Wallbox (WBX) Q3 2024 earnings call transcript

And now let's turn the call over to Michael Wilhelm from Warbox. Michael please go ahead. Earlier today we issued our press release announcing results from the third quarter ended September 30th 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 risk 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 the annual report on Form 20F for the fiscal year ended December 31st, 2023, filed on March 21st, 2024.

We will be presenting on other financial statements in IFRS formats that reflects management's best assessments of actual results. Also, please note that we use certain non-IFRS financial measures on this call and recommendations of these measures are included in the presentation posted on the investor section of a website.

Also a copy of these prepared remarks can be obtained from the investor validation website under 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 Enric.

Thank you, Michael, and thanks everyone for joining us today. Before we discuss the highlights of the third quarter 2024, I would like to take the time to put in perspective what will exist today in light of the current EV market setting, especially in Europe. Due to late, up until the end of the third quarter, we had revenue of 126 million euros. We reflect a 26% growth compared to the same timeframe last year.

If we look at the EV market in the main region we operate in Europe, North America, and rest of all, which are all countries, excluding China, we have have grown the market significantly as the EV market year-to-date only grew 3% year-over-year. In the same period, we have reduced labor costs on topics by 14% and capital spending by 48%.

Even after incorporating EVL, clearly reflecting how we are improving our efficiency while continuing to grow and develop our products.

We are a global leader in electric vehicles charging and energy management solutions. We have sold over 1 million charges in more than 100 countries, and we believe that we continue to play a key role in the transition towards electric mobility. It is clear that this transition is happening, but that it is going through a much slower cycle towards muscle options, and this is impacting the entire industry, including our competitors.

We continue to work hard in adapting to the continuous changing factors ranging from regulations, subsidies, new technologies, devian market, customer programs, product requirements, the volatility on our way to become leaders of a more mature industry is a fact and it impacts our results.

We already have been doing a lot in the last two years, but I would like to share with you key initiatives we are working on to remain agile against this market backdrop and how we plan to thrive.

First, we have adjusted our organizational structure to be business unit-driven. The core business units are home and business and fast sourcing, including software solutions and manufacturing.

Each business unit has different types of customers, requires different kinds of support, and has different sales cycles. With this new structure, we create a more effective approach to each segment we operate in, allowing us to unlock the full potential of our solutions, shape a more focused customer experience, align resources more efficiently, and solidify our path to mobility.

Second, we continue to optimize the organization according to the current market environment and as we look to the different devices.

This means creating visibility on the top-line scheme, and we have been improving this by doing detailed analysis of our selling best of sell-out data, speaking with our key customers and strengthening our pipeline. Based on this demand, we are matching the cost-based of the organization to support our path to profitability and cash generation. The aforementioned business unit structure will play an important role here, where dedicated focus will help identify the best and most efficient way to serve a particular segment.

Third, we have clear action plans to improve our growth margin across all our product groups. Due to our efforts to increase visibility, I just mentioned, we believe we are in a better position to optimize our procurement process and manage our inventory levels. There is a detailed bill of materials analysis ongoing to further identify core reduction opportunities, and we are in the late stage of entering into strategic partnership agreements with industrial partners to improve our sourcing.

Lastly, on top of the revenue we have visibility on, we have plans to further expand our sales with an improved commercial strategy and introduction of new products. As we remarkly developing differently, region by region, country by country, and segment by segment, we are realigning our commercial strategy to ensure we optimize our sales channels and best capitalize on the opportunities in the market. Besides, we aim to derive revenue by continuously innovating our existing product portfolio and with the commercialization of new products.

Examples of new products that are expected to come into commercialization soon include the Quasar 2 and the iRIT-certified Supernova 220, both segments by directional charging and public DC-fast charging in Germany open up new markets in which we didn't operate previously or only limitedly. In Germany alone, commercial projects more than 150,000 public DC chargers to be installed between 2035 and 2035.

Now, we will go into the highlights of the quarter and share our perspective on the market. Afterwards, Luis will offer a closer look at our financial results and our key financial metrics. And finally, I would recommend to close the conversation and provide you for guidance.

Q3 revenue was 34.7 million euros, up 7% year-over-year driven by strong AC sales in North America, but impacted by a software marketing Europe for all product categories and due to a one-off revenue charge of 1.6 billion euros from a return related to historical, bill and full agreement with a specific customer. We are excited with our growth in North America.

The European market growth was too good to everyone's expectations and these impacted our results. For European DC, we now see a similar trend as we previously saw in AC, where our CPO customers have been building up inventory as their focus has shifted from highly accelerated rollout towards profitability.

In North America, the demand for the supernova, 108 in North America, remains steady as we continue to ramp up sales efforts and add new partners.

As we are starting from a smaller base in DC than many of our competitors, we see ample opportunity to grow as we mature our position in the market. In total, during the third quarter, we deliver more than 38,000 AC units globally and 169 units of DC during the period.

Prof margin was 23% in the third quarter, heavily impacted by one-off inventory provision. As we continue to develop and improve our different product families, certain components become obsolete or much slower to sell, so we choose to provision them, setting the business on the right-putting for future success. It is important to highlight that this is not a cash-out.

Excluding this impact, the growth margin was higher and closer to historical results. We keep pushing for unmatched growth quality and operational excellence to growth margins in the range of 38 to 40%. This will provide more detail on growth margins shortly.

On a contrary, at a group level in QC2024, we saw a light, year-over-year reduction in labor costs and OPEX, 2% now, continuing the trend in core reduction.

Again, it is important to remember that we were able to achieve these core reductions despite AVL's contribution to our cost base.

We see additional opportunities to reduce our cost rates as we continue to optimize operations across the group and leverage synergies.

Third quarter adjusted to be the loss landed at 21.8 million euros. This quarter brought improvement trends in the last quarters due to the inventory provision.

We see this as a one-off quarter with a unique sales adjustment and inventory provision on our path in making the business profitable.

For future quarters, we expect to resume top line and most importantly significant margin accretion. They are confused to be proactive with new products, new commercial efforts, core reduction and growth margin improvements, which are not yet reflected in the numbers we report today. But which we expect to benefit from in the near term.

For the third quarter of 2020, Euro contributed 22.9 million euros of consolidated revenue or 66% of total revenue. And we mostly with 1% from the Euro-over period.

Compared to the 13% decline of the AV market in Europe, this was significantly better. North America continues to show strong progress with 45% year-over-year growth, while the AV market in the region grew with 4% and contributed 9.7 million euros or 28% of total revenue.

We are excited to see our progress in the region and how we are leveraging our complete portfolio in home, business and fast charging, which we now have in place. APAC contributed 1.2 million euros or 4% and LATAM was approximately 800,000 euros or 2%. We see clearly an increase in relative exposure to the US vs Europe, as we further diversify our unique and global geographical footprint.

AC sales of 23.7 million euros, including AVL, represented approximately 68% of our global-consulated revenue. The AC portfolio remains the most important revenue weight category for World War, containing both the home and business segments.

We start at home and we continue to leverage our strong position in this segment as announced partnerships are starting to be off.

One exciting new partnership is with ND as World War has been chosen as the all-evit charging provider for their new EV charging offer, my smart charge. In France, there is a specific regulation where chargers require an integrated connector without a cable and this makes World War Pusser plus socket the perfect solution for World War. This is another example of how our broad product portfolio is allowing us to capture opportunities in different markets. In parallel, World War is making quick ground in the business segment with the EM4 and Pusser Pro.

We are seeing up new distributors and leveraging existing partners with the aim to optimize the cross-selling opportunities in our sales network.

DC sales were 4.4 million euros, representing 13% of the revenue in the third quarter and was impacted by an expected order related by a customer due to exciting metrics. In the DC segment, the sales hackers are longer and the 4 can create volatility between strong quarters and slower quarters. As a trend, we do see the charge point operators are currently focused on profitability and network utilization much more than expanding the network by reach or by port deploy.

This means that charge point operators are working through existing charging inventories and ordering less frequently. However, we continue seeing new customers and further expand our customer base in operations. So far, services and others contributed 6.6 million euros for the third quarter, representing 19% of our world of our revenue. These activities continue to be solid compared to last quarter with electron maps and our public software activities showing 55% of our world of our growth.

If we exclude the inventory provision impact mentioned before, the growth margin on a product level was solid. We also see opportunities to improve as we introduce new cost out versions of our products. With the focus on quality, reducing our bonds cost and leveraging our strategic partners to improve our procurement process, we see upside to the 38% growth margin target in the future.

We believe this improvement will be accentuated further when the market demands larger volumes. Last time in school, we mentioned that we remain positive of our long-term growth and the future potential of the market, which we continue to do so. However, it is clear that the transition to this will take longer than everyone expected and that current growth is low.

As reported by our motion in the third quarter, there were 1.47 million emissions in our markets, which are North America, Europe and rest of the world.

If we will compare with the same period last year, this represents a 2% decrease in those markets combined. So our long-term view on the transition and the opportunities that come with it remain solid and we are more optimistic as we enter into 2025. Hundreds of billions have been invested by criminal factors. New more affordable review models have been introduced.

Charging infrastructure continues to be installed and, in the EU, new regulations come into effect. We have a diversified position both geographically and commercially, making us less vulnerable to local or regional volatility.

At the same time, we see that competition without a similar diversified position and scale is a struggle, increasing our market share and creating more opportunities for us. We believe that we are only at the beginning of the adoption curve and in the meantime, we will continue to focus on what we can control. There are clear help within the industry that we are focused on maximizing our growth and achieving long-term profitability.

Luis, I'll turn it over to you to comment further on our financial details.

Thank you, Andriq. Good morning and good afternoon to everyone. Our third quarter results are not as we expected but have also been impacted by unique factors.

The revenue for the quarter generated was $34.7 million, representing a 7% year-over-year growth. We continue to grow in North America and other selected markets, but we saw this growth offset by a softer market in Europe in both AC and DC.

Besides the aforementioned, we have recorded a one-off revenue charge of $1.6 million due to a return with one specific customer.

Absent this impact, we would have had double-digit growth year-over-year. With 23%, the growth margin is lower than expected. This has to do with the provision Andriq talked about before, which we decided to introduce after a careful review of our inventory.

We keep developing and improving our products to match new requirements and service new charging segments. As a result, some components acquired at the peak of the supply change shortage post-COVID data are at risk of not being used in the new versions of our products.

The additional inventory provision amount for the quarter is 4 million euros. This is not a cash-out nor a ride-out yet. We see an opportunity to sell some of these components and recoup part of the initial investment. We do not expect material access and obsolete provisions in quarters to come following the careful inventory review.

As already highlighted by Andriq, if we excluded this additional provision, the growth margin would have been closer to our target frame. Q3 labor cost and topics were down 2% year-on-year. Costs are decreasing despite the AVA position, which showing wallbox perimeter in Q4 of 2023.

Consolidated adjusted EBITDA loss for the quarter was 21.8 million. Absent of the aforementioned provision, we would have sustained a general sequential adjusted EBITDA improvement as the core growth margins remain intact and we continue to reduce cost. Profitability and cash generation remain our top priorities.

We ended the quarter with approximately 71 million euros of cash, cash equivalents, and financial instruments. Long-term debt was approximately 84 million euros at the end of the quarter. The last few years we have been investing in making ourselves future-proof. We have a complete portfolio to cover markets globally and state-of-the-art manufacturing facilities with plentiful capacity. Considering our existing capabilities to facilitate future growth, topics excluding capitalizer and the was again purposely very light with 1.7 million spent in the third quarter. This represents a 60% decrease compared to the same period last year.

In Q3, approximately 340,000 euros was spent on property plan and equipment. We are expecting less than 10 million euros of investment for the full year.

We continue to reuse our inventory and our goal is to continue bringing inventory down in quarters to come. This quarter was significantly impacted by inventory provision discussed earlier. Inventory total 76.5 million euros, which is a 10% reduction sequentially.

With all the efforts we talked about today, we set wall walks for success and in a strong position despite the market battle. The goal is to align the cost structure to the current demand and we can do that from a position of strength with sufficient cash balance. As part of the continuous optimization efforts, it is key we focus on our core activities and therefore we are also reviewing statistical therapies of non-core assets to conserve cash. As CFO, I am 100% focused on getting the company to profitability and cash generation as soon as possible. And Rick, I'll turn it back to you to provide some closing commentary.

Thank you, Luis. Before I share with you my closing thoughts and our expectations for the fourth quarter, every today we announce the resignation of Anders Peterson as non-executive chairman of the board of directors and the appointment of Beatriz Gonzalez as his replacement. We would like to thank Anders for all his contributions and go to regulate Beatriz with her new role. Now, I would like to leave you with the following.

It is clear that the current EV market is volatile and that this is impacting our performance. We understand that in these times visibility on the longevity of the company is key. For that reason, we share with you today the key initiative allowing us to continue building out our leadership position in a sustainable way. We have been educating key strategic initiatives in the past quarter which include expanding in new countries and segments, securing new strategic partnerships, reducing costs and strengthening our balance sheet. As part of our initial efforts, we are now adjusting the organizational structure into a business-driven model to better align the sources with our product portfolio. Improving visibility on the top line growth is identifying opportunities to expand those margins and continue to drive sales.

The main objective is to match the cost structure with the current demand to drive our path to profitability and car generation. We are in a multi-decade transition and we are laying the foundation right now. We are executing well. We have a leading position and we are building a company that is being set up for success. From that perspective, we want to provide guidance on what we expect for the fourth quarter. Revenue in the 40 million euros to 45 million euro range representing an approximate year-over-year growth rate between 23% and 38%.

Growth margin back into the 38 to 40% range. Combined with continued improvement costs, expecting negative adjustments will be between 7 million euros and 10 million euros. With that, we are raising the question from our enemies.

Thank you for the question. This is Enric. So, I think the key and what we are trying to achieve, and as I said before, no, it's obviously the profitability and the cash generation. And I think the good news is that we are growing in key markets like North America, where we are growing 45% year-to-year. But other markets like Europe, we see a market that it's very volatile. And last quarter, we saw a 13% decrease on the EBIT market. Despite that, we were able to grow, which I think it's very important. And it shows that we are constantly increasing the market share, which at the end, it's what we want. In this moment, is where we want to increase the market share.

Our approach now is instead of thinking that we will catch up with revenue, which we believe that the revenue will grow and we will be able to continue capturing more market and more growth at the end. Anytime that a company in our competition straddles, it's more market we get, it's more sales we get. So, I think even if the market is not growing as expected, we still have opportunities to continue capturing more market share and grow sales.

But our approach, right now, it's okay, we have to adapt our structure to the revenue. We are seeing for the next quarter, which is this 40 to 45. And with historical revenue, we've been having, obviously, we see an upside, obviously, because we see the opportunities to grow. But that's the key. And at the end, we will be profitable. At the moment, we achieve this, we adapt to these levels. So, maybe as a data point, we provided already the Q4, which, you know, we are doing huge steps towards profitability, while improving 50% versus Q2, in the best part of the range. But one thing is very important is 2025 as a year, has to be a profitable year.

And that's what we expect. We expect a positive year. And as a data can give you, it should not take us more than two, three quarters to get the company into the cost structure, given the current revenue. And as I said, we see upsides in revenue. But right now, we want to take an approach where seeing that the market is very volatile. And, you know, some, we are able to capture the market that is growing. But, you know, we want to make sure we are committing to something, given the volatility of the market that we can achieve. I think you mentioned that there may be some inventory on the DC side. But what about AC?

I mean, that's been a pesky issue that you've had for several quarters. Is there still inventory, in your opinion, in the European theater? And I think that in the US market, you're growing inventory through your Generac channel. That's a bunch of questions. But am I accurate? Is there any inventory left in Europe? No, I don't think so. I don't think in AC, there's an inventory issue right now.

And the clear proof of that is that we're performing in every country and segment, the even market growth. So, you know, not only we are not, we see that data in the CELINs, allowed data, but that's not inventory challenge. Obviously, we are in the North America, increasing with new customers, a new partners. And as you say, Generac, it's a new partner. We're seeing very nice sellout from Generac, but they also have been selling to their dealers, and that creates some inventory in their dealers. But Generac is also making sure they don't have too much inventory.

To give you an idea of the success of this deal, Generac has become in two quarters, our top five customers in North America, and one of the top in the wall. And I think this is a great data point on how this is working. Every quarter we are seeing orders, and we are adding more products in our portfolio. And as I also say, in the script, we see not only particular increased sales with this partnership we are doing, but also to reduce cost. We have some key statistic partners, not only Generac, other big OEM customers we have, where we can leverage their purchasing power to improve our cost and improve our margins at the end.

So as the industry is becoming more mature, our relationships with our partners are becoming more mature, are becoming, we have bigger volumes obviously, but also more ways we can have synergies and support each other. And a clear success of that is being able to expect to continue improving our gross margin, and the growth we are seeing in North America.

Perfect. Thank you. As a reminder, if you would like to ask a question on today's call, please dial star followed by one on your telephone keypad now.

So when we look at, well, Ben, thank you for the question. So this is a quick question. When we look at the different sources in different markets, we expect a growth everywhere in North America and in Europe. We expect to be fueled by new regulations on emissions for the fleets. I know there's a lot of noise right now if these relations will come or not come or these fines will come. We believe it will come no matter what. Maybe the fines or the cost is going to be softer in our opinion, but no matter what, we are seeing car manufacturers in Europe preparing for that. So we've seen a delay on the push for sales for EV at the end of this year, and expecting a stronger first half of next year, because at the end what matters is the EV sales you make during 25 to achieve this regulation.

So that's one of the reasons we also expect a strong second first half of the next year, because some car manufacturers, if they could choose, would prefer to sell EVs in January instead in December to achieve these regulations. Now that's one thing that we see positive for the next year. And North America, there's a lot of new models coming, which we believe also will impact. So our opinion, we can maybe share later, but we think we can be above the 10 to 15% low for EV market. But the way we are building our organization and our guidance and everything, we are considering a flat market, and we are making a company to make sure it's profitable in a flat EV market.

Why we are doing that? Because we believe that's the way we can be quickly profitable. And if the market will perform, so we believe we will overperform, you know, we will make more money at the end, we will be more profitable. But we are adapting the company to a flat market just to be ready in cases, some unexpected thing. But our forecast right now, and what we see is a growth, especially in the first half of many years in Europe and in North America, due to new models and changing regulations.

Just on the point of your manufacturing footprint, because you talk about both from a geographic standpoint, if it still makes sense to have manufacturing in the US as well as Europe, and then as well as any thoughts about moving to more of an outsourced manufacturing model. Thank you guys. So this is an interesting topic, you know, now with the business units, it's a thing we've recently started doing now, but we give us more visibility on cost and cost allocation of the different parts of the business. And we have these kind of questions all the time. We believe that having our own supply chain still give us an advantage. And I think, you know, we seeing the North American market as a key growth vector for us, and we are doing this quarter over quarter.

It's key that we have our own manufacturing capacity there, and, you know, there might be changes in regulations that also give us an advantage, the fact that we are an North American manufacturer. So we think that keeping this factory in North America and our one in Barcelona, but especially the one in the three decades, it's a key advantage for us. So we want to give that. The answer on if we will choose a third-partner factory or not, it will depend on cost and profitability. Right now, we still see a key advantage. We have interesting rose margins. We also have vertical inter-electronics. You know, we have this company called RS that we acquired a couple of years ago that makes our PCBs and our electronics.

The cost of our product is 50 to 60 percent electronics, and we control that part, and we get this rose margin. So with these strategic partnerships, we are doing with different partners for purchasing at a better price component, and we controlling our own manufacturing and supply chain, I think we can really exceed the 38 to 40 percent target in the future. So that's a focus, apart from growing sales and producing costs, it's increased margin, and controlling our own capacity and supply chain is key to achieve this margin improvement.

Yeah, maybe the only thing I add to that is that we've already incurred that capital expenditure, right? So when you look at our footprint, we're ready for the growth to come. It's not coming in the short term, and as Nick mentioned, we're going to stay consistent with kind of a flat-ish heavy market. When that growth comes, we already have those facilities and those products, so we are in a very strong position to capture the growth when it comes.