Alfen Nv

Hello and welcome to the Alpham Q3 2024 results call. My name is Saskia and I will be your coordinator for today's event. Please note this call is being recorded. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. I will now hand you over to CEO Marco Rolleveldt To begin today's conference, please go ahead.

Good morning and welcome to this webcast regarding the third quarter of 2024 results of Alphen. We appreciate the fact that you've taken the effort to participate. And as indicated by the moderator, Saskia, this webcast and the questions that may come forward are handled by the management board of Alphen, being Michel Lesch, CCO, Onno Krapp, CFO, and myself, Marco Roethelt, CEO. In this webcast, we will start with the highlights of the first of this three quarters, followed by a short review of the business line. Next, we will go into more detail regarding our financials and outlook. We continue with slide three with the highlights of the third quarter of 2024. Aligned with the updated guidance, in the third quarter of 2024, the revenue decreased by 22%, towards 106.2 million euros, which was mainly driven by lower energy storage revenue. Due to a positive one-off timing effect in margin recognition in energy storage, the gross margin was more than 3% higher than in the same period last year. As a percentage of revenue, the adjusted EBITDA declined from 12.7% in the third quarter of last year to 6.8% in the same period this year. The outcome of the organization Organizational Right Sizing Project and Cost Saving Program will improve to adjust EBITDA in 2025. We've reached an agreement with the bank on a new financial arrangement. The bank overdraft facility and the bank warranty facility will remain intact. In regard to the full year outlook, we will confirm our June 2024 outdated outlook, being first a revenue outlook 425 to 520 million euros. However, at the lower end of the bandwidth, mainly driven by increased EV market softness. Technically, amid single digits adjusted EBITDA margin outlook, we expect that the free cash flow will be negative, but with an improvement compared to the minus 27.2 million euros in 2023. Furthermore, the one-off restriction provision will be taken in Q4 2024. Later on in this presentation, Otto will go in more detail on the financials, and I will hand over to Michelle, who will continue with the segmental review.

Thanks, Marco. Now we'll talk through each of our product lines, starting with Smart Grid Solutions. In Smart Grid Solutions, we achieved $50.3 million of revenue for Q3 2024, which is a year-on-year increase of 1%. This is primarily driven by our grid operator segment and the successful ramp-up of our station production, which went according to plan. from 32 stations in the first week of July to 81 stations in the last week of September. We're also seeing differentiated growth rates in our smart grid segments, and in the next page, I'll talk more about the ramp-up and market conditions we currently see. Overall, given the faster-than-expected ramp-up for smart grids, we do expect an increase in growth closer to 10% for 2024 versus the previously communicated 5%. As we move to slide five, we have some additional market intelligence to support the current situation. First, let's talk more about the ramp up of our substation production. Please note the substation production ramp up is just for our Netherlands production facility and does not represent some of our other production outside of the Netherlands. As you know and can see, we saw declining station production in Q2, hitting a low of 32 stations a week. By week 40 or the end of September, we'd achieved 81 stations a week. And just last week, we were able to achieve 100 stations a week, which is earlier than anticipated and a really proud moment for our team that has been working really hard to achieve this goal. And that's fundamentally what's driving our increase from 5% to 10% for 2024. Now, as we look to the differentiated growth rates, as we look to the future, our grid operators are still optimistic about their long-term investment plans. However, they have to realize those investment plans and get everything installed. And what we are seeing in our private network business is flat to declining growth rates in solar. And we're also seeing in some of our other segments like fast charging connections where grid delays, permits are not moving as fast as we would like them to move. So we do see some softness in our private network business. Now as we move to slide six, we can walk through EV charging. In Q3, we saw revenues of 32.9 million, which is down 6% year-on-year. We've continued to see softness in the EV car market, and we do see increased competition in the home segment. As we head into Q4, we expect the slowdown to continue due to the recent car registration data where 10% fewer vehicles were registered in Q3, and on a year-to-date basis, we see a 3% decline. As we previously communicated, this business line has limited visibility, So we will continue to monitor order intake and convertibility to achieve our 2020 for guidance. However, we are not expecting a strong uptick in Q4 revenue or in Q1 of next year. And given this current softness, we now see up to a 5% decline year on year for the full year 2024. We do expect EV sales to come back in 2025 due to the continued desire to phase out ICE vehicles and the increased CO2 requirements. but expect those impacts to occur further into 2025 than Q1. On slide seven, we can see these market challenges, specific country by country, and you can see one of our largest markets, Germany, is down significantly in the first nine months. Bloomberg is forecasting 23% growth in first half 2025, so we do see that, and that could definitely have a positive impact mid to end of 2025. However, with all growth projections, we need to carefully monitor ambition versus execution, and the EV market is not yet a fully mature market. Now, as we move to energy storage on Page 8, we see a Q3 revenue decrease year-on-year of 55%, achieving $23.1 million. In 2023, we did have a more back-loaded year, inclusive of Q3. And then this year, we also had delayed first-half deals that could have potentially contributed to Q3. As we look ahead to Q4, we do have backlog coverage for the remainder of our outlook. However, there will remain some execution risk that we'll manage. And as previously communicated, we still expect full-year revenue to be down 20% for 2024. As we look ahead to 2025 and order intake trends, we do see that the rate of battery price decline has stabilized, but we don't do still see extended deal cycles with our customers as they de-risk their projects, whether it's ensuring great connections are ready or sites are available. Our intent is still to have substantial backlog coverage heading into 2025, and we're currently working on closing key deals before the end of the year. But as with many deals in 2024, the deal cycle is more extended than anticipated, and obviously what we get closed will be reflected in our end-of-the-year backlog number. So as we head to page nine, you can see some additional details on backlog. Our Q3 ending backlog was $83.6 million and our Q2 ending backlog was $72.4 million. And just for context, our current 2025 backlog is $47.5 million. And just Another point of reference, our current backlog does not necessarily reflect all of our closed deals. We only book things into backlog when we have all of the conditions met. And we do have a couple of deals, one significant deal that is still pending financial close, so it's not been fully booked. And overall, as we look to the energy storage market dynamics, we continue to see an oversupply of batteries, which drives prices down. This is primarily due to the lack of EV demand, which has previously been communicated. And fortunately, that does stimulate project demand and helps ensure the business cases are more favorable for our customers, but they also need to manage their permits and site readiness and other factors beyond just the battery prices. We also continue to see technology developments, which should further improve project viability. So long-term, we're still optimistic about this market, but in the short-term, we need to manage deal timing. And now I'll hand it over to Onof to walk through the financials.