Alfen Nv

Hello, welcome to the Alpha 2025 Third Quarter Results Conference Call, hosted by Michael Collein, CEO, and Onokra, CFO. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. If you wish to ask a question, please press pound key 5 on your telephone keypad. I would now like to hand the call over to Michael Collein. Mr. Collein, please go ahead.

Good morning, and welcome to Alphen's third quarter 2025 earnings call. Thank you all for taking the time to join us today. I'm Michael Collein, and I officially stepped into the role of Chief Executive Officer on October 1st, just a month ago. For those who don't know me, I bring over two decades of experience in the energy and environmental technology sectors, most recently a CEO of Heliox, where I focused on fast charging solutions and energy management systems. My first weeks at Alphen have been both enlightening and energizing. This company sits at the absolute heart of Europe's energy transformation, and I'm struck by the depth of our technical capabilities and the commitment of our teams across all three business lines. I will give you a more detailed view on my strategic direction and priorities at the full year results in February. Joining me this morning is Honor Krupp, our Chief Financial Officer, and he will outline what we'll cover in today's call. Honor?

Thank you, Michael. Let me outline what we will cover in today's call. I'll start by highlighting the key developments from Q3 2025. We'll then deep dive into each of our three business lines, followed by our financial highlights and our reiterated 2025 full-year guidance. We will conclude the Q&A session where we welcome your questions. Looking at our third quarter 2025 results, we delivered a revenue of 104.1 million, representing a slight 2% decline from the same quarter last year mainly driven by a lower revenue in EV charging, while maintaining our gross margin at a solid 78.7% versus prior year quarters, and achieving an adjusted EBITDA margin of 6.7%. What I find encouraging in these results is the effectiveness of our cost control measures. We have successfully reduced personal costs by 10.9%, and other operating expenses by 30.1%. This disciplined approach to cost management has allowed us to maintain even our margin level despite the revenue headwinds we have faced. Based on our Q3 performance and current market visibility, we are reiterating our full 2025 guidance. We expect our 2025 revenue to be at the lower end of this guidance range. Looking ahead, we remain confident in our 2026 ambition. Our smart grid solution delivered revenue of 49.1 million in Q3, representing a 2.5% decline compared to the same quarter last year. This performance reflects the market conditions we are navigating, particularly the labor shortages and permanent delays faced by our Dutch grid operator clients. At the same time, private customers are still facing grid congestion, which poses an obstacle to obtain larger and new grid connections. During the quarter, we produced 733 substations, of which 586 in the Netherlands and 147 in Finland. Our client mix remained well balanced, with 62% of revenue coming from network operators clients and 38% from private sector customers. Importantly, our gross margins were at 25.9% in the third quarter. This is in line with the longer-term trend, but is an improvement compared to last quarter. This is mainly due to a gross margin mix effect within our grid operator segment. I would like to deep dive now into specific growth segments within SDS projects. As an extension to the project work we are already doing for our private clients, Alphen expands the delivery of turnkey transport distribution stations to grid operator and access. These are larger stations than our traditional mid to low voltage transformer stations, and typically contain up to three mid-voltage transformers. In 2025, the delivery of these types of stations amounted to around 5% of our overall SES business and expectations that this business will significantly grow in 2026. Our EV charging business revenue declined by 12.6% to 28.7 million compared to Q3 2024. Revenue was distributed across our core markets, with the Netherlands representing our largest segment, followed by Germany and Belgium. The revenue decline was primarily driven by two key factors. Reduced installation rates for charge points in the public segment, and intensified competition, especially in the home charging segment. We produced 38,900 charge points during the quarter, and our gross margin in recharging reached 43.1% in Q3 2025. a strong increase compared to 39.4% in Q3 2024. This improvement was driven by lower component costs. Looking at market conditions across Europe, better equipped vehicle registrations show strong growth of 25% compared to Q3 2024. This shows the momentum there is, but currently to a somewhat lesser extent in our core markets. In the policy domain, we see that the European Commission maintains the 2035 ban on internal combustion engine vehicle sales, despite significant industry lobbying efforts. We've continued to innovate and strengthen our product portfolio throughout the quarter. We successfully launched our new EVE Double Plus and EVE Single Plus chargers, which feature advanced connectivity options and are vehicle-to-grid ready. Our order books have opened and the production lines are up and running. Active sales and marketing campaign will start by the end of November. Our energy storage system business performed well in Q3, with revenue growing 13.9% to 26.3 million compared to the same quarter last year. It's important to note that for one project, the on-site delivery of main components was delayed until October, shifting revenue of around 5 million from Q3 to Q4. Gross margin was 18.2% in Q3 2025 compared to 37.6% in Q3 2024. This is in line with our expected margin range between 15 and 25%. Q3 2024 provides a difficult comparison because gross margin was elevated due to one positive timing effect for margin of project energy storage system being recognized in Q3 2024 instead of Q2. Our backlog remains robust at 150 million, of which 38 million still to be recognized revenue in 2025. The overall backlog does not include the recent NOP AgroWind deal, providing us with strong visibility into the rest of 2025 and 2026. Please note that the exact timing of revenue is dependent on project execution timelines. The market conditions for energy storage present both opportunities and challenges. We have seen battery prices decline by 15 to 20% compared to last year, driven by raw material price changes, technological improvements, and market oversupply. While this creates pricing pressure, it makes energy storage solutions more accessible to a broader range of customers and applications. Now let's take a look at the financials for Q3. Our total revenue of 104.1 million represents a 2% decline from Q3 2024's 106.2 million, primarily driven by the challenging conditions in our EV charging segment that I just outlined. Our cross-margin was 38.7% compared to 32.7% in Q3 2024. Please note that Q3 2024 cross-margin were elevated due to one of positive margin timing effect in energy storage. Adjusted EBITDA reached 6.9 million representing a 6.7% of revenue. This stable performance is noteworthy given the revenue headwinds we faced, and it underscores the effectiveness of our cost optimization initiatives. From a cash flow perspective, we generated 8.1 million in cash flow from operating activities during Q3 2025. Additionally, we reached an agreement with our bank to extend our financing arrangement by one year until October 2027, further strengthening our financial foundation. The conditions of this arrangement are identical to the previous arrangement, except for the fact that we lowered the facility from 100 million to 50 million. We are currently not using the facility at all, and therefore it felt appropriate to lower the cost of commitment fees by lowering the overall facility. We achieved significant reductions across our expense base. Personnel costs increased by 10.9% compared to Q3 2024. as a result of our reorganization. Furthermore, our operating expenses declined by 30.1%, demonstrating our commitment to operational efficiency. These results reflect our ability to navigate challenging market conditions while positioning ourselves for growth when market dynamics improve. The cost structure improvements we have implemented will benefit us as we move into 2026 and beyond. Looking ahead, We are reiterating our full-year 2025 guidance of €430 million to €480 million in revenue, with an adjusted EBITDA margin of 5% to 8%. Based on our Q3 performance and current market visibility, we expect our 2025 revenue to be at the lower end of this guidance range. Looking forward to 2026, we maintain our ambition of 0% to 5% revenue growth, supported by our strategic initiatives, including scaling the turnkey transportation distribution stations were in excess, launching EV charging plus models, and implementing targeted sales campaigns in EV charging. Key risks include potential volatility in raw material prices, continued labor market constraints in the Netherlands, and competitive dynamics in EV charging. However, a disciplined cost management approach, demonstrated by significant expense reductions achieved in Q3, positioned as well, to navigate these challenges while capitalizing on structural growth opportunities in the energy transition markets. I would like to turn over to the operator to address any questions you might have.