Wallbox N.V.

Hello everyone and welcome to Warbox's first quarter 2023 earnings conference call and webcast. My name is Charlie and I'll be coordinating a call today. At this time, all participants' lines 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 to the queue by pressing star followed by one. I would now like to turn the call over to Matt Trachtenberg, Warbox's Vice President of Investor Relations. Matt. Please go ahead. Thank you.

And good morning and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss Wallbox's first quarter 2023 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 Socion, Wallbox's CEO, Jordi Lines, our CFO, and Douglas Alfaro, our new Chief Business Officer. Earlier today, we issued our press release announcing results from the first quarter ended March 31st, 2023, 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 the post-effective Amendment No. 3 to our registration statement on Form 20F filed on March 31, 2023, 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 Enric.

Thank you, Matt, and thanks everyone for joining us today. In addition to reviewing highlights from the first quarter of 2023, we will spend some time discussing our rapidly evolving product portfolio and role. I will provide an update on our path to profitability, and Douglas will join us to discuss the key competitive advantage he's going to leverage in his new role. Jordi will then step in and offer additional detail on our quarterly performance and offer some insight on our balance sheet, 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 second quarter and full year 2023. We will end by taking questions from our covering research analysts. So let's start. The first quarter finished within our expected range at 35.1 million euros, representing growth of 24% on a year-over-year basis. A few comments on Q1 results. The quarter played out as we anticipated and ended within the expected range. Today, our focus is on cutting costs, strengthening our balance sheet, forging new partnerships, and bringing new products to market. The markets in which we participate remain strong on a consolidated basis, yet somewhat variable when looking at individual countries. That is not unusual even where each is on the adoption curve. We are encouraged by the resiliency in Europe this quarter and will continue to watch for some more signs of strength and consistency. EBITDA liberates increased by 55% in the US and 18% in Europe. both on a year-over-year basis. Our sales increased by 126% and 18% in those regions respectively, enabling us to expand market share in the US and maintain our position of strength in Europe. Q1 revenue of 31.5 million euros grew by 24% on a year-over-year basis. Growth margin expanded by 90 basis points from the previous quarter and finished at 36.8%. a better outcome than we had expected. That performance was largely a function of product needs. Supernova Gen 1 production continues to ramp up nicely, and we've already begun to deploy Gen 2, which brings with it a more attractive margin profile. This will help bring consumers the gross margin back into the range we are comfortable with as we make our way through the year. Our first quarter was sealed by a solid result in the U.S., lowering revenue by 126%, but impacted by the timing of several seasonable deals that shifted into the second quarter. We continue to see traction with OEMs, distributors, and utilities, and now count a very large eastern U.S. energy provider as a new customer. As one of the largest utilities in the U.S., They are leading the way towards offering innovative and efficient solutions to manage their customers' power consumption. Many will soon be offered a Volvo Pulsar Plus or a subscription basis and have access to subsidized and, in some cases, pre-charging sessions. In return, the provider will leverage the demand-response functionality that allows them to balance their capacity with customer demands. shift some of the demand to off-peak, unlock new business models, and provide low or no-cost charging to drivers. We look forward to helping them expand the program offering to millions of customers. European revenue grew by 18%, driven by growth in Southern Europe of 110% over the prior year period. Elsewhere in the world, younger regions are just beginning to contribute, like Latin, growing at almost 60% year over year. North America now contributes 16% of total revenue, an increase of 7 percentage points over the prior year period. Europe represents 80% of revenue. Asia-Pacific provided 2% of consolidated revenues in Q1, and Latin America was 1%. This shift is both deliberate and helpful, as we continue to diversify both our geographic and product mix. Our AC charging portfolio represents 70% of our total revenue, with DC fast charging at 12%, and the remaining 18% provided by accessories, software, and services, a growing portion of which is recurring. And finally, we sold almost 45,000 chargers in the quarter. As expected, AC volumes were impacted by the continued channeling battery adjustments within our European distribution network. But that is transitory in nature. In the first quarter, as measured by activations, our partners installed more chargers than ever before. However, There were higher levels of inventory as our channel partners in anticipation of a strong second half of 2022. We expect these inventories to reach a healthy level by the end of Q2. In addition to the financial performance achieved in the quarter, I wanted to highlight a few other items worth noting. We've been very clear with our customers and investors. We are building a business in a market that has enormous long-term tailwind. To ensure we are developing the right products with the right specifications in a rapidly evolving environment, we must balance speed and agility with quality and responsible investment. The investments we've made have yielded amazing results, and our product portfolio has never been more focused. It's in exceptional shape, with new products coming to market this year and next, that will improve our competitive position, accelerate our growth, and expand our participation in new attractive markets. These in part, assuming the market continues its path, give us confidence in our growth and profitability goals, both this year and next. New product additions to both ACMDC, new service and maintenance offerings, and new features with our software platform. The innovation cycle we manage has turned out some of the most innovative and successful products on the market, and we are at an inflection point in our evolution. It's an exciting time for us. On the AC side, we continue to focus our offering, but to ensure it satisfies requirements across multiple market segments. Residential AC units have been our bread and butter, and while our offering is best in class, it's constantly improving. Pulsar Pro, which incorporates NFC and 4G, while further simplifying installation and configuration, is highly anticipated by customers and will begin to ship this spring. Energy Star is an example of a certification coming to our portfolio that will open new market opportunities that today we've not participated in. Low power, high efficiency is critical to decision makers in the U.S., as this technical requirement is now mandatory in many states. Customers increasingly rely on rebates from utilities and the Department of Energy, so it's a must-have. The product is already coming off the production line and will begin shipping soon. Not all AAC applications are the same, and the semi-public space is a new strategic initiative discussed in March, which will see a completely new product brought to life. That charger will meet the unique needs of installers who service the market, which includes apartment buildings, parking garages, sport venues, office buildings, shopping malls, and hotels. These require a different product, one that stresses ease of installation and management, open standards and interoperability, and centralized intelligence. It also will increasingly call for a more comprehensive offering that includes software, service, and in some cases, both AC and DC hardware. Communicating with and managing these complex architectures has led us to develop a unique approach to solve this real-world business problem for customers, which employs a centralized intelligence hub. That architecture will allow our system to communicate not only with different wallbox chargers, but competing brands too. That centralized management, configuration, and monitoring will connect dozens of chargers in a parking garage to hundreds in fleet settings. It will provide visibility into vehicle IDs, usage patterns, scheduling, and balancing available power with charging needs of the individual IDs. We expect products to be in testing environments in the third quarter and begin shipping to customers in the fourth. Turning to this fast charging, the control production ramp-up of Supernova in 2022 has allowed us to make meaningful improvements to the design and process that drastically improve the product. As a result, we have reduced the time in which it takes to commission a new charger from eight hours down to two. And we are targeting one hour. thereby lowering the cost and improving customer satisfaction in a meaningful way. Additionally, the reliability is exceptional, with current uptime rate of 98%, beautifully unheard of in the industry. Within the public charging space, high levels of quality and customer service are key to success, because a buyer of five stations can easily turn into a buyer of 500, but only if we offer an exceptional experience. yet do also fit into market environments that Gen 1 did not, including highway charging, expanding the product addressable market beyond that of Gen 1. This platform is already shipping and installing, and customer feedback has exceeded our expectation. This experience is also translating to learnings and opportunities in North America. As discussed last quarter, Hypernova, our 400-kilowatt ultra-fast DC charger, has generated its share of interest among customers, and we are eager to bring it to the market. However, based on clear feedback and firm orders of high volumes, we've decided to accelerate Supernova to the U.S. market, introducing a 180-kilowatt version later this year. Currently, we have orders for more than 500 units that will begin shipping in Q4. Hypernova will follow it to market in 2024, in time for maybe an IRA project deployment. We believe this is the right decision given strong customer demand and the time we have to maneuver before U.S. subsidies begin to flow. Supernova is a proven platform with exceptional reliability rates, low TCO, and will immediately place itself as the premier charger in North America. It also gives us more tools to leverage as we work to meet our revenue and profitability objectives this year. It will be a net positive to 2033. On the service side, we are encouraged by the increased interest in maintenance contracts on pallet charge installations. These contracts, often for two or more years, ensure we remain close to the customers. gain available data and open new revenue streams. As Supernova 180 comes to market, COIL will become even more valuable in delivering a comprehensive solution to our customers. They are extremely well positioned with that service offering and will deploy it alongside both Supernova 180 and Hypernova when the NEVI and IRF funds begin to hit the market next year. Electromaps, our location and payment enablement application in Europe, has performed well. They are considered as leading source of information for EV drivers in Europe, with more than 300,000 stations and 90,000 active MOLLE users. It has enabled more than 44 million kilometers traveled, the equivalent of 57 trips to the moon and back. Additionally, MyWallbox, our proprietary management app for our residential and business charging, provides unique functionality through an innovative, intuitive mobile application. and continues to innovate and improve. Today, these applications are separate, but the intelligence gathered from the 36 million stations they facilitated is priceless and allows us to understand driver behaviors. Our infrastructure is performing and evolving, and in turn, make adjustments to our offering to better serve both those who use the chargers and those who provide the energy. For the reason, bringing these two applications closer together with increased integration only increases that value. We'll talk more on future calls, but you should expect a more unified software offering from Wallbox over time. That's what customers are asking for, and we're happy to offer it. Sirius is another software application we've developed that is seeing real traction in the market. Originally created for our own use, this dynamic intelligent system that optimizes the sources and uses of energy for commercial buildings has found a very vocal customer base very quickly. This product will see its first deployment at scale this year, and when successful, see further opportunities across broad geographies with multiple customers and use cases. It's exciting to watch a product like this, which was initially created to solve an internal use, bridge commercial deployment to solve real business problems for customers all while opening up new market and business segments for us more on this on future calls second we have laid out our patent readability to you on previous calls today we want to offer you an update and provide more detail into how we intend on transitioning to a profitable business next year scale Gross margin expansion, responsible management of headcount-related costs, and meaningful reduction in operating expenses are what will get us where we need to be this year and next. Scaling any business is not an easy feat, but growth is key, and we've built a business that is extremely well positioned in the huge market we all see coming. The phase of life we are in now is exciting. We established our brand in young and fast-growing markets that recognize EVs as the future mode of transportation. But we are also entering new markets, including business, public, and services. This is extremely important because that is how scale occurs. The engineering work has been done, products have been developed and introduced, and now we aggressively grow the business. Gross margins are equally important in achieving our objectives, and we intend on consistently moving them back to and beyond, if possible, the 40% mark you come to expect from us. That is done through the cost engineering problems we discussed with the Supernova platform, but which also occurs in our AC portfolio and all other product families. We have a number of opportunities to improve our gross margin over the coming year, and I think you will like the results. During the quarter, we took a critical step by reducing personnel by 15%, which has already driven a reduction in headcount-related cash expenses this year. Some of those costs are variable and move with sales, but some are not. On a sequential basis, after removing non-cash costs, you have seen a moderate reduction in these expenses. As we capture a full period of savings in the second quarter, the progress we are making will become more visible. On a go-forward basis, you should expect personal expenses to moderately decline as we continue to find efficiencies and improve our cost structure. Operating expenses is an area where continued progress will be made. In the first quarter, again, also a partial period impact, we reduced OPEX by more than 8 million euros. On a combined basis, our commitment was to remove 50 million euros from the global expense front rate, and I'm pleased with our progress so far. During the first quarter, we drove almost 10 million euros of cost reduction sequentially, and confident in our ability to achieve our objective. Our commitment to you is that until we are profitable, you will not see a sequential increase to fixed costs. We have multiple levers at hand that will allow us to achieve profitability, even if the demand environment shifts. I'm hopeful this gives you comfort in our capabilities and renew focus on controlling costs. I look forward to providing additional milestones as we make our way through the year. Plotting out the topic of profitability, I thought it would be helpful to provide some context on where we are on that journey. Within Wallbox, some business units like AC Products are further along that path than younger units like DC. Both have their own engineering teams and resources. but all business units share corporate services such as finance, legal, or HR. However, looking at the profitability profile of each business unit on a standalone basis shows us that at Wallbox, like most companies, there is a big difference in the financial profiles. AC has had the time to scale and achieve the efficiencies needed, and as a result, will be profitable this year in adjusted EBITDA terms. Conversely, DC is at an early stage in its evolution and therefore is still moving up that curve. At the consolidated level, one supports the other, but on a standalone basis, they are at different points in their evolution. Both have equally large addressable markets, but they have come to market at different points in our timeline. The point I'm making is that as these more established units scale further and generate cash, And as these younger units reach scale and achieve efficiency, the combined business will achieve the desire of profitability. We've proven we can build a profitable business already and look forward to this next stage at Wolves. I will now ask Douglas to share the competitive advantage he will leverage in his new role as Chief Business Officer. Douglas? Thanks, Enrique.