Ads-Tec Energy Public Ltd Co Q4 FY2023 Earnings Call

Hi, everyone. Welcome to ADS-TEC Energy’s Full Year 2023 Earnings Call. A recording of today’s call and a presentation can be accessed shortly after it concludes from the Investors section of our website. Joining me on today’s call are Thomas Speidel, Founder and CEO of ADS-TEC Energy and Wolfgang Breme, CFO of ADS-TEC Energy. Today, we will be discussing ADS-TEC’s latest financial results for the full-year 2023, guidance for the 2024 year and conclude with a Q&A session. During the call, management will be making forward-looking statements regarding full-year 2024 and onwards and the outlook for expected growth in investment initiatives. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations, including among other risks and uncertainties, economic turmoil and political instability, the ongoing military action in Ukraine, conflict between Israel and Hamas and other geopolitical challenges. These forward-looking statements apply as of today, and we undertake no obligations to update these statements after the call. For a more detailed description of factors that could cause actual results to differ, please refer to the Risk Factors section of our annual report on Form 20-F previously filed with the SEC and posted to the Investors section of our website. Also, please note that financial measures presented on this call adhere to IFRS and non-IFRS. We use non-IFRS measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the IFRS measures that we provide. A reconciliation of these non-IFRS measures to comparable IFRS measures is included in the earnings release and investor presentation. With that, I will turn the call over to Thomas Speidel, ADS-TEC’s Founder and CEO. Thomas?

Yes. Can you hear me? Okay. So welcome, ladies and gentlemen, dear investors. Thank you for taking your time and joining our earnings call on the 30th of April, 2024. So, please move to the slide with the agenda. We want to go through the year. So, it’s a review of the full-year 2023 and an outlook to 2024. Let me say something about the current market trends and also the challenges we see. Then again, about the ADS-TEC strategy and our USPs. And, important for the call here also the financial highlights and then with that, I will hand it over to our CFO, Wolfgang. Next slide please. So, let’s start with a review of the full-year 2023 and the outlook 2024. Next slide, please. Let’s look at the review for the full-year 2023. So, as said last year, even in a not very easy environment, we met our projection of more than EUR 100 million revenue in 2023. So, we achieved the targets communicated to the market last year. We also achieved that the adjusted EBITDA was positive in the last quarter of 2023. We confirm that for this year 2024, we have our target revenue-wise of EUR 200 million and above. We are very proud that we reached these targets with our team and we see that the increasing number of clients and blue-chip partners and clients will lead to the growth and to the targets we have communicated and we are working for. Some numbers, we have over 1500 battery-buffered charging points installed. We don’t know any other company having similar or even close to the amount of battery-buffered charging points installed. In total, we have shipped and produced more than 2,500 charging points so far. And, a very important point is that the operation, the field experience is even better than expected. So, we hear from customers that expectations are met or even exceeded in terms of utilization. We have sites providing more than a megawatt hour of electricity a day, and we saw more than seven megawatt hours a week delivered by one ChargeBox to EV drivers on a power-limited grid with no grid expansion. So, that is close to the performance of a charge park because utilization then is more than 20 sites a day. We keep focusing on our core competencies and we also want and work for growth with many partners in different segments and markets. Next page please. Let’s dig a little deeper into the market trends and the challenges we face right now. Next slide, please. So, you should see now the assessing current market trends and challenges. A topic which is on the news every day is the grid expansion, whether we are in the U.S. or in Europe, everywhere grid expansion is one of the hottest topics, because the transition to an all-electric world needs more power and transportation capacity. That’s the point where we are focusing on flexibilities. We compile here some messages from some recent news. There is consensus that grid expansion is an issue. It gives us confidence that flexibility and especially intelligent management of flexibility is necessary for peak shaving, for example, when we supercharge a car in minutes instead of hours. We see some numbers that are important to understand, because all the costs over the next years must be distributed to us as the end customer. From our point of view, power will become more expensive in the future because investments must be repaid. We see EUR 300 billion for transmission grids and power lines and also EUR 150 billion for regional distribution grids. These are very high numbers and we also know that the time to get it done in many cases is delayed due to applications and other restrictions. Last but not least, also the acceptance of people living close to transmission lines is a hurdle. Next slide, please. Despite the challenges and the dynamic market development we see in the news, some journalists write that EVs are declining while others say they will rebound. We all know that it’s a temporary view. But in the long run, EVs will be more efficient. We also see that management of flexibilities and restrictions in the grid will lead to bottlenecks in the grid expansion. Furthermore, the driving factors for power demand are not only coming from chargers but also from heat pumps and photovoltaic systems. In both directions, we have a need to expand the grid, and we see here the EV forecast is an exponential curve in the EU and the U.S. Our battery-buffered supercharger solutions are welcome and help to solve these issues. Next slide, please. These numbers from P3 Group give us an estimation of what’s coming in front of us. In many locations, EV acceptance is rapidly growing because people who drive an EV find charging capacity to be convenient and cheaper in terms of total cost of ownership. In the Nordics, we have already achieved beyond 90% adoption. Fleets and company cars are transitioning to electric because it’s just cheaper, benefiting not only the driver but also companies through tax incentives and opportunities to generate subsidized electricity. An increasing number of charging points is essential. As we see population growth, people expect to charge everywhere. Companies moving their fleet to EVs find it inconvenient when traveling. Charging is becoming integral to infrastructure, expected in workplaces, residential areas, and more. Lastly, CO2 reduction plans led by the European Union will continue to drive companies to minimize CO2 emissions and meet credits and ratings with successful fleet management. Next page, please. As I just mentioned, there are discussions about going back to combustion engines, with some companies seeing declining sales, like Tesla’s last quarter. However, this is a standard part of the huge transition we are undergoing. The ability of manufacturers to reduce prices while maintaining profitability, as seen with Tesla decreasing profits from 17% to 10%, ensures viability. The future of vehicles will continue to expand as they become more electric and efficient. The registration numbers in China, Europe, and the U.S. indicate growth trends. In China, pure battery EVs growth is strong with new EV registrations and market shares on the rise. Europe’s growth remains steady, with Germany seeing slight decreases but still a solid future outlook. Challenges also include infrastructure needs for an expanding EV population. Next page, please. Regarding our expected need for charging capacity, data from P3 Group forecasts tripling of high-power chargers by 2027-2028. Volatile market conditions factor into growth opportunities for ADS-TEC. Compliance with various regulations continues to pose challenges, but our role becomes a supportive partner facilitating expansion in this evolving market. Next slide, please. Focusing on our unique selling propositions is key. We maintain clarity in our market position by providing technology and services exclusively to power companies rather than competing with them. This strategy has led to onboarding numerous blue-chip clients. We are active in over 15 countries with strong management teams in place. In the U.S., new developments like NACS require adaptations, and we’re carefully navigating these changes while pursuing opportunities on the ground. We aim for decentralized locations to continue our expansion strategy. We understand the importance of local partnerships and are committed to growing our presence effectively. Next slide, please. We will maintain a strong emphasis on hardware control, developing in-house software to support our products and services. Our aim is optimizing total cost of ownership for our clients and creating multiple revenue opportunities through innovative solutions. Finally, as we approach a resilient infrastructure landscape amid geopolitical challenges, we believe our services will be more valuable than ever. I will hand it over to Wolfgang now to discuss financial numbers.

Yes. Next slide, please. So, that shows the development of the revenues. I will be relatively short to open the line for questions as soon as possible. So, what we see on this slide is, as you know, we published our rough financials in February. We achieved what we announced, delivering EUR 107.4 million in revenues. Our guidance for this year is to reiterate the target of approximately doubling our revenues to EUR 200 million. Last year, the adjusted EBITDA was around minus EUR 16.6 million as announced in February. More interesting is that the EBITDA for Q4, where we had EUR 50 million in revenues, the pro forma adjusted EBITDA in Q4 amounted to positive EUR 4.6 million, which demonstrates that the company, for the first time after the de-SPAC and IPO, delivered a positive result on a pro forma EBITDA basis. Next slide, please. Let me summarize the highlights of the presentation. We delivered, more than 1,500 charging points installed—2,500 battery-buffered DCFC charging points installed in total. Our major selling products last year included ChargeBox and ChargePost, which have proven through real operating data from customers. So, those products are high-performing, meeting customer demands. We are benefiting from over 10 years of product development and entering the market with significant numbers. The revenue target achieved was EUR 107.4 million, and we confirm the revenue target of EUR 200 million for this year. We increased our customer base, which is essential. We're seeing growth from new blue-chip clients alongside established smaller startups. In North America, we have grown revenues by more than 5 times. Margins are positive, targeting a positive adjusted EBITDA for the fiscal year, driven by high-value add for clients. Service revenue growth is also important as our products gain market traction, alongside the services and contracts offered, ensuring high up-times for customers. We expect continued volume impacts as revenues and the number of products shipped expand. With that, I have a very short finance presentation, and I give back to the operator, please.

We will now start the question-and-answer session. The first question today comes from Matt Summerville with D.A. Davidson. Please go ahead.

Hi there. You have Canyon Hayes on for Matt Summerville. I just wanted to check-in on the 2024 guidance with respect to the first half and second half revenue and EBITDA cadence. Similarly, I was curious on your unit volume assumptions baked into that guide and similarly geography.

Hi, Matt. Good morning to you. So, first of all, as mentioned in the press release, we expect a stronger second half of the year, so a back-end loaded fiscal year in terms of revenue. We do not want to disclose exact numbers of products shipped into the market. However, if we assume EUR 200 million in revenues, it’s reasonable to expect the equivalent of last year’s numbers multiplied by two. Also, we do not anticipate margin decreases. We are expanding with the market without reducing prices, positioning well in a growing sector while expecting to double the output in our charging products.

Great, thank you. And, do you have any early feedback or any read on the ChargePost demand in the U.S.? Similarly, are there any existing supply chain or manufacturing challenges as of late?

Yes, we’ve discussed the ChargePost, and we plan to introduce it by 2025. Our development changes due to NACS are ongoing, along with UL certification. We expect to announce the ChargePost in the U.S. at the exhibition in Q1 2025.

Any further questions, Matt?

Thanks for taking the question. Let me start with a similar question to the previous analyst. When we think about EBITDA positive for the year as a whole, should we assume negative EBITDA in the first half, positive in the second half? Is that a fair generalization?

It’s a generalization. Of course, it depends on types of customers and products sold. Generally, in the second half, considering Q4 numbers, we expect higher revenues to lead to a stronger result. We are not expecting the negative EBITDA trends seen in previous years.

Okay. As you look to build a significant U.S. business, will that include establishing a manufacturing operation in the United States?

We are progressing with our plans for the U.S. In Auburn, we have initiated battery assembly. The changes in the market due to NACS have caused delays in the planned introduction of the ChargePost here, pending certification of our supplier’s cables. The Inflation Reduction Act and NEVI funding have created uncertainty, complicating discussions with potential customers about subsidies and funding applications. Our target is to establish a local strategy over time, starting with local suppliers as we prepare our supply chain for North America.

Last question from my end. What was the percentage of revenue from Germany in 2023? And how will that change this year?

Germany’s contribution went down slightly to around 80% for Europe. The U.S. grew by 5x, now 5% overall. We expect that Europe will develop more rapidly in EV adoption, with growth occurring in other countries like the Nordics and France. The trend will likely shift toward stronger U.S. contributions in the future.

For example, Kia installed a ChargeBox near our Auburn facility. Positive reception indicates strong potential for this decentralized model of supercharging.

Good morning, and thank you for taking my questions or I should say good afternoon.

Good morning, hi.

I was hoping that you might be able to talk a little bit more about your backlog and your business pipeline. Do you maybe have an updated number for us on the backlog today, the committed backlog at April 30? And, can you maybe characterize for us, you saw five-fold growth in the United States, those were early units and many of those customers who are taking their first units last year. Are you likely to see similar strong growth in the U.S. based on what you have in backlog? And, then is the NEVI funding starting to support an accelerating outlook for you in the United States and business pipeline, anything quantitative that you could share would be really useful? Thank you.

Hi, Craig, how are you? Let me start with the backlog. We will disclose the April backlog with our Q1 numbers soon, transitioning to quarterly reporting this year. As of December 31, our backlog stood at EUR 80 million, sufficient to cover much of last year. The pipeline is larger than the backlog, with a high-probability figure of around EUR 100 million. We start the year with a solid backlog but expect back-end loading as seen previously.

Regarding NEVI funding, companies that will benefit are those who do installations, including utility firms. As a platform partner, it’s crucial for ADS-TEC to provide additional value. Securing contracts with our technology is key. We engage closely with customers, assisting with their NEVI filing and funding needs while offering innovative solutions. You may notice different regulations impacting access to funding, and we aim to be the partner of choice based on service and reliability.

This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

Yes. Again, thank you for supporting ADS-TEC for your interest in what we do. Thank you for all support in very volatile times. I’m proud of what our team has achieved over the last years and especially that we closed 2023 on a level communicated to you as an investor, to the market, to analysts. With that, I wish you a very nice and pleasant day. Thanks again.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.