Alfen Nv

Hello and welcome to the ALFON 2025 Q1 Trading Update Call. Today's 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 1 on your telephone keypad. I will now hand you over to CEO Marco Rölleveld to begin today's conference. Please go ahead, sir.

Thank you, Saskia. Good morning and welcome to this webcast regarding the 2025 first quarter trading update of Alphen. We appreciate the fact that you have taken the effort to participate. This webcast and the questions that may come forward are handled by the management board of Alphen, Dean Onno Krupp, CFO, and myself, Marco Rulleveld, CEO. In this webcast, we will start with the highlights of the first quarter of this year, followed by a short review per business line. Next, we will go in more detail regarding our financials and outlook. Continuous with slide four with the highlights of the first quarter of 2025. In this first quarter, we realized 103.8 million euros in revenues. This represents a decline of 8.3% compared to the same period last year. The decline was driven by EV charging and for a smaller part to energy storage solutions. 27% lower EV charging revenue mainly related to a weak home market and a temporary low number of charging stations delivered for public applications. Any storage system revenue was 8% lower due to last year price declines impacting this year revenue. The overall gross margin was 29.8% compared to 32% in the same quarter last year. The main driver of this aspect was the lower share of EV charging in the revenue mix. As a percentage of revenue, the adjusted EBITDA declined from 8.2% the first quarter of last year to 5.3% the same quarter this year. With regard to cost control measures taken in the second half of 2024, we have been able to reduce personnel and other operation costs with 18.2% compared to Q4 of last year. The energy transition delays continue, transit delays, and continue to impact our business lines. Our smart grid private customers are impacted by grid congestions. While our grid operator clients are working on a resolution of grid congestion, so they face labor shortages and regulatory constraints. Furthermore, the softening of European CO2 targets for automotive OEMs delays EV adoption acceleration and, as such, EV charging infrastructure demands. Regarding energy storage solutions, we are a bit more positive. For example, in the Netherlands, some regulatory constraints have been resolved, and it's noticeable to mention that we have won our largest energy storage deal to date with Return Energy this April. The system size is 100 megawatt, 200 megawatt hour, and will be connected to the Dutch transmission grid, and will be contributing to next year revenue. For the rest of 2025, we expect revenue to be at the lower end of the full-year revenue guidance of €445 to €505 million. Therefore, we adjust the expected revenue range to €430 to €480 million. And as a consequence, we will take additional cost reduction measures to keep our operational costs in line with the revenue development, and we have to adjust our EBITDA margin guidance from higher single digits to a range of 5 to 8%. For Capex, a share of revenue will remain below 4% of revenue. Now we go to continue on sheet 6 with SmartBit Solutions and Distance Line Review. In this first quarter, the revenue was €54.3 million. This is close to the revenue in the same quarter last year. We see weakness in the market for private clients due to grid congestions, and agitations to invest in less solar park developments. The outlook for revenue with the Dutch grid operators for the remaining of 2025 will stay behind the anticipated volumes. Two of the major Dutch grid operators have decided to decrease their previously communicated volume numbers for 2025, and we have to scale down our production. Grid operators are struggling to increase their installation capacity as labor shortages persist and they have continued to use nitrogen-related permitting issues. However, of course, we support our grid operators in their appeal to the Dutch government to resolve these bottlenecks. The gross margin was 23.9% compared to 27.8% in the first quarter of this year, and this was in line with our expectations. We had anticipated a low gross margin due to a mixed shift more substations for grid operators that are more standardized and being quite more through tender processes. On sheet 7, we go in a little bit more detail regarding the current situation with the Dutch grid operators. For scaling the grid, the reinforcement manufacturers have to be – need to be in place. On the one hand, it is clear that the long-term objective for the Dutch cooperators to relieve grid congestion is to install 48,000 new substations up to 2050. This has been announced by the NetWay Nederland, the branch organization of the Dutch grid cooperators, that aims for optimal cooperation between the grid cooperators and takes care of the interaction with the governments and the other stakeholders. On the other hand, there are short-term challenges that hamper the ramp-up of the installation rate. These challenges are obtaining the necessary permits, which is currently delayed by nitrogen restrictions. There's also a problem with available transmission grid capacity, which needs to scale in parallel. There's limited availability of lands for substations, especially in densely populated urban areas. One major element is also the constraint delivery of certain components, and of course, the limited increase of installation capacity due to continued labor shortages. All parties involved agree on the fact that the installation rate of substation should ramp up, but also include that this will not happen in 2025. And I will now continue on Sheet 8 with EV charging .

Thank you, Marco. If you take a look at our EV charging business line, revenue of Q1 2025 was 28.8 million. This is a decline of 27% compared to Q1 last year. This revenue decline was caused by two factors. First of all, we see increasing competition in the home segment, and secondly, in our public charging segment, due to time of certain tender deliverers, we shipped a limited number of charge points. More than two-thirds 68.4% of our revenue was generated outside the Netherlands. However, the Netherlands remains our biggest market, and we sold most charge points here, followed by Belgium and Germany. The number of charge points we produced in this quarter was a little over 28,000, which is a decline of 24.8% compared to Q1 in 2024. In the first version of this press release, we mentioned the percentage of 35.3 percent. This has been corrected in the meantime. Gross margin was 39 percent, which is a slight decline compared to Q1 2024, in which margins were 41.8 percent. The margins remain within our expected margin bandwidth of 35 to 45 percent. The margin decline was mainly caused by an inventory charge we booked during Q1. Overall pricing remains stable. Excellent. We've seen a strong start of the year in terms of battery EV risk associations in Europe. However, the outcomes of the EU strategic review are mixed. On one hand, the fact that the European Commission has sticked to the 2030 zero emission target provides predictability for the industry and its investors. And this reconfirmation is vital to our positive long-term outlook. On the other hand, the one-time flexibility measures that allows car OEMs to meet the CO2 targets over a three-year average rather than annually will delay the short-term EV adoption in our segments. This impacts this year's revenue expectations for Alphen. I will share more about that in the 2025 Outlook section. Lastly, the European Commission has announced a legislative proposal to accelerate the electrification of corporate fleets. This will drive demand in the business and home corporate segment, which this segment often is strongly positioned for. To ensure our product portfolio remains ready for the future, we are proud to announce that by the end of this year, we will be launching our new double plus and single plus chargers. These new chargers are ready for the future because they are ready for vehicle-to-grid, which means they enable cars to charge but also discharge in case needed. We are first to provide this technology in the public segment, as our twins have been able and been vehicle-to-grid ready since 2023. These two new chargers ensure we're also able to offer this technology to our chargement operators, business, as well as home charging customers. The vehicle-to-grid feature is key for our customers. For chargeport operators, it enables smart charging as well as ancillary services, supporting them to increase their value. For building and homeowners, the vehicle-to-grid feature enables optimization of self-consumption of locally generated solar energy. For example, a homeowner can choose to charge the car in solar peak hour midday and use that energy for running the household during peak demand hours. The system we have developed is compatible with a broad range of vehicle brands and energy management systems. Furthermore, these charges are lower in installation costs when installed in a group. They are compatible with the latest protocols for smart charging and are user-friendly with a secure ad-hoc payment through the dynamic QR code. We will open our commercial book in Q4 this year. Then if we take a look at our third business line, energy storage systems, our revenue were 20.7 million. This is a decline of 8% compared to the first quarter in 2024. This decline was anticipated and is partly caused by 40% battery price decline we have experienced during last year. This decline is now impacting our revenues because orders closed last year against last year's prices are this year's revenue. Gross margin went 32.5% in this quarter, which is higher than the first quarter last year. It's also above our expected margin bandwidth of 15% to 25%. This higher margin can be attributed to one-off effects, as certain project contingencies approach completion. Looking forward in the rest of the year, often we'll be doing more large-scale projects, which will lead to the gross margin returning more towards the expected margin range. At the end of Q1, the energy storage systems backlog for 2025 revenue was 86 million, which means that all orders required to achieve the 2025 energy storage system revenue outlook are secured. As such, we have adjusted our expected revenue bandwidth slightly upwards. I will share more about that in the Outlook section. The backlog for 2026 revenue was 23 million at the end of Q1 2025. Please note that at the end of Q1, the order with return energy was not yet signed. Also, as you know, the precise timing of the backlog turning into 2025 revenue is dependent upon various factors that influence project execution. Furthermore, as announced recently, we won the largest energy storage deal to date with Return Energy in April 2025. This system is a 100 MWh system and is the second largest in the Netherlands. The system will be connected to the transition grid and provides a central reserve capacity. This reserve capacity alleviates grid congestion and ensures a more predictable and reliable electricity supply as the share of renewable energy continues to increase. The battery system expected to be operational by the end of 2026, contributing mostly to Alpha's 2026 revenue. We are proud to be able to realize such a large-scale project and are pleased with our strong four-year partnership with Return Energy. This is the third major system we developed together, and we are looking forward to continuing our collaboration in the future. Furthermore, we are pleased with the announcement done by the Dutch Transmission Grid Operator They will use a new type of time-bound contracting that will free up 9 gigawatts of capacity on the transmission grid. This creates opportunity for Alphen for more transmission grid battery storage projects in the future. We continue with the financials. Revenue amounted to 103.8 million for the first quarter of 2025. That is an 11% decline versus prior year, which is mainly driven by EV charging and energy storage solutions. Gross margin for Q1 is 29.8%. This is a decline versus the gross margin of 32% in Q1 2024. This is mainly due to a shift in the revenue mix, as we experienced a lower share of relatively high margin EV charging value. The margin per product line were broadly in line with expectations and guidance, with the exception of the gross margin for energy storage systems. These margins in Q1 were artificially high as we released some contingency as certain projects came to an end. Adjusted EBITDA was 5.3%, which is lower than our guidance of high single digits, mainly due to lower revenue volume in the first quarter of 2025. In particular, the lower revenue share for EV charging did affect the gross margin in absolute numbers, and therefore EBITDA. We did see the effect of the 2024 restructuring on OPEX, as I will discuss on the next page. Cash flow in the first quarter of Q1 was slightly positive by 0.2 million, mainly driven by working capital improvements of 3.5 million. spiking cash out for the restructuring expenses we paid in Q1. In Q4, 2024, we went through a significant cost-saving program, and we do see the result of this in the first quarter of 2025. Overall, our cost base declined by 18.2% versus the same quarter last year. This was driven by savings in personnel as well as other operating expenses. If you look towards the rest of 2025, to adjust our expected revenue range of 454 to 505 to a revenue bandwidth from 430 to 480 million. This is mainly driven by the downward adjusted outlooks for smart grid solutions and EV charging. In smart grid solutions, we do not see the anticipated growth materialize as two out of the three main grid operator clients decided to downscale their order quantities for 2025 compared to earlier communicated volume numbers. The grid operators are struggling to ramp up their installation capacity and are held back by the ongoing nitrogen crisis with delays issuing of project permits. We therefore adjust our expectations to zero to minus five decline in revenue compared to 2024. In EV charging, we have limited forward-looking visibility. The Q1 revenues were below our expectations because of the increased competition in the home segment. as well as a temporary dip in charge point deliveries in the public segments. Also, the softening of CO2 targets for automotives by the European Commission will not lead to an accelerated adoption of electric vehicles this year. It is therefore that we reduce our revenue expectations for this year to a decline of minus 10% up to minus 15%. In our energy storage system baseline, we are well on track to meet our revenue guidance for this year, as our guidance is fully backed by backlog. We therefore increase our revenue expectations by lifting our bandwidth to a maximum revenue decline of 0% to minus 10% compared to last year's revenue. As our revenue outlook is reduced, our adjusted EBITDA margin range is adjusted downwards as well, from high single digits to a range of 5% to 8% of revenue. To reduce the impact of lower revenues on our bottom line, we will look for further cost measures throughout the company to align our spending as much as possible with our revenue performance. Our CapEx guidance remains the same, expecting to have less than 4% capital expenditure share or revenue. And now I would like to hand over to the operator for any questions you might have. Thank you.