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spk00: Hello everyone and welcome to Warbox's fourth quarter and full year 2022 earnings conference call and webcast. My name is Charlie and I'll be operator for today's call. At this time all participants line have been placed in listen only mode to prevent any background noise. After the speaker's remarks there will be a question and answer session. Analysts who wish to ask a question can place themselves in the queue by pressing star followed by one. I'll now like to turn the call over to Matt Trachtenberg, Warbox's Vice President of Investor Relations. Matt, Please go ahead.
spk08: Thank you for joining today's webcast to discuss Wallbox's fourth quarter and full year 2022 results. This event is being broadcasted over the web and can be accessed from the investor section of our website at investors.wallbox.com. I'm joined today by Enrique Associon, Wallbox's CEO, and Jordi Lines, our CFO. Earlier today, we issued our press release announcing results from the fourth quarter period ended December 31st, 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 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 U.S. Securities and Exchange Commission, including in the post-effective Amendment No. 3 to our registration statement on Form F-3 filed on December 14, 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.
spk11: Thank you, Matt, and thanks, everyone, for joining us today. In addition to reviewing highlights from the fourth quarter and full year 2022, I will also discuss the rational and intended impact of the recently announced cost reduction program and offer some recent commercial wins. Jordi will then step in and offer additional detail on our quarterly performance and some recent fundraising transactions, as well as some guidance on expenses and capex. And finally, I will return to the current market outlook and how it impacts our guidance for the first quarter and full year 2023. We will end by taking questions from our covering research analysts. We have a lot to get through today, so let's get started. Looking at the full year 2022, I thought it may be helpful to revisit a few of the wins we saw last year. Because while it's important to focus on what's ahead, it's equally important to celebrate and recognize your wins. And there were a lot of wins in 2022. We expanded into an additional 21 countries. We announced strategic partnerships with leading global brands like Nissan, Fisker, Leaf, and Polaris, and expanded existing partnerships with Uber. We launch new distribution channels like City Electric, Svea Solar, and IKEA, and Napa Auto Supply. We strengthen relationships with utilities like ENI, EDF, B-Charge, Atlante, and Iberdrola. We open a state-of-the-art manufacturing facility in Barcelona, which allows us to immediately begin shipping our new DC public charger, Supernova. While bringing one new factory online is a difficult task, we also opened a second factory, this one in the U.S., to provide products for the North American market. That facility opened in the fall and continues to ramp up production, putting us in an enviable position to qualify for meaningful government investment. We acquired two attractive companies, Aries Electronics, a leading PCB supplier, and Coil, a North American installer, both of which provide competitive strength. and we navigated a challenging supply chain without ever being in out of stock position. In summary, 2022 saw its highlights and its challenges, but we believe the market of performance illustrates we're executing well and we are well positioned. Revenue for the full year 2022 was approximately 147 million euros, representing growth of more than 100% over 2021. Crossing 100 million euros of revenue at our age is something we are very proud of. There are not many businesses of our size who can point to that type of growth, but we can, and we did. And while we are proud of what we have achieved, we are even more excited about what's ahead. 2022 market share gains in both North America and Europe were solid, as illustrated by our ability to grow consolidated revenue four times faster than the overall market. As you can see from our regional competitors, this is not easily achieved. Execution versus the competition has been strong and will remain so. Of that, we are confident. But performance versus your expectations is important as well. So we are working to better understand how our customers behave in volatile economic environments. Attractive growth margins are something we've been able to deliver, and we deliver 40.5% on a full year basis. Introducing several new products with drastically different financial profiles, customers, and market drivers adds a new level of complexity, but we are confident that in the long run, we can move margins back into the range you've come to expect from us. That operational leverage is a critical element in our path to profitability, and you will hear more about today as well. The fourth quarter finished slightly below our expected range, impacted by three main drivers. Channel inventory. Our partners had sufficient inventory to service others without replenishing as they normally would and their desire to remain conservative for the foreseeable future. That channel inventory was a result of second half 2022 expectations within the industry that did not materialize. Remember, they often buy for more than one quarter forward and forecasts in Q3 were still at 3.3 million European EV deliveries. Second, geographic mix. While EV deliveries in Europe have a strong finish to the year, some of that strength occurs in markets that we have lower shares. While we are working hard to change this, it takes time. And third, seasonality. Q1 is always down sequentially from Q4, but the ordering pattern was unusual closing the year. As we made our way through the fourth quarter, it became clear that customers were more cautious on Q1 EV deliveries than we expected. And in December, the Bloomberg New Energy Finance full year 2023 European EV delivery forecast decreased by 23%, from 4 million to 3.1 million units. Digging deeper, the Q1 European delivery forecast now expects half the volume seen in Q4 2022, and no volume growth over this time last year. That low growth in Europe is not expected to persist, but clearly impacted customer behavior in December and January. Q4 revenue of 37.3 million euro grew by 44% on a year-over-year basis, a reasonable result when compared to 37% year-over-year growth we saw in the quarter from North America and Europe combined. Gross margin of 35.7% was below the expected range and impacted by both unfavorable product and channel mix. We saw more DC relative to AC, driven by what I just described in Europe. Our DC portfolio brings a lower margin today, and we sold more to OEMs who traditionally receive better pricing. Supernova continues to ramp up, but brings with a lower margin profile. However, Gen 2 of Supernova already has a better margin profile. And as that is delivered in the first half of 2023, some of that will be alleviated. Our fourth quarter results were fueled by exceptional strength in North America, growing revenue by 425%, and key markets, including 700% growth in Israel, 185% in Spain, 133% in Belgium, 117% in France, and 76% in Italy, all on a year-over-year basis. We continue to make great progress in Asia-Pac and LATAM, growing at 104% and 360% respectively, both of which are early in the RIMI transition. We continue to cultivate the relationships we establish in these young markets and look forward to them contributing materially in future years as EV adoption ramps up. North America now contributes 25% of total revenue, an increase of 18 percentage points over the prior year period. This exceptional growth drove in part the geographic mix shift from Europe, which now represents 66% of revenue. Asia-Pacific provided 6% of consolidated revenues in Q4, and Latin America was 3%. This meaningful shift is both deliberate and helpful as we continue to diversify both our geographic and product mix. Our AC charging portfolio represents 72% of our total revenue, with fast charging at 13% and the remaining 15% provided by software and services, a growing portion of which is recurring. And finally, we sold more than 48,000 chargers in the quarter, Quasar revenues doubled from the third quarter and public DC volumes almost tripled sequentially. As we've said in the past, as our public charging portfolio ramps up, you will see the impact of higher prices and lower volume on consolidated results. In addition to the financial performance achieved in the quarter, I wanted to highlight a few other items worth noting. First, the White House recently released the National Electric Vehicle Infrastructure Standards and Requirements. and mentioned Wallbox as one of the few who has made the necessary investments to help drive this initiative. While there were a number of important elements included in this document, the one that we are most pleased with and impacted by is that of Buy America requirement, which stipulates that final assembly must occur within the U.S. immediately with no transition period. This is something we were deeply involved with, and we believe they made the right decision. The purpose of these public investments are to both electrify the roads and encourage U.S. business activity, i.e. create jobs. Wallbox is extremely well positioned to participate in these subsidies today given our Texas facility, and we look forward to bringing Hypernova to market later this year. This is not a common position among our competitors, and many are scrambling to build factories. This takes time. time and money that we invested in beginning on 2021. So we believe we have an attractive head start. And already we are beginning to see real interest from customers for Hypernova. Today, we have more than 300 units on LOI representing nearly $30 million. As we continue to build that order book, we will provide more color. Second, remaining on the topic of public charging, we continue to ramp up production wealth. To give you some context, we anticipate shipping several thousand units of Supernova this year. But ultimately, on a global basis, we believe we have the capacity to produce 20,000 units of both Supernova and Hypernova combined. That production capacity, with all appropriate caveats, put us in a position to meet the massive wave of demand we see in the US and globally. The capacity is there, and the demand will dictate how quickly we ramp up production. Supernova which we are in the process of rolling out Generation 2 already, is seeing encouraging uptake. Gen 2 includes a split-charge 150-kilowatt CCS configuration, something that has been in high demand from customers. Pipeline for units continues to grow and totals several thousand units. Third, Douglas Alfaro, who many of you met on our Q2 2022 earnings call, has accepted the role of Chief Business Officers. Douglas has been with us since 2018 and has served as general manager of our North American business. Having grown that market from nothing into what it is today, our largest geography, we are ready to give him his next challenge. Douglas will bring the same rigor and process that he deployed in North America to our global business, and I'm looking forward to seeing what he can do. He will join us on the next earnings call to give you a better understanding of our global sales strategy. And fourth, there continue to be commercial wins and partnerships that you should know about. One worth noting is Sam's Club. This massive retailer, a part of Walmart, will soon carry Pulsar Plus in 50 stores across the U.S. This exposure is very valuable and is another proof point that major names are trusting Wallbox to provide innovative EV charging and energy management solutions to their customers. Of course, there are always commercial wins that you don't hear about. This occurs for one reason or another, but respecting our customers' needs is our first priority. One that we are especially excited about is a new partnership with a very large European OEM. They have agreed to allow Quasar 2 to discharge their vehicles. This is important for two reasons. One, bidirectional CCS charging requires acceptance and approval from the OEMs. Their protocols must be obtained for the discharge to occur. So this illustrates the trust we've built with major brands for our innovative technology. And second, acceptance by one often leads to others. So we hope to build momentum following this agreement. These new customers also include a large transportation and logistic provider who has requested a comprehensive offering including chargers, series, our commercial energy management application, and services in Europe. or a major OEM that has selected Wallbox as their preferred provider of hardware as they expand their EV offerings. You will get more specifics about both of these soon, but know that while you may not read about them in the news, we are doing exceptionally well in winning competitive opportunities. In summary, the conversations we are having and opportunities we've won give us confidence in our strategy and want you to share in that as well. I also want to share more detail on the cost reduction program we announced in January. We did not make this decision lightly, but recognized that actions were necessary to ensure the long-term health of the business. The factors that drove this decision are largely related to lower market growth within Europe, which was impacted by lower EV deliveries than expected at the start of 2022. As you will expect from a responsible company, when a downward revision to revenue occurs, It must be accompanied by an adjustment of cost as well. That cost adjustment will result in removal of approximately 50 million euros of OPEX and employee benefits, essentially payroll, this year from the previously expected levels. To that end, we've been very deliberate in where this cost reduction will occur. Preservation of growth, innovation, and market position is critical to the future success of Wallbox. So we evaluated the investment profile project by project, function by function. The areas impacted by these cost reductions predominantly have longer-term horizons. And while that is important, given the market variability we experienced over the last year, they will be paused for the foreseeable future. You should not expect these actions to impact revenue. As a result of these actions, we expect to drive profitability through the business almost a year earlier than originally planned. Therefore, we anticipate break-even adjusted EBITDA in the fourth quarter of this year. and positive adjusted EBITDA on a full year basis next year. Over time, we believe that consistent gross margins of approximately 40% combined with this new cost structure can drive adjusted EBITDA margins of 10% in the mid-term and 20% over the long term. You've likely heard us talk about three pillars, cash conservation, achieving profitability, and growing in excess of the market. This cost action which was completed yesterday, is directly aligned with two of the three. What you see today is a company that is establishing processes and spending capital in a responsible manner. And I'm excited to see Wallbox enter this new phase. What you have come to expect will continue, capturing market share by offering innovative hardware and software in a young and fast-growing space. It's a process and change that our companies must go through. And we are looking forward to showing you how successful we know we can be. Jordi, I will turn it over to you to comment further on financial details.
spk05: Thank you, Enric. Good morning and good afternoon to everyone. Given the continued challenges the EV market is experiencing and the supply chain disruptions that we work through, I'm satisfied with our quarterly results and know that 2023 will be an even better year. For the fourth quarter of 2022, Revenue was 37.3 million euro, a 44% increase from the year-ago period, driven by volume, new products, and M&A, slightly offset by end-of-year pricing discounts. The seasonal pattern we saw as we moved from the third quarter to the fourth was disrupted by the channel inventory dynamic Enric discussed earlier, but we anticipate that being solved in the first half of the year. Easy deliveries improved quarter over quarter, but still fell short of earlier estimates. However, our goal is to grow in excess of the Europe and North American markets combined, and we achieved that once again in the recent quarter. Now, let me share with you some key highlights that drove our results. First, our regional mix. Now, with more than 113 countries, continues to improve upon the benefit of geographic diversification. North America accounts for 25%, up from 7% in the prior year period. And Europe now represents 66% of our revenue mix, down from 88% last year. Asia Pacific is currently 6%, two points higher than last year. And Latin America is 3%, up two points as well. We expect this shift to North America to continue as EV adoption accelerates and U.S. subsidies take hold. Second, gross margins on a full year basis of 40.5% were resilient in the face of continued component shortage, but in the quarter were impacted by product mix shift from AC to DC. As we have said all year, as Supernova ramps up, we will see downward margin pressure, and this did occur. but it did occur more than anticipated, largely due to the lower mix of AC sales in Europe. We continue to aggressively cost-engineer Supernova, now in Gen 2, and believe we can make meaningful improvements this year. However, just as Supernova is going through its post-launch engineering process, Hypernova will enter. We will provide as much color as we can to ensure you understand the drivers of our margin performance. Adjusted EBITDA loss for the quarter was 29.1 million euros, up on a sequential basis, driven by lower revenue and gross margins and higher headcount costs. Adjusted EBITDA loss for the year was 88.3 million euros, As we review our growth trajectory and our revised cost basis following the actions Enric discussed, we believe we can reduce this materially by more than half in 2023 and into positive territory next year. We have sharpened our focus on profitability here. Philosophically, profitable growth is one of the key tenets that drive our strategy, equally important to operational excellence and innovation. To our shareholders, we are committing to you this renewed focus and look forward to proving this out. We were also very busy improving our balance sheet in the fourth quarter. As you may have seen, Wallbox raised approximately $43 million through a sale of ordinary shares to a group of investors, including Enric, board members, and early private holders who believe in the long-term value we are creating here. In addition, we completed a loan of 16 million euros and expanded working capital by 15 million. Our balance sheet remains solid, with almost 90 million euros of cash and equivalents available at quarter end. In the first two months of 2023, we've also brought on an additional 25 million euros of cash through loans and other financing instruments. Opening two new factories, accelerating hypernova to market, and building a robust supply chain for supernova in Europe to support the demand we see ahead requires capital. But we do not intend on spending at this rate. CAPEX is relatively light going forward as well. Additionally, we continue to evaluate opportunities to bring additional capital onto our balance sheet, and we believe we have access to the cash we need to run the business until we generate positive free cash flow in 2025. And finally, as we discussed last quarter, we hold more finished goods, work-in-progress and raw materials that we put in a normally functioning supply chain. Our intention is to continue to work through those components as we progress through the year. We ended the quarter with 44 million euros of long-term debt, which now incorporates assumed debt from recent acquisitions and other additional facilities. As of December 31st, there were more than 1,250 full-time Wallbox employees around the world. Any headcount additions we do this year will be done in key areas of growth. CAPEX for the quarter was 17 million euros. of which 6.5 million was PP&E. For the full year, we spent 36 million of PP&E. We would expect approximately 26 million of PP&E in 2023, as our factories are up and running and do not require significant additional investment until 2024. With that, I will now turn it back to Enric to provide you with some commentary around the fourth quarter.
spk11: 2022 was a volatile year. Of that, we can all agree. And that gives us a greater sense of caution as we look at 2023. Market volatility occurred for many of the obvious reasons, including the war in Ukraine, persistently high inflation, supply chain disruptions, OEM capacity constraints, fears of recession, etc. We do not believe that most of these are long-term systemic issues. we do believe that we will begin to turn the corner late in the second half of the year. As we look into 2023, we focus on two data points. One is the new European EV delivery forecast of 3.1 million units, a 23% reduction from when we last spoke. The second is our January and February sales data. For this, we believe a conservative outlook is the responsible thing to do. But the year, by many measures, will still be widely successful and productive. Growth rates between 60% and 100% are not often seen from a company of our size, but we believe we can achieve them. And those growth rates are well in excess of the overall market. Again, not a common occurrence. And an uncertain economic climate presents us with some opportunities that we have not yet discussed today. It allows us to get ourselves in better shape for the tidal wave we see in the coming years. The wave is driven by customer preferences, more accessible public charging infrastructure, more affordable vehicles, government subsidies, sunsetting ICE vehicles, and new EV capacity coming online. For us, it's driven by this, but also by the exciting partnerships we've spoken to you about all year. Uber, Nissan, Fisker, Best Buy, BYD, Lyft, and many others. by new product introductions, new customer verticals, new geographies. That getting in shape is about optimizing our business, some of which was announced in January. But it's also about our focus on cash conservation and profitability. All of these things will set us up very well to come out of 2023 in a much stronger position than when we entered it. That position of strength must be built today because the amount of infrastructure needed is difficult to comprehend. We intend on winning in the marketplace, and to do that, these actions are needed now. That's our plan. Therefore, for the first quarter of 2023, we anticipate revenue within the range of 35 to 40 million euros. This represents year-over-year growth of 33% at the midpoint. We also expect full-year 2023 revenue to be between 240 and 290 million euros. representing growth between 60% and 100%. As we make our way through the year, this range will tighten up. And we expect Q1 gross margins to be flat sequentially and approximately 38% for the full year. With that, we raise the question from our analysts.
spk08: Welcome back everyone to our analysts. We ask that you pose one question with a follow up if needed, then reenter 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 questions as time allows. So Charlie, I think you have some additional instructions.
spk00: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to draw your question, please press star followed by two. I'm preparing to ask a question. Please ensure you're unmuted locally. As a reminder, that's star followed by one on your telephone keypad now. Our first question comes from George Giannarichas of Canaccord Genuity. George, your line is open. Please go ahead.
spk07: Hey, good morning, everyone. Thank you for taking my questions. So first, let me just focus on what you've seen in the marketplace over the last, you I want to make sure I understood it. You saw a weakening of demand past the last time we spoke in November, and you think that's a function of two things, of lower than expected EV demand and also inventory in the channel. Is that an accurate portrayal?
spk11: Hi, George. Thank you for attending, and thank you for the question. This is Enric. in q4 basically we we were able for the full year and by the year to grow more than the market so that's important to know because our markets grew 37 in q4 and we were able to grow 44 so we kept our path to acquire more market share and more presence in the market. However, it didn't grow as expected Q4 because we had some channel inventory in our partners that, given the reduction in the last 60 days from industry forecast in heavy deliveries, They were more cautious on stocking for the next quarter. You have to think that they buy the products that are going to be delivered the following quarter many times. So they have stock. They have to replenish many centers, many retail stores. So, well, basically, we overperform the market. That's very important. We grow more than 400% in the U.S., But in Europe, we are seeing and we saw that industry forecasts for 2023 were dropping 23% for EV deliveries. And that made our partners to be more cautious.
spk07: Do you have a follow-up, George? So, on the inventory, how... How confident are you that you've cleared it? You mentioned that your partners felt like they needed to destock relative to the industry forecasts. What levels of channel inventory do you think we have today?
spk11: We are monitoring this with our partners and we expect to see still some reduction in inventory during this first quarter.
spk08: Yeah, George, we think we will be through that inventory through the first half of the year within our channel partners. First quarter. Yeah, first quarter. Sorry. But we're having good discussions with our channel partners in terms of what that right level is. And certainly industry forecasts impact that, right?
spk11: You have to think that, for example, Q1 2023 is in terms of EV deliveries in Europe is half of the EV deliveries in Q4. So that obviously impacts the consumption of inventory. That said, that's why we have given the guidance for Q1.
spk10: George, anything else? Thank you.
spk00: Sorry, Charlie, we'll take the next question. Please press star followed by 1 on your telephone keypad now. Our second question comes from Maryam Bulo of Bank of America. Maryam, please go ahead.
spk04: Yes, hello. Thank you very much for taking my question. I had a question on the growth in North America. It was a bit lower than we might have expected. Was it due to this inventory channel you mentioned, or have you seen some slower investment in the next course level perhaps? with a delay in investment patterns around the people waiting for the IRS funding. Thank you.
spk11: Yeah, so actually in terms of Wallbox, thank you, Mariana, by the way, in terms of Wallbox performance in Q4 in North America was exceptionally good. We were able to grow 440%. 425%. So we overperformed clearly the market, but grew on double digits. And we even got, as we explained, orders and agreements with OEMs in North America. So that really fuels sales in the market. So the market may have not performed well or not, but as Wallbox, we over-performed very well. The market's growing more than 400% in North America.
spk10: Does that help, Marianne?
spk04: Okay, but so if... Yeah, I'm just trying to see if you look into maybe a bit longer term, 2024, 2025, what type of growth you're expecting in the U.S. given there is this IRS funding that might increase the investment of your customers?
spk08: Sorry, I want to make sure we understand your question. Are you asking for a better view into 2024 and 2025 in terms of North America?
spk04: Yeah, basically it's a better view on your growth in North America and what you're expecting.
spk11: Yeah, we are seeing a big uptake, actually a big growth in fast charging pre-orders in North America coming from the Navy program. The fact that we have a factory in Texas already up and running and has been commented and approved by the white house as one of the few ones that are ready for the buy america requirements it's obviously impacting very well in in our future sales for the next years in terms of fast charging in north america so in that regard we already have collected more than 30 million dollars on lois and pre-orders for hypernova the fast charging product we we are launching in the us uh later this year so You know, we are seeing a lot of potential growth in the U.S., given the fact that we are ready in terms of manufacturing and we have the right products that fulfill the government requirements.
spk08: And Marianne, the impact of both NEVI and the Inflation Reduction Act is really exceptional. And so while it's hard to give you a number for 2024 and 2025 on a regional basis, you know, we feel like we're ready and we feel like we have the right products to sell. So we're excited about next year.
spk10: Okay, thank you very much. Anything else? Charlie?
spk00: Perfect, thank you. Our next question comes from Maheep Mandloy of Credit Suisse. Mandeep, your line is open. Please go ahead.
spk02: Hey, good morning. Maheep Mandloy here from Credit Suisse. Thanks for taking the questions. On the margin versus your target, I think like for Q4 and Q1, could you talk about like, is that a makeshift or is it just some pricing discounts? I'm just like wondering if it's possible to kind of like see some pressure on pricing to enable a faster B-stocking in the market.
spk05: Yeah, thank you. Thank you, Mahit, for joining us today. Basically, the gross margin in Q4 was just impacted because of the mix of sales. Basically, you know that we are on a ramp up of Supernova sales, which is our public charging new product. And in the last quarter, Supernova DC sales represent higher percentage versus the total sales than expected through the EV market in Europe was not as expected, it means that how we are on the ramp up of production, it has been impacted on gross margin. However, we are expecting, as we have announced today, that we will maintain these excellent gross margins for the total 2023.
spk11: Yeah. And to add to that, thank you, Mahip, for the question. This is something that you have to expect from us as we are launching new products. We are focusing on time to market. We launch a new product like Supernova, and the first six months, few months, gross margin is a little bit lower. After that, which we are now in that phase, we do engineering improvements and operations improvements to radically improve gross margin. So right now we are launching Generation 2 Supernova, which is higher power but also higher gross margin and lower cost. product. All the things we've learned, all the operational things we could do, we redesigned some parts, like we always do every time we launch a new product, to improve gross margin. So during this month of March, we will start delivering the first units of Supernova Generation 2, and next quarter, we will start seeing even more positive impact of gross margin in fast-charging sales. And all this transition to Gen 2 is going to be almost over at the end of the year. But, you know, the volume of Gen 2, obviously, is growing, and it has a much better gross margin. But this is normal in our case that new products that have just been launched have a lower margin. But after six to eight months, we are back on our expected gross margin.
spk02: Thanks for that. And just a follow-up on the target EBITDA margin, which you kind of talked about on the prepared remarks on the slide deck. Just curious, like, what's the timing on that? I mean, since 2024, you expect positive EBITDA margin, but how should we think about that ramp from the breakeven in Q4 to achieving the target for U.S.? ?
spk08: Yeah, so we're not providing guidance for 2024. I think that midterm is sort of a one to three-year range, and obviously it will ramp up as we make our way through that period. But we do think that we'll break even as we exit this year, and next year it'll probably be at the lower end of that range and continue to move up from there. And there are a lot of variables that will determine how quickly we move up, including the market forecast. And as you know, market forecasts have been changing fairly drastically over the last couple of quarters. And so I think we want to take quarter by quarter and year by year. And we'll give you a better idea as we come out of 2023, if that's OK, Mahid.
spk02: Absolutely enough. Thanks for that. And I look forward to catching up.
spk00: Thank you, Charlie. Thank you. Our next question comes from Ryan Dobson of Chardon. Ryan, your line is open. Please proceed.
spk09: Hey, it's Greg Tendi in for Brian Dobson. Thanks for taking my question. Just wondering, can you kind of help us understand on the gross margins on where they came in? Can you maybe give us a little bit of color or some numbers? You know, how much of this was mixed to the OEMs? How much of it is from Supernova? And then also just big picture, where we are in Supernova and where you think it, how long do you think it'll take to get to kind of their peak margins?
spk08: Yeah. Hi, Greg. Thanks for the question. And I'm just looking through the data now. Jordi and Enrique are just looking through our bridges. And so I would say the biggest impact to gross margin sequentially was from volume. And then we're looking at mix. And so that lower volume of AC relative to what we expected, and then the volume of DC was not um more than we expected but obviously when you compare the two uh that product mix shift did drive that gross margin lower than we had thought i wouldn't say there's a material uh i wouldn't say it's material uh impact from uh from channel uh or from end of year pricing but but they did have they did come into play
spk11: And, you know, in Q2, well, thanks, Greg, in Q2, Gen 2 is going to be already available in the market. As I said, this month of March, we are delivering the first unit of Gen 2 to selected customers, and it starts with a margin closer to the 40 percent. So, we expect that to ease already in Q2.
spk08: And, Enric, Gen 1 is different from Gen 2 how?
spk11: Well, it allows higher power charging. So Gen 1 Supernova can charge up to 60 kilowatts. Gen 2 can up to 150 kilowatts. So it can be used for commercial centers, but also for highways. And it has all the improvements in terms of uptime, quality, service, and cost to that we learned from Supernova Gen 1. And maybe one important difference is that it doesn't have char demo charging. So Gen 2 is a split CCS product that doesn't have char demo. But at the end, it's an improvement in power and in technology from what we have been selling the last year for Supernova. Does that help, Greg?
spk09: That helps a lot. Thanks a lot. I appreciate the call. Sure.
spk00: Charlie? Thank you. Our next question comes from Alec Scheibelhofer of CFO. Alec, your line is open. Please go ahead.
spk06: Thanks. And good morning, everyone. Thanks for taking my question. Sure. So if you can hear me, just to kick us off here. So I just was wondering if you could provide a little bit more color on your production capacity. So you said during the call that there's 20,000 units in aggregate for supernova and hypernova. I'm just wondering from a breakdown perspective, how much of that is more so on the supernova gen one side versus hyper? And also, if that's primarily U.S. production capacity or is that more global, including Barcelona?
spk08: Sure. Yeah. So I think that let's put that number into context because that's a long term aspirational number. I think we've been getting a lot of questions internally, sorry, from analysts and investors in terms of What are our long-term capabilities, manufacturing capabilities, when we think about the public charging portfolio? And so it's going to be a mix, and I think that that mix is going to evolve based on customer preferences, based on projects, especially when we look at NEVI and IRA in North America. But, you know, by the time we get farther out into the curve, you're going to be in future generations of supernovae. And remember, we're making some assumptions with that 20,000. We're making some assumptions in terms of continued capacity build-out, so expanding our factories, right, to their full footprint, adding production lines, doing full shifts. That is designed to give you sort of an extreme boundary. And if the demand is there, we will continue to ramp that production up to meet that demand.
spk11: Yeah, thank you, Alec, for the question. With this 20,000 number, which obviously has been deeply studied by our operations team, we wanted to show the capacity that the current facilities and warehouse we have today, how much they can produce. Obviously, as Matt said, we will need to invest slightly additionally in assembly lines, but in terms of facilities and the factories, The footprint we have today and the companies we invested last year in Texas and in Barcelona, they allow us to have this capacity of 20,000. And we are talking about a three to five year target for these productions. But, you know, the investment is already done, except for a few assembly lines.
spk06: Got it, got it. Thanks for the color there and for the clarification. Just as a follow-up as well, I know, Matt, I think you touched on the NEVI funding. When do you think we're going to start to see some allocations of that? Is that going to be 23 or is it more of a 24-story? And for those 300 units, I believe, of hypernova they have in the pipeline, is that tied to the NEVI funding or just starting to see some incremental demand for that product take up?
spk08: Yeah, that's a great question. So those units are a mix between both US and Canada. So it's nice to see that they're not all tied to NEBI funding. And they Sorry, your question about the NEVI program. So in terms of when those projects are going to hit the calendar, we believe that there are some infrastructure upgrades that need to take place. I think Douglas has talked about this publicly. And we expect this year to have discussions publicly with regards to project wins and where we're going to participate. But installation and having it hit hardware vendors' P&Ls, it's probably either late this year or first half of next year. That's when you're probably going to see disbursement of funds. to where we are in the marketplace. And thank you for the question, Alex.
spk11: The key here is that we have COIL as part of our portfolio. The company work I had last year, they installed in the U.S., and they are experts on upgrading the power, building the switch units, the transformers, making all the installations for fast charging. So what we are working very hard now is to make sure we can provide a turnkey solution that can be quickly adopted by our customers, because the main challenge is not only the hardware that is by America, and we can provide that, also everything what Matt was explaining, making the upgrades and everything. And we think with Coil, we'll be able to provide a faster track for our customers, so we will help us to get more business.
spk10: Great. Thanks for the call. I'll turn it back.
spk08: Charlie?
spk00: Thank you. Our next question comes from Abby Sinner of Northland Financial. Abby, your line is open. Please go ahead.
spk01: Yeah, hi. Thanks for taking my question. Just wondering, you know, on the hypernova, I mean, from all your learnings that you have had so far, from moving from supernova to hypernova, I'm just wondering, like, maybe you can talk a little bit more about, like, you know, how the learning has been and where the industry is heading. I mean, do you see at some point we go to, like, 1,000 kilowatt system? Or do you think that even if... you know, technically feasible is not economically viable? Or, you know, I'm just trying to understand, like, where the industry is moving and what your learning has been and how difficult would it be to get to the 1,000 kilowatt? Are we reaching a point of diminishing returns already?
spk08: Yeah, I think, Abby, what you're asking is, you know, what does the roadmap look like in terms of electrification, in terms of needs, in terms of certainly our public chargers? And remember, you know, Hypernova is a generation ahead of most other products coming to market this year. It goes up to 400 kilowatts. And so, you know, we think that we've built in quite a bit of future proofing for our customers. We want to make sure that we preserve that long-term investment value for them. Some of this is dictated by the OEMs, right? What they're building into the cars. Some of it is dictated by battery technology. A lot of it, excuse me, is dictated by some of these subsidies that are going to be coming to market this year and next year. And so I think, you know, for the next couple of years, I think that that 400 kilowatt for the next year or two, at the very least, that next 400 kilowatt configuration is probably enough, given what we what vehicles we see coming to market.
spk11: Yeah, exactly. So there's today actually few vehicles that can charge up to 350 kilowatts, not even 400. However, we are seeing, especially in the US, that cars are getting bigger and bigger batteries. We are seeing the Dodge Ram coming with 200 kilowatt hours of battery, which means that that it will take you half an hour to charge this battery with 400 kilowatt charger. Obviously, it has a long range, but it's maybe too much time for this kind of cars. So in a few years, as Matt says, maybe in the longer term, power will be upgraded. But for this program and for the next two to three years, 400 kilowatts with the current roadmap of carbon factors and technology is more than enough and is future-proof.
spk01: Anything else? Sure. Thank you. Uh, can I have a follow up? Yeah, sure. Can I have a follow up?
spk08: Yeah, please do. Go ahead.
spk01: Just one quick on, on your, on the system. Yeah. On your, on this use of Silicon carbide, uh, you know, on your modules that, that is one of your differentiating factor. I'm just trying to find out like, you know, uh, where do you think the industry is right now in terms of catching up? And, you know, um,
spk11: you how long you think that technical mode if you will will be there or you have some technological differentiation that will keep the mode wide yeah thank you for the question so um it's not only the silicon carbide mosfets allow us to work in in higher frequency when doing the the switches no so these allow us to uh better more efficiency and a better form factor and lower costs. So we think we are a couple of years advanced from competition, and that gives us obviously a very good head start. But I think it's going to have especially a huge impact in bidirectional charging, because bidirectional chargers for the home, which we are now and working with OEMs in this direction with Quasar 2, you need a product that's compact, that's in the wall, that has a small form factor because it's a home charger, but works with DC, you know? So obviously for fast charging, it's good in terms of cost and four factor, but it's even more important for bi-directional charging in the home. And that's where we believe we have the biggest advantage, even more than two years in this area, because we have the capacity to discharge CCS cars. We have a product already available, which is Quasar 1, and Quasar 2 is, you know, soon to come. And it's going to be, again, the first home CCS bidirectional chargers, you know, which one was the first bidirectional charger for the home, which is going to be the first one for CCS. So we are very excited, and the key of this advantage of being the first is our technology that uses silicon carbide MOSFETs.
spk08: Thanks, Avi. Charlie, we have one more. Sure, thank you.
spk00: Yes, that's correct. We have a follow-up from George Gianaricas of Canaccord Genuity. George, your line is open. Please go ahead.
spk07: Thanks for taking a follow-up. I just wanted to make sure I understood the NEBI related orders of 300 units. Is that expected to hit your P&L in 2023, or is that a 2024 event?
spk11: so thank you george for the flow of questions so it basically depends on our capacity to deliver the product you know in this year uh we are trying to accelerate the launch of the product to make sure as much as possible from these lois can be delivered but we don't expect the huge numbers for this year so not all the 30 millions are going to be delivered during 2023 and It obviously depends on also on UL certification, which is something we cannot control 100%, so there's also opportunities to be more, and that's making to our guidance. But I can see that not everything is going to be delivered here, but we will try to deliver as much as possible. Thank you.
spk08: You got it. Anything else? Charlie, anybody else in the queue?
spk00: We currently have no further questions registered via the telephone line. So I'll hand back over to Matt Trachtenberg for any closing remarks.
spk08: Great. Well, I guess that's our last question then. So thank you all for joining us today. We hope you found today's call a good use of your time. Also, please note that we have several upcoming investor events in March. So watch for our website for details. If you're interested in meeting with us, let us know if we can help you in any way. Have a great day, everyone.
spk00: Thank you. Thank you. Ladies and gentlemen, this concludes today's call.
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