Envipco Holding N.V.

Well, good morning, everyone. It gives me great pleasure to welcome you to the 4Q 2024 presentation by Invibco. I'm Simon Bolton, CEO of Invibco. And I'm joined by my colleague, Michael Clement, Chief Strategy and IR Officer. And we'll go through an update of the business and then opportunity as normal to address any questions you have with a Q&A at the end. Okay. Next slide, please. Solid end to 2024. Group revenues, as we announced earlier this morning, 36.4 million, which is 3% higher than a year ago on a very high Q4 23 comparable. Overall then, group revenues, 2024 came in at 17.8, which is 35% growth year on year and definitely underlines the strong progress we're making as a business as we develop and execute on our growth strategy. Gross margin was very pleasing. A lot of work that we've done, as you know, those who have followed the business, as we target improvement in gross margin. And in the quarter, it was 38.4%, giving gross profit of 14 million. Overall then, EBITDA was 5.4 million for the quarter, which is just under 50% margin. And cash balance was just over 30 million. So positive work on working capital, which Michael will tell you about later. Overall operational highlights, you know, as I mentioned, we continue to grow and execute in our existing markets. Solid operational execution shown by good gross margins, good work and capital management. And, you know, as we've talked about over several quarters, and we'll summarize again in this presentation, really a fantastic, unprecedented opportunity ahead of us. And we need to continue to invest to be able to capture that. Highlights really for this quarter, excellent performance in Romania, actually our single largest market in the quarter, and continued great work in Hungary as we complete the delivery of the first phase of that particular project, and also strong contribution from Greece and Ireland. As we've highlighted before, our focus is really on greenfield new markets. But there are opportunities for Invipco's technology to help in brownfield markets. We've been in Sweden a long time, for example, and we see some other opportunities. Most recently, the Netherlands, which has issues with particularly the introduction of cans into the deposit return scheme, that's now starting to use our quantum product to increase their recovery rate. And that's an exciting opportunity, an example of what we're doing in Brownfield. As mentioned, we've made careful and focused investments in the team, in markets, in product development, and we'll continue to do that as we look to be able to execute on the terrific, exciting growth ahead. And as announced just before Christmas, we uplisted from the growth market in Oslo, which we joined in 2021, to the main market in Oslo. And we believe that's the right thing to continue to develop and solidify our profile in the international financial markets. Maybe for those who are joining for the first time, a quick recap. So we are a recycling technology business. We've been around just over 40 years. And our focus is the delivery of products and services that support the recovery of beverage containers, normally in markets, countries that have implemented a deposit return scheme, so-called DRS. And this is to improve the recovery of those materials and obviously the use of that material in new containers. Driven by legislation, we see ahead of us unprecedented growth in this market as we go to 2030 and beyond. We'll talk a bit more about that later. Over the last few years, we've proven that we can capture a leading position in European markets, fantastic efforts in Romania, Hungary, Malta, and so on. And based on our broad product portfolio, we'll continue to invest in this platform, which includes for us both the product and also the services. We've invested in the team. We have a very nice mix of industry veterans and also newer people who are coming into the team. And we feel those four things will deliver revenue growth and increasing profitability. So with that, a pleasure to hand over to Michael, which will go through the financial review. Michael, over to you.

Thank you, Simon. So let's start out with the profit and loss statement. Q4 revenues, as Simon mentioned, 36.4 million euros, up 3% from 35.5 million euros in the corresponding quarter last year. Remember, Q4 23 was a record quarter for the company at that time. Gross margins continue to widen. In Q4 last year, 38.4%, up nearly 400 basis points year over year, driving gross earnings of 14 million euros. In Q4 24, operating expenses were 11.3 million euros, up from 8.9 million euros in Q4 23. I'll come back to that bridge. EBITDA this quarter, 5.4 million euros, includes 0.5 million euros in non-recurring items, such that the adjusted EBITDA in Q4-24 was 6 million euros, for a margin of 16.4%. Operating earnings in Q4-24 were €2.8 million, down from €3.8 million in Q4-23, with net earnings after tax of €0.3 million. For the year, revenues were 117.8 million euros, a growth of 35% from 2023, driven by growth in existing and new European markets. Gross margin for the year ended at 36.6%, up nearly 200 basis points from 34.5% in 2023. with EBITDA for the year at 12.8 million euros and an adjusted EBITDA of 14.4 million euros. So with that, let's take a closer look at the underlying revenues. First of all, Europe. Revenues in Europe in Q4 24 were 27.3 million euros, down 2% year over year. Our VM revenues were 24.8 million euros, with Romania being the strongest growth driver in the quarter, Romania actually being our largest European market in the fourth quarter of 2024. However, Hungary showed good sequential progress and a very important revenue mix in the quarter, also the same with Greece. Program services still make up a very small portion of our European revenues, but growing very nicely. In Q4-24, program services in Europe were 2.5 million euros, up nearly fourfold from 0.6 million euros in the corresponding quarter last year. For the year, European revenues were 82.8 million euros, up nearly 50%, driven by 43% increase in RVM sales and nearly threefold increase in program service revenues. Our North American business is a much more mature business, a business in which we've been since the early 1980s. In Q4-24, revenues in North America were €9 million, an increase of 22%, from €7.4 million in Q4-23. One driver are increased program services revenues, up 12% year-over-year, driven by the doubling of deposit in Connecticut, driving higher collection volumes. RVM sales in the fourth quarter were 1.2 million euros, an increase of 183%, partly on an increase in spare parts sales. For the year, North American revenues were 35 million euros, an increase of 9%. And WIPCO is positioning in European growth markets. and we need to position ahead of DRS Go Live. We continue to do that in selected markets in Europe, and that is partly driving our increase in operating costs. This quarter, operating costs were 11.3 million euros, up 26% year over year. The drivers are new hires, increasing OPEX and the introduction of Sensebin amortization of intangibles, and also accruals on our long-term incentive plan. Non-recurring items this quarter from the uplisting on the Oslo Stock Exchange and the Sensebin acquisition related costs were 0.5 million euros. Adjusted for this, operating costs this quarter were 10.7 million euros. For the year, our operating costs were $38.8 million, up 36% year over year. Bridging our OPEX from the previous quarters. In Q3, we reported €10 million in operating costs, including €1.1 million in non-recurring items from the Sensebin acquisition and the uplisting on Oslo Stock Exchange. Underlying OPEX in Q3 was thus €8.9 million. This quarter, we have increased amortization on the Sensibin acquisition of €600,000. We have long-term incentive plan accruals of €700,000, and then new hires and underlying OPEX increases of roughly €600,000. For an underlying OPEX level of €10.7 million, adding the €0.5 million in non-recurring items, €11.3 million. So let's move over to our balance sheets. Our balance sheets total increased by around €4 million to €229.4 million this quarter. Our non-current assets were close to €40 million, up around €3 million. largely made up of property, plant and equipment, roughly half that, 20 million euros, and intangible assets of 15 million euros, largely from activated development expenses and also some intangibles from the Sensiben acquisition. Current assets were at 89.5 million euros. Inventories, 28.6, down around 4 million euros, with accounts receivables, 30.1, up around 3.5 million euros. Our cash increased by 2 million euros to 30.7 million. Equity ratio this quarter, flat with the previous quarter at 52%. Our non-current liabilities, 16.4, fairly flat with the previous quarter, of which borrowings were close to 6 million euros. Our current liabilities were at 45.4 million euros, up from 44.1 in the previous quarter. Trade creditors were at close to 17 million euros, flat sequentially. Finally, Let's have a look at our cash flow. First, for the fourth quarter. We started out with 28.7 million in cash at the end of Q3 and ended up with 30.7 million in cash at the end of Q4. Our cash from operating activities gave a positive cash flow of 5.7 million euros, driven largely by our EBITDA generation. Our cash flow from investing activities this quarter was 1.7 million euros negative, driven by capex of 1.1, largely from piloting equipment, from leasing equipment and IT investments, and also some capitalized R&D of 0.6 million euros. Our cash flow from financing was a negative 2 million euros in Q4, driven both in a reduction of borrowings and lease liabilities. Then over to the cash flow for the year, increasing our cash balance from 12.5 million euros at the end of 2023 to 30.7 million euros at the end of 2024. Cash flow from operating activities last year were a positive 1.2 million euros. Our capex was €6.5 million, driven by underlying capex of €5 million and capitalized R&D of €1.5 million. So our total capex in 2024 was at 6% of revenues, compared to 8% of revenues in the previous year. In addition, we had a payment of €1.5 million for the Sensiben acquisition in Q3. Cash flow from financing activities in 2024 were €25 million, driven in large by the private placement in March last year of €24.8 million, ending the year at €30.7 million in cash. So with that, Simon, I think I'll leave the word over to you again for a look into the future prospects.

Very good, Michael. Thank you very much. So, yeah, just we'll go through an outlook. Look, I think the key thing to say, and those who follow the business for several quarters will have seen this, is I think we've got now some really good proof points that we're delivering on our European growth strategy. Just here is development of revenue of the business from 2018 to 2024. The bottom grey is North America. Then you have Europe on top. You know, as Michael said, you know, solid growth in 24 from North America as a mature business. But really, as these that growth is being driven by these new markets as they come on and that will continue over the next several years, as effectively people need to address and countries need to address the legislation that is now in EU law. And that legislation, which we have talked about before, that's now fully approved. So last year, the Council approved the law, and that's now into EU law in December. As a reminder, that sets clear targets for the recovery of beverage containers, 90% to be recovered by the 1st of January, 2029. And importantly, it sets minimum recycling targets for the beverage industry. So not only must the government set up a system to recover this material, these containers, but also the beverage industry, there's a demand there for the recycled content. So that's a fantastic link. and that drives the system. And the best way of doing that, and it's clear in the legislation, is that's to put in a deposit return scheme, as you have in a number of countries in Europe at the moment, but will be prevalent in all EU countries. Outside the EU, UK, for us, a very important market. That UK legislation also passed over the last few months, And that mandates a scheme to be in place by the third quarter 2027. And certainly there's excellent activity by the UK government to continue to maintain that timeline with probably the next milestone being the DMO, so the operator of the system, being appointed in spring of this year. So, maybe taking a slightly further look, a longer-term horizon, you see here on the left-hand side really a snapshot of our revenue growth over the last few years. So, really, the European growth strategy being executed and that actually coming into tangible results for the business. The next few years are going to be very busy. as those countries that are looking, legislating for, actually implement a deposit return scheme and obviously need the goods and services, the machines that we as Invitco can provide to them to help make the deposit return scheme a reality. We've looked at the market in a few different ways. I think you've seen industry estimates before of roughly 100,000 units tripling over the next few years. A different way of looking at it is actually the population that's served through these new deposit return scheme markets. So the last few years, Hungary, Romania and so on has probably covered about 42 million in terms of population. Over the next three years, about 278 million people will be in countries that will implement a deposit return scheme. And over the next five years, that adds about another 148 million people. And roughly the population is proportional to the number of reverse vending machines, the number of recycling points that that country needs to be able to cope with that return volume. So that's very exciting. And a rule of thumb is probably about 500 RVMs per 1 million population. So next five years, that's 200,000 to 250,000 units, which correlates well with industry estimates from before. So very exciting times ahead. Maybe a little bit more specific. We've updated this slide a little bit. Effectively, all of the key countries, all of our target markets continue to work diligently to implement a deposit return scheme. So the key markets coming up are Poland and Portugal. So certainly Poland has been several announcements, but the president signed off that the scheme will go live, but it won't be earlier than the 1st of October. But we still see a lot of activity in the country. And that's an interesting market. Portugal, again, continues to work at pace, and we expect that scheme to go live beginning of the beginning of 26. Czech Republic slightly later in 27 and then later on in 27 as I mentioned the UK. And then we have a number of other markets who have announced go live dates or are working diligently on the systems. You know some of these like Spain and France are very significant large countries. And we're excited about those growth prospects. As I mentioned earlier, our focus is on those new greenfield markets, but we keep an eye on brownfield and obviously we offer our technology support and help when we can support a system to improve their recovery rates. So a couple of quick examples here using quantum. So in the Netherlands, we installed our first machine in March last year. And in the first year, it's already done 3.5 million containers, which is a fantastic result. And the local team gives the customer a cake every 1 million containers. So they've received quite a few cakes and hopefully a few more to come. And we continue to follow up on opportunities with different customers in the Netherlands. And that's quite exciting step by step as we go through the years ahead. USA, as Michael said, there's a number of refresh going on in different deposit markets. And that offers opportunities for entrepreneurs, different customers to put in larger kind of bulk machines like the Quantum. So we've delivered our first units in the USA, and we expect that, again, to be a market that's interesting for us in the years ahead. So just before we finish, really a summary of where we got to over this, the first few years of our growth strategy. So the key thing is we've delivered significant growth. So we've gone from 38 million to now 117.8, increased margins. That is something that we've focused on. And we have an opportunity with this very significant market opportunity ahead to capture 30% plus market share, which is one of our ambitions. And we've got proof points that we can do that. And in terms of gross margin development, that's something that we're really focused on. We see continued opportunities as we scale the business to do so. And we also expect with growth, There will be continued operational leverage opportunities within the business. Overall, then, these will continue to drive the top line and also continue to drive development of us as a stable and sustainable, profitable business. And I think that's it for the presentation. So I think, Michael, if there's any questions, we could certainly take those now.