Wallbox (WBX) Q2 2024 earnings call transcript

I will now hand the floor to Michael, we will help him to begin. So Michael, please go ahead when you are ready.

Thank you, Adam, and good morning and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss World Walks second quarter 2024 results. This event is being broadcast over the web and can be accessed from the investors section of our website at investors. wobox. com.

I am joined today by Enric Azashon, Wobox CEO, and Luis Boada, Wobox CFO. Earlier today, we issued a press release announcing results from the second quarter ended June 30, 2024, which can also be found on our website. Before we begin, I would like to remind everyone that certain statements made on today's call are forward looking that may be subjected to risks and uncertainties relating to future events and or the future financial performance of the company.

Actual results could differ materially from those anticipated. The risk factors that may affect results are detailed in the company's most recent public filings with the SEC, including in the annual report on the form 20F for the fiscal year ended December 31, 2023, 12, March 21, 2024.

We will be presenting unalluded financial statements in IFRS format that reflect management's best assessment of actual results. Also, please note that we use certain non-IFRS financial measures on this call, and reconciliation of these measures are included in the presentation posted on the investor section of our website.

Also, a copy of these prepared remarks can be obtained from the investor relations website on the quarterly results section, so you can more easily follow along with us today.

So with that out of the way, I will turn it over to Amriq.

Thank you, Michael, and thanks everyone for joining us today. Before we go into the highlights of Q2 2024, as announced yesterday, I would like to commend on the $45 million strategic investment from a number of current shareholders, including $5 million from GenAC as the main investor in this round.

This capital raising was needed to ensure the company's balance sheet strength and support our strong growth. We are extremely pleased with the continued trust and follow-up investment, allowing us to continue building a leading company in e-v charging and energy management solutions.

Out of the competition, GenAC should work with our winning products and solutions to lead the efforts in the e-v charging space. In conjunction with this investment, we have also finalized the Warren agreement, which was an undertaking of GenAC's initial minority investment in December 2023. Through his agreement, GenAC has the right to buy an additional 5% of the company at $3.05 per share price set during their initial investment.

In Q2, we saw the excellent initial results of our 10-year worldwide agreement with the sale of several thousand Pulsar products to GenAC in North America and the first order of Supernovas to Prabmak in Europe.

Customers can purchase the charges through GenAC certified dealers online and through a growing number of retail and wholesale distributors nationwide. We expect plentiful growth from this strategic move, which will now be strengthened with additional products, including Supernova 108 in North America, Pulsar Pro, and the portfolio of AC commercial products globally.

At the same time, we have signed a strategic battery storage system initiative whereby Wal-Vox will buy batteries from GenAC. But the integrated charging solutions will open up a vast array of opportunities towards smart energy management and other reliability to circumvent grid limitations.

For example, the expand power capacity for our DC fast chargers were integrated with batteries, yielding power lot management to satisfy peaks of high-power charging demand.

These integrated solutions also call seamlessly with our software, like our energy management system called CU. We are so excited about working together with a leading partner that has the same vision and ambition to be growing at an unparalleled pace in the US.

Now, similar to the preliminary results announced in early July, Q2 2024 has been a solid quarter with 48.8 million in revenue, up 48% year over year, but driven by higher sales across the board, but especially strong AC and DC sales in North America. The AC sales in North America picked up a North working pace and the growth was further accelerated by DC with strong demand for the Supernova 110. After the initial deliveries in the first quarter of this year, this resulted in an impressive 65% year over year growth for the region.

In Europe, our white presence and unit diversification with AC, DC and EVL allow us to achieve overall growth of 44% compared to the same period last year in a software than expected environment.

EVL continues to steadily contribute to the top line, and we see the initial results of our cross-selling initiatives. One impressive highlight this quarter for EVL is the installation of 424 EM4 charging points in a car park in Wishland, Germany, making it one of the biggest EV charging parking sites in Europe. We see this as a great testament to both the quality of our products and our ability to evolve to support growing customers and user needs.

The EM4 is a smart EV charger specifically designed for this type of sites, positioning it to reap the benefits of a future growth of similar public charging installations.

The DC product portfolio continues to show tremendous progress with the announcement of our highest power to footprint ratio DC fast charger today, the Supernova 220.

This revenue shows a remarkable growth of more than 60% compared to the same quarter last year, mainly driven by sales in the US market. In total, we delivered almost 48,500 AC units globally, including sales by EVL, and approximately 380 units of DC during the period.

Our margins stood up 39.1% in the second quarter, remaining steady compared to the previous quarter and improved 936 basis points compared to the same period last year. We believe this is a great proof point that the cost of generating and strategic sourcing action taken in the previous quarter's shock consistency. We believe we can continue to hold the 38 to 40% range in a year to go with opportunities for improvement in the future.

Please, we provide more detail on gross margins shortly. On a console, at a group level, in Q2 2024, we saw an 11% year-over-year reduction in labor costs and op-ex. It is important to remember that we were able to achieve these costs and reductions despite EVL contribution to our cost base. As we continue to optimize operations across the group, and leverage synergies, we see additional opportunities to reduce our cost base.

We are excited that in the second quarter, we continue to reduce the justify the loss, now landing at 11.2 million euros, which represents a year-over-year improvement of 47% and more than 2 million improvements as compared to Q1 2024.

As mentioned during our last year's call, we believe that top line revenue is the main catalyst to future profitability. Despite the current EVL market slowdown, holding back the acceleration of our top line, we remain very committed to our path of profitability. So we are fully focusing our attention on what we can control, and we'll continue to achieve adjustment in the break-even this year.

For the second quarter, 2024, Europe contributed 34.5 million euros of consolidated sales, or 71% of total revenue, and revenue by 44% from the year-over period. We saw strength in Benelux, Daft, and the UK, while in Southern Northern European countries, we experienced some softness in line with daily markets.

North America show a strong quarter and contributed 23% or 11.4 million euros, a 65% growth compared to last year, and more than 140% compared to Q1 2024.

We were delighted to see the strong performance of the AC product portfolio, as well as the very successful launch of the Supernova 180 sales. Congratulations to the US team for their effort in scaling the DC sales and boosting AC sales growth. The progress of both APAC and LATAM show the advantages of being a lower player and how this geographical diversification can help us capture progress of additional growth.

AC sales of 32.2 million euros represented 66% of our global consolidated revenue, a 55% year-over-year improvement. With interaction for both, the new introduced Pulsar Pro and AVL's EM4. Strengthening or positioning the commercial AC segment and accelerated by cross-selling activities.

We're also seeing continued interest in our dedicated Pulsar residential chargers. In total, we have now sold over the 500,000 Pulsar residential chargers since this launch and enter into crippled commercial relationships with the likes of Generac, free-to-move, Lucid, and more recently Luminous, setting us up for further exploration.

Free-to-move, as an example, has no launch, it's charging offering across the US in support of the rollout of the Stellantis EV vehicles. When customers purchase an EV, they can choose to get a free-to-move charge home charging station provided by Walbox or credits to charge in the public network. In the case of Lucid, we announced earlier this year that Walbox has become the official home EV charging partner in Europe, and we are now expanding this partnership to the UAE market.

Luminous is a relatively part of the EDF group and will distribute global solutions to local partners, providing a solid start to what we expect to become a long-term commercial relationship.

DC contributed 22% of the revenue in the second quarter, a 64% increase from the prior year period, which shows the continued strength and diversification of our business. After the introduction to the US market last quarter, the Supernova 180 has been very well received, resulting in recurring orders from existing customers and the signing-up of new ones. We are seeing the same trend in Europe.

So, for services and others, contributed nicely to our quarter-over quarter growth, with 6 million years for the second quarter representing 12% of our total revenue.

In parallel to our commercial expansion, we continue to develop the Supernova product line. We are introducing the Supernova 220, which is Walbox's highest power to footprint ratio DC fast charge area. The new addition to the product family is designed to charge up to 220 kilowatts, meaning that it can fully charge a passenger EV up to 100 miles in as little as 8 minutes.

The introduction of the Supernova 220 needs our customers' expectations for more powerful systems and a broader range of power options.

This new version has the same award-winning compact design as other Supernova models, increasing the power while maintaining the installation efficiency, maintenance, and space improves the return of investment for charge foreign operators, especially in high volume locations.

Supernova 220 services, 1 EV at up to 220 kilowatts, or 2 EV simultaneously at up to 110 kilowatts each. It is fully compliant with the latest AFI regulations without the need for any accessories. Currently, we have an early-order program in place, and we expect the first shipments in September.

We believe that our product improvements and focus on cost engineering have resulted in continued strong reminds close to 40% for the quarter. In particular, the pull-front Supernova product lines experienced strong improvements which contributed significantly to the consolidated growth masses.

We are already moving to the new and more much original Supernovas, which are more efficient to manufacture, especially the Supernova 108 in North America.

Now, let's talk about the market. We remain very positive about the long-term growth and future potential. EV is our run is reversible path, and we believe that we play a larger role than most competitors in that transition with our wide range of EV charging solutions and geographical footprint.

We are seeing much softer growth for the residential charging market and a shift in customer preferences in DC. As reported by Rome Ocean in the second quarter, there were close to 1.5 million EV sold in our core markets. Representing a 19% increase in the rest of the world, a 11% increase in North America and a 3% decrease in Europe, all year-over-year growth rate.

This is very subdued to the double-digit growth everyone expected, and as I show in the graph, there are differences over the quarters instead of consistent growth. However, the state is slowly being put in place for massive adoption, as more affordable models are being introduced, inflation and internal rates normalize, and more expansive quality charging infrastructure is being set up. These solid fundamentals are irreversible, despite any uncertainty on the policy front.

Please, I'll turn it over to you to go in further on our financial details.

Thank you and Rick. Good morning and good afternoon to everyone. Our second quarter results show significant 48% year-over-year growth that came in lighter than expected with 48.8 million. This was driven by a strong performance in AC sales in the U. S. and Global BC fast-charge ourselves, offset by software market growth in other regions.

With 39.1% for the quarter, Rose Margin showed a phenomenal year-on-year, 936 basis points increase, continuing with Q1 trends thanks to our margin improvement programs.

Pro-quality improvements in AC and the transition to the new generation of the supernova product were the biggest contributors. Our reporter, Rose Margin, was impacted by an excess inventory provision. When we exclude this impact, the margin is almost 200 basis points higher. So we are pleased with our tracking on Rose Margin, and we see significant momentum for future improvements.

We continue to make progress in managing our class base. Q2 labor costs and topics were down quarter-and-quarter and decreased 11% year-on-year.

Consolidated adjusted EBITDA loss for the quarter was 11.2 million, representing a 47% year-over-year improvement. The path to profitability remains our main priority as an initial milestone to generating net cash, and with it, long-term capital appreciation.

June was the strongest month in the quarter and our strongest month ever. In June, we were already adjusted EBITDA positive. So our financials showed solely through points towards achieving our profitability and cash generation goals.

These light shows our three main focus metrics, revenue, cash costs, and adjusted EBITDA. We present the cash costs in this light, which is a 32.3 million of labor costs and over-operating expenditures, plus capitalized R&D, minus 7 and 1 of, and non-cash items. Overall, we have seen flat cash costs compared to last quarter, despite the significant revenue growth and a 3% decrease compared to the same period last year, which did not include AVL yet.

When looking at the contribution of the different components, topics readings for Q4-2023 and Q1 of this year benefited from warranty freight and bad-tech provision releases, creating a tougher comparable for Q2. But the underlying operating expenditures are being managed down and should read through in the years to go.

Cash percentage costs have continued to decrease from 24 to 21 million. With the continuous reduction efforts, we are confident this trend will remain throughout 2024.

We ended the quarter with 65.2 million of cash, cash equivalents, and financial instruments. This predates the strategic investment led by Generac as announced yesterday.

This 45 million investment transcends, wall walks, balance sheets, and provides capital to accelerate the company's ability to manufacture and sell more charges throughout the world. Considering the expected revenue growth, continued cost management initiatives, and the new investment, we believe we have a comfortable balance sheet position to get to future cash generation. Long term debt was approximately 91 million at the end of the quarter.

Approximately 5 million decreased to the previous quarter. CapEx, excluding capitalized R&D, was again purposely light with less than 3 million invested in the second quarter, of which approximately 450,000 on property plant and equipment.

To reiterate what was shared last quarter, our CapEx will focus on the development and production of higher power charging problems.

We expect to invest less than 10 million for the full year 2024, as we have ample factory capacity to scale already in place.

We ended the quarter with 84.9 million in inventory for the consolidated group, a 5% sequential reduction, or close to 5 million euros in value.

Optimizing our inventory is central to free of cash, and this is another key objective of improvement delivered. The goal is to keep bringing the total inventory down in a year to go, and we are on the right track to do so.

And Rick, I'll turn it back to you to provide some closing commentary.

Thank you, Luis. As I look back at the first half of the year, we have been executing well in a difficult market. In this environment, we achieve milestones on all fronts, ranging from revenue growth, award winning product introductions, securing strategic partnerships for other growth, margin improvement, as well as cost and inventory reduction.

And I think all of these improve our competitive position as the entire industry is trying to navigate the current cycle towards mass adoption. We have the products, we have the technology, we have the production facilities, we have the funding, we have the best people, and we have the competitive position to benefit longer.

With that, we raise the question from our analysts.

Welcome back, everyone. To our analysts, we ask that you post one question with a follow-up if needed. Then re-enter the queue if there is more. This will allow each of you to ask your questions upfront, and we'll get to as many additional questions as time allows. Adam, I think you have some instructions for our analysts.

If you'd like to ask a question on today's call, please press star followed by one on your telephone keypad now since the queue. If parents ask a question, please ensure you are unmuted locally.

Thank you Adam.

Hi there. Thanks for the question. I couldn't hear it all that clear, but I think you were referring us to being positive every day in the year to go. Yes.

Hi, Leah. Thank you for the question. So, we decided to strengthen our our balance sheet to make sure we were able to one and continue financing our growth. You know, we, although the growth is not what's not as we expected, it has is a great growth level. We are growing almost 50% year over year.

And also to be able to navigate the current cycle towards. As an option, no. So this funding, as she was saying, does not impact our or slow down our efforts to reach profitability. We're actually committed to by this year, be profitable. And at the end, we believe that we have a very comfortable balance sheet position as recommended until we start generating cash. So we don't expect additional funding until the company generates positive cashflow.

Alex, so I understand the question is regarding the growth in and which are the main drivers for our growth in AC, no. So there's in the US. Obviously, we have all these great strategic agreements. We have been announcing an hour starting to create a lot of value. We spoke about the free to move deal, which is part of the Stellantis group. This is, you know, as carman of factors, continue growing. We get the band that's through these problems because at the end, there's a huge attachment between EV sales with carman of factors and these problems we have. We have this problem with Stellantis. We have this problem with Nissan. Also, the general agreement we expanded yesterday.

So we made a close deal with them early this year and already broke several thousands of AC units in North America as an initial and second record order. And at the end, Generag is a great partner to have. They have almost 9000 installers nationwide. And the idea is that, you know, many of them take advantage of our products and our products become part of the ecosystem, no. So right now in North America, the huge expansion in our AC sales comes from a strategic agreements. Also, there's an additional thing, which is the expansion of our product portfolio.

We used to have Pulsar Plus in North America, but now also, additionally, we have Pulsar Pro, and this is a commercial product. It's more focused on parking companies.

So we have a product that attacks a different segment in the North America market. And finally, we're really happy with our team and how everyone is performing. If we go to Europe, when we acquired a company last year, apart from bringing strength in a key market, which is Germany, to give you an idea. Now, Germany is our second biggest country in the world after North America.

More important than that, we brought a new product, which is the EM4, that now we are selling in all world of channels in Europe. And at the end, we have done this integration. It's going very well in duration, and we can sell all these products everywhere. So at the end, we can sell in the European market.

We see a lot of potential of improvement. We're already comfortable the way our DC margin is improving. We are already in the third generation of our Supernova products, and they're already cost optimized. And we are still seeing lots of opportunities to improve the margin. So our goal is to get them closer to the 50s, the DC fast charging margins from the close to high 40s it is today.

When we look at AC, there's a mix here, because as you've seen, we are reducing our inventory. So our focus for AC products, where we have 84 millions in total of inventory is to reduce the inventory. So we cannot really in some of those models optimize as margin as we would like. But for the new models, like Pusar Pro, Pusar Max, margins are also quite high. So taking advantage of the reduction of the inventory and in the process where we don't have inventory, we already have strong margins. We also see improvement above the 40% as we go into the next year. And finally, there's a lot of synergies and taking advantage of the virtual integration of wallops.

We have the RS in our loop, which is a electronic specific manufacturer in our loop. So these are things that we are sharing our regular integration, we are sharing strategic sourcing. So all these synergies, these are programs that are in place. And we expect to start seeing them as we start the next year.

Hi, Adam.

Okay. Then I would like to thank you all for joining us today. We hope you found today's call good use of your time. Let's know if we can help you in any way.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your...