“I am pleased to present a new, sharpened and stable group management team for Impact Coatings. We are reducing the size of the team while including the managers of our operating businesses and the regional heads of our primary growth markets. Filling the COO and CTO roles, which have had interim personnel and a vacancy, respectively, with highly motivated and experienced permanent employees provides long-term stability for the company,” said Jonas Nilsson, CEO of Impact Coatings.
 
Carina Höglund transitions from VP Coating Services to Chief Operating Officer (COO). Carina holds a PhD in Thin Film Physics from Linköping University. Before joining Impact Coatings in 2019, she was responsible for coating development and the building of a production unit for the European Spallation Source ERIC (ESS). Since 2021, Carina Höglund has led the company’s Coating Services business area, which has more than doubled its revenue under her leadership.
 
Kristian Hillgren joins the group management team as Chief Technology Officer (CTO). Kristian holds a PhD in Materials Chemistry from Uppsala University and was first employed as a technical specialist at Impact Coatings in 2010. Since the end of 2020, he has been based in Seoul, South Korea, as Regional President Korea responsible for the joint development work in hydrogen solutions with Hyundai. Kristian will initially divide his time between Sweden and South Korea.
 
Yaowen Wang (Regional President China) and Robert Mamazza (Regional President North America), also join the group management team.
 
Yaowen Wang has managed Impact Coatings’ subsidiary in China since 2022 and during 2023 launched the new Coating Service Center in Shanghai, which is now fully operational. Yaowen has a Master’s degree in Environmental Engineering from Ghent University, Belgium, and many years of experience in the hydrogen industry in various roles in technology development, business development and sales. He joined Impact Coatings in 2019.
 
Robert Mamazza is the head of the newly formed subsidiary in the USA, where preparations for a Coating Service Center are underway, with planned commissioning in the first half of 2024. Robert holds a PhD in Electrical Engineering from the University of South Florida and has over 20 years of industrial experience in the thin film coatings field. He joined Impact Coatings in 2021.

As resolved by the AGM, the nomination committee of Impact Coatings shall comprise three members representing the company’s largest shareholders in terms of votes, together with the Chairman of the Board as an adjunct member.

If any of the three largest shareholders decides not to exercise the right to appoint a representative on the nomination committee, the right is passed on to the next largest shareholder.

The nomination committee consists of:
   Kai Tavakka, Chairman, appointed by Accendo Capital SICAV RAIF
   Syafiq Johari, appointed by Hyundai Motor Company
   Hans Österberg, private investor
   Mark Shay, Chairman of the Board, adjunct member

The AGM will be held in Linköping on May 22, 2024. The proposals of the nominating committee will be published in the invitation to the AGM and will be made available on the company website, www.impactcoatings.com.

Shareholders who wish to submit proposals to the nomination committee may do so via e-mail to investors@impactcoatings.com no later than February 1, 2024.

FINANCIAL RESULTS THIRD QUARTER 2023

• Net sales amounted to SEK 14,798 thousand (4,207)
• Net sales, excluding metals for electrolysis, amounted to SEK 10,819 thousand (4,207) [1]
• Total revenue amounted to SEK 17,628 thousand (13,863)
• Operating profit amounted to SEK -13,777 thousand (-11,593)
• Operating profit after financial items amounted to SEK -13,776 thousand (-11,592)
• Cash flow amounted to SEK -15,263 thousand (-23,086)
• Net cash, end of period, amounted to SEK139,083 thousand (82,919)
• Liquidity ratio amounted to 169% (282)
• Order backlog coating systems at period end amounted to SEK 36,478 thousand (32,964) [2]
• Order backlog Coating Services, excluding metals for electrolysis, amounted to SEK 750 thousand [1] [2]
• Order backlog Coating Services, including metals for electrolysis, amounted to SEK 750 thousand [1] [2]

FINANCIAL RESULTS JANUARY-SEPTEMBER 2023

• Net sales amounted to SEK 59,933 thousand (13,945)
• Net sales, excluding metals for electrolysis, amounted to SEK 50,763 thousand (13,945) [1]
• Total revenue amounted to SEK 57,972 thousand (34,261)
• Operating profit amounted to SEK -32,628 thousand (-34,616)
• Operating profit after financial items amounted to SEK -32,624 thousand (-34,620) [3]
• Cash flow amounted to SEK 77,617 thousand (-46,890)

SIGNIFICANT EVENTS THIRD QUARTER 2023 [4]

• No significant events have occurred during the period

SIGNIFICANT EVENTS AFTER THE PERIOD [4]

• No significant events have occurred after the end of the period

[1] Metals for electrolysis are invoiced in a cost-neutral manner and do not affect operating profit.
[2] Currency exchange rate at period end.
[3] Includes a provision for severance pay for the departing CEO of SEK 2,960 thousand.
[4] Significant events refer to events that comprise insider information and shall be made public via press release.

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CEO’s COMMENTARY
Continued growth, first impressions as new CEO

I am honored and excited to have been appointed CEO of Impact Coatings, a role that I assumed on October 1. This interim report summarizes the company’s performance for the period July 1-September 30, thus prior to my arrival. However, I will provide my first impressions of the business as CEO and reflect on the strategic priorities I see ahead.

Third quarter net sales growth and commercial progress in line with our strategy
The third quarter of 2023 demonstrated continued growth in net sales and execution on the strategic plan communicated in conjunction with the March 2023 rights issue. Net sales amounted to SEK 10,819 thousand (4,207) during Q3 2023 and SEK 50,763 thousand (13,945) for the year to-date period, excluding metals for electrolysis. On a rolling 12-month basis, net sales at the end of Q3 2023 amounted to SEK 68,081 thousand, excluding metals for electrolysis.

Coating Services sales were roughly flat compared to Q2 2023, with robust sales activity compensating for the seasonally slower summer holiday period during the third quarter. Electrolysis coatings for green hydrogen remained the main sales driver. No coating systems were delivered during the third quarter, in line with previous communications.

At the end of the third quarter, the order backlog for coating systems was SEK 36,478 thousand while the order backlog for Coating Services was SEK 750 thousand, which is a snapshot at the end of the period. Although there was no order backlog for electrolysis at period end, a part of customer pre-payments for raw materials are intended for future Coating Services for electrolysis. We cannot, however, guarantee the timing or volume of future Coating Services orders. Electrolyzer stack manufacturing is in a ramp-up phase and coating orders vary in timing and size. We expect the activity level in Coating Services to remain high during Q4 2023 and into 2024.

In conjunction with hydrogen trade shows in Germany and South Korea, and at the official inauguration of our Coating Service Center in China, we launched a new premium coating for fuel cell plates in heavy duty applications during September. In parallel with our focus on electrolysis, the premium FC coating is an important step in strengthening our offering in the fuel cell segment. Heavy duty applications are driving the demand for long lifetime fuel cells, which require more durable bipolar plates. Today, China is the main market for fuel cells globally. Our Shanghai facility is therefore offering the premium FC coating initially while we provide samples and qualify the coating with customers in other regions.

Coating Services – our growth engine
At the end of September, Regional President Yaowen Wang hosted the inauguration of the Coating Service Center in Shanghai together with customers, local officials and team members, and visitors from our Swedish headquarters. The facility in Shanghai is the cornerstone of expanding our Coating Services offering and will help meet the growing demand for fuel cells in the Chinese market.

The Shanghai facility launched operations during late spring 2023 and activity has been high throughout the third quarter. Production volumes have increased while we have in parallel performed customer qualifications of the new premium FC coating for heavy duty applications. The premium coating strengthens our offering for the growing fuel cell vehicle industry in the region. The sales pipeline in China is strong and growing, comprising regional stack producers as well as global automotive and industrial OEM’s.

The advanced, efficient facility in Shanghai will serve as a template for the planned North American Coating Service Center. The Shanghai facility also offers lessons and best practices for the new headquarters in Linköping to be opened during 2024. Having Coating Service Centers in three distinct global regions will over time yield meaningful synergies in terms of sales and service levels to global customers, cost and quality management, and production processes.

The Coating Service Center in North America will bring us closer to current and potential customers, accelerate delivery times, and increase market awareness. The facility will be located in Upstate New York. Proximity to customers, inbound/outbound logistics, and access to employees with coating and vacuum equipment experience are key considerations in our facility search. With Regional President Robert Mamazza leading the efforts, we aim to have the facility operational during the first half of 2024.

At our Capital Markets Update held on September 18, Yaowen Wang and Robert Mamazza described the company’s market assessments and commercial progress in China and North America, respectively. China is a commercially active market for fuel cells – still in its early stages but with a viable industry ecosystem and functioning supply chains. North America is emerging quickly, with electrolysis (more so than fuel cells) driving demand initially. We expect strong commercial and regulatory drivers in the hydrogen segment to stimulate activity in these regions during the coming years. Impact Coatings is well-positioned to capitalize on the resulting growth in the market’s pursuit of robust coatings.

First impressions and a look ahead
After just three weeks as Impact Coatings CEO, I am deeply impressed with the expertise and drive of our team members; with the rigorous demands and technological leadership of our customers; and with the size of the commercial opportunities before us.

Looking ahead, I see several areas where I hope to make a lasting difference together with my new colleagues.

We can do more for our customers after they have purchased and installed INLINECOATER™ systems, driving increased after-market sales. This is an area that has received increased attention in recent years, but looking at the average revenue generated per system over its useful life, there is more we can do. As with all our activities, we will start by listening to our customers and adapt our offering to help them do more for longer with our market-leading PVD coating systems.

To facilitate sales growth and increase margins, I look forward to working with the team to reduce machine delivery lead times, so that we produce coating systems according to qualified market forecasts more so than reacting to incoming orders. We will work closely with our suppliers and other partners to accelerate production while reducing our bill of materials and labor costs.

In the organization, we have world-class coating experts that help our customers develop tailored coating solutions that solve emergent problems in, for example, water electrolysis or waveguide antenna production. We can work more closely with these customers at an early stage in their product development, then stay with them through commercial growth and long-term support to deliver value during an entire product life cycle. By working closely with our customers, we can help them translate their business and technical requirements into coating solutions that help create competitive advantages in the marketplace. We can also extend our technical expertise into a larger qualified sales team that drives more revenue, with deep technical expertise relevant for our most promising application areas.

These are only a few early thoughts after a busy but energizing first three weeks at the helm. In the next several weeks, I will continue my one-on-one conversations with the team and will be meeting customers visiting Linköping while also traveling abroad to see customers and prospects.

I look forward to further elaborate on the company, our progress, and priorities in the coming quarters. Once again, I am very happy to be here and thankful to be entrusted to lead the company in the next step of its journey.

Jonas Nilsson, CEO

The full report is attached, and can be retrieved on the company’s website at www.impactcoatings.com/finansiella-rapporter-arkiv/.

Jonas Nilsson was named as incoming CEO in a press release on June 16, 2023. Jonas has a relevant background in the technology and engineering industry, with experience that includes previous CEO positions and board assignments in growing technology companies, and has been active in the semiconductor, automotive and coatings industries. He comes most recently from LiU Invest, where he was Investment Manager. As of September 30, 2023, Jonas owned 250,000 Impact Coatings shares privately and via a privately held company.

“The Board is pleased to welcome Jonas as CEO of Impact Coatings. The change of CEO opens an exciting new chapter for the company as it enters the next phase of its commercial development, with a focus on further industrializing and internationalizing Impact Coatings. Jonas has a deep understanding of the industry, extensive experience, and strong leadership abilities – all of which will help strengthen our market position and drive the company forward,” said Mark Shay, Chairman of the Board at Impact Coatings.

The update followed the completion of a rights issue in March 2023, and provided insights into the potential the company has identified within the green hydrogen market, which is entering a ramp-up phase and is expected to grow sharply during the coming decade. The development of green hydrogen presents an exciting growth opportunity in which Impact Coatings’ market-leading coating services are well-suited to meet the market’s increasing volume needs and demanding technical requirements.

During the Capital Markets Update, Torbjörn Sandberg Kanon (departing CEO), together with Yaowen Wang (Regional President China), Robert Mamazza (Regional President North America), and Jonas Nilsson (incoming CEO), explained the company’s strategic priorities and growth ambitions related to hydrogen solutions. They elaborated on how the company’s coating technology aligns with the increasing demands of fuel cells and electrolysis, which comprise the company’s most significant business opportunity.

The company described its Coating Service Centers in China (launched mid-2023) and the US (to be established 2024), which serve two exciting growth markets driven by technological advancement and government incentives. The presenters discussed the company’s different business and delivery models, where Coating Service Centers serve as the main growth engine to meet customers’ production needs in all development stages, supporting the scale-up of the hydrogen industry in a controlled manner throughout each production phase.

Finally, the Impact Coatings team described the journey ahead toward becoming the leading Coating Services provider in its prioritized markets.
 
Take part of the full Capital Markets Update here.

During the last decades, focus on ways of leaving fossil fuel-based powertrains has increased. Electrical vehicles transferring hydrogen into electricity in fuel cells have become increasingly interesting for OEMs to pursue, especially for long distances and heavy-duty applications. The most common technology in this field is the LT-PEM (Low Temperature Proton-Exchange Membrane or Polymer Electrolyte Membrane) based fuel cell system. LT-PEM fuel cells rely on anode and cathode plates arranged in the fuel cell stack, plates that are either made of metal or graphite. From a production point of view metal plates are the emerging solution, thanks to the higher power density, and to lower cost, size and weight. To assure a long lifetime and efficiency in the stack’s challenging environment, a surface treatment, such as PVD coating, is necessary.
 
During recent years heavy-duty applications have been driving an increasing demand for components that can withstand higher voltages without degradation of the protective coating. To meet this demand, Impact Coatings has developed and introduced the new premium FC coating in the group’s fuel cell coating portfolio. The coating is currently offered as job coating to best support customer needs in verification stages.
 
Impact Coatings’ new robust premium FC coating mitigates metal ion leakage into the fuel cell stack at potentials up to 1.6 V. Leaking metal ions damage the stack membranes, reducing both stack life and performance. With the new, premium FC coating, which offers good adhesion and electrical conductivity, as well as stable and low contact resistance, the stack’s performance will be maintained throughout the stack’s lifetime.

Impact Coatings is a center of expertise and a leading provider of PVD coating solutions for metal plates in the hydrogen industry. Development of the company’s fuel cell coatings started over fifteen years ago. The company’s mid-end coating, Ceramic MAXPHASE™, for LT-PEM fuel cell plates has almost a decade of field qualification in automotive applications. Today, the company continues to work closely with customers in coating development to meet coming market demands for fuel cells, as well as for electrolyzers and the production of green hydrogen.

The capital market update will be held as a physical event at Inderes Studio, Västra Trädgårdsgatan 19 in Stockholm, on September 18, 12:00-13:30 CEST, and will simultaneously be streamed live.
 
Speakers:

• Torbjörn Sandberg Kanon, departing CEO
• Yaowen Wang, Regional President China
• Robert Mamazza, Regional President North America
• Jonas Nilsson, incoming CEO

Registration is open on https://tv.streamfabriken.com/impact-coatings-cmu-2023/register.
 
If you wish to attend the physical event at Inderes Studio, please register as soon as possible.

FINANCIAL RESULTS SECOND QUARTER 2023

• Net sales amounted to SEK 25,119 thousand (4,379)
• Net sales, excluding metals for electrolysis, amounted to SEK 22,677 thousand (4,379) [1]
• Total revenue amounted to SEK 20,708 thousand (10,934)
• Operating profit amounted to SEK -9,720 thousand (-13,307) [2]
• Operating profit after financial items amounted to SEK -9,718 thousand (-13,312)
• Cash flow amounted to SEK -39,325 thousand (-17,209)
• Liquidity ratio amounted to 238% (457)
• Order backlog coating systems at period end amounted to SEK 36,318 thousand (20,278) [3]
• Order backlog Coating Services, excluding metals for electrolysis, amounted to SEK 3,250 thousand [1] [3]
• Order backlog Coating Services, including metals for electrolysis, amounted to SEK 5,924 thousand [1] [3]

FINANCIAL RESULTS JANUARY-JUNE 2023

• Net sales amounted to SEK 45,135 thousand (9,739)
• Net sales, excluding metals for electrolysis, amounted to SEK 39,944 thousand (9,739) [1]
• Total revenue amounted to SEK 40,687 thousand (20,399)
• Operating profit amounted to SEK -18,851 thousand (-23,022) [2]
• Operating profit after financial items amounted to SEK -18,848 thousand (-23,028)
• Cash flow amounted to SEK 92,856 thousand (-23,804)

SIGNIFICANT EVENTS SECOND QUARTER 2023 [4]

• System order for the new INLINECOATER™ IC2000 for volume production from SEKSUN (China), for coating of fuel cell plates

SIGNIFICANT EVENTS AFTER THE PERIOD [4]

• No significant events have occurred after the end of the period

[1] Metals for electrolysis are invoiced in a cost-neutral manner and do not affect operating profit.
[2] Includes a provision for severance pay for the departing CEO of SEK 2,960 thousand. Adjusted operating profit SEK -6,760 thousand and SEK -15,891 thousand, respectively.
[3] Currency exchange rate at period end.
[4] Significant events refer to events that comprise insider information and shall be made public via press release.

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CEO’s COMMENTARY
Strong quarter lays the foundation for the rest of 2023

The second quarter of 2023 showed strong revenue growth, in line with the previously reported order status. Net sales for the group amounted to SEK 22,677 thousand (4,379), excluding metals for electrolysis. In comparison to the same quarter in 2022, the second quarter of the year includes a system delivery and was our strongest period to-date for Coating Services.

Coating Services achieved net sales during the period of SEK 8,599 thousand (2,362), excluding metals for electrolysis, with the primary contribution from electrolysis coatings for green hydrogen. As in the previous report, we focus on sales figures excluding the metals used for electrolysis within Coating Services, since these are invoiced cost-neutrally and do not affect operating profit.

Coating Services is expected to grow further in the long term after we, during the quarter, brought our Coating Service Center in Shanghai into full operation and in 2024 will open a Coating Service Center in the USA and move to a larger more modern facility in Linköping. These three initiatives will lead to a marked increase in capacity.

The order book for Coating Services is reported at the end of the second quarter with a value of SEK 3,250 thousand, excluding the value of metals for electrolysis. Orders within Coating Services are normally delivered over 1-4 months and the order book at the end of the quarter is a snapshot. Our large American customer, with whom we entered into a Letter of Intent in February 2023, has continued to place electrolysis coating orders for separator plates and porous transport layer plates.

In June, we received the first order for an INLINECOATER™ IC2000, our new coating system for volume production to be used for the production of fuel cell plates for the automotive industry at SEKSUN in China. Delivery of the IC2000 system is planned for 2024. The order book for coating systems amounted to SEK 36,318 thousand at the end of the period.

The increasing sales volume generated improved earnings compared to previous quarters; at the same time, we are continuing to invest in our growth strategy with the goal of becoming profitable.

We continue to deliver on our strategy
Throughout the first half of 2023, we have intensified the company’s focus and investments in the hydrogen area in accordance with our strategic agenda. As specified in connection with the March 2023 rights issue, the growth journey can be summarized in four points:

1. Investments in electrolysis and green hydrogen
It is becoming increasingly clear that green hydrogen produced by electrolysis using renewable energy and water will play a central role in the future global energy mix and will be a cornerstone in the transition to sustainable energy systems with low carbon dioxide emissions.

The company’s coating technology is well-adapted to the two-dimensional metal plates found in both electrolyzers and fuel cells. Over the past year we have made significant investments in coating solutions for electrolysis and our new INLINECOATER™ IC2000 enables cost-effective coatings and production solutions that are competitive in meeting the industry’s needs.

Impact Coatings’ strong focus on hydrogen makes us unique in relation to other PVD suppliers who work broadly across many industries and applications. The focus means that today and in the future we can be at the forefront and quickly respond to customers’ needs in an industry undergoing intense development.

2. Expansion in North America
Our investment in North America continues. In mid-June, we completed the registration of our subsidiary in the USA. The establishment improves our capability to meet the growing demand in the North American market. We move closer to customers and facilitate contract processes, at the same time increasing market awareness of Impact Coatings.

In the wake of strong regulatory and commercial developments, North America in general and the USA in particular have established themselves as our main markets in green hydrogen electrolysis. It is a central part of our strategic agenda, with significant commercial potential. We look forward to continuing our work in the region, with a focus on establishing a Coating Service Center, planned for operation in 2024.

3. Development of Coating Service Centers
Today, Coating Services is the cornerstone of our business. A great advantage lies in the fact that we even out both our cash flows and work efforts, which increases predictability. But above all, it enables customers to use our production solutions without significant investment, which lowers the threshold for an initial commitment. Our approach also creates the conditions for meeting customer demand immediately. Coating Services creates a solid platform to drive and scale up our business. Continuing to develop our existing Coating Service Centers in Linköping and Shanghai will be crucial to reaching larger sales volumes over time.

In Linköping, we increased production during the second quarter to include a second shift. At the same time, planning is underway for a move in Linköping to larger and more modern premises in the company’s new headquarters, with planned occupancy in autumn 2024.

Our new Coating Service Center in Shanghai became fully operational in the second quarter, following the installation of the center’s first coating machine, an INLINECOATER™ IC500, which arrived in April. The new facility now supplies bipolar plate coatings produced in the same region to fuel cell customers in China. The Shanghai facility will also serve as a model for future Coating Service Centers, first in the USA and later in the new facility in Linköping.

4. Industrialization
Continuing to industrialize the company will be of the utmost importance to ensure competitiveness and profitability over the long term. This includes automation, system solutions, securing components, and new facilities – activities that make it possible to reduce the relative share of costs as the business grows.

In addition, the capitalization of the company is an important part of our growth journey. It enables, in addition to investments, our ability to secure component supplies and purchase in advance central components such as machine bodies for coating systems. We tie up capital for a period of time, which is later released in connection with system sales and Coating Services.

Thank you
On September 18, Impact Coatings will host a capital markets update as a follow-up to the completed rights issue and our strategy. It will be my last investor presentation as CEO of the company. Incoming CEO Jonas Nilsson will participate and will introduce himself at the event.

I am pleased to pass the baton to Jonas Nilsson. Jonas brings solid experience in the coating industry and in technology companies in general. He has the right qualities to lead the company into its next phase. I am also proud that we have achieved so much during 2023, with the company in a stable position and with the right conditions for future growth and profitability.

I would like to thank all colleagues, customers, partners and shareholders for our collaboration during these past years.

Torbjörn Sandberg Kanon, CEO

The full report is attached, and can be retrieved on the company’s website at www.impactcoatings.com/finansiella-rapporter-arkiv/.

The Capital Markets Update provides an opportunity for investors, media, and other stakeholders to get an update on the strategy and development of Impact Coatings.

The event will be live streamed for those who cannot attend in person (number of seats is limited). More detailed information will be provided closer to the event. The event will start at 12:00 CEST and is estimated to finish by 13:30 CEST.

Date: September 18, 2023
Time: 12:00 CEST
Venue: Inderes Studio, Västra Trädgårdsgatan 19, Stockholm

If you wish to participate, please register at https://tv.streamfabriken.com/impact-coatings-cmu-2023/.

“Torbjörn Joelsson has played a central role in building up Impact Coatings from a start-up to a growth company, in the development and industrialization of our INLINECOATER™ systems, including coating technology and coating processes, as well as in building long-term relationships that have generated business with several key customers. During my tenure as CEO, he has also been a driving force in refining the company’s strategy to focus on solutions for hydrogen and autonomous safety systems. I want to thank Torbjörn for his defining contributions to the company over many years,” said Torbjörn Sandberg Kanon, CEO of Impact Coatings.