Goodtech ASA (GOD) Earnings Call Transcript

Welcome to our webcast where we will present GoodTech's results for the second quarter of 2026. I'm joined today by our CFO, Anders Engetten, who will provide a more detailed review of the quarter's financial performance and key developments. My name is Magreta Haugen, and I am the CEO of GoodTech. Over the past few years, GoodTech has continued to strengthen its position through focused execution and strategic transformation. We are pleased to report continued progress in the second quarter with positive development across our key performance indicators. We will also share our perspectives on the market outlook and the opportunities ahead of us. Thank you for taking the time to join us today. Let me start with the key highlights for the second quarter. We delivered net operating revenue after external project cost of NOK 132.1 million, representing a 4% growth year-on-year, supported by solid activity levels and stable utilization across the organization. EBITDA increased slightly to NOK 15.9 million, while the EBITDA margin remained stable at 12%, demonstrating continued operational discipline despite a somewhat less favorable project mix compared to Q1. The organization remains stable with the headcount at 307 employees. Order intake was NOK 164 million in the quarter, broadly in line with last year, and we ended the quarter with an order backlog just north of NOK 300 million. Finally, our balance sheet remains very strong. Based on the company's improved profitability and robust financial position, the Board currently intends to allocate approximately NOK 60 million of excess capital to shareholders while maintaining ample flexibility to support future growth initiatives.

Let me walk you through the financial performance for the quarter. Total revenue increased from NOK 164.6 million to NOK 171.7 million, corresponding to a growth of around 4% year-on-year. The project mix was slightly more procurement intensive than in the same quarter last year with external project costs increasing by approximately 5%. As a result, net operating revenue after external project costs increased from NOK 126.9 million to NOK 132.1 million, equivalent to around 4% growth. During the quarter, one of our larger projects was discontinued following funding challenges on the customer side. While the project ended earlier than anticipated, we were able to redeploy most of the affected personnel to other assignments relatively quickly. This demonstrates the flexibility of our business model and continued healthy demand across our customer base. Personnel expenses increased by 6%, reflecting annual salary adjustments and continued high activity levels across the business. Other operating expenses decreased by 10%, reflecting continued focus on cost discipline and lower discretionary spending. EBITDA increased slightly to $15.9 million, while the EBITDA margin remained stable at 12%. EBITDA increased to $10.1 million, corresponding to a margin of 7.7%, demonstrating that the improvements implemented over the past years continue to support profitability. Overall, the quarter demonstrates the resilience of the organization. Even after the unexpected termination of a larger project, we maintained utilization, delivered profitable growth and continued to strengthen earnings year-on-year. Moving on to order intake and backlog. Order intake in the quarter amounted to NOK 164 million, resulting in a book-to-bill ratio of approximately 1.0. Order intake was broadly in line with the same period last year and was driven by a diversified mix of small- to medium-sized projects across the industries we serve. Order backlog ended the quarter at NOK 304 million compared to NOK 345 million in the same period last year. Approximately NOK 8 million of the backlog reduction relates directly to the discontinued larger project mentioned on the previous slide, which was already in its final execution phase. As such, the operational impact on GoodTech has been limited. The backlog also contains a lower proportion of procurement heavy projects than in previous years. We continue to experience healthy activity levels across our markets, yet we do see that investment decisions for larger industrial projects remain characterized by longer lead times. During the quarter, we announced 2 strategically attractive contracts. The first was a contract with Noruranet to modernize the Sua transformer station in Narvik, supporting critical energy infrastructure ahead of the 2029 Alpine World Ski Championships. The second was a contract with Unal to deliver an automated container unloading solution. This project highlights GoodTech's ability to combine automation, robotics, vision technology and digitalization to create tangible productivity improvements for our customers. Together, these contracts illustrate the breadth of our offering and the value we create across different industries. Let me conclude the financial review with the balance sheet and cash position. GoodTek continues to maintain a very strong financial position with an equity ratio of 61%, up from 57% in the previous quarter. Total equity ended at $286.5 million despite the dividend payment during the quarter. Cash and cash equivalents ended the quarter at $81.2 million. The reduction in cash compared to Q1 was primarily driven by a combination of ordinary dividend payments and temporary working capital movements. During the quarter, we experienced a reduction in trade payables and timing effects related to project execution, invoicing and customer payments. These effects negatively impacted operating cash flow during the period. The company remains back debt-free and continues to maintain significant financial flexibility. Based on the strength of the balance sheet and the progress achieved during the turnaround of the business, the Board intends to distribute approximately $60 million of excess capital to shareholders during the second half of 2026. Let me spend a few minutes on our capital allocation priorities. Over the past few years, GTech has completed a significant strategic refocusing and operational turnaround. We have strengthened profitability, improved earnings quality, streamlined the business portfolio and built a robust balance sheet with no interest-bearing debt. As a result, we now believe the company has capital in excess of what is required to support our business model. Our capital allocation framework is built around 3 clear priorities. First, maintaining a robust balance sheet. As a project-based company, it is very important that we retain sufficient financial strength to support working capital needs, guarantee obligations and projects and future growth opportunities. A strong balance sheet is critical for both our customers and suppliers. Secondly, investing in profitable growth. We will continue to invest in capability development, digitalization, AI service offerings and selective acquisitions that strengthen our competitive position. Growth investments remain an important priority. Consistent with our capital allocation framework, larger strategic acquisitions would normally be subject to shareholder approval and may be financed through equity issuance and/or share-based consideration. This allows the company to maintain an efficient balance sheet while retaining strategic flexibility for future growth. Third, returning capital to shareholders. Our starting point is the company's dividend policy of 30% to 50% of annual net profit after tax. Beyond this, we regularly assess the capital required to support the business, including working capital needs, growth investments and strategic flexibility. When capital exceeds these requirements for a prolonged period, we believe it should be returned to shareholders through supplemental dividends and/or share buybacks. Based on this framework, the Board has concluded that GoodTech currently has capital in excess of what is required to support its project-based business model. The Board, therefore, intends to distribute approximately $60 million through supplemental dividends and/or share buybacks during the second half of 2026. The exact structure and timing of the distribution will likely be communicated towards the end of Q3 2026. Importantly, the planned distribution does not change our strategic ambitions or financial flexibility. Following the distribution, we expect to maintain a balance sheet that remains well suited to support both organic growth and selective acquisitions while continuing to provide attractive returns to shareholders.

As Anders stated, there are plenty of growth venues for GoodTech. One area that I would like to address with vast opportunities is artificial intelligence. Opportunities to both continue our own margin improvement journey, but not the least to develop solutions to support our customers' competitiveness. The industry today is data rich, but decision poor. Factories generate vast amounts of operating data, but most of it stays siloed and disconnected from the engineering know-how needed to act on it. And this is exactly what most industrial AI initiatives miss. They forget the engineering context needed to turn data into value. Plugging and contextualized time series of data into an AI engine is costly and delivers little on its own. That gap is where GTech comes in, and we do act as a link between factories and AI. Our approach is engineering led. We encourage customers in an AI strategy that starts by contextualizing each installation, connecting its data to the specific engineering principles that govern it. Then we run AI where the data already lives, open, on-prem with no vendor lock-in and accessible to both operators and management. That lets us generate insights cost efficiently and with high precision. The result is value that moves the P&L, more uptime, faster root cause analysis and less energy consumption and waste. Our differentiators are superb engineers who understand both AI and industrial processes. Recent AI developments open real opportunities ahead, and we believe GoodTech is well positioned to take lead in industrial AI going forward. Having delivered solid progress in the last quarters, we remain focused on operational excellence, disciplined execution and selective growth. The continued expansion of our aftermarket and life cycle service activities is strengthening the quality and predictability of earnings with recurring revenues representing an increasingly important part of the business. Although the backlog includes fewer large procurement heavy projects than in 2025, overall market activity remains healthy. Larger investment opportunities continue to be characterized by extended decision-making processes, but the pipeline remains encouraging. Supported by our diversified presence across energy, manufacturing, process industries and infrastructure, we believe that we are well positioned to navigate the current environment and capture attractive growth opportunities. At the same time, our strong financial position provides strategic flexibility. With a sound balance sheet and solid cash generation, we are increasingly focused on optimizing our capital structure and ensuring that capital is deployed in a disciplined manner to maximize long-term shareholder value. This includes continuously evaluating opportunities to enhance capital efficiency while maintaining the financial strength required to support future growth. In summary, GoodTech enters the second half of 2026 with solid profitability, strong financial foundations and a clear strategic direction focused on sustainable growth and increasing shareholder value. Thank you for following this webcast. For more information, please visit gutek.no.