CTEK AB (publ)

Thank you operator and good morning everyone and welcome to the presentation of CTEK Q1 interim report and the presenter today will be myself Henrik Wagenius and CFO Tom Mathisson. So let's start before we dig into the figures spend some time with our history. CTEK was founded 25 years ago by the inventor Bengt Wahlqvist. He invented the world's first smart battery charger. And ever since, development has been core for CTEK. All design and development are done in Sweden. We are producing by our production partners in Asia and China. And we have our own personnel in place in China for more than 20 years to secure quality and production. CTEK is then consisting of two main technologies. The EVSC, which is a charger for electric vehicles. There we have three different areas. One is destination charging. One is mobile charging, and the last one is client brand charging. Then we have our low voltage segment, that is 12 to 24 volts chargers. And we have four different areas, consumer, professional, which is the workshops, client brand, where we have had among Porsche as a customer since 2003. And we have other numerous high end car manufacturers, and then we have integrated solutions. So that is the four areas for our low voltage business. We are going to market with two different divisions. One is the professional division that is selling it to big parking operators, our destination charging, and also selling our client brand low voltage to the OEMs. in the consumer uh division we're selling mainly our low voltage but also our mobile evsc and there we're selling for different channels like retail and e-tail and crew importers in some countries but let's dig into the numbers for q1 it was a solid quarter the net revenue net sales ended up 201 million gross margin ended up 54% almost 10% higher than comparing quarter adjusted EBITDA 19 million which is a 9.7 percentage also up 6.7 percentage points since the comparing quarter good stable cash flow of 45 million The share of EVSE fell to 17%, and our net debt ratio fell to 2.2 times. The key takeaways from the quarter is, of course, continuously good cash flow and increased profitability. We can see that our activities are working. We have a stable cost base. We are improving both gross margin and adjusted EBITDA margin. We have a stable cash flow and we're working to reduce the net working capital. We have also had a very strong low voltage sales. This is the third consecutive quarter where we see a growth in that division. This quarter we grow with 11 percentage points. And we see positive trends in Sweden and DASH region. What is reducing our net sales is significantly lower EVSE volumes, especially in North America for our customer there. It was a remarkable lower sales. We had also quite a strong comparing quarter to compare with. But we see a positive trend in the overall EVSE sales in the Nordic. And as we mentioned last time, we are now also introducing our new ChargeStorm Connected Free, which will open up more markets for us by the end of the year. So I would say that we have buttoned out the EVSE and see a growing trend in that segment as well. For some more details, I leave the word to you, Tom.

Yes, so dig a little bit more into the financials. This first quite crowded slide highlights just a few items there. As Henrik mentioned, the decrease in the overall net sales is only related, I would say, to the EVSE and particularly the customer we have in North America. I'll come back to that a little bit later. have a strong increase in the gross margin and that is a mixed effect from the higher low voltage sales so we are 10 percentage points above last year same quarter on the adjusted EBITDA Again, the increase there is related both to the higher sales of high-module products on the LV side, but also to the impact of the lower OPEX of our cost reduction programs from end of 2022 and beginning of 2023. With that, I go to the divisions and the consumer division. continue to increase quarter on quarter the sales. So around 10% higher net sales compared to last quarter same time. Stable margins on good levels. And we also can see that quarter over quarter, it's a good positive trend both on margins and volumes. This division is, as you can see from the upper right-hand corner, two-thirds of our company. As you see, it's predominantly low-voltage sales. Almost the full sales are from low-voltage. Coming then to the professional division, if you start in the same end, this is then one-third of our company. and it's around 50-50 between EVSE and low voltage products. Here we can see the decrease quarter over quarter with almost 45% and that is again related to this North American EVSE customer. On the positive note, you can see from the graph on the lower side of the slide that it's a sharp improvement from quarter four 2023 and still we are not happy with the margins we will continue now foremost looking for higher volumes to come up to profitable levels in the professional division finally on the financial highlights cash flow and capex says that this really important for us to continue the good cash flow development. We have now operating cash flow positive of 45 million and after investments, it's still positive with 26 million, which is 50 million more than, 70 million, sorry, more than the same quarter last year. This good cash generation has made it possible for us to now also amortize on our loan with 100 million in this quarter. which also will improve our cash flow going forward. And most importantly, this continues to take down our net debt ratio from 2.7 at the end of 2023 down to 2.2. And from the graph on the lower side of the slide, you can see that we have now stabilized our CapEx development on the lower levels, and we had 22 at the beginning of 2023 as well. If it should be 9% or 8% or 10%, you can always debate. We will always have quite high capex investing in new products and improved products, but it should be on the levels as we are right now. With that, I hand over to Henrik again.

Thank you, Tom. Looking then a little bit into the future, as we presented last quarter, We have divided our future journey into three phases where the first phrase is stability. We can now conclude that we have a cost base that is sound and we are having a positive cash flow. So we are leaving phase one and entering into phase two where the focus will be on profitability and also profitability through organical growth. So we're putting more efforts into growth, into organical growth, and then we have a phase three that is more accelerated growth with both new geographical areas and also to investigate the M&A possibilities. So what are the summary then of Q1? Solid quarter, continuously strong cash flow and increased profitability. We are continuing to reducing our net debt rate. We see a continued growth for the third quarter now in low voltage sales. We see a significantly lower EVSE volumes for our North American customer. But we see positive trends for other EVSE segments in Nordic, and we will also open up new countries. I know there have been a lot of discussion about lower sales of EV vehicles, but there is also a growth in plug-in hybrids. And for CETEC as a company, it doesn't really matter if it's a sales of an EV car or if it's a plug-in hybrid. Both need the charging infrastructure. And we are leaving phase one and entering in phase two in our journey towards profitable growth. With that, we open up for questions. Please, operator.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Johan Eliasson from Kepler-Chuveriax. Please go ahead.

Hi Henrik, hi Tom, this is Johan at Kepler-Chuveriax. I have a few questions for you. Talking about the low-voltage business first, how would you say deal reinventories are right now at the end of the quarter? Are they high, low, or normal for the season?

Hi, Johan. Thank you for the question. We can see that after having very high stock after that pandemic, I am now judging that they are more normalized stock levels at our dealers.

Good. So no, nothing to worry about when we go into the sort of summer season here in terms of suddenly stocking or so?

Not when it comes to stock. No, I don't see that. Good.

Just curious a little bit, in the consumer segment there are the very limited sales of EVSE, I guess it's the New Order Go product. How is this product now developing when you have the load balancing as well? Are you seeing a positive trend there?

Yeah, we see a positive trend from low numbers, but we see a positive trend. And personally, I think it's a fantastic product together with the load balancing. And we are making efforts to sell that even further.

Yeah. And then you talked about still on EVSE here, charge storm free now with the more countries available for you. What countries would that be sort of that you have?

We are... We're first introducing it in Sweden as our home market and UK, and then later on also a version for the German market.

Okay, and the current product you have today, I guess, is Chorson 2. Is that sort of today only for Sweden and the UK, or was Germany already there?

No, it's only for Sweden and limited segments in the UK.

Okay, good. And then just a question while we are on EVSE. You talked about North American customer volumes being down a lot in this quarter year of each year. Is the context sort of still valid? Is it more their rollout of their EV course, or what's the latest on that?

Yes. The contract is still valid. We are still supplying one model for them. But I think it's more about their sell-out of EV cars. Which you can find quite good figures on their homepage. So it's a slow start. And we don't know much more about that development. But we still believe in the long-term trend of electrification. And we have a good product for the North American market when it comes to 19.2 kilovatts charging.

Okay, good. And then I noticed you talked about the positive trend for EVSC in the Nordic. I guess that's the old traditional charged-on product. But you were a bit more cautious in the Q4 call because of the bleak outlook for construction in the Nordic. Has anything changed here?

We see a positive tendency. We see more projects restarting. We see more activity. It's still not huge numbers, but it's a positive trend. And I believe that we have the worst behind us.

Okay, good. And then just finally a question for Tom. You talked about CapEx. staying at current level, did you refer to that as percentage of sales or sort of in absolute terms, Swedish krona sort of?

More or less both, but maybe we look more for absolute numbers, but it's because that is really the cash impact. And then we try to balance that in a good level between low voltage and EDSE.

Good. And the net debt target you have, can you remind me of where you want to be?

Free is the national target. And obviously, the lower, the more space we have for various things like CapEx or further down the road, other possibilities.

Okay. That was all I had. Thank you very much.

Thank you. Thank you.

The next question comes from Sofia Sörling from Carnegie. Please go ahead.

Hi, Sofia Sörling here from Carnegie. Thank you for taking my call. Hi Henrik and Tom. My first question is about the consumer segment. You mentioned you had a really strong sales growth within the low voltage segment and that also has a positive impact on margin. But would you say that the Q1 margin within this is quite inflated in Q1? Or would you say that this is more of a sustainable margin level within this segment?

Good morning, Sofia, and thank you for your question. We are thinking that we should be able to hold this level of margin.

OK. and and would you say that it's extra boosted the sales growth here in q1 due to the cold weather or um but this is a quite unusual growth here due to the cold weather or yeah would you say that is more expected i think it's more expected we have strengthened the consumer organization and we are doing more activities

So I would say this is more of it.

Okay, great. And then if we go to the CC3 product, have you started selling this in Sweden? And can you say something about the demand already for this product? And current trading, if you can give some details on how it has been, yeah, how the market view this product, basically.

We haven't started yet. It's in pre-production. We will start within short. We have seen great interest from our existing customers and new customers for this product. So we are positive going forward.

All right. But in Sweden, you will launch it then in end of May or in June?

Something like that. Q2 and Q2, I would say.

All right. And then I would say I have a question also about the EBITDA margin for the professional segment. So you mentioned that it has improved quite quarter by quarter. It has a sharp improvement here, as we can see. But what would you expect? When will this break even? And what would you expect to be a more normalized EBITDA margin for the professional segment?

I think what we see now in this quarter is the effect of the changes in the organization we did last year. So we have reduced the first phase in that division and now it's more about adding volume into the EVSE and we are not revealing any goals for EVPA levels but it should definitely not be a minus in front of that margin.

Yes, okay. And regarding the adjusted cost base, it seems now, or should we interpret that this is stabilized now and you do not expect to make any further cost-saving implementations at all?

We can say that we think we have done what we should in the things we launched beginning of 2023 because it stabilized on the two levels. So now it's the volumes we are looking for.

Okay, great. And let's see if I had a final question here. Yeah, and also within the EVSE market in the Nordics as you saw some more positive trends. Is there any difference between the different countries? And also if you could give some more details, how do you view competition at this moment? Is it very fierce? Is it price pressure? Yeah, how do you view it?

If we take the Swedish market, which is our biggest market, we see of course that there are a decline in new registrations of EV cars, but that is counteracted by an increase in the registration of plug-in hybrids. So if you look at Q1 in Sweden, I think chargeable personal cars spent 54.6% of the new registration. So it's still a majority of the new cars registered that needs charging infrastructure. If you look at the competition, it is a fierce competition in the home charging segment, but that's not our focus. We are focusing on the destination charging, and there we are dealing with B2B customers that are appreciating our robust solution and our load balancing system. And there is competition everywhere, but I would say that we are We are keeping up there.

All right. Okay, thank you. No further questions.

Thank you, Svea.

The next question comes from Johan Eliasson from Kepler-Tuvriax. Please go ahead.

Yeah, hi again. I just had in mind a question regarding this. minor impairment you had in the quarter or charge, you call it. Was that an inventory impairment that impacted cash flow in the quarter or what was that?

It was, rightly said, it was impairment in the inventory related to the EVSE business and to be specific for the North American customers. Okay, that's all. Thank you.

Thanks.

As a reminder if you wish to ask a question please dial pound key 5 on your telephone keypad. There are no more questions at this time so I hand the conference back to the speakers for any closing comments.

Thank you very much for joining our call and if you have further questions later today or later in the quarter don't hesitate to reach out thank you so much and have a good day thank you