Alfen Nv

Hello and welcome to the Elfin 2024 Q1 Trading Update call. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, Please press star zero and you will be connected to an operator. Today, we have Marco Roulevel, the CEO, joined by Michel Lesch, CEO, as our presenters. I will now hand you over to your host, Marco Roulevel, to begin today's conference. Thank you.

Thank you, Laura.

Good morning and welcome to this webcast regarding the 2024 first quarter trading update of Alphen. We appreciate the fact you have taken the effort to participate. As indicated by the moderator, these webcast sessions that may come forward are handled by the members of Alphen, being Michel Les, CCO, and Marco Roelleveld, CEO. In this webcast, we will start with the highlights of the first quarter of this year, followed by a short review of the business line. Next, we will go into more detail regarding the financials and outlook. We continue with slide three with the highlights of the first quarter of 2024. In this quarter, we realized 116.8 million euros in revenue. This represents a growth of 3% compared to the same period last year. This growth was driven by a growth of 32% of smart grid solutions. The 60% lower EV charging revenue was mainly related to the fact that in the first quarter of 23, we benefited from use or the backlog from orders in 2022. Energy storage revenue was 8% lower due to timing aspect of a single project in project execution. The overall gross margin was stable at 32% compared to 32.1% in the same quarter last year. This gross margin excludes the one of 5 million euro costs related to the Leander-Papto substation moisture issue, and these one-off costs are also excluded from the adjusted EBITDA. As a percentage of revenue, the adjusted EBITDA declined from 12.7 in the first quarter of last year to 8.2% in the same quarter this year, as a result of the time shift in revenue recognition in energy storage. In 2024, the revenue will be backloaded toward the second half of 24, driven by a ramp up of substations, where we are confident that due to the new building that's now finished, and where the moving of production will start coming weekend, and will be finished at the end of Q2, that in the second half of the year, we'll be able to further the production of smart grid solutions. Second reason for the revenue to be backloaded is the demand for AV compliant EV chargers, and of course, the timing of energy storage projects towards the second half of the year. Two organizational aspects are relevant. The first one is that we have appointed an interim CFO in the person of Onno Krupp. Onno joined Alphen Esper today. Furthermore, we have strengthened our management structure by extending our EXCOMM with Bud Catman, a COO, and on of a note, a CHRO. And regarding the outlook, we reconfirm our 2024 full-year revenue guidance and our EBITDA margin, and we also are sure that we will have a positive free cash flow at the end of the year. We also reaffirm our growth ambition for smart grid solutions and EV storage. EV charging. For energy storage, there will likely be less than 40% revenue growth due to the rapid decline in battery prices. I will go in more detail on the financials later on in this presentation. Our CCO, Michelle Lesch, will now continue this webcast.

Thanks, Marco. Now we'll talk through each of our product lines, starting with EV charging. In EV charging, we saw revenues of $39.3 million, which is down 16% year-on-year. Q1 2023 is challenging to compare with as we had significant backlog carried over from 2022. And Q1 2024 does show modest quarter-on-quarter growth compared to Q4 2023. We had 66% of our revenue generated outside the Netherlands, and we still expect to grow EV charging approximately 15% in 2024. This is really driven by new AFIR requirements and recent tender wins where we're already seeing order intake for our new Twin 5 Plus AFIR compliant product. As we move to smart grid solutions, we achieved 54.9 million revenue for Q1 2024, which is a year-on-year increase of 32%. This is primarily driven by the increased grid operator volume. This increase is as expected, and as previously communicated, we continue to see the long-term growth trend for smart grids. Just to note for Leander, we do expect a one-off revenue impact in Q2, but to be clear, there was no revenue impact in Q1 for Leander. The $5 million cost Q1 impact was just for the Alliander Pacto stations, and was a one-off in SGS. It's also important to note that the production stop was just for Leander. Our other SGS business was not impacted and continued and will continue into Q2. Finally, in energy storage systems, Q1 saw revenues of $22.6 million, which is down 8% year-on-year. The volatility in Q1, as Marco explained, was driven by a single large project milestone. tied to a site delay, which was out of our control. We will see a recovery in Q2 and further acceleration of revenue in the second half. In addition, we do see that the battery prices will have a larger impact on future 2024 revenue, as prices have fallen faster than we had forecasted at the end of 2023. Just for reference, Bloomberg NEF estimated about 7% decline in December for energy system costs And now that's in excess of 19%. We had planned on a forecasted decrease. However, with the incremental change, we now expect energy storage revenues to be less than 40% growth year-on-year. We do expect this rapid decline in battery prices to be temporary, and that over time, the rate of decline will slow. And due to our agreement with suppliers, we have back-to-back pricing. So the impact is only on revenue and should not affect gross margin. And the positive of the lower battery prices is that we are seeing increased interest in projects and have more qualified projects in our pipeline. I'll now hand it back to Marco to go through the financials.

Thank you, Michelle. On Sheet 7, you can see the quarterly revenue overall gross margin, and it's adjusted EBITDA development. The revenue development has just been explained by Michelle. Overall gross margin of 32% was in line with the gross margin in the first quarter of last year. I have to note that the gross margin excludes the one of cost of €5 million related to Leander-Pecto substation moisture issue. As a result, this is also excluded from the adjusted EBITDA. The adjusted EBITDA declined from €12.7 million, being 11.2% of the revenue in Q1 2023, to €9.6 million, being 8.2% of revenue. This is a result of lower than planned revenue in energy storage causing temporary operational deal average. As in the past years, with the Q1 and Q3 trading update, we do not give working capital and cash flow statements. However, we can say that the working capital and cash flow is developing as planned. For example, the inventory for ACE is going down as planned, where we indicated last year that we had an overstock of 30 to 40 million euros. We are progressing on this say on an average basis over the year to bring this down to at the end of this year to the expected number.

Continue on sheet eight.

We decided to fill the CFO position on a temporary basis. This gives us time to carefully manage the selection process for a permanent CFO going forward. and we intend to announce a permanent CFO early 2025. I'm pleased to announce that Ono Crabfield-Joon Alphen as interim CFO as per the 21st of May being today. Ono brings more than 25 years of broad financial and leadership experience to Alphen and has worked in a variety of financial roles in a wide range of industries across multiple public, private, and private equity-owned companies. We are convinced that Onno has a balanced mix of experience as both a strategic advisor as well as a hands-on operational leader with expertise building processes, teams, and capabilities in international manufacturing setting. Our company will continue to grow and we decided to extend the executive committee as per January this year with Bart Kempen in the role of COO and Anne van Noot in the role of CHRO. The extended executive team allows for more dedicated attention on key areas of the business, such as operations and our employees, while it leads to more focus for the existing board members. On the last sheet of the presentation, we would like to elaborate on the outlook for 2024. Across Europe, the transition to carbon-free energy systems that is not dependent on fossil fuels is without debate. And therefore, we foresee long-term positive market development for all of our business line. To facilitate our growth, we continue to invest in our organization, production lines, and innovation for the future. And we reconfirm our full-year revenue outlook of 590 to 660 million euros, as we also reconfirm our guidance regarding the just EBITDA of a minimal 11.3% of revenue and the fact that we expect a positive free cash flow. We're now at the end of the webcast. Laura, can you take over again and open the line for questions?

Sure, thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We'll now take our first question from David Kirstens of Jefferies. Your line is open. Please go ahead.

Hi. Good morning, everybody. Thank you for taking my question. I've got two, please. First of all, can you talk a little bit about the gross margin development in the first quarter, which was better than expected, and given the rough indication of the development by segment? Is it correct to assume that gross margins in EV charging sequentially improved after they weakened towards the end of last year?

the first question uh it starts a little bit say maneuvering and now into answer is that we say historically like with working capital and cash flow statements are not supplying the gross margin statements in the first and the third quarter of the year but i think in overall you're more or less right in the assumption that the only development of our growth margin in the individual business line We didn't deal them out, say, this quarter fully, but say we are, say, happy with the overall growth margin development, and they are well within the bandwidth as which we indicated previously.

And what would drive the sequential improvement in gross margins in EV charging versus the second half of last year and into Q1? Is that the mix effect from the home segment coming back?

It's fundamentally a mixed effect, but say partly what also Michin was already saying, we expect for the second half of the year or that say the AV element where we more or less the transparency on payment is related to say the public and semi-public segments. Therefore, we think that also that segment will have the capability to show an upward in revenue, and therefore also it will be translated into our results also.

And in Q1, sometimes we do see a positive mixed effect. If we've got more – if the home segment comes back, even if we've got more business and public chargers pre-Aphere, that would also help support a positive mixed effect in Q1.

Okay, understood. And maybe moving to the next question on the impact from the moisture issues in smart grids. How should we – How will that impact revenue and operational leverage in the second quarter? Will there still be operational deleverage again in smart grids next quarter?

Fundamentally, what's happening in the second quarter that we had, say, in April, a temporary stop-down of production. That means that, say, at this moment, we have resumed production of our Leander substations, but we have kept reducing the number of substations of the remaining customers. Therefore, there will be a slight impact on revenue in the second quarter, but also indicated due to the fact that we are now fundamentally, we have resolved the elements of that stopping us from production in April. be able to compensate those numbers in the second half year. All the costs are incorporated in the 5 million euros. That are the costs that we have incurred more or less up to now, but also the costs that we expected to occur in the remaining part of the year related to this subject, because we still have some repairs to be done. But they are all incorporated in the 5 million euros. So the deleverage is in, if you talk about those terms in our operators and gross margin, will not be fundamentally there. There will be slight impact on our revenue in the second quarter, but that will be compensated by revenue in the third and the fourth quarter.

Okay, understood. Thank you very much.

Thank you. And we'll now move on to our next question from Jeremy Kinside of Wendell & Scott Campen. Your line is open. Please go ahead.

Good morning, Marco and Michelle. My first question is just on the energy storage business. Obviously, you called out there was a timing effect impacting revenue there, but obviously it seems to be quite large. Does that suggest that you're working on more large-scale projects this year rather than lots of smaller ones?

Yes, it does. I think what we've seen is the project sizes have continued to increase over time. I think we've shared previously, for example, you know, Alivio was one customer where we had started with, you know, 10-megawatt-hour projects and moved up to 20-plus-megawatt-hour projects. So, yes, over time, we are seeing larger projects in our pipeline, larger projects that we're executing, which makes the milestones larger.

Okay, sure. And so would it then be fair to assume that the margins could be lower compared to last year since you're working on larger projects?

So we do have larger projects, but we still have the smaller projects where you don't have the same dilutive effect from the battery pull-through. So I don't think it's fair to say that you'll see a decline because we still do have a mix. As we grow, we have more larger, but also more of the small and medium-sized projects.

Okay, sure. Second question, just on the cost side of things. There was a sequential increase up to around $28 million on the OPEX line for the quarter. up from around 24 last quarter. Could you talk to what some of the moving parts were there?

If you talk to our operational costs, they are more, say, fundamentally related to personnel and, say, housing. So those are more or less linear type of costs where we try to plan as secure as possible, and they are also quite close to the number we planned for. and say the fundamental impact on this quarter is more related to the relevance, the percentage-wise towards revenue. If, say, the timing of this single project had been as planned, then we would have been able to recognize revenue, and that percentage-wise, the cost would have been also more in line with what everybody was expecting, because in absolute number, the costs are there, but as a percentage, of course, they are related to the revenue we can accommodate, and We cannot more or less delay the recognition of cost in the same way we can relate more or less the revenue. So we have to present cost as they are and revenue is more or less related to the fundamental milestones of the projects that are related to.

Okay, that's clear. And then one final question. Could you help me understand the interim CFO decision and why the decision to hire Ono is only on a temporary basis or interim basis and then you're looking to hire someone in 2025. Is that because you're looking to find someone else or more that Ono is on a trial period?

Maybe to put it a little bit in perspective, we did a thorough process or we tried to do a thorough process in the second half of last year when we knew that Jeroen would be stepping down from his role of CFO and to have a candidate with, say, a nice overlapping period to transfer knowledge about, say, the company in the role. And, say, at the end of the first quarter, we, more or less together with Baudouin-Thonsel, we had envisioned to be the next CFO. We came to the conclusion from both sides that the fit was not fully there. And then you can debate what to do. And at that time, both Boudewijn and we concluded that it was better to stop the cooperation. But, say, because of the timing of that decision, it was not anticipated by us and not anticipated by Boudewijn that we would come into that situation. And after more or less this being... executed, we sat together with the supervisory board what to do next, and we concluded that was in our company's benefit to not start up a fundamental new process to finding a CFO, because that would say normally such a process would take something like six months. And we said we need a quicker solution, and we said, okay, if we want a quicker solution, then although we have done a thorough process, we didn't want to run the risk to have a final nomination and a final decision, and then come to the conclusion that on timing we had other discussions again. So we concluded that we would start this process with the basic starting point, that we would have an interim solution. And if the interim solution works out fine, maybe we could consider to have that also as a final solution. But fundamentally, we've done our best to find an optimal candidate, but also do it in such a way that we have some maneuvering room for both in this situation, but also for Alphen as a company, to have some maneuvering room to be able to come to the best solution.

Great. That's helpful, Carlo. Thank you very much.

Thank you. And we'll now take our next question from Ruben Davos of Kaplashuru. Your line is open. Please call the line.

Yes. Good morning. Thanks for letting me on. I had a question on energy storage. I think you mentioned that there was a single energy storage project that has caused sort of the miss versus expectations. I'm assuming, you know, if you look at the numbers, sort of the miss was about 24 million. I'm assuming that single storage project does not entirely bridge the 24 million. So could you just help us thinking about maybe other causes of what disappointed potentially or what was a bit softer in Q1, thinking about market volatility, lower battery prices, and then the single energy storage project you referenced?

Yeah, you're correct in that the single project was not the full miss. I think Q1 was really driven by project timing. So whether it was other smaller milestones tied to projects or the large project, Q1 was really around project timing. For the future, you will see the battery prices come more into play as we execute and finalize those projects. But Q1 was really driven by project milestone misses with the largest portion being the single project. The site wasn't ready, and we can't deliver components to site if the site's not ready. And that was out of our control.

Okay. We don't have a balance sheet or a cash flow statement for Q1, but could you discuss maybe inventory levels, especially for energy storage with 20% lower battery prices roughly? Is there somewhat of a pricing risk or is it mitigated by your contract structures and purchase agreements basically?

Yeah, it's essentially mitigated by contract structure and purchase agreements. So all the batteries we have are tied to projects that have been closed. So the pricing is locked. And then what we do for new projects is that is tied to new purchase orders, new pricing, and everything is back to back. So there's no inventory risk from energy storage because all of the batteries we have are allocated to projects that have been signed.

Okay. And the lead times, they're still about 12 months these days or have they come down?

Well, so for overall projects from when we first start working at the final close, it can be approximately 12 plus months. But we've got a lot of projects at various points in time. And then we've got our agreement with our suppliers that allow us to get the batteries we need to support those projects in a much shorter timeframe.

Okay. And then just a final question on EV charging regarding the Twin 5 Plus, your new public EV charger compliant with AFIR regulations. You expect that to drive demand in the second half. Could you maybe explain why this is expected to drive incremental demand? I mean, obviously, your clients want to be compliant with regulation, but I can imagine that your competitors will also need to launch such compliance charges. So what is maybe somewhat of an incremental driver here?

Yeah. So for us, we've got two products that really tie to AFIR. One is our EVE Double, which has a screen, and then the Twin 5 Plus was our old Twin 5, where we had to add a screen. Most of our customers, if you've got the Eve Double, it's backward compatible, you upgrade the software. In Twin 5 Plus, new screen that started shipping in April, so we've got the order intake in Q1, but the revenue will start happening Q2, Q3, Q4. I think what makes our solution unique, comparable to some of the others out there, is dynamic QR codes. So on the screen, what we do is the QR code that is displayed is dynamic. And the reason that's important is there's been some recent, some customers, not necessarily of ours, but are using other stations, are simply putting a QR sticker on the charger. And the problem with that is then anyone can go put a QR sticker on the charger. And that QR code can lead you to, you know, a site that is not, the one that is for the CPO. So from a cybersecurity perspective, from a just fraud perspective, static QR codes are not the preferable solution. So our ability to serve up dynamic QR codes on the screen is a value add for our customers that want to protect their customers who are initiating charging sessions from fraud. So that is one reason we feel we've got a solid solution, Q2, Q3, Q4, with our AFIR compliant twin, as well as with the EVE double. That is software, it's on the screen, it's dynamic, it'll protect against fraud. And not all of our competitors are offering the same AFIR compliance solution.

Okay, that's very clear. Thank you very much.

Thank you. And we'll now take our next question from Nikita Lal of Deutsche Bank. Your line is open. Please go ahead.

Good morning, Marco. Good morning, Michelle. Thank you for taking my questions. I have just one question left regarding the inventory level. I understood that you don't give any numbers on Q1, but regarding your Leander issue, will we see any negative impact on inventories in H1, which will wait on cash generation?

What we've seen or know now is that there will be no inventory impact on the H1 figures based on the Leandro aspect because we stopped production, but also we stopped production of our suppliers, so the incoming of our goods we more or less have directly related to the corrosion as we have planned. Maybe integrate also maybe what is said in the webcast where we said in inventory we see the decline of inventory of EV charging components, that's in the process. And it's not that it will not have a depletion of our surplus stock in the first quarter or in the first half year. It will be step by step over the whole year that we will more or less step by step ramp down our EV charging revenue number. based to a normalized level, and as indicated last year, that will be having a positive effect on our overall 2024 inventory level between somewhere between 30 and 40 million euros.

We will now move on to our next question from Tiff Backelder of ABN Emro, AutoBHF. If your line is open, please call ahead.

Yeah, good morning all. First question on your outlook on revenues. Why do you think you still can make the high end of your guidance range, given that you already lowered the guidance for energy storage? revenues and maybe partly relate to that. Is it possible to give a bit more flavor on Q2? You're indicating you will see a strong recovery in MSD storage normally in Q2 versus Q1. You will have slightly lower revenues on the substation business. I heard you say so on EV charging. Can we expect decent growth in Q2 versus Q1?

I think, Thijs, what you mentioned is, yes, we will see a Q2 recovery for energy storage. SGS will have some impact. And then what we had talked about last year is some small sequential growth quarter on quarter for EV charging. We're still expecting that. So we said AFER will come into play. Some of that will happen Q2. Some of that will happen Q3, Q4. So that's what we're expecting as we head into the rest of the year. And then in terms of the overall guidance range, what we see is energy storage, especially with the larger projects, can have large impact in both directions. We're working on some large projects where we've got verbal agreements, and if those get closed, then we'll see milestones that will support revenue recognition that are significant. If they don't get closed, then that will also have equal downside. So, we are still within our bandwidth, but energy storage is really the primary driver of whether we're up or down against the midpoint

That's up or down from the midpoints. More or less, energy storage by itself has, let's say, a delta of something like $17 million in terms of revenues for this year still.

That's probably a bit on the high side, but it does have the largest impact on our ability to hit the high end.

Yeah.

Okay. Then another question on EV charging and RV regulation, you're saying your, let's say new public chargers have a screen and this can show the dynamic QR codes, but in terms of installed base of your public chargers, most of them do not have a screen. What do you see there, or what are you expecting there to happen in that installed base? Do you already see, let's say, customers maybe accelerating the move from old public chargers to newer public chargers?

Well, for example, when we won the City of Amsterdam tender last year, that is an example of those chargers have been installed for 10 plus years, so we're already into that replacement cycle. You know, for units that are younger than that, we've not seen an acceleration yet. And fortunately for our customers, AFIR only applies to newly installed chargers after mid-April. So the older public chargers do not have to be compliant. But depending on how dynamic QR codes are utilized and the fraud risk potential, it is possible that that could accelerate some refurbishment of install-based units. But we'll have to see how that plays out. We're not seeing that trend yet, other than what we saw with City of Amsterdam, where they are in a replacement cycle, and we won those tenders.

But it's logical that these fraud stickers also can be placed on your chargers, of course.

On the older ones, yes. So that could be... Sorry, I said, so that could drive faster replacement, but we haven't seen that happen yet.

Okay, then last week you, I think, officially opened your order book for your DC chargers. Is there already some kind of an expectation on the traction there?

So we do already have orders. So we had been working with some of our Netherlands and Belgium customers to make sure that things were as expected. We, you know, publicly opened our order book. We do have orders. We've always communicated that that is not going to be a material contributor to revenue growth. So we're not expecting it to drive things, you know, up or down this year. But we are starting to see traction and are happy that we're able to get the DC charger out into the market publicly.

Okay, then there was also a client question on your number of search stations produced already in Q1 while not having opened a new factory yet. Can you maybe explain how you produce such a high number of search stations already and what kind of production levels you could reach post opening of the factory?

In our factory, we have been more or less squeezing all the square meters that we could in order to be able to support the ramp-up production. As indicated also last year, we know that we bought the building of the Damsluisweg to accommodate the growth of batteries storage. In order to facilitate the growth of smart grids, we decided to first more or less ramp up our production and use the existing facility at the Damsluisweg to more or less already pre-ramp up before the new building was ready, so that we more or less used the square meters we have bought extra to prioritize the growth of SmartBridge solutions. And we now have started moving equipment towards a new building. The offices are now, say, for 90% taken into use. We started moving office personnel At the mid of mid April to now, and I think for offices, we now fully equipped and we have started more or less the 1st. The production elements in the new building to to to make sure that all production lines and all say, data communication, all transporting facilities are operational. And from common weekend on, we will start moving warehouse equipment so that we step-by-step will move production to the new building. And at the end of this quarter, we will have moved all our smart grid solutions production towards a new building that will not have that, that will directly can translate that to high output. It will be step-by-step because it's not only about say square meters, but also of step-by-step having experienced personnel. And we think that during the third and fourth quarter, every week we will step-by-step increase our production in order to accommodate more or less the requirements of our grid operators to be able to execute on their orders.

Yeah. Okay. Thanks.

Thank you. And we'll now take our next question from Chris Hollestell of ING. Your line is open. Please call a halt.

Thanks, Laura. Morning, everybody. Yeah, I've got a question. Are you having, let's say, internal discussions to improve the overall disclosure, to improve the reporting, for instance, that you do provide a net debt or trade working capital position in the first and the third quarter, maybe gross margins per division? Is that something that is being internally debated?

Up to this moment, we have more or less included figures on, say, the full year and half year to have a full set of figures, including gross margins and including also cash flow and those type of elements. Starting last year, we have more or less said that we will do that on a half-year basis and not in, say, the quarterly updates. The quarterly updates are more oriented in the first and the third quarter on revenue and on EBITDA level. So it's this moment we are trying to, on one hand, try to extend our set of information that we supply to the market, but also in a practical manner so that we can also follow that ourselves in relation to our financial structure and our financial departments. If there would be fundamental deviations for what we have seen, then we would have indicated so. This moment, whether it is gross margin, or working capital or inventory or cash flow development, we don't see fundamental deviations from what we have said as guidance and communicated earlier. We more or less used the half year and year figures to have a full financial set of information to reflect on our performance.

Okay, and I also noticed from the questions from the other brokers that, let's say, there's a big ask for, let's say, kind of a directional approach heads up per division because the shares are down what is it 18% now because there's big disappointment compared to the expectations the model of all disappointment on the stock market so I think that with your kind of production kind of divisions like smart grid and EV charging Yeah, it's mid-May now. You have a pretty good overview of what's going to happen. So I'm not asking for, let's say, specific numbers or things, but a kind of a directional heads-up is quite common. And I think it would help reducing share price volatility. But maybe that's not something that you're having discussions about within Alphen.

I think we do regularly have discussions around what is the appropriate amount of disclosure within the parameters that Marco just explained. So it certainly is a discussion. How do we consistently provide information that helps support the direction that the company is headed? I think what we did share is in energy storage, we expect Q2 to have a recovery. The milestone missed from Q1 will carry over to Q2, so we'll see that convert So Q2 will be stronger. Overall, it will be back half loaded, but Q2 will be stronger. And SGS will have minor revenue impact in Q2, but we'll expect a full recovery for the second half. And in EV charging, we still expect sequential quarter-on-quarter growth. It'll be modest, but we do still expect sequential growth, especially compared to last year where Q2 was not our strongest quarter in 2023 for EV charging. We'll see some of that recover as well. So I think that gives some flavor. And then the overall percentages, as we shared, approximately 15% for EV charging, approximately 20% for SGS, and then below the 40% for energy storage is what we have right now.

Okay. Thank you.

Thank you. And we'll now take our next question from Paul Diffelman of Brian Garnier & Co. The line is open, please, for the height.

Yes, thank you. Two questions for me. The first, regarding EV charging, could you give us an update on grid connection delays for CPOs in Europe right now?

So some of the grid connection delays tend to be tied to fast charging infrastructure. And I know we've communicated in the past with SGS that sometimes those grid connection delays could impact the SGS stations to support fast charging connections. Right now, we're not seeing any grid connection delays in regard to our EV charging business as we're primarily destination charging. So charging plazas at businesses, the home segments, the public segments. So less impacted by grid connection delays.

And what about fast charging? Do you have any inputs? Because, of course, it could impact your SGS segment as well.

Yeah, no, so we're still seeing that business with strong growth. So that's from an SGS perspective, our projects business primarily supports that fast charging infrastructure business.

Okay, and my second question is at the group level, do you have any exposure to copper prices, whether in batteries or EV charging or substation transformers?

We have seen copper prices going up, say, but in related to, say, those price developments, you have to bear in mind that, say, we can fairly well predict, say, our required volume in copper for a whole year. That's also the reason within our purchasing department, we are having price programs that we would not only have secure of supply, but also secure of, say, stable pricing. Or other end, you have to bear in mind that, say, copper has been going up and down already in the past years. Let's say for a lot of, say, elements that can be used, can be designed in copper, you see also that there are alternatives in aluminum. And for example, in transformers, we have seen already that for some years, the windings that are within the transformers are not related to copper, but are mainly related to aluminum. to have less dependence on, say, the pricing of copper. So, yes, there is, of course, a relationship to some components in our products, but the majority of our components are not directly related to copper pricing, and there is a very low percentage of copper in our products, overall, related to our revenue.

Okay, thank you very much.

Thank you. And we'll now take our next question from Jeroen van Aken of D Group Petercam. Your line is open. Please follow high.

Yes, good morning, everyone. Still a couple of questions from my side on the energy storage business. Because first, you basically say that the 40% revenue growth will no longer be reached. But could you basically give us any hint where it then should go instead to are we looking at 20% growth, 30% growth, any direction I think would be very helpful for us. And then you mentioned larger projects or larger contracts there in the business. Could you give us an idea how long it typically takes between signing and finalizing those projects or getting milestones for those projects? And then finally, if I look at peers who are more involved in those larger projects in energy storage, I see that their profitability is quite weak, I would say. So if your move to larger projects would be structural going forward, would this then also impact your long-term EBITDA margin targets for the whole group? Thanks.

Yeah, so let me just talk to the larger contracts and the timing from assigning and milestones. So Fortunately, and I think we shared a visual in our capital markets day last year, we set the projects up to be cash flow neutral. So at point of signing, we usually have a down payment milestone. And then we have other major milestones, you know, when we order materials, and sometimes that can be within weeks or a month after signing, depending on the actual execution timeline. Getting components to site is another major milestone. Again, that can happen fairly rapidly if we've already been planning and have ordered the materials to support a project. Sometimes we anticipate and give a heads up to suppliers. We don't place the order until we actually have a signed contract with our customer. But for example, there was a project last summer we shared previously where from signing to execution was less than six months. So it is possible for us to realize revenues on medium-sized projects fairly rapidly. And while we do see the market trending towards larger projects, I think if we think about where Alphen has a lot of value add for energy storage is with the medium-sized projects where we're working with independent developers and those that maybe don't have the in-house capability to do the engineered equipment package. We really are able to serve our customers best with those projects and those customers. And so while we will do larger projects and the market is moving that direction, I think many of our competitors are very focused on only doing the large projects, whereas we've got a healthy mix in our pipeline and in our execution backlog of projects that are both small, medium, and what we would consider megaprojects that we're looking to do.

And maybe in relationship to, say, the element of gross margin, this is the reason why we last year with the capital market, they decided to start sharing more or less gross margin per business line in order to have also not the discussion that what is the impact of, say, revenue of smart grids compared to EV charging compared to battery storage so that we can more or less value the three business lines and also their contribution to the overall gross margin. And also what we explained that, say, in leveraging our fixed cost base with, say, battery storage, we are also quite well capable of leveraging our fixed cost base when we are growing the revenue.

Okay, thank you.

Thank you, and we'll now take a follow-up question from Thierry Spichelder of ABN AMRO. Your line is open. Please call ahead.

Yeah, thank you for that. Looking at your guidance for energy storage, less than 40%, so... that more or less hints at something like 220, 225 million revenues for the full year, versus only, what was it, 22 million in Q1. Can you roughly indicate what is already in the backlog for the full year of the 225 million you guide for the full year? Are we already at 150 million, 170 million, or Just to get some grip on your feasibility for your guidance. That's a lot of questions I get from customers there. Then maybe you've appointed a new COO and a new CHRO. Can you maybe explain what their focus will be? What will they focus upon in terms of improvement points? and relates to that. That gives you, Marco, extra time for something, maybe for M&A. And finally, maybe a short update on Finland.

So let me start with the energy storage. So we did give backlog last year because what we saw was There was such a fundamental shift in growth with energy storage last year that we needed to provide that information. You know, we're not currently sharing it, but something to remember with energy storage is we do have the two businesses. We have our mobile business and our utility scale business. And in the mobile business, that one doesn't run with backlog. So there is a portion of our energy storage revenues that will be tied to incoming orders for the rest of this year, primarily with mobile. And then there is a portion for projects that are verbally awarded. but are not in our backlog yet. So we've gotten the verbal indication, we're finalizing terms and conditions, but until that project is signed, it won't go into our backlog. So we do have visibility on that, but it's not shown in a backlog number. And then fortunately, we do have a healthy mix of pipeline, small, medium, large projects, where those small and medium projects, especially with customers that we've worked with previously, we already have terms and conditions. We already know how to work with them So we're able to close those projects and execute, especially through some of the first milestones, in a fairly short amount of time. So while we do have strong backlog for the year, there is still a portion that will be tied to mobiles. There's a portion that will be tied to verbally awarded projects that are not in backlog yet. And then some other smaller, medium-sized projects with existing customers that we'll be able to convert and recognize revenue on in the second half of this year. So it's a mix. So not everything is in backlog today. But we do have line of sight to what we need to close to achieve the targets that we've put out.

And in relation to your organization elements, of course, for the CEO, in growing the company, we see also that we are growing our production facilities, not only physically, but also in the processes, how to control and steer production. And for example, what we're now doing also, we're a charging station. We created departments on, say, production engineering. We're now leveraging those capabilities also to our different production facilities for energy storage and for smart grid solutions. So we are now step-by-step trying to professionalize, say, all the different elements within our production and production area. And related to CHRO, it is clear that, say, in our overall approach, the human being is also the more or less the most capital worthwhile element within our overall company. So to emphasize that we, in growing our company, we also need to be able to operate, to improve our processes, to grow our people. And in relation to me, it's not a tension for me to do nothing, to sit in the sun, but there will be, there are still a lot of elements where say my own attention will go to, as indicated on say growth, it will be, mainly driven by, say, organic growth. We do not exclude M&A, but I think that's not our primary focus, and that there will still, say, be a lot of focus on, say, development and new development of products in order to be able to benefit from, say, the growing mask area with elements in our products where we can differentiate ourselves to the competitive landscape.

Finland? Oh, Finland, I forgot this one.

Sorry, Thijs. Finland is progressing. What we do mean with that is that, say, some time ago, we said, okay, we are not only, we're not interfering the type of products they have, but we are more or less helping them also to steer towards, say, the renewable market area, whether that's related to solar or wind, but also to fire-charging equipment. We have now, we have their stable, organization with a focus on, say, the same type of business as on smart grid solutions that we have here in the Netherlands. And we're also, of course, leveraging their capabilities in order to secure, say, the project execution on battery storage in both Finland and Sweden.

Okay, thank you.

Thank you.

There are no further questions in queue. I will now hand it back to Marco Roulevel for closing remarks.

I would like to thank everybody for participating in this webcast and I hope we'll speak together in a short time. Thank you.

Thank you all. This concludes today's call. Thank you for your participation. You may now disconnect.