Envipco Holding N.V.

Good morning, everyone. It gives me great pleasure to welcome you to Invipco's Q3 results presentation. My name is Simon Bolton, Group CFO. I'll be running through this presentation with my colleague, Michael Clement, Chief Strategy and IR Officer. Look, very solid Q3 quarter we're pleased to present this morning. Sales, 27.4 million euros, so it's 9% up year on year. And last 12 months, 24 versus 23 at 117 million euros, well up versus prior year. One of our important focus areas is gross margin, as you know, and we're pleased to show that that continues its steady progress, and we reported 36.6%. We do have a number of one-off OPEX items this quarter, which we'll go through in a little bit detail later. But overall, adjusted EBITDA at 2.9 million gives EBITDA rate of 10.5%. We're a, as many as you know, we are a working capital intense business in stocks and so on. And that was a particular focus of this quarter. So we're really good working capital management. We've increased our cash balance. It's up from 24.4 to 28.7. As those who have followed us for the last few quarters, 2024 is about really delivering on existing markets. This is particularly Romania, which had a great quarter in Q3, Hungary and Greece. The other element is operational excellence. That we also see coming through in gross margins and then investing in the future. In terms of growth, one of the other interesting aspects that we updated in the Q3 report was brownfield opportunity in Netherlands. Our focus, as you know, is in new markets, greenfield new markets, as they open up and they implement deposit return schemes to recover beverage containers but we've got opportunities in brownfield so very pleased that the first two quantum units are now fully operational in netherlands and one of those is actually the best performing machine in the netherlands only after nine months We continue to build for the future. We have this wave of countries coming through implementing deposit return schemes, which will need our machines and services. And so there's investment both in the organization, the team, operations. and also to expand our technology portfolio. So we're very pleased that we closed the sensor bin acquisition in Q3, and also that team is now an integrated part of Invipco, which is fantastic. Maybe for those who have just joined in, this is the first earnings call. We are a global recycling technology business. We've been around 40 years and our focus is the recovery of used beverage containers. We started in the US and there we have a really strong and stable business with about 40-45% market share. And with the legislative activity and the tailwinds of legislation in Europe, we now have a very dynamic and growing European business. In terms of progress, we're three times the business over the last 12 months than we were in 2021. And we maintain our ambitious growth goals of continuing that growth four to six X going into 2025. with a 30% plus market share for those new markets, and also continuing to work on gross margin to move that to 40% as we exit 2025 next year. Okay, with that introduction, pleasure to pass over to Michael to go through financial review. Michael.

Thank you, Simon. Good morning, all. I'll take you through some of the financials for the quarter, starting out with the P&L. As Simon mentioned, revenues in Q3, 27.4 million, a growth of 9% from 25 million in Q3 last year. Gross margins continued to improve this quarter, going to 36.6%, up from 34.9% in the same quarter last year. Operating expenses were €10 million in Q3, up from €6.6 million in Q3 last year. Operating expenses this quarter included non-recurring items of €1.1 million, which I'll come back to. EBITDA reported 1.7 million euros with adjusted EBITDA of 2.9 million euros. That compares to an EBITDA of 3.8 million euros in Q3 of last year. EBIT came in at 100,000 euros, down from 2.2 million euros in Q3 last year. Year-to-date figures, revenues are up 56% to 81.5 million euros, close to our full-year revenues in 2023. Gross margins year-to-date, 35.7%, up from 34.6%, with adjusted EBITDA of 8.5 million euros for a margin of 10.4%. European revenues continue to grow, up 9% year over year in Q3, and up close to 160% over the last 12 months. Key drivers, as Simon mentioned, Romania, a very, very strong sales performance in the third quarter, how also backed by very strong performance in Hungary and Greece as well. Program services, I mean, our main share of revenues in the European markets are new installments of RVMs. And in the initial period of warranty, we don't see much service revenues coming through. But after a period of 12 to 24 months or so, we start seeing that. And this quarter, we see our service revenues from Romanian and Hungary installations starting to come through. With program service revenues, of 1.4 million euros. North American markets, flat revenues year over year over the last 12 months, but improvements in revenues for the third quarter, with revenues up 8%, both for program services and RVM installations. Program services continue to see positive benefits from the doubling of the Connecticut deposit early this year, giving a rise in collection volumes in that state. Operating expenses, we continue to build at Invipco for taking on this growth opportunity that we see coming in the next five to 10 years. This quarter, operating expenses were 10 million euros, with G&A expenses at 8.1 million euros versus 5.5 million euros in Q3 last year, sales and distribution costs at 1.1 million, and some R&D expenses. we did have some non-recurring items in Q3 from the uplisting process that we are now underway, the Sensiben acquisition and closing of that, and also some of the extended audit and some severance payments in the quarter. Total non-recurring items were 1.1 million euros. which gives an underlying OPEX of 8.8 million euros, and that is flat with the three previous quarters. Over to the balance sheets. Total balance sheet, 125 million euros, up around five million euros from Q2, with equity at 65.5 million euros for an equity ratio of 52%. Non-current assets, 37 million, primarily consisting of PPE, 17.7 million euros, and also some intangible assets, where the Sensebin intangible values from the Sensebin acquisition make up around 6.5 million euros. Current assets, 88 million euros, consisting largely of inventories and also accounts receivables, where the inventories came down during Q3. Non-current liabilities, 15.8 million euros, fairly flat from the previous quarter, with other liabilities being six million euros from projected payments under the Sensibin acquisition, and also borrowings of 6.8 million euros. Finally, current liabilities, 44 million euros, up from 37 million euros, with trade creditors at 17 million euros, and borrowings of 13 million euros. Finally, over to the cash flow. As Simon mentioned, we had a very strong working capital management in the third quarter, starting in the quarter with 24.4 million euros in cash, with cash flow from operating activities of more than seven million euros from working capital release, offset by four million euros in CapEx, with two and a half million euros in underlying CapEx, come from capital expenditures and capitalized R&D, in addition to one and a half million euros on payment for the Sensebin acquisition. And then we had one million euros in positive cash flow from financing activities, for a cash balance of 28.7 million euros at the end of Q3. With that, I think Simon will take us through some of the steps ahead.

Thank you. Michael, thanks very much. Very good. Just a few slides now on Outlook. After the presentation Q&A session, so please, if you have any questions, don't hesitate to use the functionality within the platform to post those and we'll get onto those in a few minutes. We've talked a bit about the sensitive acquisition, so we just want to spend a minute giving a little bit more detail. This is exciting technology for us that broadens our product portfolio and really is a great machine for the expanding and rapidly growing small convenience store segment. These are stores that may be covered by the legislation in their country, maybe decide to start manually collecting bottles, but find it very difficult very quickly. They also want to have an offering that maybe competes and continues to get their footfall versus maybe a larger store down the road that has a machine that's very convenient to use for customers. So this is a best price unit, ideally suited for that segment. In addition to for that segment itself, clearly it broadens our overall portfolio, which is great for our larger tier one customers because they are also obviously moving into that space. So a great strategic acquisition and implemented now. And a great team have come over and joined the technology group within Evipco. What does this mean then for our product portfolio? Well, maybe before we go through what it looks like now, maybe we can take a step back. So we talk about investing in the business. What does that look like from a technology point of view? Well, if we'd have shown this slide back in 2020, 2021, it would be half the number of units there. There wouldn't be the compact, there wouldn't be the optima, and there wouldn't be the modular. All of those have been developed state-of-the-art products in the last three years and what this does from the compact very small convenience stores to the very large first to market bulk feed product which is the quantum this gives a very very broad portfolio to cater for any customer in any situation. We're seeing that and we're certainly getting excellent customer feedback. That's the investment we're doing in technology is continuing to refresh and broaden our portfolio. And that's obviously resonating well with customers. So we've shown this slide before. But as you see, as markets start to open up, then that growth is starting to come through. And we've got a very, very exciting future ahead. If we look at this snapshot, these are, this is again, what we've shown before. We like it. We have timing of the markets coming through, our target markets. really legislation drives the implementation of a deposit return scheme to aid and encourage recovery of these used beverage containers in itself that then drives demand for rvm products and services that we supply legislation is complex usually takes a little bit longer than we expect but nevertheless it's a very strong tailwind and sometimes it doesn't always go the way we think so Portugal was delayed you know a little bit if you remember those who followed the business Scotland we were ready to go the middle of last year that's now been delayed and to be included in the overall UK scheme But despite these delays, still, as you see, very, very strong growth to our expectations through Hungary, through Greece, through Romania and the strong and stable US business. And if you look between 2025 and 2030, then we have a very significant wave of growth coming up. We're very excited about this and we feel as we move nearer to the target for the EU legislation, which is 2029, 90% recovery by 2029, then the milestones, the legislative processes are firming up and becoming much clearer. Just a reminder, the background behind this growth. So you have a critical piece of EU legislation, packaging and packaging waste regulation, the 90% target that I've talked about, and importantly, minimum recycled content for the beverage industry. 25% by 2025, 30% by 2030. So there's a real demand for that recovered material. The UK is also really pushing on with a unified scheme going live in autumn 2027 and overall That legislation with those markets is driving industry estimates of trebling of the installed base. We're over 100,000 RVMs now, and it's taken 40 or 50 years to get there. In the next five or 10 years, another 200,000 will be added, and that's why we're excited with that growth opportunity. Last slide before we hand it over to Q&A. We're focused, as you see from the update we've given in Q3, we're focused on delivering on the growth strategy. Great legislative momentum continues. We have now an increasingly broad number of markets. and we're certainly excited with the markets that are coming up portugal poland uk still some things to work out but nevertheless significant markets and that will continue to drive growth 2025 and beyond for us also not to forget there's a number of markets that we that we term brownfield like the netherlands we have technological solutions to really start to work in those markets. We'll be selective, but we're also excited about that. Then we'll continue to invest in the future as Michael mentioned earlier. Since the acquisition closed, we continue to invest in our organization, our people, our technology such that we can deliver a great solution to the customer, and also our own corporate structure. So we're going through the process of uplisting, as we committed to, on the main Oslo market, and we expect that to conclude in the next period. So thank you very much for your attention, and we open up for Q&A. Michael, would you join me? Sure.