Ferroamp AB (publ)

Hello and welcome to Förams Quarterly Report for Q1 2024. I am the CEO of Kant Jonsson who is holding the presentation today. As usual, I will try to make room for questions at the end. Please feel free to enter the questions in the chat or by e-mailing us at .ferroamp.com. I will briefly introduce Föram. Our vision is a world that is driven by 100% renewable energy. We believe that we can help the and the third is challenges in the electricity grid, both production and distribution. Our Föram system helps to optimize the production of solar energy, storage of remaining solar energy in batteries, but also to be able to provide support services with the help of batteries. It also helps to control the electric car charging and everything is held together by an intelligent inverter which is our energy hub and which is the heart and the brain in our system. We have some good patents. One of the strongest patents is PowerShare, where you can share energy between buildings behind the power meter. If you have a good solar roof, you can produce energy that can be consumed and moved to other facilities. The alternative is to send over production to the grid, which is quite poorly paid, and then you can buy back the more expensive energy from the grid into another facility. This will result in both transmission costs and taxes and various benefits. On a good and strong business case around solar power production, it is very important with your own consumption level. This makes it possible to consume a much larger amount of produced energy within the measure. This is a function that is built into our energy hubs. What you need is an energy hub in all buildings that will participate in this energy distribution. A strong and good patent, which we see a fine demand for in Europe and especially in Sweden. Our customers have a wide range of customers. Our platform is modular, both in size, so you can start with a smaller one and then increase the effect, but also modular in the form of function. You can start with only the energy hub, which means that you get more of your electricity connection or that you can secure it down thanks to our patent on phase balancing. You also get a very high-end data that you can use to control your consumption and see how your facility uses your energy. So you get a tool to optimize your energy use in a facility. But you can also build on solar power production, solar power on the roof, for example, or batteries, which I have talked about, but also chargers for electric cars. It is modular, so you can build it out, both in size and function. It is a very flexible system that suits many customers. Quartile 1 numbers, a little bit of market position. We are at three market segments primarily. Solar cell in Villa, we see a continued decline during this quarter compared to the previous quarter. On the facility side, we see that it is still beginning to increase during the quarter. So that is a market where it happens more than at Villa. Support services, a great interest both from villa owners and property owners. So it is a market that we are focusing on and I will come back to our investments later. Electric car charging, there we see that the registration of electric cars and sales have gone down and is at a fairly low level now. The demand is low on regular AC chargers. We see, however, that there is an increased need for DC-DC chargers, where you can charge the car faster and with less energy losses. So that is something that is increasing, an interest that is increasing. We also see a lot of questions about DC-DC V-grid. The possibility that we have talked about, to be able to move energy back from the car's battery back into the house and back to the network, so that you can use the car's battery as a regular battery that you rarely have. There we are done with the technology and we are waiting for the car manufacturers to decide to get started. The market will come, but it is not there today, it will come from above. Look here at the solar power plant market, there we have the dark green are the announcements that must be made to the energy companies and then the main part of them will be installed and driven and connected to the facilities. Here you can see that it was a very hot market the first half of last year and I described it as an unnatural high demand there and then. We have seen that it has fallen and that it continues to go down even in Q1. However, you can see here on the graphs that both announcements and connections go up something in March. We believe that we are on our way to a more normalised market. We will not come back to the unnatural high demand that was the first half of last year, but we believe in a normalisation during the year. Business highlights, we have developed support services on the balance market and during the period we have also talked about the end of the after period. We have also talked about the Vigil to Grid during the period, that we technically are far ahead. We have also talked about our agreement with Ära, which I will return to. After the end of the period we have also been talking about a new mission. Support services first, it is the market that there is a lot of demand for, both from the customer and the owner of the property. We got approved in January and the first offer was made in March and it has worked well. We are now one of only three approved and active virtual power plants, where you can aggregate several smaller batteries, so that it becomes a large virtual battery and you can then participate in the frequency support that we have offered. There is a great interest in many actors, but there are three today that are active and we are one of the three. We also have a unique solution where the battery can be used for other things, not just support services. So that our battery is still connected in the system, can store the remaining solar energy and peak shaving and do a lot of other benefits, in parallel with the battery can participate in the frequency market. So that is a unique opportunity that we or our customers have with our technical solution. We have also talked about the support services, that we should move forward and now we have said that we will now leave the application in short in SE4, the southernmost electricity area in Sweden, and open up for more energy companies. The first one here now that we have started and have offered is Rör Elområde 3 and Varberg Energy. A little more about the agreement with Ära. I think this is a fantastic, good and important agreement for us. And a little short about Ära, they develop energy solutions to meet the need for gas for heating and they focus on Europe. They have communicated a lot themselves. They are on three markets today and sell and have their own installation capacity. And those three markets are Germany, Italy and Great Britain. We have signed a development agreement and a production agreement with Ära, which means that we adapt our products to Ära's concept. And then we will also be manufacturing products for Ära. Ära is the one that has come very far with creating a whole for the customer and being able to look at the entire energy needs of the property. And there we will contribute with a technique that Ära can control through our open APRs and control solar production, battery storage, support services, electricity charging and so on. Together with Ära's own heating points. So this we see as a very good partner for us, a strong partner and a good opportunity for us to come out into Europe. Vehicle to Grid. We have been developing in the lab here in Sundbyberg for a long time. And we now have a small production of pre-series models of a DC-DC charger that works excellent. We have tested with most car brands and can charge 20 kilowatts and at the same time take out 20 kilowatts from the car battery. So it works very well. This we see mainly that will be used as support services. This is a large battery, often in the size order 8-10 times larger than a battery that is there on the garage or in the parking lot today, that could be used to support the network. But also backup with electricity. As I said, it is a powerful battery that already exists in these cars. It is also a very cost effective solution we have, where we reuse the technology and functionality that exists in our energy hub. And here are a few strengths with our electricity technology, that we see that we have already solved the difficult issues with Vehicle to Grid. So that about half of the complexity and half of the cost is already taken in the energy hub. So adding a pre-amp Vehicle to Grid charger will be much cheaper than buying a new one. We see a price of maybe half of making a complete stand alone Vehicle to Grid charger. So this is a great opportunity for us. Here, as I said, we are done and now we are waiting for the car companies to standardize their protocols. We think this should be able to be in place towards the end of the year and that it can be a form of launch and the volume of this next year. Financially, here we have a low sales in Q1. I have highlighted this in relation to the previous report when we were a bit into Q1 already. And it is a weak market that we have seen in Q1 and a weak sales on our side. And there I will remind you that we have a little reduction effect there with that installers have a stock and they buy from distributors who have a stock. We sell in our turn to distributors. So there is a little reduction effect for us there. In comparison with the previous year's Q1, it is down 65 percent. So it is historically a bad quarter. We see, however, a certain normalization of the market under Q2. So it starts to look a little brighter, but it is difficult to say when you are back on a normal level. We will not come back to a solar sales market that was the opposite of the first half of last year. But it will be a good market anyway. And the electric car sales will also come into action, but it is also unclear when it will come into action. But we still see certain lightings there. The stock market marginals. I have said since I came in a year ago that this is not good enough. Now if you compare with a year back, it looks good, but it is a bad comparison. So it is only to note that this is not where it should be. And I have said before that a company like us, of our type, should have a margin between 40 and 50 percent. So I am of course not satisfied with this. In this there are no spot-buy effects left. There will not be any historical spot-buy costs. Why has it gone down compared to the previous quarter? It depends on the component in the stock market marginals. The fixed costs have become unnaturally large now that we have had such a low turnover. So it is the low turnover that makes the fixed costs, such as stock-holding, get a bigger margin. So that is the explanation for going down compared to the previous quarter. But as I said, we are not satisfied with this stock market marginals. I will come back to this a little later, how I see the stock market marginals in the future. EBITDA, minus 17.8 in the quarter. It is better than the previous quarter. 10 million better, quite a lot better, I would say. And then you have to remember that we have been re-settled three times as much in the quarter. Why does this look better or worse? We see that the cost savings we talked about last year, correspondingly 50 million, if you look at the whole year 2024 compared to 2023. So they are starting to give effect now. We follow our plan there and are perhaps even a little ahead. It is the measures that are giving effect now. So it is pleasing that you can see it in the numbers too. The cash flow is negative, in large part due to the result. It is, however, significantly better compared to the two previous quarters. Then you should again remember that we have a low turnover here. But despite that, despite the low turnover, we improve the cash flow and that is pleasing. And here again, the cost savings are starting to give effect here too. Together with the fact that we have now taken down the inflow of finished products to a minimum. If you compare the key numbers a little over time, you can see the same here too. That it is a weak turnover. But still a little pleasing that we have an improvement compared to earlier on the result line and also on the cash flow line. So there it goes in the right direction. I would again emphasize that this is despite the low turnover. So there is something positive in that, if you put the light out of the orange box. If you look a little forward, it is the profitability. There I can now tick in the fourth box that I have had open since I started. And the cost reduction is at about 50. We see them in our hands now, so it is a check on that. What I have also talked about earlier in the quarter report is that we can make a part of the profitability on the gross margin. But if we are to get to where we are supposed to be, then we have to get the new fully industrialized products in the market. The primary thing with these is that we have looked over the entire production phase of these. And found a much more cost effective way to produce these. We have also seen a little change in design internally and in the production improvements. We see a significantly lower production cost, which is the big difference with these products. And that has a big impact on profitability, the gross margin and profitability. So that is the last thing I hope to tick in here today. And then I think we will be on a profitability that we can be satisfied with. Growth then. It is about us working to develop our existing distribution between our existing partners. That is still the backbone of our business. But we also work with finding new commercial partners. I think that ERA is the perfect partner for us. Very strong on the market and sales. A strong installation chain and installation capacity. And they are on the market where we are not today. To be able to be a technical supplier to ERA. ERA was a great recognition and a great opportunity for us. And that will contribute to our European launch. Where we are currently, as you know, in Holland. So it is the north and Holland we are in today. Then it is also about, as I have talked about all the time, that we must develop as a company. Both our functions and our capacity to be able to handle it with growth. And to go out into new countries. I said in the previous report that we are ready to take the step. I have great respect for going into new countries. And you have to be stable in the ground to get through it. And now I feel that we are stable enough. We can of course be better than everyone else, but we are at a good enough level to dare to take this step. Then we continue with dual source production. Where we feel that we should be prepared to handle such a disaster. We were not really ready for that in late 2022 when the solar boom started. Now we should be better equipped for when the market is normalized in Sweden. And at the same time we are entering several European markets. We have learned and we will be prepared. Dual source production is an important step. Innovation. Of course everything should result in the goal of getting a sustainable growth. But the driving force for us is something we will never lose. We are known for being innovative and we have built our business on innovation. And we will continue to do so. We continue to develop our modularity. So that we can easily handle a product portfolio. And can meet many different customer needs. This is a key. It is a much more complex business to have a large product portfolio. Where every product is super-niche towards a small segment. That we can build on the effect in steps. From customer needs. That we can build on functionality that I have talked about. It is an important thing for us. And this is what we are refining. And build on our Lego-thought. That we can build blocks above and beside. To get a better solution for the customer. So that the customer can grow. We are also working on our open APIs. We are developing faster APIs for support services. We are working on our open APIs. For example, we want to connect to important partners. That is a good example. And we want to continue to expand our ecosystem. Again, I can take this as an example. Where we now get a connection to heat pumps. And where I see that our -to-grid is a component that expands the ecosystem. And makes our part in the ecosystem more valuable for partners and customers. And then we build on the same technology that we have in the base. Which makes -to-grid can be made at half the cost. And not to forget that we have a unique option. Where we can upgrade softwares over the air. So that we can automatically shoot out new, updated softwares to systems in operation. And an example is that a system that we took into operation from customers seven years ago. They are participating in the support service market today, in 2024. So it is a strength that our solution can be part of the development and time. Because in 2017, when we put in this particular facility, no one knew what support services were. And -to-grid was not even on the map. Now this facility is running support services. And will be able to run -to-grid when it is launched. So this innovative touch is important to us. So we keep that in mind. I'll stop there and open up

for questions. Just to remind you that you can ask your questions directly in the chat. We have received one question here. It is that Grozister, like Rexel, has lowered their net price on Energy Hub 14 with about minus 30 percent. Are it you or them who have lowered the price?

I do not want to comment on that. It is the Grozister who put the price of our partners there. And how we... I do not want to comment on that. It is a price that is set free in the market and that will vary over time.

The stock price is 134 million. Compared to 127 million on December 31. Can you develop further that the stock price does not decrease?

Yes, we have our installers and distributors who have, just like us and all our colleagues, saw that there would be a boom even during the autumn last year. So everyone ordered and bought quite large stocks. Then the boom was extended and it has gone down as we have talked about. We have known that we would not sell so much of our core products. We have now had a focus on selling batteries to our existing system and to the system that is on the shelf at our partners. So the sales from our perspective have been batteries. Because that is nothing that we keep on the shelf. But when we get an order from our customers, the Grozisters, then we take it home and ship it. So our turnover has been mainly almost exclusive batteries. And battery components under Q1. Which then makes it clear that our core products that were in stock at the beginning of Q1, they are mostly still there and a small inflow of more. But the main turnover is batteries.

Last you mentioned costs of 150 million SEK that would be pure income in 2024. When will they come?

Yes, we talked a little more about how it looked with liquidity and how we would get the cash to be enough. That was a question I got then. And then it points out that we have a warehouse with finished products that is now about 130 million. And with a sales margin of 150 million SEK, and this is the goods that have already been manufactured by our partners, that we have already paid for and that are already on our shelves to sell. So when they are sold to our distributors, it will generate cash flow straight into our boxes. So I think you understand it correctly, it was probably those 150 million SEK that we talked about. And there we see that there will be a large battery sales under Q2. But we also see that under Q2 there are signals that show that it will start to move on the shelves. We see that the sales will start from our core products under Q2. But exactly when that timing is, it depends a lot on when the market has been normalized. And it's hard for me, I think it's hard for most companies, to point out which quarter, so you can say that the market is normalized again. But it is at least going in the right direction. It's a current layer with very good products, so I see that when the market starts, I

will sell them. You recently mentioned customer orders

that were transferred from Q4 2023 to Q1 2024. Has that changed?

I don't remember that question.

If I interpret it correctly, it was that in Q4 we had quite high customer orders because we sold a lot in December, and it was not paid. If

I interpret the question correctly. Then I have the answer. I hope we have actually got a question via

email. I think we have actually dealt with it. When do you think the market will recover? As I

said, it's hard to say. It will recover. This is a market where everything speaks for the fact that it will continue to grow. Then the economy is a bit weak now, the electricity price is a bit low, even if it is on the way up. But we all know that the question will come, but exactly when? It depends on central banks, electricity prices, if it is blowing so much. The water magazines are empty, full. The nuclear power plant that stops, does not stop. It's just very hard to say.

But after that it will come.

You recently mentioned that you had many patent breaches. How do you evaluate your patent when you do not meet the requirements?

We have managed to defend ourselves so far. I see that we have strong patents and we have no really malicious companies out there. We have a bit of a run-up and we have managed to defend ourselves and to avoid the threats. I see it more as a quid pro quo that we have good patents, but also that they are strong patents that make us able to defend ourselves. Attractive and strong patents. So far it feels manageable and mostly positive.

How do you evaluate the threats? Do you run processes?

No, no processes. So far we are just highlighting that there is a patent and that it is enough.

So no state processes.

How fast do you calculate that you can connect more users who are activated for support services? For example in larger systems and new power stations, the supply of customers.

Yes, I think we are starting to get the flow in SC3 on the supply of customers we have. We are following up on the portfolio and are increasing with more portfolios. At the same time we are entering SC4 with portfolios. I feel that we are starting to get the flow faster and faster now. So it will be in the near future. We hope that we will be able to work on this. At the same time it is a simpler process for us when we are already in the process of getting started in SC4. I have calculated that we will submit the application within a few weeks and that it will not take too long for SWK to approve this. I hope that we will be able to get started in SC4 before the summer and start to receive customers and

put them in the portfolio. It seems

that all questions were answered. I can also mention that the recording of this webcast will be available on our website within about an hour.

Good. Then I thank you for today and wish you a nice day. Thank you. Bye.