Autostore Hldgs Reg S

Good morning and welcome to AutoStore's second quarter 2022-2024 presentation. My name is Siva Florskjär and I will be moderating this webcast. As usual, I'm joined by two members of our executive management team, Mats Hovland-Vikse, AutoStore's CEO, and Paul Harrison, AutoStore's CFO. We would like to remind you of the disclaimer with regards to forward-looking statements. It can be read here at your own convenience. Moving on to the agenda, Mats and Paul will present the quarter's operational and financial development, and as usual, all financials are stated in US dollars. We will host a Q&A session right after the prepared presentation. As always, you will be able to post written questions in the webcast player, starting now. Similar to the previous quarter, you're also provided with an opportunity to log on the webcast via the Teams link and ask your questions verbally directly to the management by using the raise hand feature in the Teams. The team's link is available on our IR website and in the invitation distributed as a stock exchange release a week ago. After the Q&A, Mats will round off with some final remarks. And with that, I will hand over the words to Mats.

Thank you, Ivo. So, looking at the highlights of this quarter, we report 12% sequential improvement in revenue, with 154 million, driven by EMEA and North America, which was as planned and communicated in the previous quarter. Our order intake was 141 million, representing an increase of 3.4% compared to last year, and a decrease of 23% compared to the strong first quarter of this year. As we've talked about several times in the past, there will be variations from quarter to quarter. The current challenging market environment also has an effect on the numbers. But more fundamentally, looking at the first half year development and eliminating the quarterly fluctuations, order intake grew by 8% year over year to 324 million. Moving into the profitability of the business, the Q2 gross margin was above 73%, which represents the eighth consecutive quarter of gross margin improvement. And Paul will provide more details to this later in the presentation. We maintained our adjusted EBITDA margin of 49%, which is on par with the same period last year, and an increase of 300 basis points versus the first quarter of this year. On our side, we continue to invest into the right areas of the business, such as sales and R&D. Moving then to the operational highlights, we recently announced that we have strengthened our leadership team and I'm thrilled to say that Parth Joshias joined our team as the new CPO. He brings extensive global experience from high-tech and high-growth companies such as Cisco and Eaton and I'm very excited to have him as part of the team. In addition to that, we announced the transition of Carlos Fernandez, who's been with Autosora for over 13 years, to the newly created role of Chief Solutions Officer. This will see him build out a solutions teams that will support our partners and customers more robustly, especially as we see an increasing demand for high throughput solutions, where integration with other technologies is even more important. Now I also want to spend some time sharing what we're seeing in the market today and share some of my reflections around that. Fundamentally, the potential of warehouse automation market remains huge with the secular growth drivers remaining intact. In addition to that, the particular tailwind that drives the need for high density, rapid retrieval solutions like ours is especially compelling. So what are we observing at present? Warehouse automation penetration continues to grow, albeit at a slower pace compared to two years ago. If you look at market studies such as Interact Analysis, you will see that the annual global automated storage revenues declined in 2023 from the 2022 peak levels, and that those same studies now indicate that this trend continues into 2024. This is also consistent with what we've been experiencing in the market, where the situation has been largely the same as we experienced throughout 2023. A particular feature we observe are longer evaluation cycles. And to elaborate on that, we see that this slowdown comes from the combination of one, more opportunities remain open, which means that customers are just spending more time getting to a conclusion, and two, customers defer automation and remain manual for now. In addition to that, our product mix is deliberately shifting more towards the large and attractive high throughput segment projects, which on average just takes longer time to convert versus the standard projects. The natural effect of this is that the backlog conversion takes longer. And what I shared with you now is consistent with the many conversations I have both with small and large customers across all of our main regions and industries. Without exception, they all emphasize their continued commitment to automation of their warehouse solutions. So that has not changed. Neither has our ability to compete. Our win rate remains unchanged and at a high level despite an expected increase in competition. Numbers-wise, the value of the pipeline is at its highest level ever and the pitched proportion of that pipeline has increased 90% over the past two years. This tells me that we're tracking in the right direction and that we are investing in the right areas. But let's be very clear. Whilst I've explained what is happening in the market, we are not satisfied with the current growth levels. Short-term, we are working even more closely with our partners and using our commercial toolbox to speed up conversion times. For example, we're intensifying our engagement with partners, both strategically and on a project-by-project basis. In addition to that, we continue to invest in our market-facing activities, such as business development and marketing, which have demonstrated strong ROI. At the same time, our strategy is long-term oriented, and we're investing into the business and taking actions to advance our position, both when it comes to our product offering and go-to-market model. And we'll talk much more about that in our upcoming Capital Markets Day. So moving on, this well-known slide very efficiently summarises our strong position and why the business is so attractive. We've now delivered roughly 1,550 systems with 70,000 robots in 57 countries. We just added the Philippines, Paraguay and Puerto Rico. We have about 1,100 unique customers compared to 900 customers a year ago. And within the cubic storage space, we are the only player with such a significant install base, providing us with great advantages. Not only is it a real proof of strength of our solutions, but it also represents a big base of satisfied customers to expand our relationship with. And let me also reiterate that our research shows that only around 20% of the market for warehouse automation is currently penetrated. That's a tremendous opportunity. And we are positioned for strong growth in the future. First of all, the market opportunity is massive. And we have a solution that can address all end markets and all system types with very attractive economics for the end customers. To deliver on this, we have a highly efficient go-to-market model with a strong network of 23 integration partners around the world, which then are complemented by our business development and global account teams. And it is this efficient go-to-market model, together with our highly standardized and scalable solution, which is the foundation for the attractive and stable financial profile that you see on these slides. At the same time, we focus relentlessly on our customer-led product roadmap with around 300 colleagues in R&D, driving continuous improvement, leveraging all data and insights from the large install base that we have. So this is also a slide that you're familiar with. Here you can see a small selection of our over 1,000 customers, and you can see we have a wide customer portfolio. In Q2, more than half of our revenues came from existing customers, which is a very strong reflection of customer satisfaction and our land and expand strategy. This area is particularly important when you consider that we've added around 500 new customers over the last two years. And looking at our data, that tells us that typically over a two, three year period, customers will return and invest further, both in existing and new sites. And as you know, we like to give you a real example of how we help our customers solve problems and improve their operations. This time, we're highlighting a US-based apparel customer, Cutter & Buck, which sells activewear. They particularly look to improve their picking process and delivery time to customers. With the AutoStore system, they're now able to offer same-day delivery to their customers. And you'll hear, picking is no longer a bottleneck. So, before Paul takes us through the financials of this quarter, please have a look at this.

We've been part of the Seattle community since 1989. We were founded as a men's sportswear brand. Early on, we found an audience in the golf space as golf was really booming in the 90s. And then we started branching out and now we've grown our business in corporate. We have a really awesome licensed products business. We have a specialty retail business and e-commerce is really where we're growing the very most today. Our ability to have the stock on the shelf and then decorate it very quickly and fulfill those orders fast, even down to one unit at a time, is something that makes Cutter Buck really special. Our customer base wants their orders really to ship same day if they're undecorated. And if they're decorated, they want those orders to ship in just a couple of days. So we're just running out of daylight. We found an incredible partnership with Kardex, who is the implementer for us here in the United States. And boy, they just went above and beyond to walk us through how the auto store system could really change our business. So whereas before, picking was a bottleneck for us, and now with auto store, that's not a bottleneck at all. So we're free to optimize all of these other processes that we need to do that our customers are demanding of us. And auto store just kind of fades into the background as being this really incredible platform that we can build our business around. The incredible win for us at Cutter and Buck was that we did not have any downtime between systems. We really like the flexibility and the speed that AutoStore gets us. We can move products really same day out of a shipping container. They can be pickable in the AutoStore system in the same day. If your freight's coming in a little late, you can get it turned and ready to be pickable really fast in an AutoStore environment. The auto store fulfillment is usually in single minutes. So we can have an order that comes into one of our websites into a pick ticket. We're picking packed and on our way in less than 10 minutes. We have exact knowledge of how many units we have in every single SKU that's available to ship that day. So we know exactly what we have. all the time. That's reduced our need for cycle counting. We don't have to use the inventory cycle counting anymore. So it's giving us a lot more control and also just easing that. So we trust the system. The true system knows exactly where everything is and that we're able to use that to power our business. AutoStore, just opening August 5th of last year, it helped us to have our largest fourth quarter that we've ever had in the history of Cutter & Buck. And we also have the most profitable fourth quarter we've ever had in the history of Cutter & Buck. And a large part of that is built on the speed and the efficiency that we get through all of our processes. And the cornerstone of that process here, this operation, is AutoStore.