Wallbox (WBX) Q3 2022 earnings call transcript

Thank you, operator, and good morning and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss Wallbox's third quarter 2022 results. This event is being broadcast over the web and can be accessed from the investor section of our website at investors. Wallbox. com.

I am joined today by Enrique Asuncion, Wallbox's CEO, Jordi Lines, our CFO, as well as Masoud Rabbani, our Chief Business Officer. Earlier today, we issued our press release announcing results from the third quarter period ending September 30, 2022, which can also be found on our website.

Before we begin, I'd like to remind everyone that certain statements made on today's call are forward-looking that may be subject to risks and uncertainties relating to the 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 us are detailed in the company's most recent public filings with the U. S. Securities and Exchange Commission, including in the post-effective amendment number three to our registration statements on Form F-1 filed on September 28, 2022, which can be found on our website at investors. Wallbox. com and on the SEC website at www. sec. gov. We will be presenting unaudited 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 reconciliations 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 under the Quarterly Results section, so you can more easily follow along with us today.

So with that out of the way, I'll turn it over to Enrique.

Thank you, Matt, and thanks everyone for joining us today. In addition to reviewing highlights from the third quarter of 2022, I will also share some thoughts on the current market we're experiencing and provide you with some insights into our fast-charging portfolio, both Supernova and Hypernova, including detail on customers, production, and backlog. I'll discuss a few new partnerships, then Masoud will join us to offer some higher-level insight into how we approach partnerships with leading CPOs and energy providers like V-Charge and EDF, and why they select Wallbox.

We will then turn the call over to Jordi, who will provide a more detailed review of our financial results. Before, I return to communicate our guidance for the fourth quarter and full year 2022. We will end by taking questions from our covering research analysts. The third quarter finished within our expected range, with strength in North America and key European markets offsetting softness elsewhere.

Market share gains, as defined by units sold relative to EB and PHEB deliveries, have been substantial all year and continue to grow through the recent quarter. Our European market share goal for 2022 was approximately 15%, and we achieved 19%. That is a testament to our products and footprint.

Today, Walvox has one of the most comprehensive charging portfolios, including home charging, public DC fast charging, bidirectional, and semi-public AC. This award-winning offering, including proprietary software and services, is both designed and manufactured in-house. The operational capabilities are enabled by our regional manufacturing footprint, now with facilities in North America, Europe, and Asia, and give us an expected capacity of more than a million units as we exit 2022.

Our ability to consistently deliver high-quality and innovative products while remain flexible to changes in the demand environment has allowed us to build strong relationships with leading brands. Our strategy is resonating with customers, and we can see this in their results. It's always a busy time at Vologs, and Q3 was no different. Revenue of 44.1 million euros grew by 140% on a year-over-year basis, and we are pleased with our growth margin of 41.4%. We force new exciting partnerships and have accelerated key initiatives within our product development roadmap. Our Q3 results were fueled by exceptional strength in North America, growing revenue by 535% in key European markets, including 270% growth in France, 160% in Belgium, 130% in Italy and the Netherlands, and 125% in Spain, all on a year-over-year basis.

We continue to make great progress in APAC and LATAM, both of which are early in the DB transition. What's most exciting for us here is that we have built the infrastructure, brand, and relationships in these young markets. Often, while of a small base, our market share in these new countries is massive. This position has extremely well to continue our leadership position as DB adoption takes whole, and I'm excited to see what can be done here. North America now contributes 22% of total revenue, an increase of 14 percentage points over the prior year period.

This exceptional growth dropped in part the geographic mix shift from Europe, which now represents 71% of revenue. Asia-Pacific provided 5% of consolidated revenues in Q3, and Latin America was 2%. This meaningful shift is both deliberate and helpful as we continue to diversify both our geographic and product mix. Our home charging portfolio represents 83% of our total revenue, with fast charging at 5% and 12% provided by software and services, a growing portion of which is recurring.

Over the long term, as Supernova ramps up and Hypernova is introduced to the market, we expect our product revenue to be more balanced between home and public charging. We also anticipate software and services to represent approximately 20% of revenue. Consolidated gross margin in the quarter was 41.4%, driven by stable pricing, continued cost control of key components, and the impact of recent acquisitions. We believe we are navigating the supply chain shortage of critical items better than most, and will continue to re-engineer products and establish strategic purchasing agreements for critical components. Jordi will share more details with you. And finally, we sold approximately 67,000 chargers in the quarter, with the geographic mix nearly identical to that of our revenue mix by geography.

The macro environment has become increasingly complex as we made our way through the year. There are always going to be gifs and takes as you progress through a forecast period, but the differences in 2022 have been notable for many companies. The challenge for a successful business like Wallbox, which has been more than doubling in size every year, is remaining focused on the long-term opportunity while navigating near-term obstacles. Clearly, EV demand is stronger than anyone ever imagined. It's been driven by consumers and enabled by new innovative technologies and increased choices. The record number of new 2023 EV models is exciting to see. will only serve to accelerate adoption.

But manufacturing capacity and economies of scale and its impact on pricing has yet to be realized within the automotive industry. While we are preparing for a strong 2023 and 2024, we are not ignoring the challenges that many in the automotive industry face today and which I will speak about in a moment. Still, near-their bumps won't distract us from executing our long-term strategy, especially given the size and duration of the transition taking place within our market.

And our goal is to be the most successful company in it. For most of 2022, Europe has delivered fewer EVs than expected. And as a result, our investments in the coming quarters will be focused on pockets of growth within the region. As Masoud will share, there are always opportunities that we identify and win. That's what Goldbox does best.

The U. S. , which is now the world's second largest country for EVs, continues to grow at a staggering pace and is expected to continue given subsidies from both the NEBRI Program and Inflation Reduction Act. Our current portfolio, capabilities, and product roadmap sets us well to be one of the few hardware vendors that meet all manufacturing and performance requirements, qualifying us for government subsidies. We began investing in our infrastructure there last year and believe we are well ahead of the curve.

While it's too early to put a number on the opportunity here, it has the potential to be massive. Our focus over the next five quarters will be to ensure we have everything we need to be the market leader going forward.

Our business model is also a key element in our ability to navigate the current environment. You heard us talk about our unique manufacturing model, about our highly verticalized supply chain strategy, about our global operating and distribution footprint. It's something that is not openly visible, but under the hood, Wallbox is a very different vehicle. The decision to operate in this way was not made yesterday.

It's not a reaction to recent supply chain disruptions or the subsidies announced in the U. S. The decision was made when the company began, and we've built a business like this to allow for improved agility and time-to-market, improved control of the manufacturing process, faster delivery times, reduced freight costs, and more rapid certification times. One example is the recent acquisition of ARIES, which is a leading supplier of PCBs, a critical component in most technologies today.

We believe this transaction announced last quarter allowed us to secure a critical component, enabling us to better navigate shortages than others are experiencing, allowing faster innovation times, offering cost savings, and supporting our goal to ship product within 72 hours. Another example is our installer capabilities. COIL, a leading North American installer network, is now part of Worldbox, as you heard on our last call. When paired with our in-house capabilities in Europe, the value customers can realize from a comprehensive solution is compelling and not easily replicated. Masud will share why it's so important in a moment.

The final example is our EMC chamber at our headquarters. It's one of the only two in the south of Europe as it's currently equipped to test up to 150 kilowatts and upgradable to 400 kilowatts. Why do we need something like this? Consider the testing, validation, and certification process. Having in-house the capability to test electromagnetic compatibility at very early stages of a new development puts Worldbox in a position to optimize not only component selection, but to design the most effective energy management architecture with highest performance at most competitive cost. But advantages are also at the time of product certification. Perhaps you are one of the 30 different hardware vendors who want to introduce a new charger in the UK in January.

Your product cannot be sold without being proven compatible and safe to connect to the grid. That requires you to get in line to have your charger tested, and now you are waiting in line behind dozens of your competitors. Such equipment is normally fully booked, and you will wait months for your term. And if you do not pass at the first attempt, product iterations and recertification will take several additional months. That time lost is pure waste. It's costly and can erode a competitive advantage very quickly. At WorldWalks, we roll the new charger from the lab to the fourth floor and perform the test. It's how we build the business from the ground up to control our own destiny, and you see that in everything we do.

Turning to our next business highlight today, I want to share some thoughts on the U. S. and our fast-charging portfolio. We recently held our factory opening ceremony at the facility in Arlington, Texas. We posted a video on our investor relations website for you to watch when we are done here. In Texas, we hosted customers, partners, government officials, and even some of you on the phone today. It was a great day for us, and it ushers in a new era of participation in the North American market.

While we were proud to showcase our technology and capabilities, the product demonstration stole the show, especially Supernova and Hypernova. Today Supernova is sold in a 60 configuration with multiple versions on the way that will scale up to 150 kilowatts These modular stations can operate with very high reliability rates and are sold at competitive prices While incumbent vendors are often working to undo years of poor quality and uptime, we are not burdened by it. This is a differentiation today and one we intend on driving home with our customers.

Poor reliability impacts the investment return profile for CPOs, many of which are our customers. It's expensive to consistently run a truck to swap out a cellular modem or an RFID reader, or change out a power volume. Labor is expensive, and losing consumer trust in a charging infrastructure ultimately impacts adoption for EVs. For this reason, it's critical that industry reliability rates improve drastically. That is key and is something that we have focused on from the start. This is one of the main criteria when purchasing a DC fast charging station and one that sets us apart.

Supernova also continues to ramp up nicely. Today, we have delivered units to almost 50 customers across more than three countries. We currently have a healthy pipeline of several thousand chargers, and we will continue to build upon it as production ramps up.

If you are unfamiliar with Hypernova, it's our next generation DC fast charger. which reaches 400 kilowatts. That's fast enough to provide 100 miles of range in less than five minutes. It's designed to be highly reliable, provide low total cost of ownership to operators, and will grow to the market in 2023, in time for the programs I mentioned.

That product was not only on display in Arlington, but was charging a vehicle at that EV's maximum limit, more than 220 kilowatts. We are very pleased with the overwhelming reception from customers, which resulted in our first order and multiple LOIs and have very high expectations for market acceptance.

Before Masood discusses our partnership strategy and outlines some exciting new programs, I wanted to offer some exciting updates on what the North American team has accomplished recently. First, you might have seen our announcement in August regarding Fisker. Wallbox has been selected as the exclusive partner to provide hardware and installation services to buyers of Fisker's EV globally. Customers will be able to purchase a co-branded charger and schedule COIL installation service through Fisker's website. We are very proud to have been selected and look forward to their vehicles hitting the road soon. There was a joint announcement last week by the U. S. Department of Energy, KB Homes, SunPower, Kia and Schneider Electric detailing what they call the first all-electric solar and battery powered microgrid community in California.

The houses involved in these communities are equipped with backup battery storage, bidirectional EV charging capabilities and perhaps most importantly are interconnected, creating a resilient energy network. When combined, this technology established a self-supporting energy network capable of powering a neighborhood during a power outage. We are excited for Wazer to be a part of that infrastructure and believe this is the first of many to come as utilities look for solutions to the growing gap between energy production and consumption.

If you are a regular shopper at BestBuy. com in the U. S. , you will soon see Pulsar Plus on the website. We've been working with them in Canada, and this new phase opens up an enormous opportunity. This is a meaningful win for WorldWalks, and we look forward to reaching more consumers through their online presence. So congrats to the North American team, nice work, and keep it up.

Masut, I hand it to you.

Thanks, Henrik. Good to be with you all today. Building strong partnerships with leading brands around the world is a key element of our go-to-market strategy. At our core, we develop very intelligent, high-quality EV charging and energy management solutions for public, home, and business settings. Our partners know their core competencies, and they also know that the problem we are helping them solve is extremely complex.

The issue is not simply how to charge an EV, but rather how to help the consumer manage their energy consumption in a rapidly changing world. Embracing the fact that the EV is not simply a mode of transportation, but also an energy storage asset sets us apart from our competition. That's why we are viewed as a technology partner that focuses on innovation, reliability, and contributes to the energy transition. For this reason, the strategic partnerships we have built and continue to cultivate are unique. Three examples of such partnerships are Uber, B-Charge, and EDF. Uber began as a U. S. partnership and quickly grew into what it is today. Their goal of electrifying their driver base by 2030 requires more than one million electric vehicles, and last week we announced the expansion of the program into key European markets.

This evolution is one that we're very proud of, as it's a great example of how our broad footprint allows local partnerships to turn into a regional one and eventually evolve into one that is global. A brand like Uber could partner with a handful of hardware vendors and then cobble together installation network for a few countries. But what happens when they want to enter 10 countries or 25?

It becomes virtually impossible to manage. That same premise applies to names like Fisker and Nissan. They want to work with somebody who provides high-quality products on time with the right volume and offers an overall comprehensive solution for their customers. That's exactly what we offer. Lowest price does not win these opportunities. Amazing hardware, software, exceptional customer service, and the ability to deliver products on schedule is what determines the winner.

B-Charge is another example of a meaningful opportunity that if you're in the U. S. , you may not be aware of. B-Charge is part of ENI, one of the largest energy companies in Europe. They are undertaking a massive infrastructure upgrade and replacing AC chargers with 60 kilowatt supernovas. There are currently 300 units in order, 200 of which are expected to be delivered and installed in Q4.

The total number delivered to this customer could potentially exceed 1,000 charges next year, which makes it a very important partnership for both companies. EDF is another one of the world's largest utility companies. They service more than 25 million retail customers, many of which are already driving EV. Our participation in their residential charging program is expected to drive orders for potentially more than 10,000 AC units in 2023 and grow from there. It's a testament to our products and solutions to be included in a sizable program like this. While I wanted to highlight these three partnerships, there are dozens of other opportunities to share about. For example, Atlante, a CPO with potential for more than 600 fast charges in 2023 and 60 already on order in Q4.

Howie, formerly operating as F-Charge, has 200 units on order. Another notable Mediterranean utility has 100 units ordered. And A2A has another 100 units of Supernova audit. To give you context, in Italy alone, we see enough demand to account for 100% of today's production capacity, but we continue to scale up and improve each quarter. It's looking to be a very exciting time for us in our new fast charging portfolio.

Our dedicated DC fast charging team has been doing an incredible job, and we continue to hire the absolute best talent to ensure we provide the best commercial management to our clients on both the sales side and, equally important, the services and after-sales side of things. On the OEM side with our home chargers, we've been equally successful. The Nissan partnership in Europe is performing well, and we're excited about the arrival of their new SUV in the US and Europe. We have similar partnerships with companies like BYD Motors, who sold almost 650,000 vehicles in the first half of 2022. We're proud to be included as they expand globally.

In closing, our strategy is resonating well with customers, and we continue to build momentum in the marketplace. Our value proposition of delivering the best products in the market with exceptional customer support is allowing us to take meaningful share as the sales team fires on all cylinders. I look forward to sharing more exciting announcements with you in the coming quarters. Jordi, I'll turn it over to you to comment on our financial details.

Thank you, Massoud. Good morning and good afternoon to everyone. Before I review the financials, I'd like to point out that our first half 2022 unaudited financial results can be found in our Form 6K, which was filed on September 29, 2022 with the SEC. As a reminder, our intention is to provide you with key and audited financial and operational measures as we make our way through the year so you can remain informed of our progress.

Like Enric, I'm pleased with our record quarterly results and the progress we've made this year. The business is executing well and we are operating from a position of strength.

For the third quarter 2022, revenue was 44.1 million euros, a 140% increase from the year-ago period, driven by strength across multiple regions and products. The seasonal pattern we saw as we moved from the second quarter to the third was similar to what we've experienced in past years.

Now, let me share with you some key highlights that drove our quarterly results. First, our regional mix, now with more than 113 countries, continues to improve upon the benefit of geographic diversification. North America accounts for 22%, up from 8% in the prior year period. And Europe now represents 71% of revenue mix, down from 85% last year. year. Asia Pacific is currently 5%, one point lower than last year, and Latin America is 2%.

We expect this shift to North America to continue as EV adoption accelerates and U. S. subsidies take hold. Second, gross margins continue to be resilient in the face of continued component shortage, and 41.4% is a great outcome. This consistency is something investors have come to expect from Wallbox and we work very hard to meet our commitments the resiliency you see in our gross margin is a result of our unique offering of hardware and intelligent software most competitors compete on price we do not our value proposition is based on the consumer experience energy management easy of install reliability and design this is how we compete and as a result are able to hold pricing relatively stable.

Adjusted a bit the loss for the quarter was 20.7 million euro, down slightly on a sequential basis. Our balance sheet remains solid, with 87 million euro of cash and equivalents available at quarter end. Opening a new factory in the U. S. , accelerating Hypernova to market, and building a robust supply chain for supernova in Europe to support the demand Masud just spoke about requires capital.

The investments we've made are intended to enable us to deliver a high-quality, innovative DC fast charger portfolio that far exceeds anything you see in the market today. The components needed for these complex devices are often in short supply, so securing adequate supply in a competitive market is an advantage. As a result, we hold more finished goods, work in progress and raw materials, than we would in a normally functioning supply chain. To provide context, 5% is from accessories, 8% of the inventory is related to Ares, 16% is related to DC fast charging, 15% is for materials that are shared across the portfolio, and 55% is to support our AC products. From a different angle, 30% is finished goods and 70% is in raw material form, ensuring we have critical components.

These balances are as we anticipated and allow us to act on shared capture opportunities quickly while others struggle to deliver products. In fact, we have gained a great deal this year because we have been able to deliver chargers to customers very quickly. For our distributors, suppliers and installer customers who can't bid on a project if they're forced to wait 10 weeks for a charger, this is critical. We view this inventory valued at approximately 86 million as temporary and as a strategic in similar fashion to cash on the balance sheet, and it's taken into account when assessing future cash needs and uses. The vast majority of this balance are new products that are expected to be sold in the coming two quarters.

As the supply chain disruptions ease, our inventory levels are expected to return to reasonable levels. While I'm confident in the strength of our balance sheet, I also want to ensure that we enable the growth we are able to achieve. A company which has been doubling in size every year has substantial working capital needs and we are no different we believe that our cash combined with our inventory and planet expansion of our working capital facilities provide the capital we'll need to navigate 2023 we believe we have multiple options to adjust our balance sheet as we chart the path to positive cash flow on that topic i'm pleased to announce our participation in an exciting run program in Europe named next generation funds.

The program is designed to cultivate innovation in the region and Worldbox has been awarded almost 5 million euros to further develop fast charging technologies We ended the quarter with 36 million euros of long-term debt, which now incorporates assumed debt from recent acquisitions and other additional facilities. As of September 30th, there were more than 1,200 Worldbox employees around the world. Given the uncertain economic climate that we have spoken about today, our plan is to be more strategic in where and how we add headcount and spend OPEX. Initiatives that have near-term revenue impact will remain intact, as will functions like R&D, which is crucial to our expansion plan. To be clear, we intend to continue to invest in areas that fuel our growth while increasing our diligence on cost-controlled measures.

With that, I will now turn it back to Enric to provide you with some commentary around the fourth quarter.

Thanks, Jordi. As we shared with you on our calls in May and August, we have been closely watching EV delivery data, especially in Europe. Delivery rates have lacked EV orders for some time, and as a result, most industry forecasts have been adjusted down. Many had originally expected European EB deliveries in the 3.2 million range this year. That figure was recently reduced by 20% to 2.6 million.

Depending on the source, the expected year-over-year EB delivery growth rates in Europe for the full year 2022 are now between 10% and 20%. However, our 2022 regional growth to date here is 124%. That is eight times the rate of EVs delivered. EV deliveries on a country level paint a mixed picture. While some markets have slowed considerably, others remain resilient. But it's important to remember that while EV deliveries are softer in some of these markets, our growth, as I pointed out, has been often several times higher. These meaningful shared gains give us comfort that we are executing well and our strategy is working. Given our revenue today is heavily weighted towards residential charging and skewed towards Europe, it's not surprising that this should have an impact on the timing of sales.

However, these headwinds are largely transitory and in combination with our geographic and product mix shifts are expected to be solved in time. The long-term secular growth trends that we are benefiting from remain intact and we believe we are very well positioned to lead the transition in the coming years.

Remember, only 3% of the charging infrastructure needed to keep all the EVs moving in 2030 is installed today. Because this opportunity is so big, we remain focused on building our business to meet the future needs of the market, while being disciplined in where we spend today.

Because you've seen us more than double the size of our business every year, we continue to believe we can achieve a billion dollars of revenue in 2025. This is aligned with our stated commitment of generating positive adjusted EBITDA in 2024 and generating positive free cash flow in 2025.

Given what we see and have discussed here today, we expect consolidated revenues in the fourth quarter of between 42 and 52 million euros, or growth of approximately 60 to 100 percent year over year. We also expect gross margins of approximately 40 percent in the fourth quarter. For the full year 2022, this results in expected revenue of between 154 and 164 million euros, representing an approximate annual growth rate of between 115 and 130 percent. This reduction in full-year guidance reflects soft EV deliveries and challenges that many companies have presented recently. And while we are cautious about the remainder of 2022, we are optimistic about 2023. To this context, recent industry forecasts for EV deliveries next year in Europe and North America are 3.9 million and 1.8 million respectively.

That represents growth of 50% in Europe and 65% in North America. Our improving geographic diversification and product mix, when paired with the expected production improvements from EV makers and both the NEVI and IRA subsidies beginning to roll out, give us reason to be constructive in the coming year. Because we believe it's prudent to allow the economic climate and OEM supply capacity To evolve and continue collecting data, our plan is to provide more detailed 2023 financial expectations in the coming month.

However, today we expect 2023 revenue growth to be at least 100% and potentially as much as 120% while we continue to work towards achieving positive EBITDA in 2024. We believe this is a realistic view of the coming year, but you'll note that if component constraints is and OEMs can run production faster, there is absolute potential. We will continue to watch market indicators and share progress as we make our way forward. What we can control is going quite well, thanks to the world-class organization we've built with an experienced management team and talented employees. Capturing market share, managing our supply chain, forging new partnerships, building backlogs, achieving stable gross margin, and innovating products are what we focus on today.

These all remain on track or are exceeding the expectations we had at the onset of the year. However, we remain aware of the global economic environment and its impact on supply chains and ultimately in deliveries.

I want to leave you with a few key thoughts. First, we are confident in our ability to execute our business plan and meet our commitments to investors, customers, and partners. Achieving consistent results, including revenue growth and growth margin, is key to our philosophy and long-term success.

Second, our portfolio continues to evolve and expand and is now more complete than it's ever been. Third, the operating model we've deployed is proving to be a key advantage in the marketplace as supply chain disruption persists. And finally, our global reach is enabling us to forge key partnerships with market-leading brands around the world, which strengthens our competitive position and serves us well to continue capturing share in the EV charging market. That concludes our prepared remarks today. We will now take questions from our covering analysts.

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

Thank you so much. Hello, George. Good morning. Thank you for attending today. So that's what's coming to solve Hypernova. You know, Hypernova, first of all, has all the requirements to be eligible for the NEMI more than 150 kilowatts. Actually, it's a 400 kilowatt charger that can be starting at 150 and can be upgraded up to 400 kilowatts. It has all the specific requirements for being eligible. And the most important one, obviously, is the made in America.

There's a different percentage of made in America that has to be achieved every year. This is still under discussion when starting and which is the percentage that needs to be achieved. But starting the moment of production, and as you know, today we're already producing in Texas, in Arlington, our home chargers, we will be able to achieve these requirements. Today, more than 60% of our supply chain is being sourced locally, and it's all being assembled in Arlington, Texas. So we have lots of room, and I think we're ahead of the curve at the end. You know, we started doing this factory and preparing these products more than a year ago, even before that was a requirement.

We have a factory up and running. We have a supply chain built with local suppliers. We have the employees already there. So once Hypernova is there, which is going to be at the second half of next year, we will have a product that will be fully compliant to be eligible for this program. So, again, the message here is that we are ahead of the court to capture these subsidies and these grants.

Yeah, and George, the only thing that I would note, sorry, it's Matt, by the way, is that it's a bit early to put a number on it. And so we're very optimistic about how we're going to participate in the program. We're having very constructive dialogue with CTOs and with project administrators, but But it's too difficult at this stage to put a number in the model. And for that reason, we're conservative in our outlook for next year. That means that as we make our way through 2023 and we have line of sight to projects, we can have those conversations in Q2 and Q3 of next year. The only other thing that I would point out is that we like to talk about DC fast charging and the big opportunity there.

there's equally as big an opportunity on the AC side so there's lots of subsidies around and tax concessions on the on the automobile side which we believe will drive demand on the AC side as well which were very well positioned to take advantage of thank you Charlie thank you our next question comes from Chris Schneider of UBS.

So here the important thing and I think it's key is that we grew 140% in this quarter and we are in fact to grow more than 100% this year in a market that grew between 10 and 20% this year. And you're right on assuming that for 2023, we're already assuming constraints on the deliverance of EVs. So when we are providing this 100%, 220% growth for 2023, it's including our assumptions that the supply chain will not be solved and there's going to be issues with that. That said, we 100% believe and we are seeing that the problem on the software deliveries is a problem of delivery, not a problem of demand. We are seeing today 8 to 12 months of book orders to buy an electric car.

And proof of that is that the use-hand or second-hand vehicles today are often, when you buy an electric car, are often more expensive than if you buy them new. there's reports that are showing that in the US and in Europe, so it's not only something that's happening in Europe, but also in the US, you want to buy a used electric car, you have to pay more than it is new. So looking at the order book, looking at the delay that it takes to get a car bought, looking that we are seeing reports from car manufacturers that are increasing prices in orders that have not been delivered and the increased price of used vehicles, we believe and we are seeing that it's a problem of supply, not a problem of demand.

Demand is stronger and we order books of electric cars for more than eight to 12 months.

So it's going to be a CCS car which will work with American cars and European cars. And what we have already is a few car manufacturers that we're working with to make sure we are compatible with their model. And we will launch and we will announce soon with a specific car manufacturer that we are selling the Quasar to with them. So, yes, there's a demand from the public, but what's helping us more is that the OEMs and car manufacturers are paying interest by directional charging because it solves... It's a point of sale for them. It's becoming a point of sale because now you sell an electric car and you can power a home in case of a blackout, you know, and you can charge your car when energy is cheaper and power the home when energy is more expensive.

So they are starting to see that with this, they can sell more cars. So we have these conversations, and not only conversations, we are working on preparing launches with some of these car manufacturers for the new product, Quasar 2. So it's definitely accelerating the interest for Quasar 2, and soon I hope I will leave you new soon about this.

Thank you, Henrik. Really appreciate the color. Thank you.

So regarding the SunPower Hunters with GM, we are not part of this project. So we're actually part of another project with KD Homes and the Department of Energy that we commented during the call. And the idea is that Quasar 2 can be part of a micro read of many houses. So there's only many houses in this project. And in case that there's a blackout, Quasar 1, Quasar 2 is part of this micro-lead to provide energy to the different houses.

Okay, I will let Masut answer this one.

Yeah. In terms of channels, if you look at the overall global distribution of revenues by channel, I don't necessarily see any specific material changes for next year. That doesn't mean in specific geos that it won't switch. If you look at the different geographies that we have, there's 13 countries with a very significant revenue contribution. So the top 13 countries is around 85%. Within those countries, there could be some shifts. If I would have to highlight one channel that probably is going to gain some importance, it will be the distribution channel. especially on the AC side simply because if the on AC as we as the market matures the distribution channel which is which just amplifies our sales force gains a bit more importance because it just allows us to get more granular right and then on the DC FC side so DC fast charging CPOs that will be an incremental to our revenue where we're charge point operators become a significant percentage of our revenues next year which they were not this year so those are the only two material changes I would highlight.

Ben, the only other thing that I would add on the SunPower question is that you're going to see lots of different trials take place over the next couple years. And you're going to see lots of different architectures and configurations. And I think that we have lots of good partnerships, a lot of very interesting, successful partnerships that will play out very nicely. But it doesn't mean that SunPower is not going to participate in other trial programs with folks like GM. So we don't view that as a negative at all. We think that our position is exceptional and we have a great partnership with them. Okay?

Charlie, next.

Charlie?

That's correct. That backlog on home charging is not as visible, right? These are sort of quarter-out purchases.

Yeah, so we have a strong pipeline of a few thousand units, and we already have fixed orders to be delivered during Q4 and the next year from some of the partners that Masood commented. We expect next year around 20 to 30% of the revenue to be fast charging. Most of it is going to be supernova, and a small percentage is going to be maybe 5% or a little bit more. It's going to be hypernova. So the biggest part of the fast charging for the next year is going to be supernova.

And the rest is going to be very similar to now. 10 to 15% hardware and services, sorry, software and services, and the rest home products, which most of them are AC products, and around 15 to 20%, again, of Quasar midirectional chargers. So to summarize, 20 to 30 fast charging, 10 to 15 software and services, 10 to 15 Quasar and the rest AC home charging products.

But for 23, with the new capacity ramping up in the U. S. markets, the lower sales impacted Yes, so we exceeded our gross margin expectations so far. We were expecting 40 and we've been always about 41%. With the acquisition of ARIES, we have a potential upside for gross margin increase. And that's something we have not been able to see this quarter because all the additional stock of raw materials we still have in our balance sheet. So we are consuming through the stock we already have, which were purchased before we acquired ARIS. So that's having, still we are not seeing the impact of ARIS. So we have a very positive trend, which is the acquisition of Paris, which will impact in improve our gross margins.

But then you're right. We are seeing a potential impact on new products that we are launching and we are ramping up, which are Supernova and Hypernova, which will have the first six to seven months of the launch of the product, a lower gross margin, given the fact that every time that we launch a new product, we have a lower gross margin. But we will give you more detail, but I think overall we are in a very good position to be working on the gross margins we expected.

Because again, thanks to ARIES, thanks to improvements on cost efficiencies and design to cost and increase of volumes, we will be able to manage a potential reduction, given the fact that we are launching new products and will become an important percentage of our revenue. So I think overall, we will compensate both effects.

Thank you. Charlie?

Yes. So thank you for the question. We have an order that is going to be delivered next year for the U. S. , a few units, and multiple LOIs that are adding to the pipeline of Hypernova, all of them for the U. S. To be clear, Hypernova is a product that we are first launching in the U. S. We expect to have it in the U. S. the second half of next year and in Europe as we finish 2023. So we are prioritizing hypernova in the U. S. before Europe. In Europe, with the 150 kilowatt supernova, it will be more than enough to cover the market needs next year. And in 2024, we will have huge hypernova in Europe.

That doesn't mean that 250,000 are going to come off the production line.

Yeah, yeah. So I think that that number is still appropriate. And remember, that's a pure AC number. But our product mix next year will be mixed between AC and DC. And to explain, give a little bit more color about Arlington. So we have, for the people that joined and visited the factory a couple of weeks ago, we could show that the factory had, it was half empty, you know, because we have split the development of the factory in two parts.

The reason why we did it this way is to be able to increase capacity once we are above our capacity. And also to be able to reduce CAPEX now. So we have invested enough to be able to produce 250,000 chargers a year with this phase one. We are limiting CAPEX and we are taking half of the space of this facility.

And once we are at 100% of capacity, we will double our space and we will be able to achieve up to 1 million of chargers a year of capacity. So, Arlington still has a lot of room to grow, and we did intentionally to make sure we didn't invest all the capex now, so we are able to delay capex in one year or two years.

Well, Charlie, I think that that's all the questions in the queue, so that's going to be the last one for today. But thank you all for joining us today. We hope you found today's call a good use of your time. So please note that we're going to have several upcoming investor events during the quarter. So reach out to us if you're interested in meeting with management.

You can catch us at investors at walbox. com. Let us know if we can help you in any way. Have a great day, everyone.