Envipco Holding N.V.

Good morning, everyone. Welcome to the Q2 2025 presentation by Invipco. I'm Simon Bolton, CEO of Invipco, and we'll run through this presentation with my colleague Michael Clement, Chief Strategy and IR Officer. Normal disclaimer. One of the financial highlights for Q2 2025 You know, as we talked about in the first quarter, this is a transitional year for us as we deliver on existing markets and then we look forward to new growth markets coming up. We've seen sequential growth, Q1 to Q2 this year, and group revenues of 23.1 million. That is 13% down year on year. But as mentioned, we expect that to continue to build as we go through the year. More on that later. In terms of gross margin, we continue to work hard, make investments on our production capability, our supply chain to drive down the cost of operations and cost of our products. So gross margin of 36.6 shows 1% up versus the year before, giving a gross profit of 8.4 million. EBITDA of 0.4 and cash, which Michael will talk about a little bit later in more detail, ended the quarter 18.9 million euros. In terms of operational highlights, as we've discussed previously and we'll show later in the presentation, there's a lot going on. Lots of markets are active. Some of those activities haven't gone through to final commercial. decisions and agreements and orders quite yet, but still we're continuing to prepare for the significant opportunity ahead of us. That's both on production and supply chain. Whilst not all those activities have gone through the final decision, some have and we're very excited to have announced the first two orders in those two new critical markets. So 250 RVMs were announced to a major retailer in Portugal. Portugal is an exciting market for us and we've had certainly a really great business development team on the ground there for some years as that starts to prepare for go live at the beginning of 2026. Poland, very large market potential, maybe up to 15,000 reverse vending machines, and we're certainly excited to announce the first agreement for 1,000 units to a major retailer in Poland. And based on the current scheduling with the customers, that's expected to roll out during the course of the second half. Romania, it continues to be a real success story for us and we're certainly, we're proud of the contribution that we've made to the deposit return system in Romania and also the fantastic team and business that we've built in the country. As you know, we've been in Romania now well over a decade, initially as a supplier, and we built up that business to become one of our major manufacturing hubs and also a very active participant delivering machines, delivering services and support to the deposit scheme in Romania, which is working very well. As we've continued to work with the retailers and overall the country at large, certainly our market share has built up to now over our initial target of 30% and we expect continued development in this exciting country going ahead. We continue to invest in the team. This is something we've committed to do as we look to prepare the business for the future. So a number of people were added in the quarter, particularly around business development, the service function after market. That's important, of course. We only sell and deliver a product with a service offering. That's super important for our customers, so we really focus on that. And then we also continue to invest in core functions. As we grow the business, as we grow the organization, core functions, particularly around finance and IT, also are developed. For those who may be joining for the first time, we are a global recycling technology business. We're focused on the recovery of beverage containers, and with the legislative framework to increase recovery, there's an unprecedented market opportunity, really a tripling of the market in the next few years. We have positioned ourselves to capture our fair share of this developing market, And step by step, we execute with a seasoned team and we're driving both revenue growth and we're developing profitability. What does this look like? If we go back a few years here on this chart, you see as new markets come in, and that's our focus, really being there when these markets open up so we can capture our fair share. And as they have, then you see that's propelled our growth over the years. We, of course, still have a strong and stable U.S.-North American business, which Michael will talk a little bit more detail about. Whilst the number of deliveries was relatively modest this quarter, having production capacity is important and we We deliver North American products in North America from our North American operations in Connecticut, and then European markets we service through three facilities that we have, Romania, Germany, and Greece. This is important. It allows us to serve the customer efficiently and quickly. And also that capacity that we've developed over the last few years allows us to respond when customers maybe make decisions later than we anticipated. So a number of these markets, there's still work going on in the market to frame them and to organize them, particularly in Poland. But when those decisions are made, then we have the capacity, we have the ability to serve those customers very quickly. And we think that's important, particularly as we head towards the regulation target of 2029. Okay, with that, Michael, I'll hand over to you for financial review.

thank you salmon thank you good morning i'll take you through some of the financial highlights of the second quarter 25. starting out with the profit and loss revenues in q2 were 23.1 million euros a decline of 13 percent from q2 last year of 26.6 million euros The key driver behind that decline are lower RVM sales to Europe, as we continue to deliver on existing markets, whereas in the second quarter last year, we were still in the build-up phase in some of those DRS market introductions. 36.6% gross margins this quarter reflect underlying improvements in our production supply chain activities offset by lower utilization in our assembly facilities as we sold out older inventories, finished goods inventories previously produced. Operating expenses, 10.4 million euros in Q2, up from 8.8 million euros in Q2 last year. The increase, both on a sequential and a year-over-year basis, is driven by increased headcount, as Simon mentioned. 505 employees exiting Q2 this year, up from 416 employees Q2 last year. EBITDA in the second quarter, 0.4 million euros versus an EBITDA of 2.6 million euros in Q2 last year, with net profit at minus 2.5 million in Q2. For the year-to-date figures, Envipco posted group revenues of 44.1 million euros, a decline of 18% from 54 million euros in the first half last year. Gross margins in the first half this year were 37%, up 170 basis points from 35.3% in the first half last year. Operating expenses, first half this year, 20.2 million euros, up from 17.6 million euros in the first half last year, with EBITDA of 0.9 million, down from 5.6 million euros in the first half of 2024. Drivers behind our revenues, Europe is the market that we are focusing on as new markets continuously are introducing and rolling out new deposit return schemes. Revenues in the second quarter were 14.5 million euros in Europe, down 16% from 19.9 million euros in the second quarter last year. We continue to deliver on markets. This quarter, Romania, once again, very strong performance. We are continuing to deliver in Hungary, but at a lower rate. And where Greece started out quite soft in the first quarter, has built momentum into the second quarter, but is expected to continue to build momentum into the second half of the year. Reverse vending machine sales in the second quarter in Europe were €12.8 million, down from €16.4 million in the second quarter last year. Program services increasing still at a low level as we still are in warranty periods for a majority of our installations, €1.7 million, near doubling from €0.9 million in the second quarter last year. Our North American operations are stable. In the second quarter this year, revenues were 8.6 million euros, down 7% year over year from 9.3 million euros in the second quarter last year. We've had a weakening of the dollar versus the euro, so adjusted for that, the underlying growth is 3%. The driver behind the decline are lower sold volumes and therefore also lower collected volumes in the North American markets. Program services declined 4% year over year. They comprise the largest share of our US business, excuse me, North American business to 7.5 million euros. RVM sales in North America in the second quarter were 1.1 million euros. Our operating costs 10.4 million euros in the second quarter, up 17% year over year, and as explained, largely driven by the increase in our headcounts. And WIPCO will continue to invest to meet anticipated market growth in the quarters and years ahead. This goes in a wide variety of our activities, from market and business development to R&D, developing our technology and delivery platform further, our administrative capacity and systems. including other income total operating costs in the quarter were 10.3 million euros moving over to our balance sheets balance sheet total declined uh marginally from 122.6 million at the end of q1 to 121.1 million at the end of q2 non-current assets were 39.2 million euros down from 41.2 million at the end of q1 Major components, PPE, 21.2 million euros, and intangible assets of 14.2 million euros. Roughly half the intangible assets are made up of capitalized R&D. Current assets were totaled 81.8 million euros, fairly stable from 81.4 million euros at the end of Q1. Taking out the cash balance of 18.9 million, inventories were 33.1 million euros at the end of Q2, up from 31.5 million, with the increase being driven by raw materials, offset by a decline in finished goods inventory. Accounts receivables were 29.9 million euros versus 29.3 million euros at the end of Q1. Equity stood at 57.9 million euros for an equity ratio of 48%. Non-current liabilities were 16.1 million euros flat sequentially with borrowings at 6.8 million euros down from 7.6 million euros in Q1. Current liabilities were 47.1 million euros up from 42.6 million euros at the end of Q1 with trade creditors at 17.8 million and borrowings at 15.6 million euros up from 10.5 million euros at the end of Q1. Total borrowings on the balance sheet exiting Q2 was 22.4 million euros up from 18.1 at the end of Q1. Moving then over to the cash flow for the second quarter. We exited the quarter with 18.9 million euros in cash, down from 20.7 million euros at the end of Q1. Cash from operating activities were negative 4.6 million euros, with EBITDA of 0.4 being offset by working capital build of 5.3 million euros. Higher inventories, higher receivables, key driver behind that build. Cash from investing activities were €1.5 million negative with capital expenditures of €1.1 million and capitalized R&D at €0.4 million key drivers. Cash from financing was positive €4.6 million with FX effects of €0.4 million negative. That was driven by an increase in borrowings of 5.2 million euros, while lease liabilities came down a half a million euros during the quarter. Since Q2, now in August 5th, we announced a new consolidated working capital facility with ABN Amro Bank. Thereby collecting financing arrangements in different markets that the company has had over time and built over time to a collective facility. This facility gives us a flexible capacity currently up to 21 million euros. As part of this arrangement, we have repaid all USA-based financing, which then in sum gives us net of these repayments an increase in working capital capacity of 10 million euros. a very important stepping stone for the company as we continue to move ahead towards new growth opportunities. With that, I think I'd like to give the word back to you, Simon, for a few comments on our outlook.

Okay, Michael, thank you very much indeed. Great. Just a reminder, obviously on the webcast, you can enter questions, send questions to us, and after this outlook, we will then take those Q&A. So please do send in your questions. Good, right. Outlook. We wanted to highlight again the opportunity facing us. So we are recycling technology business. We produce reverse vending machines and services and systems that support the recovery of beverage containers. And that recovery is now very strongly written and driven in legislation, both the EU packaging and packaging waste regulation, which mandates 90% recovery by 2029. And also additional legislation in other countries, for example, the UK, which is mandating the introduction of a deposit return scheme in the UK by October 2027. very powerful pieces of legislation which are driving activity in this market and of which, of course, we want to take, we're positioning ourselves to take our fair share. A different way of looking at this is in terms of coverage of population. So the last few years, roughly 40, 50 million people have been covered in those countries that have recently introduced a deposit scheme. In the next three years, there's another 270, 280 people, and then in the next five years, potentially another 150 million people. Roughly, the number of reverse vending machines, our products that you need to cover population is proportional. So huge opportunity, and we've expressed this differently before to say there's about 100,000, 110,000 units operating globally at the moment. And to cover all of these deposit schemes, we'll need another 200,000. So about 300,000 units will be needed in the next few years. This additional 200,000 units is a market opportunity of about €4 billion. So very significant, very exciting. But timing. is a challenge that we face. And if we look at this slide, which we keep updated, and by the way, thanks for the feedback. People find this very useful. These are the markets that are finishing off a deposit scheme, so Romania, Hungary, and Ireland. These are markets we're still delivering units in, as Michael mentioned. Hungary, in particular, for example, has done most of the installation last year. So that is being delivered at a slightly lower rate. And year on year, we deliver less in Q2 25 than we did in Q2 24. Romania has a longer tail. Lots of local independent stores have moved and want an RVM, which is great. So sequentially, actually, year on year has seen growth. And Ireland and so on is filling in. And then we have Poland and Portugal, which for those who follow the business several quarters are really key markets for us during this year and into next. And whilst there's still a lot of activity in both of those markets, there are some things that need to be continued to be defined and sorted out. So Poland, there's interoperability questions which are being worked through between multiple operators, retailers and beverage industry are still working on their final plans and this uncertainty therefore is pausing somewhat some of the very final decisions of retailers our customers when they buy RVMs so we're seeing that move slightly into the latter part of 2025 and potentially even to 2026. Good thing is we've now been there a few years. We have a fantastic business development team. We've won the first agreement, which is great. We have pilots operating in many areas of Poland, which is exciting. and we're ready to win when the customers make those final decisions. Portugal is a smaller market, and certainly there's been no official announcement from SDR Portugal, the operator, on the go-live date, but we expect that to be in the first quarter of 2025 again. A slight delay has caused slight delay from some of our customers. Again, great team on the ground, lots of piloting, and we do expect still in both those markets to win our fair share, which is 30% plus. The other markets are starting to come through. Greece, which Michael mentioned, we've got a fantastic footprint in Greece through work with a great partner. And as Greece starts to transition between pre-DRS and DRS, then clearly there's some things that need to be organized before that gets going again. So overall, we continue to see really exciting momentum in new markets. It's a multi-billion dollar euro market in Europe, and we have obviously outside of Europe continued interest in different markets and obviously potential growth within North America. The timing and character of these will influence final procurement decisions and delivery. We're ready. We have the team, we have the products, we know we can do it, we've proved we can do it, and we're just waiting for that final go before launching those products onto the market. We continue to deliver on a tale of very successful launches, particularly in Romania and Hungary. We have our first agreements in Poland and Portugal, and we're working hard with other customers on their final decision points. And look, we're confident about the future. We're confident about the market, our ability to capture our fair share. So we will continue to invest to be ready for when those decisions are made so we can deliver excellent products and services to those customers. So that's the end of kind of the Q2 update. We'll take Q&A in a moment. Just a reminder, we are holding our very first Capital Markets Day update in Oslo, 9th of September. So those who are in Oslo or want to travel to Oslo, you are more than welcome. Please register and let us know. For those who can't make it live, then we will be webcasting it live on invipco.com. and it will be between one and four Central European time. So hopefully look forward to seeing many of you there live. Should be exciting update and obviously The few hours gives us longer to go into a bit more detail about the business, about our targets, and as we look slightly further ahead to 2030. In terms of the next specific event on quarters, we have Q3 results. That will be on the 12th of November. And with that, I'll say thank you very much for your attention. And Michael, I think if we have any questions, it's over to Q&A.

Yes, and questions are coming in here.

thick and fast, I hope.

Yes, absolutely. Okay, well, let's just start on top. Could you comment on what is driving sales of the Quantum in the US?

Okay.

How the characteristics of this machine fits the US market?

Yeah, great. Look, I think one of the things is that the deposit schemes are have been established in the US for a long time, since the 1980s. But, as we've announced before, and as you've seen in our numbers, Connecticut, as a state, has refreshed their bottle bill, which has increased the number of containers which are coming back to the scheme. We're also seeing increased volume in places like New York. the quantum machine is fantastic for high volume. We've seen that in Europe, and now we're introducing that technology into the US. Actually, the photo that you see here is in fact the US machine. So we're putting these machines in recycling centers which can be used by the public, can be used by people in those recycling centers, the team of those recycling centers, and they've been really well received. And we've got lots of inquiries for other machines. And so we feel very positive about Quantum as a product platform in the US.

Yeah, absolutely. And we're looking at producing it as well.

Yeah, I mean, it's a big unit. I mean, for those who have had the pleasure of using it, one of the things that customers like is Not only it's good for their consumers and the people who use their shops, it's very efficient, but it stores a lot of material. And it's easy to take that material, which means you need a big box. And shipping boxes across the sea is not the best thing to do. And there's lots of people who make good boxes in the US. So one of the benefits, of course, of having a dispersed manufacturing strategy and having factories that are ours, that we control, allows us to be very flexible. So just like we have done in Greece to localize the quantum product, that localization we can also do in the US, which allows us to be highly flexible, and of course, particularly in the current regime, very cost effective.

Can you provide a bit more color on if you are expecting Poland and Portugal orders to come into the P&L in Q4 this year or is it more split between Q3 and Q4?

Yeah, look, I think we wanted to highlight the timing of these opportunities. I think we still, it's not a matter of if it's gonna happen, it's gonna happen. Both of those are, Those schemes will happen in the next short period. It's the timing of those. Now, certainly, we've announced the two new agreements. We expect those to be delivered during the course of the second half of the year, before the end of the year. And clearly, we are working hard to add to that. So far... because of the work still going on to solidify and clarify some elements of the schemes in both countries, there's been really no more announcements or conclusions by customers anywhere. We're ready to obviously jump on those as soon as they as soon as those decisions are made and they want the product But certainly we do expect influence of Poland and Portugal in the second half a year to revenue and The extent of that, again, is the extent of timing. And, yeah, so we're basically ready to go.

But more in Q4 than in Q3 is a reasonable assumption.

Yeah, I think so. I mean, here we are. We're mid-August now, and I think it's reasonable that... As we've said, we see momentum building as we go through the year, but like we've seen the last couple of years, we do expect Q4 to be quite busy.

uh do you see anything significant with regards to the decrease in north american sales um well as we explained uh program services uh were down uh q2 this year lower sequential seasonal growth that we've seen in previous uh years uh from what we gather uh the cell in of new beverages has been lower weather, partly explaining that in specifically in North East, lower sold volumes also then results in lower collected volumes. So All in all, the North American market for us is still looking as a stable market, moderate growth. It will vary on a quarterly basis, but that's still what we see. There's no difference structural or in the North American market for us. um do you expect working capital build to reverse over the course of q3 and q4 we've seen in terms of seasonality we've seen a a a build in q2 over the last few years we will have a higher activity level moving into q3 and even higher activity level into q4 that will drive receivables We have different types of contracts with different types of customers. And of course, the mix of that could be changing that dynamic. In terms of our financing capacity, we're very comfortable with what we have to deliver on what's to come for Portugal and Poland. We have a strong focus on our working capital, but we also need to have an availability to deliver on the opportunities that are arising. Let's see here. Can you provide any further color on the Netherlands win and how big this could be for 2026? Do you expect to win any further orders in other existing markets? In other words, yeah.

Certainly, one of the things that we put in the report, a subsequent event, is we're very pleased to announce the kind of frame agreement with Staskeld Nederland, the operator of the Dutch system, to kind of formalize some of the pilots and some of the work we've done over the last six months in terms of introducing quantum to the Dutch market. As we presented before, the Dutch market has grown from big bottles and then introduced small PET bottles and now introduced cans. And cans is a huge fraction of the overall beverage containers in the market in the Netherlands. And so this has created kind of an issue, also created an opportunity for us to introduce quantum. And we've had several fantastic pilots by private private groups which have also been supported by Star held Netherlands and that's now cumulated you know in recognizing that technology as a huge potential and an investment and program that lifts the Netherlands towards the 90% recovery target so yes we do expect We do expect, of course, follow-on orders, both during the course of this year and during next. It will be step by step. As we talked about just before in the US, these are big machines. It needs planning permission and zoning and so on and so forth. But certainly, everyone's very excited. We've got now a team focused on that brownfield opportunity in Netherlands. We have technical support and so on. Certainly, the feedback from customers, feedback from staff of Netherlands is very positive, so yes. In general, What you see, and hopefully we try and communicate as best as we're able through these quarterly updates, is you see a spread of Quantum. I think you go back two or three years, really Quantum was only in Sweden, but step by step now we see Quantum pretty much existing in every market that we're working in. It's a great product, unique product to the market. Consumers love it. It's very quick. It's very efficient. They don't have to stand there putting bottles in one by one. And our customers, retailers, or even private individuals like gas stations, they like it because it's high footprint, it drives footfall to their facility, and of course, with very high volume, they get a lot of handling fees. So overall, a fantastic product which is important for us and will continue to develop and also apply in other markets.

Could you please explain the gross margin decline sequentially? Q2 production was lower than in Q1. So it's a utilization factor. So lower utilization of our assembly facilities. So in other words, part of the sales in Q2 was sell out of previously produced finished goods inventory. That's the explanatory factor. Let's see here. I'm just trying to see which questions may be overlapping. Could you maybe elaborate on your performance in Romania?

Yes, sure. Yeah, look, we wanted to highlight Romania. It's actually the biggest single market in Q2 and showed very strong, both sequential and also year-on-year growth. As I mentioned, I think, in the presentation briefly, we've been working in Romania now for quite some years, initially just as a supplier of compactors, very high quality, very efficient. and then we've built out that business both from a production point of view now we fully make the whole product in romania and the full range to also then supporting the romanian deposit return scheme and you know we've made several announcements um you know over the course of the quarters in terms of key wins that we've had with international retailers But also, more importantly, we have a very active local sales team and commercial team that look at the much wider opportunity of local and regional retailers. And we've built, therefore, into that market. They really like the fact that they can get the product quickly, it's simple to use, it works, it's effective, it's a good price point for them. And so that has developed our market share. We've surpassed now 30% and we feel we can continue. And this is an interesting dynamic because we see similar dynamics in some other markets like Poland probably being even more like this. So 10, 15% maybe of retailers are kind of international retail groups or large groups. And then you have the majority being these smaller chains smaller local retailers which are very effective at what they do in those markets but maybe start off with manual collection then they have an rvm a reverse vending machine later in the process so these uh you know this market share builds over time so we've been working in Romanian air commercially for well over two years. But it shows commitment to the country, commitment to the market, a great team on the ground, clearly, allows us to have a very nice, solid business, and ultimately build up to a good market share. Then we're through all the questions. Very good. Okay. Excellent. Well, thank you, Michael. Thank you, everyone. Thanks very much for your attention as ever. Again, a reminder, September the 9th, do put it in your calendar. It's the InVIPCO very first Capital Markets Day, either online or, of course, warm welcome to Oslo. And then we'll see you again for Q3 update in November. With that, we'll sign off saying thank you very much for your attention. Have a fantastic day. Bye-bye.