Hello, and welcome to today's webcast with I-Tech, where CEO Philip Chaabane will present the third quarter for 2023. After the presentation, there will be a Q&A, so if you have any questions, you can submit them in the form to the right. With that said, I hand over the word to you, Philip. Thank you so much, and most welcome to our quarter three report of 2023. A wonderful day here in Gothenburg. I'll walk you through the slides that gives you an overview of what we've been working on in the past quarter. Let's start with a company presentation. As you may know, hopefully you have been following us, I-Tech is the company name for, which is under Interface Technology abbreviation. We are deeply engaged in marine coating systems and then within the shipping industry, of course. Our technology is now available in 20 different, or more than 20 different products, I should say. It's ingredient technology. It is anchored well into six of the nine largest paint makers in the world, and it should be noted that those nine control basically the full commercial paint market in the world. Number of ships using it is increasingly, increasing all the time. There are more than 1,000 ships using technology in paints on the ship hull side. The opportunity side is estimated to be around SEK 350 million-SEK 500 million worth of Selektope sales if all antifouling paints produced would contain this agent. As you probably have understood from before then, it's obviously a listed company on the First North list, Nasdaq in Stockholm. It's a unique and protected technology, and therefore, we're an asset-based entity with basically everything else outsourced in terms of production and so on. The ingredient, which is then a result of biotechnology discoveries back in the university era, in the shift of the millennium, is called Selektope because it has a very selected effect on the octopamine receptor of the target organism, which in this case is barnacles, which is one of the big problems for any underwater structure, but mostly for those who are then attended to move through the water, i.e., ships. It's by consequence added as a powder into the paint system. The purpose of what we are doing is to enhance the power of the coatings, meaning making them more resistant to the pressure of marine biofouling that every second is occurring on every surface submerged in oceanic environments. The contribution of resisting biofouling better on a hull is lower emissions to air and sea for the ship because it reduces drag, and drag is the key contributor to inefficiencies for a ship. This is what we do, and that's an overview, right? Into the quarter, a very steady and profitable growth in this quarter. We're very happy to see a 51% sales growth and a strong EBIT margin of 25%, comparing to 23%. By consequence, a strong net result in monetary terms, SEK 6.8 versus SEK 4.2. A very solid quarter where we again prove how the increase in sales comes also with increase in profitability. This is something we're very proud about and has been, you know, a key cornerstone in the assumptions around the business plan way, way back. It's so overwhelming that we now see this effect for almost three quarters in a row. Moving on to the impressive graph of how our history or legacy has been looking since the IPO time frame, which was 2018. This is 12 months rolling, and here we can see how the EBITDA are shifting from negative in terms of the orange bars into positive. Over COVID, it was a bit steady state in our business. To then really release the power of the model and the interest of the technology in 2022. Revenues are following the same, and the operating cost as a percentage of the revenues are moving from being very much high in revenues and then down to a complete opposite scenario where the growth in sales is actually contributing to an increase in sales and then lower operating costs. At some point, that will obviously flatten out the operating cost part, and you see tendencies to that. Strong EBITDA, as mentioned, I think it was 32% of the quarter. Back to the needs of the product driving these fine figures. Emissions to air is an enormous discussion everywhere, which is well aware, for all transport sectors and every other sector almost as well. That's a key focus, and in this case, it's been identified that the hull alone would be able to contribute by some 100 million tons of CO2 in savings. It should also be mentioned that shipping alone is about 2.3%-2.6% of global CO2 emissions. There's been some changes that I will come back to in the guidelines and targeting of the improvements of these figures, at least on the global shipping level, moving forward. That comes from IMO, so I will review a bit more on that later on. But it's not only about emissions to air. Environments are also under the water, and in this case, the ecosystems and the risk of disturbing those by transporting other alien species into them is also a very big problem. It's a bit more difficult to set a monetary figure on, and it's clearly not a emission to air problem, but it does impact ecosystems, and it's a increasing problem for many countries with the large coastlines. Antifouling coating, which is fouled, i.e., not performing, would constitute a huge risk to bring forward more of these alien species that in some cases could be invasive. A clean hull with the best possible resistance to biofouling attachment would then reduce this risk. Hence, it has a big value also in that perspective. Moving forward, we also see that certain regions in the world are aiming to implement guidelines or maybe even regulations and try to optimize what comes out of the paints, meaning reduced amounts of biocide loadings, as an example, or in other ways, trying to reduce whatever is leached out from them. In that context, I-Tech does have an interesting position as well. I say that because the concentrations of Selektope used in the paint are so tremendously small compared to any other, that it automatically qualifies as an interesting tool in the toolbox to see if there are further optimization steps to take without compromising the performance of the coating. Those three different pillars are key to drive the business forward. How are customers reacting to this? Well, first of all, I must say it's a conservative industry, right? It takes a very long time to move. We're 23 years into the business, and obviously, the startup phase is very difficult as it is. Speed is much higher now when we're established, and we're happy to see that all the nine customers in the world who have some sort of magnitude of impact on the industry is developing products and retuning products with Selektope as a key ingredient. That's good. Only that brings us to a very strong hope that all of those will, at some point, be recurring customers on a commercial basis. It's good to note that we remain with the six big paint makers here using our product for new building. A new building is a special type of event where the ships are expected to perform very well initially, of course, not the least within the yard and into the delivery time frame, but also important to give the owner, the ship owner or the operator, the best possible first-hand experience when it gets to delivery. To be on that market is important to open windows for further business into the dry docking area, which has a bit of a different business model itself. It's a bit different factors coming in there, but we are seeing how those, through the regulations of IMO and so on, are changing into a trend where high-end coatings are gaining much more traction than before. *Wait, "dry dock":* "dry dock". *Wait, "R&D":* "R&D". *Wait, "launch is coming":* "launch is coming". *Wait, "Not sure in what area":* "Not sure in what area". *Wait, "That's to be seen, but...":* "That's to be seen, but the intensity and the R&D processes are aligned to at least give us a good chance that something may happen in six-12 months from now." *Wait, "six-12 months":* Actually, I'll use "6-12 months". The "numeric form" rule is very emphasized ("You MUST"). *Wait, "two different paint makers":* "two". *Wait, "quarter-to-quarter":* "quarter I should say that all of these R&D programs that are run are three different key reasons why they have been prioritized in the paint maker R&D domain. One is the stronger overall performance that's needed because the penalty of fouling is much higher moving forward due to higher fuel prices, and not the least, the risk of increasing the energy cost in general if they're gonna shift fuels. Less biocide loadings is a key thing in certain regions. That also is an interesting aspect when it comes to Selektope, as I mentioned. Generally, innovation in new concepts that could trigger readaption of how to integrate the technology. It's very good that we're part of all these different paint makers here. We're happy with the long-term progress on the customer side. I've been mentioning now the regulation change, and IMO is the governing body around this that gathers the flag states of the global shipping industry, but also the key stakeholders in terms of countries. This is where the only decisions are made that can have a global impact on the industry. All the others are regional impact, which may be more or less detrimental to the industry as they easily move from one country to another. With IMO, overall decisions need to be respected. What am I then talking about more specifically? Well, the key event is that 2050 targets have been revised from having a 70% CO2 reduction ambition to actually go to net-zero greenhouse gas emissions or around at least. That means, translated to direct CO2 figures, that the industry needs to save somewhere around 800 million tons of CO2 per year, which is the current gap. Of course, that involves a lot of different things. But that's a big news that came in early 2023, actually in July. It also revised the previous targets a bit. So 2030 is a 40% reduction. I think that actually remains the same, but they're also requesting introduction of new fuels in this time period, and I recall a figure of 5% of fuels should be renewed, coming from renewable sources or are some sort of synthetic fuels. That's an update. The benchmark between 2030 and 2050, i.e., 2040, is updated to actually contain the 70% reduction target on annual savings, adding striving for 80%. The regulations or how the global pressure, I should say, to improve faster is obvious in our shipping industry. We're happy that the industry actually appears to be quite well aligned to do the needed changes, although it will be a challenge. The challenges are then actually put in figures in terms of introducing, as we have been saying before, operational index, the Carbon Intensity Index, which measures the continuous improvement of CO2 emissions year by year on a ship, meaning it needs to be maintained well, it needs to be continually improved and all that. That's where paints come in. It's also how well they are designed and how efficiently design could work as its operating sweet spot. There are also other things coming into the game which are more penalizing things, such as the EU Transmission-- sorry, EU Emissions Trading System, which forces ship owners, operators to pay fees depending on how the CO2 profile is from the ship. That is for EU, and I think there are similar things for U.S., and let's see what the rest of the world will agree on. There are strong drivers to make the change. There is strong pressure to speed up the change as of this core IMO news that came out in July. All that points a direction that it's not a good idea to stay cheap on technologies such as antifouling coatings, rather opposite. It does pay off, and there's a big risk associated with a coating that does not perform or is not selected in an appropriate manner. That brings us into the next picture. There's a lot of things the ship owner could do, apart from the biofouling, of course, and we will not go into all of those, but every single thing needs to be addressed to have a chance to reach this net-zero 2050 target because net zero basically means shifting fuels, and shifting fuels means a lot higher transportation costs or energy costs, at least, I should say. To try to make that hurdle a little bit more manageable, a very strong, high-performing, proven antifouling coating is essential part of the equation. That means that Selektope, combined, in combination with a few other key technologies, hopefully could see a very strong future to help the industry transform as needed. We also have this nice charity ship that we are so dearly proud about to be a sponsor. So I should change them. Wait, "I took" vs "I-Tech". "it's probably only I-Tech really looking into it". This is a very common thing in transcription editing where a company name is misheard as a common phrase. Wait, "Selecoat" vs "Selektope". "We're donating the Selektope powder". This is also a common mishearing. Wait, "la-" in "at this la- uh, point of time". "la-" is a false start for "later" or "last" or something, but it's meaningless here. Removed. Wait, "the, the, the" and "and, and". Stutters. Removed. Removed. Wait, "uh". Fillers. Removed. Wait, "And", "But", "Uh However, it does have some slime and the so-called microfouling on the hull side, which is to be expected after 32 months in so static conditions. This ship is static over very many, many months, maybe half a year up to a year, before it moves anywhere. The power of Selektope is really showing its effect here. For the slime and so on, it's very difficult to keep that away unless the ship moves more often. The good thing is that it's relatively easy to rub, to wash off if needed. Strong 32-month results on the barnacle-free arrival at Sierra Leone. We also, in the quarter, pulled off a conference where we gathered the whole industry. I say the whole industry, it's all the way from a few selected shipowners, yards, meaning the leading yards, in this case, Korean yards, paint makers, all of them, ingredient suppliers, all of them, and that's not only biocides, that's also polymer suppliers and so on, and other technology suppliers. Key academic and research institutes and researchers have been all contributing to this well-received conference. We have been giving ourselves a good chance to put the Selektope brand in the center of bringing the industry together, because without collaborations with others, no one goes anywhere, as we're all dependent on each other. Also, it's a good way to enhance relationships throughout the industry in a very efficient way, and we're happy that people pay their attention to go to Gothenburg, in this case, 117 industry attendees from all the corners of the world. Back to then the quarter and the numbers. We have this morning at 8:00 A.M. reported strong sales of SEK 32.2 million in the quarter, and for the first nine months, SEK 95 million. Getting very close to the SEK 100 million that we set out way, way back in the IPO statements. COVID came in, in between, but now glad to see that we're on very close to hitting that target, and that's only the first nine months. Gross margin remains in the same ballpark. The EBITDA and EBIT earnings are significantly impressive, I would say, in the terms of growing a bit faster than the sales growth. That is probably the best evidence that this part of this model is really, really working, and this is despite some one-time, you know, some costs that we bring on specifically for each quarter. That's a very nice figure. On the operating cash flow, very solid performance, and that gives a strong contribution to strong cash balance with a good result in the background. The growth in sales, 51%, and if you adjust that for currency, it's 48%. High volume, and actually, the quarter with the highest volumes. The EBITDA margin was 31%. As I mentioned before, the EBIT was 25%, and net profit, 21%. Very solid figures and not much to comment other than enjoy the nice outcome of the quarter. Should be said that the largest customer, meaning Chugoku Marine Paints, stands very firm and drives the growth continuously. Most importantly, this quarter, where they have a very high dependency on the figures. As I mentioned, the sales volumes are higher than ever this quarter. Reason why that is not fully reflected on the sales is a different customer mix from a high-volume account. In terms of geographical distribution of our sales, it's not surprising that most of it goes to Asia. That would be true for most suppliers and paint makers in this industry, but as most yards are located in that area, we do have a higher-than-normal sales into EU in the quarter, though, so the 30% remaining are EU deliveries. It's an interesting balance, probably reflecting the overall industry. Having said that, I'm moving to the next to the final slide. Well, it's the final slide, to give you some overall view of the business. On the opportunity side, a very strong focus from our customers. Wait, "that are ready, that can deliver that performance at that time frame, that does not contain biocides." Are these three separate "that" clauses modifying "solutions"? 1. that are ready 2. that can deliver that performance at that time frame 3. that does not contain biocides Yes. Wait, "does not contain biocides". "does not" is singular. "solutions" is plural. But "performance" is singular. "deliver that performance... that does not contain biocides." Does "performance" contain biocides? No, the paint/solution does. So "that" refers back to "solutions" or "paint solutions". Regardless, I must keep "does not" as spoken. Wait, "five biocides and the advanced binders that goes with it are essential to have a chance to meet these IMO targets. I think that's an interesting and important statement from the conference and from the many interactions we have. That gives us confidence that it's a long, long, interesting growth journey ahead, hopefully. As mentioned, the overall regulations from IMO and moving into EU and all that is giving a long-lasting transition in this industry, where every single actor, depending, not depending on if they're owning the ship or just operating, everybody will have to conform and actually pull the things together to have a chance to reach the targets of zero emissions 2050. There is also challenges, of course. One is very obvious, is the regulatory challenges that are most prominent in Europe, where the whole chemical industry is being shaken up by new, much tougher regulations. For Selektope, that means that, how to say? It was flagged early on in the process as a potential candidate for being classified as ED endocrine disruptor. There is nothing, there is no update on that process, as it is a long, long process, and there is no new milestones being passed over this quarter. I think it's something that the whole industry, including all biocide suppliers and many other chemical suppliers, are fearing, that the extreme position of EU is taking, putting the necessary tools at risk, the tools that are needed to have any chance to save the planet from these excessive CO2 emissions or greenhouse gas emissions. Let's see where this ends up for the industry as such, and certainly for our ED. We will keep you informed when we have more information later on. The broader the business is important. That's much more in our hands than the first challenge item I just highlighted. That means trying to help customers go transition from new building products into dry docking products. The same goes for the last bullet, which means try to enhance technical compatibility to any novel coating systems or any different approaches the paint maker may want to take to achieve the future targets. One example is obviously silicones, which is performing best when it also does have a slight amount of biocides inside, and the question is how to integrate those in a more predictable way when it comes to leaching. That's an example of things that the industry is questioning themselves, and that's part of the antifouling conference discussion, as well as a general topic. Having said that, I'm done with the presentation. I thank you for your attention. I'm ready for questions. Thank you so much for the presentation, Philip. We received a number of questions, so I think we'll get right ahead with it. Yeah. Can you provide an update on the current order book status and how it's compared to the same period last year? Well, first of all, we don't have that long visibility. We've been six, four to six weeks on the order side, so it's difficult to make any comparisons to how it looked the year before. But we remain positive to the development of the customer accounts. Are there any significant orders or contracts that I-Tech is currently negotiating or expecting to finalize in the upcoming quarters? Yes, as I mentioned, we do have signs that there is some movements into the commercial domain by two different paint makers. Those are including obviously contractual and commercial discussions as we speak, and not being concluded, but the process is ongoing. Those are the ones that could be, you know, included in my response to this question. I think the question also includes, do we have other of those frame agreements that we've been having in the past? No, we do not have such frame agreements. We're not pushing for it either because the supply chain is now so robust that we can manage ups and downs in a better way than before. How can the company ensure in timely delivery and fulfillment of orders, especially with the increasing demand? Yeah, that's the beauty of the case. We're ready to go four times the volumes today on very short notice. We have a solid setup in the production and supply chain structure. We have no challenges whatsoever to ramp up even if there would be significant changes on the positive side. Are there any significant investments or expansions planned for next year to dedicate to the growing demand for Selektope? We do have some investments that would be related to entering new market space, meaning geographical areas, and this has been a topic in the past calls as well. The U.S. EPA is owing us some sort of a result, at least according to their communication to us as of October, on what the next steps are in that process, and that, be aware, is following a two and a half year delay or something like that in the process. If that comes to the way we hope it comes, it may generate investments for us to start to enter that market from a regulatory approval perspective. Something in that domain may come up on the investment side, yes. Could you provide some insight into inventory levels with your customers? Is there a risk that sell-out is lower than sell-in with the inventory buildup or vice versa? We don't see any tendencies of that at the moment. It seems from the discussions or from discussions we have and from the pattern of order placements we get that that should not be the case, but you should never know. After three so strong quarters, there may be someone with a higher buffer or losing a few contracts on the customer on the ship side that then generates some sort of inventory that may push volumes out in time, but there's no obvious signs I can highlight now. How do you look upon the risk of that one of the paint makers tries to buy I-Tech to get a competitive advantage on the market? I would say there is always a risk if you have a compelling product and you're highly dependent on it. That's a natural strategy discussion, I would assume, but I can't comment that. Other than, of course, there is a risk if you're delivering a nice performance and you're part of a solid strategy. Again, I think the technology also has benefits of being available to the whole industry to allow everyone to meet the future targets and get the commercial advantages of lower pricing on the total scope. Yes. That's it. You mentioned in your report that you sense a strong continued interest both in nearby and in Asia. Could you elaborate a little on what you have experienced? Yeah, but I think it's just same as the other quarter. It's been very strong, and Asia is strong in general, and, well, the whole thing is actually growing because there's a greater awareness of that there is a return of a higher investment in marine coatings. They are interested to trial in the new high-performing coatings, many of those, some of those, including Selektope. It It goes hand in hand with the shipowners or operators. Now, I'm talking about the most prominent ones in the world. It goes hand in hand with their overall ambition to show they're leading the game into the most efficient and ship and operation profile that, you know, could be achieved, and coatings is part of that. EU, I think it's just the fact that there is some turbulence in the world itself that maybe pushes a bit more dry dockings into certain European countries than before. This could be very also temporarily for the quarters. I cannot say that's a trend, but we see some complexity out there in the world, and maybe that brings some work back to Europe at the moment. Yes. Chugoku is growing its market share. Would you say that it's in any specific paint area, such as premium coatings or new build, et cetera? Wait, "They do have a strong footprint in new build and in dry docking." I'll use "They do have a strong footprint in new build and in dry docking." Wait, "They are obviously the leading customers in all aspects." I'll use "They are obviously the leading customers in all aspects." Wait, "Yeah, it's interesting with Chugoku." I'll use "Yeah, it's interesting with Chugoku." Wait, "They could probably offer a strong Selektope candidate product to most ship owners, while others are maybe targeting more specific type of ships or ship owners at the moment." I'll use "They could probably offer a strong Selektope candidate product to most ship owners, while others are maybe targeting more specific type of ships or ship owners at the moment." Wait, "Cel top" -> "Selektop Global tension has risen in the last week. Have you noticed any effects from that in, for example, new build orders? I can't really comment on that. I think I heard a figure that new build orders are quite strong. I think we talked about that maybe even in quarter two, that new buildings and the orders are relatively strong. I think most yards are booked out in Korea, at least, for the next three years, even maybe four or three years, I think it is. It has, up until now, been a strong demand for energy carrying vessels, meaning gas vessels or LNG vessels, as they're called. I think we're seeing a trend also on the container side to renew and, you know, make them bigger and more efficient, maybe more, most importantly. This is part of the IMO trend as well, because a ship need... There needs to be new ships coming in at some point that are adapted to new alternative fuels, as an example. So I think that the whole thing is going to also spill over to the new building side eventually. Now, it's maybe more of hesitation, what fuels to use and what is proven, what works, what doesn't work. So step by step, I think there will be a new building boom in terms of adapting ships to this future new fuel strategy. Thank you. How did your visibility change over the last quarters? Do you have a reliable visibility for 2024? We have indications, as always, for a 12-month period ahead. I wouldn't say it has changed in resolution, quality, or in visibility compared to before. I think it's what we could expect, and then we make some assumptions on that, and it's a relatively good idea some what's to come. Thank you. Would you consider the current environment a boom for your product? Are we at a cycle high, so to speak? This is an interesting question, right? If you ask people in the industry, I would think they would answer that, "Okay, we're in a bit of a downturn." Shipping goes in five-year cycles. The next boom in the industry, from a general supplier perspective, I should say, is probably expected to be around 2025 and onwards because they have a huge number of ships that are then coming in for either new build or dry dock needs, and that correlates with the regulations. For I-Tech, we're working from small market shares, and I think there's a lot of room for growth, even if the market is a bit down on the general perspective. I think if, you know, if we can have a strong growth, we had a strong growth so far. If we can continue to have a growth at least of a, and hopefully strong growth, of course, I think there is more factors speaking in our favor, moving 2025, until 2025 and onwards. That's an assumption on a high level based on the industry patterns from the past. What is the revenue share of CMP in the last quarter? Very high, over 90%. Thank you. Can we get an update on the EU regulation process? What do the customers think of the process, and do you think it's affecting the demand? The EU regulatory process, you said, right? Yes, yes. Now, I think the industry, I mean, how to say? For us, yes, it's a concern that, you know, it may spill over to some sort of doubt about the future-proofness of the technology if ED actually happens and if Selektope is the only one falling under that regulation, or falling short under that regulation. So far, I think the industry is, or I know the industry is, very supportive. They are questioning how, among each other, at least, how these regulations actually are set up, given the need for fuel-saving needs, right? The emissions to air and reduce the, and meet these IMO targets, and even the European targets, and then they try to take out most of the tools. "sort of"). But "similar kind of headwinds" is a standard phrase. The stutter is "of, of". So I remove one "of". * Wait, "European Union" vs "the European Union". Transcript: "taken by European Union." I will stick to "by European Union". * Wait, "EU" vs "the EU". Transcript: "the EU discussion". I will stick to "the EU discussion". * Wait, "Selektope". Transcript: "Cel tope". Thank you. Following your recent antifouling conference, which was very good, by the way, have you experienced a greater interest for collaborations and partnerships? Yes, we have. We see that the industry is appreciating to get together and talk. Obviously, what happens after is not disclosed to the public and not to us either. We do feel, however, that there are more creativity, more questions coming around, a bit more united industry to manage certain overall issues, such as the biocide review in Europe. It's not only I-Tech fighting this on a lobbying perspective. We do that jointly with other biocide suppliers, as everybody is fearing or experiencing challenges in one way or the other. The question is more related to what kind of customer interactions did we get out of this, I would assume, and I'll say that we don't disclose what went on after, but I can confirm that we have interesting development, co-development projects being discussed after this conference that we didn't have before. Thank you. Moving on to the last two questions here. You have a strong cash balance. How do you plan to invest your cash holdings? It's a fair question. It is being obviously discussed in the board. As we see a continuous strong contribution to building the cash, it also means that we can be more and more confident that potential dividends could actually be reasonable. But there are also other options in expanding the business and using the capital to create a long-term growth or a different product segment, or develop Selektope into more use areas or something like that. So I think there will be further information on that in timeframe of May next year. Moving on to the last question here. What is the outlook for 2024 in the end market, so to speak? Yeah. 2024 is one of those important transitions here, when CII and all those things actually been measured for one year. I think it will inspire the shipping industry to actually take a look at the figures and understand that it makes sense to invest in efficiency technologies. If they didn't, they see that they need to do it, right? The numbers coming on the table in 2024 will help push the industry forward. As I mentioned, there's this cycle of huge new buildings on, you know, five years back that are now coming in for dry docking. On top of that, the need for either new vessels or dry docking for retrofitting technologies will help increase the likelihood of high and nice business environments from 2024, 2025, and onwards. How that plays out exactly in 2024, I don't know, but it's a good feeling on the overall picture, which I guess was the question. Thank you so much for presenting today and answering our questions, Philip, and good luck going forward. * Wait, I'll check if I should include the "Thank you so much. Thank you all for tuning in, and we wish you a pleasant weekend.