Wallbox N.V.

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.

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.

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.