CTEK AB (publ)

Welcome to CTEC Q2 Report 2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Henrik Fagranius and CFO Tom Mathisen. Please go ahead.

Thank you very much, operator, and also a warm welcome to the second quarter report review from CTEK. Today's presenter will be myself, and I also have Thomas Mathisen, our CFO. And as usually, we will start with some background information about CTEK. CTEK was founded for over 25 years ago by Bengt Wahlqvist, the inventor of the first ever battery charger to use electronic pulse technology. And this revolutionized the market. We are designing and developing and testing all our products in Sweden. We are putting a lot of efforts to the quality levels and we have about one third of our employees working in research and development in Falun, Norrköping and Shenzhen. We are also committed to sustainability targets and we are focusing on reducing air frights and make our products more repairable and the use of recycled materials wherever possible. We are very proud to have more than 50 of the world's most premium vehicle manufacturers as customer where we are building their branded 12 volt chargers. Especially proud to be double branded together with premium brands like Lamborghini as you can see on this picture. This has helped us to build a very strong consumer brand. And with the passion and with the CTEK family that we have, we have built a very strong global consumer brand as well. CTEK has mainly two technologies. Low voltage is the 12 and 24 volt chargers for cars. And we sell them to consumers. We sell them to client brands. We sell them to workshops and also to other installations like caravans, lifts, et cetera, wherever you have a battery that needs charging. other technology that we have is chargers for electrical vehicles and there we are focusing on destination charging our go-to-market strategy we are divided into two divisions consumer divisions that are selling directly to end consumers through retailers and through distributors and through online marketplaces We have our professional divisions that is focusing on business to business where we are selling low voltage chargers to OEMs, premium brands, and we're also selling our destination chargers to parking operators and others. CTIC we are focusing on niche customer segments where we find the ability to pay willingness to pay higher and we are focusing on these niche segments for low voltage that could be sport cars that could be motorcycles and all of these users really appreciate the chargers and know that they are dependent on them for electrical car charging, we are focusing on parking operators, energy companies that are really appreciating high uptime and are also prepared to pay for that. In May this year, we presented our new financial targets for 2028 at our Capital Markets Day. And that consists of having a revenue of 2 billion and an EBITDA margin of 20%. And the net depth below three times. And we are aiming to have a possibility to divide 30% of our net earnings. We will do this by developing our existing business, but we will also introduce two adjacent product categories. The first one is premium boosters. That is an emergency help if you have a breakdown and the battery is flat. So you can start your car immediately and go back home and charge it with a ZTIC charger. The other one is power solution that is focusing when you have a secondary battery solution. in, for example, a boat, a caravan or a motorhome or a service van. We will introduce products in these categories and also in our existing charging category starting this autumn. And the big impact will come later this year, but mainly in the coming years, 2026 and onwards. So as you can see here, we will grow in our existing business, but we will also grow with premium boosters and power solutions. So with that, over to the quarter. In the second quarter, we have seen a revenue of 197 million SEK, a bit lower than last year, where we have 212. We have seen growth in low voltage, but lower sales and revenues in EVSE, mainly GM contract being canceled. The gross margin was improved to 56.3% due to the product mix. We have an adjusted EBITDA of 14 million SEK, that is 6.9% compared to 7.1 in the comparing quarter. We have increased the EBIT to 9 million, that is 4.3%, and we have a net cash flow of 31 million SEK. And with that, we end up with a net debt ratio of 1.8. The key takeaways for this quarter, it was a very reluctant and hesitant start of the quarter due to the macroeconomical situation. A lot of our customers were hesitant to order for stock, but it turned out to be quite an improvement and recovery at the end of the quarter. I'm happy to see that we are continuing to grow within our low voltage business and this quarter it was mainly the client brand that has a very good quarter. We also see good sales in the online and. I'm also happy to see that it's the second consecutive profitable quarter for the professional division on the EBTA level. We've turned around that segment and are showing profit on EBTA level. We have also seen some improved cross margins in our new EV charger CC free charge from connected free and we have also seen existing a new customer that are interested in that one. And as I mentioned, we are working hard now to introduce our new adjacent product categories and that will come at the end of this year and I hope to see an impact on. on later on this year, but mainly 2026. So with that, I leave the word to you, Tom.

Thank you, Henrik. So then I will do some deep dives into the financials for quarter two and starting with some more details around the divisions. First, the consumer division, as you can see from the graph, it stands for around 65% of our revenues. And the net sales were lower in absolute terms, 128 versus 135. But organically, without any FX impact, we actually grow with 0.3%. EBITDA amounted to 42 million SEK, which is a 33% EBITDA margin. However, that margin is, it's a high margin still, but a little bit higher than, but a little bit lower than last comparing quarter. And that is due to somewhat lower margins, but also to a mixed impact from geographies that we have had higher mix of high margin markets last year. And then last, also a periodization of our performance marketing that has had an impact. So still good margins, a little bit lower than last quarter, but in the basis, it's stable and good margins. When I go over to the professional, sorry, I turned two slides there, professional division, it stands then for 35% of our volumes. Here we saw a decreased volume with 6% organically. And these decreases, as Henrik mentioned before, mainly related to that the GM contract has ceased as from this year. The EBITDA level is, however, increasing. to the second quarter in a row with a positive margin. That is, we are very happy to notice going forward. Cashflow and CapEx, as I mentioned, the CapEx is a big part of our business. One third of our team are working with developing new products and maintaining the ones we have. And from the graph on the lower end of the slide, you can see that these CapEx has been on a very high level back in 22, 23. And as we have earlier communicated, it will go back to more normal, but still high levels. We are now on 8%, and we foresee that that will continue down to in the range of 5% to 7% over the years going forward. So our cash flow from operating activities is now 31 million compared to 22 in the comparable period. And from net cash, we have reached now from 4 million last year to 15 million this year, in this quarter two. We have, as Henrik also mentioned, net debt ratio now at 1.8. It's an improvement versus a similar quarter last year. And that's well below the free time that we have in our financial targets. So with that, I hand it over back to you, Henrik.

Thank you, Tom. And the summary then for the quarter, key highlights. Strong recovery in the end of the quarter. Started a bit hesitant, but then we saw that our customers were more confident at the end of the quarter. Continuous growth within low voltage. I think we have eight quarters now with growth in low voltage business. And that is, of course, very good. This time it was driven by a good amount from client brand, both existing and new customers, and also online sales. And second consecutive quarter of profitable growth, profit, not growth, but profitability on EBDA level for the professional division. and improved gross margins for our new short storm connected free EV charger and new contracts rewarded as well. And as I mentioned, we are focusing very hard now on the two new adjacent product categories that we will start to show by the end of this year. coming years to come. And with those new product categories, we are tripling our addressable market in order to meet our financial targets. So with that, back to you operator, and we open up for questions.

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 Sophia Sorling from DNB Carnegie Investment Bank. Please go ahead.

Hi, this is Sophia from DNB Carnegie. Can you hear me? yes we can yes absolutely thank you great okay so um my first question is related to the professional division and so can you please give us some more detail of how much of the sales decline in q2 in this division was related to the general motors evse states yes we can do that uh

We have in the comparable quarter, I think the sales to General Motors was 15 million Swedish kronor, about 15 million Swedish kronor.

Okay, yes, thank you. And if I can challenge you a little bit on the profitability level in this professional division, since this GM orders are now not included anymore. Why isn't EVTA margin higher than 3% in this quarter, given also that it was actually 6% in Q1? If you can give some more details on that.

Yeah, I would say that is volume based. We also have the right profitability in the products, both in the low voltage, of course, but also in the EV products. But now we need some more volumes to make it even more profitable.

Then basically more, the WM business is good, the low voltage business is good and professional, but the EVSC business, we need more volumes.

Yeah. Okay. Yeah, because that was actually my following question, what actually needs to happen ahead for you to increase profitability, but then It's more the volumes in EVSE segments in this division.

Yeah, absolutely correct. We see a very good development in the client brand business. We are gaining new customers and also our existing customers are developing very nicely. But when it comes to EV business, we still see a very low activity on the market and that needs to change. have some more volumes there and of course we're also increasing our focuses on the uk market and later this year we will also have a product for the german market so that of course will will increase our addressable market for the ev side as well okay um okay so um the german market when do you expect this to have a reflection in sales We will introduce the product late this year, so I would say the impact will mainly come 2026.

Okay. And what would you say is EBITDA margin level, what is possible here within the professional division in the long term? Or what are you satisfied with?

We haven't said anything, but we, and I believe that the professional division should support our financial targets to have an EBITDA level of 20%.

Okay. Let's see, maybe you mentioned this a little bit, but can you give some more details on how the sales of the CC3 the charger is progressing feedback from customers and also if you can comment is there any need for another updated version near term or midterm if not why

I would say that with this shore storm connected free, we have a market leading product when it comes to technology. It's prepared for all the new V12s and whatever that is coming in the future and also have a very high cyber security level. We will update it later this year with a display and the eye fresh for the German market. And this display is mostly to comply with the AFIR regulation. But after that, I see that we have a product that will be very future proof. Then you never know about legislation and how that will change. But as it is now, it will be a very future proof product. And I see that the customers that have bought it so far, we have received very good customer feedback. It's easier to install, very reliable, high uptime as also the CC2 had. So overall, very good feedback. But as I said, the activity in the whole business is a bit low at the moment.

Okay. No, sorry, you already answered the new product categories. And just a comment on this financial targets. You had a good page there about how CTEK will reach its financial targets. But it seems like the EVSE segment is expected by you to have quite a acceleration during 27 and 28. Do you expect, I guess my question is, what is your market assumption behind these numbers? Do you expect that it will come back to the, I would say, the previous market expectation of around like 30% CAGR? Or what is your assumptions behind your own numbers?

the assumption is mainly that we are entering into both uk and germany which are much bigger than our current markets main market that is sweden and nordic and but of course we also foresee that the very hesitant market situation that we have right now will ease up and come back okay and um

final question from my side um you had you mentioned that you had a very strong financial situation at the moment or financing situation do you see any potential mnas ahead as as we said at our capital markets day in may we do see mna as a possible accelerator to to reach our

And the stable financial situation that we have right now makes that possible for us to look into M&As, yes.

Okay, already near-term or is it more of a mid-term horizon here?

That depends on how and when we find suitable subjects.

Okay, thank you for all your answers.

Thank you, Sofia.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Matthias Ehrenborg from Red Eye. Please go ahead.

Good morning, gentlemen. I think a lot of my questions have already been answered, but I'm curious to hear what you think that needs to happen within the consumer segment for your customers to become a bit less hesitant. Obviously, you've been mentioning the current macroeconomic situation, but is it more than that? I'm curious to hear what you think.

Thank you, Mattias. I think what we saw in the beginning of the quarter was mainly our distributors and retailers that were a bit reluctant to take on stock. And that is, of course, due to the macroeconomical situation. We have throughout the quarter seen stable demand from our online sales channel, where we more directly see the end consumer demand. So that has been stable throughout the quarter. So I think the main hesitation was among our distributors and retailers if they would take on stock. So what I would say is if we get more certainty when it comes to tariffs, that will probably increase the consumer demand and also make our customers more confident to take the necessary stock for the quarters to come.

And you mentioned there that the online sales have still been solid and improving also. Is it possible to shed an extra light on this? What are your expectations going forward for online sales?

Now, the online sales is a very important channel for us, and we see that that has been developing very, very strongly during the quarters, and we continue to see that as a strong development going forward.

Okay. Also, you mentioned that the geographical mix has had a negative effect on the gross margin in the consumer segment. Is it possible for you to share what markets are more high margin and vice versa?

last in the comparison quarter we had high sales to Australia due to some new product introduction in into Australia at that time and Australia is a high gross margin market and then we have other there is generally we have very high gross margins in all our market for consumer but there are some variation and Australia is a positive variation so

Okay, yeah, understood. Just one question regarding the EVF segment. Obviously, the professional segment has a whole very strong development in the quarter, primarily driven by the low-voltage sales. But I think we may have answered this question earlier, but UK in this quarter for the EVFC, what was the development? Yeah, in the region, because now your CC3 has been available for the market for quite a few quarters, I believe. So I'm curious to hear what the development looks like.

We see a slightly positive development from very low figures and not really vibrant, but we see an interest from customers in the UK. We also see interest from our existing big global parking operators that are active in the UK. So we see a positive trend, but from low numbers.

Okay. And a final question from my side. As you mentioned on your capital markets day, you will launch a couple of new product areas now in H2. Are there any markets in particular that you are excited about going into the second half of this year and launching products in those markets? For instance, I noticed that your duck sales in this quarter was once again very strong and continued to grow year over year. Is that a market that

particularly interesting or what do you think that is definitely a big market for us and a market of continued interest and if we look into the two different adjacent product categories boosters we will of course sell in all our existing channels and all our existing markets when it comes to power solution that's also the long-term plan there might be some certification delays to some of the products but of course Germany especially with a lot of RV manufacturers is and will be a very important market for those kind of products as well okay thank you very much for your answers and have a good day thank you thank you

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions.

Thank you. And we have two written questions. The first from Johan Eliasson. Your new product, will they drive up CapEx a lot in second half year? The answer to that is no. We will keep our CapEx budget. We will not increase. We are reallocating focus on our existing CapEx on that one. Second written question is from ST. Given your comments on retailers and distributors willingness to take on stock and the improvement in the end of Q2, do you expect a bounce back in demand in Q3 when then or is your judgment that inventory levels are normal again? We it's very hard to guide and we do not guide for the future, but I see it more as a normalization not see any possible bounce back and that was the two written questions that we had so far And if there's no further questions, I would like to thank you for listening in and wish you a good day. Thank you very much from our side. Thank you.