Wallbox N.V.

and I'll be the operator for today's call. 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 into the queue by pressing star 1. I would now like to turn the call over to Matt Trachtenberg, Wallbox's Vice President of Investor Relations, to begin. Matt, please go ahead.

Thank you, Charlie, and good morning and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss Wallbox's fourth quarter and full year 2023 results. This event is being broadcast over the web and can be accessed from the investor section of our website at investors.wallbox.com. I'm joined today by Enrique Asuncion, Wallbox's CEO, and Jordi Lines, our CFO. Earlier today, we issued our press release announcing results from the fourth quarter and year-ended December 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 SEC, including in the annual report on Form 20F for the fiscal year ended December 31, 2022, filed on March 31, 2023. 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 full year and fourth quarter 2023, we'll spend some time discussing the current EV market and our position in it. We will also dig into the Generac announcement from December and why we are so excited about joining forces. Jordi will review our cost reduction achievements. He will offer some additional color on our quarterly financial performance and share some thoughts on our balance sheet as we prepare for a new year. And finally, I will return to discuss our view of the market and what we are focused on in 2024. We will end by taking questions from our covering research analysts, so let's get started. 2023 was a busy year for us, with some challenges driving both reflection and action, as well as exciting milestones and celebrations. Revenue for the full year totaled 143.8 million euros, essentially flat from the prior year. This was a result of a softer demand environment than many anticipated paired with corresponding inventory adjustments by our channel partners. While the EV adoption curve is in the process of crossing the chasm and moving from early adopters to mainstream, these items drove variability in our forecast and results. And although those disruptions make for a challenging year, we focus on executing our long-term strategic plan and achieve several outstanding milestones. We deliver 166,000 AC units and more than 1,400 DC units during the year, a solid outcome. We launch exciting new products, streamline our cost base to accelerate our path to profitability, and forge meaningful new partnerships with global brands, including Generac, Costco, Kia, and Free2Move. We acquired an industry leader in ADL, placing us at the forefront of the largest EV market in Europe, and we raised almost €143 million of cash through debt and equity financing. It was a year of efficiency and innovation, of operational improvements, of cost reductions, and it has set us up extremely well for a successful 2024. Turning to the quarter, revenue came in within our expected range of €43.3 million, of almost 34% from the year-ago period, driven both by organic and inorganic growth. ABL contributed €6 million of inorganic revenue as anticipated. Organic growth was once again a result of strong performance from our DC offering, with sales growth of almost 150% year-over-year. Our AC portfolio saw some moderate stocking in Europe and North America. but AC unit growth was almost 38% quarter over quarter in Europe on a selling basis, which we view as a positive sign for the region. Sell-through was healthy as well and points towards continued growth. In total, we delivered almost 44,000 AC units globally, including ABL, and almost 500 units of DC during the period. Growth margins were 32.8% in the fourth quarter. impacted by product mix shift and warranty and obsolescence costs. We continue to believe that through cost engineering, changes to our product mix, and strategic sourcing, gross margins in the mid-term can return to the 38 to 40% range. We will work very hard to implement actions in 2024 to achieve this. Our cost reduction program in 2023 was front and center. and allow us to reduce a lot of quarterly cash expenses by an additional €4.8 million sequentially. We are proud to announce that we have exceeded the original €50 million reduction target previously discussed and have achieved a total reduction of more than €60 million in 2023. Jordi will spend more time on that in a minute. Fourth quarter adjusted EBITDA loss was €14.7 million on a consolidated basis, which includes the impact of KDL. representing a year-over-year improvement of 54%. Due to the timing of the transaction and iteration, AVL brought with it one month of sales and two months of costs. Excluding AVL, Wallbox's standalone adjusted EBITDA loss was €11.9 million in the quarter, representing a 63% improvement from Q4 of 2022. We continue to be focused on achieving positive adjusted EBITDA in the June quarter and look forward to celebrating that important milestone with you on the Q2 call. For the fourth quarter of 2023, Europe contributed €34.3 million of consolidated sales, or 79% of total revenue. North America contributed €6.4 million, or 15%. APAC was €1.5 million, or 4%, and LATAM was €1 million, or 2%. These mixed shifts were largely driven by the addition of ABL, whose sales are entirely in the MIA region. AC sales of 26.5 million euros represented approximately 61% of our global consolidated revenue, down 7 percentage points driven by strength from our DC offering. Supernova 150, our second generation DC fast charger, continues to see strong reception from customers and drove the DC revenue contribution to 27% up 12 percentage points. Software services and accessories contributed the remaining 11%. 2023 saw numerous new large customers, including Iberdrola, Atlante, Paui, Osprey and B-Charge. In November, we announced that Atlante, which recently was selected to receive a 49.9 million euros grant from the EU, aims to install 5,000 fast charging points by 2025 and over 35,000 points by 2030 across Spain, Italy, France and Portugal. And they chose Wallbox as a preferred partner in the project due to our production capacity and high-quality innovative offering. Margins continue to be impacted by product mix, which we expect to ease as we make our way through 2024. To provide color, approximately 60% of DC units sold in the quarter were Supernova 150, similar to last quarter. Recall that while the 150 brings higher gross margins profile than Supernova 60, our first-generation product, It's still lower than AC. So in time, as that mix shift continues and the cost profile of the new product declines, we anticipate that impact to less. Generac is one of the most well-respected names in the energy transition space. The transaction is one of the most exciting and impactful events in our history and has the power to accelerate our commercial presence in North America at a critical time by opening important global opportunities for both companies. The announcement included a $31.6 million strategic investment led by Generac and an upcoming commercial agreement. The minority investment was completed at a price of $3.05 per share, highlighting the inherent value both companies see and includes a seat on World Works Board of Directors. Through the execution of the commercial relationship, Generac will offer its customers our full suite of EV charging solutions, including Pulsar Plus for residential, Pulsar Pro for commercial, and multi-tenant applications, our bi-directional charger, Quasar 2, and our DC fast-charging Supernova, as well as installation services through COIL. Generating 60-plus years of experience distributing energy-resilient devices and its extensive network of over 8,700 dealers will be a strategic addition to Wallbox's distribution network in the US. The European brand Pramac will offer DC fast chargers through their energy storage sales network in some selected markets, strengthening the offering for commercial and industrial customers. In turn, our strong relationship with Tier 1 utilities and OEMs will open new doors. Bidirectional charging, enabled by Quasar 2, will be extremely important for both companies. Providing EV owners independence and security against outages, while saving money and tapping renewable sources, is quickly becoming a reality. And giving utilities access to a vast network of stored energy during peak load times will allow huge populations to balance demand with supply, removing the need for new investment in power generation. Governments are starting to see the light, and it's remarkable to watch. It has the unique ability to change the way we store and consume energy. Together, we plan on bringing that solution to market in 2024. So look for it. We're also exploring new architectures to adapt to the needs of applications in environments that lack the necessary power. Pairing a supernova with battery storage from Generac has the potential to reduce reliance on the grid, reduce installation costs and utility requirements, and accelerate time to market. That's just one of numerous new configurations given the combined capabilities we have. It's exciting to watch, and I think customers will like what they see. We look forward to collaborating with the leadership team aligning product roadmaps and aggressively competing in the global marketplace. The combination will be unstoppable. I want to spend a moment discussing the markets which we operate in. As you know, there is a high correlation of sales of our AC products to EV deliveries. Deliveries have been lumpy based on geography in 2023, and price actions and commentary by large OEMs have created some noise. There were almost 13.6 million EVs sold globally in 2023. Promotion forecasts global EV deliveries are set to reach 18 million units in 2024, representing growth of more than 32% year-over-year. To OEMs spending billions on new factories and developing new models, that number might be disappointing. To us, this continues to present attractive opportunities. There are a number of elements that we see as key to driving continued adoption, including the success of new models like Kia's EV9 and Nissan's Ariya. Innovative technological breakthroughs that improve range and quality. Accessible and reliable public charge infrastructure, which we expect Volvo will be a major driver of. Economies of scale, which will help bring down vehicle costs and improve industry margins. and continued financial incentives for EV buyers to bring price parity with ICE vehicles. We believe that early adopters are fully bought in into the value proposition of EVs. Their pocket you are reading about in the media is a function of where we are in the adoption curve. It's understandable and expected in any large-scale technology adoption, and we are prepared and well positioned to exit the current environment stronger than we enter and well ahead of the competition. Jordi? I'll turn it over to you to comment further on our financial details.

Thank you, Enric. Good morning and good afternoon to everyone. Our fourth quarter results came in as anticipated, driven by strong DC sales, stability within European AC demand and contribution from ADL. Margins were softer than expected, but we have identified a remediation plan and intend to make improvements through the remainder of the year. Cost controls continue to yield solid results, and additional opportunities may present themselves in 2024. I'll provide more detail on these results and share some thoughts on the upcoming year. For the fourth quarter 2023, revenue was 43.3 million euros, up 33% sequentially and up 34% year over year. On a year-over-year basis, total revenue increased in both DC fast charging and AC, the latter a result of the channeled stocking discussed on previous calls. Consolidated gross margin for the quarter was 32.8% and were impacted by continued product mix shift and the timing of warranty and obsolescence charges. we were able to further reduce both employee-related cash expenses and OPEX, which amounted to 28.4 million euros in the period, excluding ABL. I want to thank all Wallboxers for their dedication and commitment to this initiative. It's taken everyone together to reach this target, and we appreciate what you've helped us achieve. Going forward, including ABL, we anticipate both employee benefit or payroll expenses and OPEX combined to be approximately 30 million euros per quarter. This, when paired with the gross margin improvement plan we've implemented, is expected to allow us to achieve positive adjusted EBITDA in the second quarter and full year 2024. We commit to shareholders to keep this initiative in focus as we re-accelerate growth. Consolidated adjusted EBITDA loss for the quarter, including ABL, was 14.7 million euros, representing a 54% improvement over the prior year quarter. On a standalone basis, excluding ABL, we were able to reduce our adjusted EBITDA loss by 28% from the previous quarter and 63% from the prior year period. We remain extremely focused on cost and conserving cash and have seen tangible benefits of those efforts. Here you see the three main metrics we have been focused on over the last year. Revenue, cost and the resulting adjusted EBITDA. As you can see, cash personal costs have been reduced from 23 million euros to 19 million, and cash OPEX has gone from 27 million to 9 million. Combined, this represents a 44% reduction to Wallbox cash costs, excluding ABL. We've made exceptional progress against our goals. The trends are all moving in the right direction, and with ABL bringing increased revenue at a reasonable cost base, we believe profitability is within reach. The trends you see here should continue in 2024. The financing events in 2023, paired with aggressive cost reductions we went after, allowed us to end December with approximately €107 million of cash, cash equivalents and financial instruments. long-term debt was approximately 81 million euros at the end of the year. We did not utilize the ATM during the fourth period as we continue to believe that our current stock price is not reflective of the shareholder value we are creating. CAPEX, excluding capitalized R&D, was again very light, with 4.6 million euros in the fourth quarter, with 3.4 million of that spent on property, plant and equipment. For the full year, we spent 16.2 million euros in 2023 versus 46 million in 2022 after opening two new factories. I'm pleased with our ability to quickly adjust the spend levels with the current demand environment, as evidenced by the gap versus our original 26 million euros target for 2023. Inventory reduction is another initiative we made significant progress on with Wallbox levels falling by 11% or more than 10 million from the third quarter and ended the year at 83.9 million euros. ABL brought 8.6 million euros of inventory, which is an appropriate amount given their projections. Our goal is to continue to bring a total inventory down by the end of the year. This will also contribute meaningfully to reducing our cash bar rate. Full-time headcount, excluding ABL, decreased by 82 people or 7% on a quarter-over-quarter basis. We are slightly above the level reached in Q1 of 2022 and may see the number come down in specific areas. ABL brought with 281 people. With that, Enric, I'll turn it back to you to provide some closing commentary.

Thanks, Jordi. I'm optimistic as we enter 2024. We've worked very hard to position ourselves well for the coming year. Our growth will be fueled by new products like Pulsar Pro, Pulsar Socket, Supernova 240 in Europe or 180 in the US, by Quasar 2 with Kia and General. AVL's strong offering and our ability to cross-sell both their products to our customers and our products to theirs will contribute meaningfully. It will be fueled by Wallbox products sold through Generac's extensive distribution network. And it will be fueled by new partnerships with leading brands like Atlante, Free2Move, Costco, and Kia. Our gross margins will be improved through cost engineering of existing products, by better leveraging Ares and their capabilities, by continued vertical integration of key components and by more strategic sourcing and price negotiations. Our personnel and operating costs will continue to be optimized through disciplined controls and headcount management. As a result of this, 2024 will be a year in which Wallbox achieves profitability, an important milestone in our history. And while much of our investment in infrastructure is complete, reducing the need for additional CapEx, we will explore opportunities to further regionalize our global footprint leveraging efficiencies and cost benefits. We will also continue to reduce inventories by utilizing common components across multiple platforms, strategic vendor management, and leveraging growth. For these reasons, positive free cash flow is within reach, which will set us apart from competitors and highlight the resiliency of our business model. And we will allocate that capital to the highest return projects, including M&A, new product innovation, and capturing market share. In summary, meaningful growing revenues through both organic and inorganic means, new products, and big commercial partnerships, while improving growth margins, all of a lower operating expense base, while conserving cash, will create significant value for shareholders this year. That's our plan, and we are aggressively executing it. To the shareholders, partners, and employees who have trust us and believe in us, we thank you and we are grateful to have you with us. We will work hard to ensure you are rewarded. With that, we raise the question from our analysts.

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

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 withdraw your question, please press star followed by two. When preparing to ask your question, please ensure you're unmuted locally. As a reminder, that's star followed by one on the telephone keypads now.

Thank you, Charlie. I think we can take our first question now.

Of course, our first question comes from George Gianaricas of Canaccord. George, your line is open. Please go ahead.

Hi, everyone, and thank you for taking my questions. If you could just share, please, a little detail on the broad stroke of the Generac relationship, and I know you're still working on the commercial agreement, but whose product or whose nameplate is going into different channels? What is the relationship going to be when there may be some channel conflict in certain retailers? Any details that would be helpful. Thank you.

Thank you, everyone. Thank you, George. So right now, the main focus of the agreement is on the level two chargers for North America. Obviously there's 8,700 installers or electricians that Generac has access to, will immediately allow an important growth of this channel. And next step, which we are working parallel actually, it's fast charging sales, supernova sales, because there's something They can sell in the US in their commercial industrial business, but also in Europe, they are very strong in the commercial industrial space. And they're actually working on a product that they already have that includes a generator plus storage, plus solar storage that can be paired with supernovas. So we are working also together to make sure we integrate this product. So these are the two first things. The third thing is going to be Quasar, which as we commented in April, we're starting to deliver it with Kia. We are very excited. Quasar 2 will start in the US delivering it. And to ensure we don't achieve conflicts at the end, both companies have the same goal. We have the goal to make both companies successful. We are making a product under their brand and with Bulbox co-branding. They we are connecting with their software platform. Obviously, we provide our infrastructure and our software, but we make sure they take advantage of their ecosystem. So, you know, if you want the Wallbox ecosystem, you can buy Wallbox with the Wallbox app and all the things that has the Wallbox ecosystem. If you want the generic ecosystem, you can do the same.

Thank you. And maybe as a follow-up, just to focus on ABL, could you just kind of give us some – comments on how that's going and also the financial contribution for 2024 from a revenue perspective. You mentioned 7 million in Q4. I think you said one month. What broadly can we expect from a revenue perspective from ABL in 2024? Thank you.

Thank you. So basically we announced that we will be between 60 and 75 million euros of revenue. We are still in that range. When we look into the February numbers, it looks like the company is moving towards that direction. And it's normal. The first quarter has been only one month of revenue, given the fact that we had to integrate the systems. We moved from an old company to a new company. We had to move customers. We had to move different agreements and contracts with customers. So that took one month. And then we had Christmas, which was the last week of December, which in Germany... there's not really much sales activity. So when we look right now, things look like we will be on that range, 60 to 75. And the main focus now is making sure we make a successful cross-selling. Priority number one, apart from what we've done now, which is restart AVL operations. The second thing is that we can take advantage of the EM4, which is AVL's product. So we are starting very soon to sell it to other markets. where Wallbox has presence and AVL has not because AVL is mostly a DAG region company. And we're also bringing a Wallbox Pulsar AVL version for the German market. So customers are very enthusiastic. They are looking forward for both products in both ends of the spectrum in home charging and commercial charging. And I think it will provide an extra revenue that we have not accounted in our focus.

Thanks, Georgie. Charlie, next question.

Of course, as a reminder, if you wish to submit a question, please dial star followed by 1 on your telephone keypad. Our next question comes from Ben Callow of Baird. Ben, your line is open. Please go ahead.

Hey, good afternoon, guys. Thank you. Maybe just with the tough backdrop for some charging companies, can you just maybe update us on how you think the competitive market has changed and where you guys sit at it, both in home charging and commercial charging?

Thanks, Ben. So, I think we have to differentiate AC charging level two from DC fast charging. So in general, if you are a DC fast charging company today that has an acceptable gross margin and like we are of 30% and very high uptime, the market is a blue ocean. You know, basically we've seen that we've grown 325% in a year. And we continue expecting important growth, given the fact that we just recently launched our supernova in the US. And we're launching supernova with higher power in Europe, the supernova 200 plus 240 kilowatts. In terms of AC charging, I think it has been more challenging in 2023. The challenge in stocking has impacted most of the companies. And when we look at our public peers in Europe, we've seen an average of 25% to 50% level 2 drop in selling, in sales. We've been hit less than others, given our European presence and the presence in many, many markets. And if you look at the revenue improvement in Q4. We already can see that the tele-inventory issue is easing and we have 5 million euros of improvement coming from organic sales.

Thank you. And, you know, the OEM partnership channel, just how much is that contributing and how much time you spend? I saw Lucid is going to start offering a wall box charger. I think they announced that. I'm just wondering if, you know, of your channels where you're seeing the most, I guess, take out of it or growth of the different channels.

Thank you. Thank you, Ben. I think the OEMs have tried many times to do their own product, and at the end, it's very challenging to have compliance in all countries, compliance with the installation. You have to do the actual installation. And to be competitive, you have to be able to claim different subsidies in different regions. You have to be able to connect with utilities. So there's companies that have longer term in the EV space, like Nissan, and we're working with them globally. Or Kia, one of the major players in the EV space, we're also working with them. Or BYD itself, also we work with them in some markets. So it's very challenging to be a global e-charging player that can be competitive in every market. And that's not the focus of OEMs. We keep working with them. We collaborate with them. And an example of that is Free2Move, for example, which is part of Stellantis. And what we're doing is making sure we provide the most competitive products for the different brands of the company. But we believe that that's the way forward, given all the challenges that you need Thanks, Ben.

Charlie, I think that that's all the questions that we have in our queue. So if that's the case, we're going to let everybody go. We hope that you found today's call a good use of your time. Please watch our website for details if you're interested in meeting with us because we're going to be at multiple investor events in March. So let us know if we can help you in any way. Have a great day, everyone.