Envipco Holding N.V.

Good morning, everyone. My name is Simon Bolton, CEO in VIPCO, and very much welcome you to our Q1 2024 earnings presentation, joined by two colleagues, Bob Lincoln, President and Head of the US Business, and Michael Clement, who's Investor Relations and Corporate Strategy Officer. Normal disclaimer, just very solid Q1. It gives me pleasure to report. Group revenues, 27.4 million euros. So that's over 160% higher than a year ago. I think we've passed a really good threshold. So last 12 months revenues now over 100 million euros as we continue to execute our growth strategy that we've laid out over the last few years. Gross margins 35% gives a gross profit over 170% up at 9.6 million. Overall performance for 1Q, very positive EBITDA of 2.7 million and certainly significant year-on-year improvement versus a loss of just under a million a year ago. I think for those who are following the business, you know, a couple of months ago we did a very successful private placement which raised 26 million euros, which funds all the growth opportunities that we'll tell you a little bit about in this presentation. Maybe for those who are just joining for the first time, a little bit about us and Vipco. So we're a recycling technology business. We've actually been around over 40 years. We've got very, very solid business that Bob will tell you about in the US, 40% market share. And for the last few years, we've really focused on the European market, where all the growth is coming from. This is really driven by legislation, which has recently been revamped to really focus on the recovery of single-use beverage containers. To do that effectively, the best way of doing that is to put in a deposit return scheme, a DRS, which gives a small deposit which consumers of the beverage can get back when they return the container. And to do that volume, billions of containers a year in most markets, then you really need automated solutions. And that's where we come in. We provide the technology, the RVMs, reverse vending machines, and the systems and services around that. So once again, we've now, last 12 months, we've passed over 100 million, which is 2.7 times 2021 revenues. I'm with 35% gross margin. So we continue to be on track to our... what in 2021 were long-term targets of four to six X in revenue, 30% market share in these new greenfield markets that are opening up in Europe and a gross margin of 40% as we exit 2025. If we look at how that has come through over the previous years, you'll see that while US business remains a real solid foundation for us, and we're seeing some really great opportunities for growth and development in that market at the moment. You've seen nearly a 10x increase in revenue in Europe. And again, all of these markets are starting to put in deposit return schemes, which needs our products both now and in the years ahead. So that kicks off the start. Now I'll introduce Bob, if you could talk us through the operation review. Thanks.

Thanks very much, Simon, and good morning, good afternoon to everyone. I'm going to take us through an operational review. But a question we're often asked, I mean, these are vast market opportunities we have, tens, 30,000 machine opportunities. So the question comes, why are we winning our share? We have a lot of proof points that we're doing that already. It starts with the product portfolio. We have probably the broadest product portfolio in the business from very small applications all the way up to hypermarket applications. So there's no customer that we don't have a product form that we can meet their demand with. We also have significant global customers. We've acquired new global customers in Europe, and we're performing to their expectation. Production capacity is very critical. Some of these markets, like the UK, are 30,000 RVM opportunity just in that market, so we need to prove to retailers that we can scale our production. We can do 30,000 standalone units a year, and our specialty products, which is Quantum and Modula, we can go from 8,000 to 10,000 a year. So that's ample production capacity to meet the market needs. But importantly, we really work very hard on understanding the target customer, what they're facing. This is new to everybody. These are all greenfield. And these retailers really have no idea what they're facing. Obviously, we're experts, but we're more collaborative in trying to understand how they're going to handle this waste stream throughout their store. We pilot extensively with retail. We do very well on pilot. And by the time we get to the RFP, we're certainly in a very good position to win. And we've proven we can win. I want to spend just a touch on the Quantum a bit. I mean, this product really is a breakthrough product. I mean, it's the true bulk feed. The platform processes over 100 units a minute. Super reliable, very high container storage. And, you know, we've had a big success in Sweden with this. We've had a big success in Greece with it. We also have just done an installation in the Netherlands and It's been an important platform, and there's nothing really unique about these markets, Sweden and Greece. You know, stores want to use their footprint to sell goods. If they can move this function outside, the quantum is a perfect application. In Sweden, we're seeing much greater consumer uptake, more foot traffic into the store, volume lift, because the machine's so simple to use. So when we're looking at these new markets, we believe quantum's going to be a more important platform, more installations, more critical application for those markets going forward. And on module, this is our backroom system, which is also an important feature for large retail. And what we've done here is we've looked at the competitive products and we've refined our offering. We've made it smaller, more discreet, more cost effective, very flexible. It's plug and play. It can fit into any existing backroom system. So that's a very important product for us. So we definitely have the low-end very well captured and now we have high-end applications, very competent products in those segments. In terms of operational updates in North America, the Connecticut The state of Connecticut doubled their deposit value in January to 10 cents. We've seen a significant increase in our container volumes, which, of course, hit our bottom line. It's been very visible, this law change in the neighboring states of Massachusetts and New York, and we have every expectation that both of those states will also double their deposits. We have a very big machine base in both of those states. It's legislative, so it's hard to pinpoint when it will happen, but inevitably, those states will also double their deposit. California is a big focus area for the company. Last quarter, we launched a pilot there to establish some proof points on how we can raise redemption rates in existing locations. We've had the state regulators look at this site, visit it, highly complimentary. It's still a very difficult market, but we are not giving up. We are going to put a lot of effort and scrutiny on how to crack the code in California. In Europe, I just got back from Ireland. We have a very solid start there. We have an unbelievable team. We have reporting on reliability on our machines in Ireland to the system operator. We're at 95% to 97% uptime on our platform in Ireland. So this just goes to the reliability of our technology, our responsiveness of our service force. So that's off to a very strong start. Hungary, of course, continues to be a big revenue driver, not just in this quarter, but we expect Hungary to continue to be an important revenue driver throughout the year, demanding customer in MoHu. We're meeting all of their expectations. The Romanian business is still moving forward on a constant steady state. There's still tier one opportunities, traditional retail, small retail and municipal applications in Romania that our sales team is working. So we believe there's growth to become, you know, in the future in Romania. And as I mentioned in the quantum side, you know, this continues to show success, Greece, Netherlands, Slovakia. So we're moving forward in a meaningful way in these markets. And now I'll turn it over to Michal.

Thanks, Bob. I'll bring you through some of the financial highlights and details for the quarter. Revenues, as Simon mentioned, a very strong performance in the first quarter of the year. Revenues at 27.4 million euros, a growth of 164% from Q1 last year. Somewhat down from Q4, but still a very, very strong performance. Gross margins in the quarter, 35%, up from 33.9% in the corresponding quarter in 2023. with gross earnings up 172% year over year. Gross margins were slightly down on a sequential basis from Q4 as we had some manufacturing cost effects from the Q4 capacity buildup due to the very strong sales we had in that quarter. Operating expenses were up 48% year-over-year versus a growth in revenues of more than 160% year-over-year at 8.5 million euros. Driving an EBITDA of 2.7 million euros versus an EBITDA loss of 0.9 million euros in their corresponding quarter last year. EBIT, positive €1.1 million versus a loss of €2.2 million in Q1 2023. The key driver behind our growth in the first quarter of 2024, once again, is Europe. European revenues were up close to 800% to €19.9 million. Key driver being installments of RVMs across several European markets. Greece, Hungary and Romania continue to be our key growth markets in the quarter. In Q1 24, we also saw our initial first revenues from Irish installations. Program services at 0.7 million euros in the quarter. Keep in mind that during warranty periods, we do not generate any service revenues. So the sharp rise in installments that we've seen over the last few quarters will take some time until we start generating service revenues on. To North America, North America continues to be a very stable and profitable business for Envipco. Revenues in the first quarter amounted to 7.6 million euros, a drop of 7% versus Q1 last year. We did see a turnaround in program services with a positive growth of 3% in Q1 to 7.1 million. We are seeing, as Bob mentioned, positive volume effects in Connecticut from the doubling of the deposit values, following then several quarters of negative growth in program services. RVM sales in the quarter were at 0.5 million euros, down from 1.2 million euros in Q1 last year on difficult comparisons, as the Connecticut DRS expansion gave very positive sales effect late 2022 and early 2023. We continue to invest in our business and we will continue to invest in our business to take on the new market opportunities we see coming. Operating costs in Q1 were up 48% year-over-year to 8.5 million euros. OPEX as a percentage of sales came down from 55% in Q1 last year to 31% in Q1 this year. up slightly on a sequential basis from 25% in Q4. We exited the quarter with 418 employees, slightly up from the latter part of 2023. Over to our balance sheets. Total assets increased to 126.4 million euros in Q1, up from 96.3 million euros at the end of Q4. The key driver being current assets up to 94 million euros from 65.7 million euros. Once again, driven by the private placements in March with gross proceeds of 26 million euros with a cash balance of 33 million euros at the end of Q1 up from 9.9 million euros at the end of Q4. Gross working capital has also increased slightly to €60.5 million, driven by a slight increase in inventories, as we try to be responsive to key customer demands. Non-current assets in the quarter at €32.4 million, slightly up sequentially, with total equity at €68.4 million for an equity ratio of 54%, up from 44% at the end of Q4. We had total borrowings of 19.6 million euros at the end of Q1. Finally, a look at the cash flow during Q1. Cash flow from operations were negative 2.7 million euros, driven by a positive EBITDA of 2.7 and a working capital buildup of 4.8 million euros. Cash flow from investing activities was a negative 0.9 million euros, driven by capitalized R&D of 0.5 million euros and CapEx of 0.4 million euros. Cash flow from financing finally at 27.2 million positive, giving a cash balance at the end of the quarter at 33.5 million euros. With that, I'll leave the word back to Simon for a look into our future.