Alfen Nv

Hello and welcome to the Eltham Half Year 2024 results. 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. I will now hand you over to your host, Marco Roulevel, the CEO, to begin today's conference. Thank you.

Thank you, Laura. Good morning and welcome to this webcast regarding the first half of 2024 results of Alphen. We appreciate the fact that you have taken the effort to participate in this webcast. The question is, that the webcast and the questions that may come forward are handled by the Management Board of Alphen, being Michel Les, CCO, Onno Krupp, CFO, and myself, Marco Rulleveld, CEO. I'm especially happy that in this half-year release, we are able to confirm that Onno Krupp will join the statutory board of Alphen. In this webcast, we will start with the highlights of the first half-year, followed by a short review of the business line. And next, we will go in more detail regarding our financials and outlook. We now continue with the highlights of the first half year of 2024. Compared to last year, in the first half of 2024, the revenue increased 10% to €245.7 million, mainly driven by any storage systems and smart grid solutions. The group adjusted gross margin, corrected for once-off, was 28.9% compared to 30.5% in the same period last year. This was mainly caused by the shift in our provisions line mix and the low margin with smart grid solutions. As a percentage of revenue, the adjusted EBITDA declined from 9.4% in the first half year last year to 5.5% in the same period this year. And as indicated in June, we have started the strategy validation and organizational resizing project. We will communicate and update on this project during the Q3 trading update on the 7th of November this year. We have obtained a preemptive waiver for the to be expected breach of our bank covenant in Q3. We will continue the construction constructive conversations with the bank to conclude an updated covenant. This will be based on a revised business plan in which the outcome of our ZC Validation and Organizational Right Sizing project will be taken into account. With regard to the full-year outlook, we will confirm our June 2024 updated outlook being a revenue outlook in the range of 485 to 520 million euro, a mid-single-digit adjusted EBITDA margin outlook and we expect that the free cash flow outlook will be negative, but with an improvement compared to the minus 27.2 in 2023. Later on in this presentation, Onno will go in more detail on the financials, and now Michelle will continue these webcasts with the segmental review.

Thanks, Marco. Now we'll talk through each of our product lines, starting with EV charging on page four. In EV charging, we saw revenues of $80.1 million, which is up 1% year-on-year, and an adjusted gross margin of 38%, which is in line with our expected gross margin range for our EV charging business. This is lower than last year for the same period, primarily driven by mix due to a larger share of mid-range home chargers, which is our S line. We also generated 60% of revenue internationally, which is consistent with the same period in the prior year. Overall, for the EV market, we see variability country to country with momentum in countries such as Belgium and France, and less so in Germany where the market is more challenging. And in general, we have seen the EV market slow with only 2% growth in registered EVs in first half of 2024 for Europe compared to first half of 2023, which we previously communicated in June. And we maintain that view as we move through Q3, where we expect revenue to be slightly below Q2. This is a segment with less visibility compared to our other product lines, and while we have secured public tender wins with volume into the future, most of our business is flow, and we still have order intake to secure that will convert to revenue in 2024. Longer term, we still see a positive growth trend for EV, expecting a CAGR of 15% to 20% from 2023 to 2030, and a likely acceleration again in 2025. As we move to page five, we'll talk through smart grid solutions. In Smart Grid Solutions, we achieved 93.5 million revenue for the first half of 2024, which is a year-on-year increase of 9%. This is supported by our grid operator and private networks business. And while in Q1 we saw 18% year-on-year growth, Q2 was impacted by lower production quantities due to our production stop and ramp-up related to the moisture issue with Elephant's Pacto substations. Our adjusted gross margin was 27%, which is on the low end of the 25 to 40% range. This is really driven by inefficiencies in our process due to the moisture issue and an increased share of revenue from the grid operators. In addition, a short update on the moisture issue. We have three work streams. We have new builds, we have rebuilds of existing stations that are not installed in the field yet, and substations that are installed in the field. Our first work stream and first priority was to get production up and running on our new builds, which we have done. And what we'll focus on for the rest of the year is continuing to optimize our processes for those new build concrete stations. The second work stream is to rebuild substations not yet installed. For these stations, we have spread that work out from now until Q1 of 2025. This also allows us to put the priority on building the new stations in Q4. Then for the third work stream, this is the on-site repairs. In this work stream, we have executed some repairs on-site, but this work will also run into next year. Overall, we're using Q3 to ramp up so that we can be at our anticipated capacity of 100 stations a week in Q4. Now let's move to energy storage on page six. In energy storage systems for first half 2024, we saw revenues of $72.2 million, which is up 23% year-on-year, and does include the large project milestone that was delayed from Q1. The strong first half growth in first half is due to 2023 being heavily back-end loaded, and in 2024, we see more equally distributed revenue relative to 2023. But we still expect energy storage to be down 20% for 2024 overall, and we expect Q3 to be in line with Q1. Our gross margin was 22%, which is as expected, and supports ALPHA's ability to realize medium-sized utility scale projects that are able to maintain a fair gross margin. We did close the four open deals we communicated about at the end of June and currently have sufficient backlog to support our energy storage revenue guidance for 2024. At the end of Q2, our backlog was $72.4 million, contributing to both 24 and 25 revenue. And just for context, as of mid-August, we have $88.3 million in backlog. In future quarters, we will continue to share our quarter-ending backlog for the energy storage business. In terms of market, while we have seen some deal delays as we communicated in June, We do still see momentum in our funnel with a considerable increase of qualified opportunities compared to this time last year. As we move to slide seven, we'd like to share a sample of our commercial successes that reinforce our position across all three of our product lines. This is again a mix of new and existing customers. First in EV charging, we continue to see wins with existing customers across Europe. First in the public charging space with OpCharge. and also saw two wins in our business segment, supporting parking applications with Effia and Dri-V. In smart grids, we secured strong wins in adjacent segments, first with a new customer, Tech in Belgium, which is to support grid connecting their e-bus station. Then we also supported our existing customer, Annexus, with a 10 kV distribution transport station. This is outside of our standard contract, and we hope that there will be additional supply to Annexus in the upcoming years. We also continue to support an existing greenhouse customer with their substation needs. In energy storage, we secured winds with Raleigh-Chate, also a new agreement with Alibio, and a project with Odura for a system here in the Netherlands. As we move to slide eight, we'll share a short update on some recent innovations. First, in Smart Grid, we're partnering with one of the local universities and grid operators to further investigate developing a solid-state transformer substation. This would really be a significant development in substation design, which would allow the grid operators more nuanced grid control capabilities than they're able to get today with traditional transformer design. Then in EV charging, we're the first to have both core and advanced security in OCCP 2.0.1. And as you know, Alphen was one of the originators of OCCP, so we're very happy to continue to be supporting this protocol development and and be one of the first to help continue to support this protocol in the market. And in energy storage, we also have a first in regard to our mobile storage systems, where we're the first mobile storage system provider to have a fire propagation certificate for our mobile X product. And now I'll hand it to Ono to continue with our financials.