Sea based. The revenue in Q1 this year was $13,000,000 higher than last year and equal to 32% of the total Sea based revenue. Moving on to Land Based.

The order intake in Q1 of million is primarily related to the RAS contract with Salmac Chile. We had a strong increase in revenue of 74% compared to Q1 last year, and a significant part of this revenue is from the two ongoing projects, the Nuva, the Phase two of the project and also the Postmort project with Samak in Finnmark. And both projects are progressing according to plan. So on the back of a higher revenue, improved project margins, EBITDA improved by 13,000,000 for Land Based in Q1 compared to last year and ended at 5.5%. And also for Land Based, we see a positive development in the twelve months revenue and order intake trend, and we still have the capacity and the focus to take on new projects.

So order backlog is close to $600,000,000 at the end of the quarter, which is comforting for the revenue level in 2025 and also into 2026. And last, digital order intake of 32,000,000 in Q1, which is SEK 13,000,000 lower than last year. The revenue was 12% lower compared to last year and is related to fewer upgrading projects for AquaConnect. So the recurring part of the revenue is stable and slightly higher than last year. EBITDA of 22% is acceptable, but as we have informed you before, we still believe that the profit is on the soft side as the current cost base is high compared to the current revenue level.

And as we have talked about in previous presentations, the focus in digital is to further grow the top line as we have the organization in place to manage a significant higher revenue than the level we are at today. And from the revenue and order intake trend, this is turning downwards, which is the reason why the top priority is on sales for the business area going forward. And we are confident that we will term this trend positive later this year. Order backlog of billion is NOK17 million lower than one year ago. So that was my financial update.

I will give it back to Knuth to close off this presentation.

Knut, CEO or Senior Executive, Aqua Group: Thank you very much, Ronny. And then a quick summary on the outlook. We expect to still see a strong momentum for deep farming concept. We think that's a kind of mega trend in particular the Norwegian market. We think there are some possibilities to develop the same concept modified a little bit also for the Chilean marketplace.

Expect to see a normalization of the Postmod market in Norway, gradual and over a bit of time, and also continue to invest and improve our solutions across sea based, land based and digital like we have been doing the last few years. The guidance for the year, we are aiming for a revenue of 4,000,000,000 and EBIT of 6% in 2025. And we are really looking forward to present our strategic roadmap and financial ambition in the Capital Market Day on June 12. And we really, really hope to see you there. So thank you very much.

And then we like to invite you for posting any questions. So hopefully, are some questions already to start with. We are still waiting for some questions and we kindly invite you to post any questions. We give it another twenty, thirty seconds so so that's, that's fine. But you have to type now.

Okay. No questions. Maybe it's helpful with a with a little improvement in the financials, so story was probably good. Thank you very much.

Ronny Meinken, CFO, Aqua Group: Thank you.

Knut, CEO or Senior Executive, Aqua Group: And have a nice weekend. Thank you.

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