Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant progress in transforming ITM Power PLC (ITMPF, Financial) into a credible delivery organization, completing a 12-month plan.
- EBITDA losses decreased significantly to one-third of the previous year, while revenues grew threefold.
- Strong year-end net cash position, reflecting disciplined capital use.
- Successful deployment of electrolyzers into large and prestigious green hydrogen plants worldwide.
- Growing base of reference plants and operational field data, enhancing customer confidence and leading to new partnerships and capacity reservations.
Negative Points
- Customer FIDs (Final Investment Decisions) are often delayed due to regulatory uncertainty, inflation, and other external factors.
- Revenue recognition is dependent on customer site readiness, which can delay revenue realization.
- Gross loss impacted by under-absorption of production costs and extended on-site work durations.
- The electrolyzer market is still immature, with many companies overpromising and underdelivering.
- Significant reliance on government incentives and support mechanisms to offset cost differentials between fossil-based fuels and green hydrogen.
Q & A Highlights
Q: Could you elaborate on what the path to profitability looks like from an ITM perspective?
A: Andrew Allen (CFO) explained that the path to profitability involves generating income through sales and controlling costs. ITM is ready to take orders and has controlled costs carefully over the last 12 months. The profitability depends on the sales mix, particularly TRIDENT projects, which have a lifecycle of two to three years. Dennis Schulz (CEO) added that ITM has gained control over project profitability and is now selling at today's prices with a profit margin, meaning any future cost improvements will be an upside.
Q: Could you give an update on the development of Kronos and when we expect to hear some hard news on it?
A: Simon Bourne (CTO) stated that Kronos, aimed at larger-scale deployments, is on track and builds on existing strengths and lessons learned. The development focuses on design for manufacture and ease of assembly. Kronos will not make TRIDENT redundant; improvements will be implemented in TRIDENT as well.
Q: What do you regard as your main USPs against your peer group?
A: Simon Bourne (CTO) highlighted ITM's leading technology, highest current density, leading conversion efficiency, and the smallest footprint containerized product. Dennis Schulz (CEO) added that customers appreciate ITM's factory capabilities and operational data from reference plants. ITM's ability to test stacks and NEPTUNE containers at full load, including safety cases, provides significant customer confidence.
Q: Can you give an update on manufacturing capacity, particularly in light of the sales pipeline?
A: Dennis Schulz (CEO) explained that ITM has put a lot of focus on increasing the number of NEPTUNE units they can produce in parallel. While they are not currently running out of manufacturing capabilities, they are pre-producing NEPTUNE units in anticipation of high demand. Capacity reservations are being managed carefully to ensure credible customers with confirmed off-takers and financing.
Q: Could you provide more details on the extensive audit by Shell?
A: Simon Bourne (CTO) described Shell's rigorous and detailed audit process, which included lessons learned from REFHYNE I, a physical audit of ITM's factory, and assessment of technology and operations. The audit covered every aspect of ITM's ability to deliver large-scale projects. Dennis Schulz (CEO) added that the successful hybrid stack upgrade at REFHYNE I, which delivered a 10% efficiency improvement, was a significant factor in Shell's confidence.
Q: Could you comment on ITM's relationship with Linde?
A: Dennis Schulz (CEO) stated that the relationship with Linde is constructive and professional. The successful delivery of projects like REFHYNE 2 and the 200 MW RWE project are proof points of the strong partnership. ITM and Linde are tendering for many projects together, leveraging their combined strengths in technology and EPC capabilities.
Q: Could you give some indication over which you expect GBP105 million of revenues to be recognized?
A: Andrew Allen (CFO) explained that the GBP105 million of contract backlog is expected to be recognized beyond FY25. The guidance for the current year is based on signed contracts, and the backlog includes TRIDENT projects expected to be delivered in future years.
Q: Has your view on the UK outlook changed or improved in the context of the recent member election?
A: Dennis Schulz (CEO) mentioned that the continuity of funding programs by the new labor government is positive. The government's strong drive towards energy transition and the continuation of existing programs are expected to lead to actual contracts, making the outlook for the UK market positive.
Q: Can you give an update on your approach to licensing agreements?
A: Dennis Schulz (CEO) stated that while licensing remains an interesting model, ITM prefers to be the manufacturer to maintain tight control over the supply chain and quality. Licensing could be an option for specific regions, but the focus will remain on manufacturing and delivering the world's best electrolyzers.
Q: Could you provide insights on the development of electrolyzer supply chains and any areas of weakness?
A: Dennis Schulz (CEO) noted that more companies are taking the electrolyzer business seriously, leading to competition and higher quality. Simon Bourne (CTO) added that deeper relationships with key suppliers, like the one with Gore, are important for optimizing components and processes, which is paying dividends for ITM.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
