Wallbox N.V. Q2 FY2023 Earnings Call

Hello, everyone, and welcome to Wallbox's Second Quarter 2023 Earnings Conference Call and Webcast. My name is Nadia, and I will be your operator for today's call. At this time, all participants' lines have been set to listen-only mode to avoid background noise. Following the speakers' remarks, there will be a question-and-answer session. I would now like to hand the call over to Matt Tractenberg, Wallbox's Vice President of Investor Relations. Please go ahead.

Thank you and good morning, and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss Wallbox's second quarter 2023 results. This event is being broadcasted over the web and can be accessed from the Investors section of our website at investors.wallbox.com. I'm joined today by Enric Asuncion, Wallbox's CEO; Jordi Lainz, our CFO. Earlier today, we issued our press release announcing results from the second quarter ended June 30th, 2023, which can also be found on our website. Before we begin, I'd like to remind everyone that certain statements made on today's call are forward-looking and may be subject to risks and uncertainties relating to future events and/or the future financial performance of the company. Actual results could differ materially from those anticipated. The risk factors that may affect results are detailed in the company's most recent public filings with the US Securities and Exchange Commission, including the Post-Effective Amendment No. 3 to our Registration Statement on Form 20-F filed on March 31st, 2023, which can be found on our website at investors.wallbox.com and on the SEC website at www.sec.gov. We will be presenting unaudited financial statements in IFRS format that reflect management's best assessment of actual results. Also, please note that we use certain non-IFRS financial measures on this call, and reconciliations of these measures are included in the presentation posted on the Investors section of our website. Also, a copy of these prepared remarks can be obtained from the Investor Relations website under the Quarterly Results section, so you can more easily follow along with us today. So, with that out of the way, I'll turn it over to Enric.

Thank you, Matt, and thanks everyone for joining us today. In addition to reviewing highlights from the second quarter 2023, we’ll talk a bit about how the current EV market is evolving and how we’re effectively competing. I will also provide an update on some key operational initiatives including our cost reduction program, inventory management, and new product launches. Jordi will then offer additional detail on our quarterly performance and provide some insight on our balance sheet. Finally, I’ll return to discuss our current market outlook and how it impacts our results for the remainder of the year. We will end by taking questions from our covering research analysts, so let's get started. The first quarter finished below our expected range, at €33 million. This includes an adjustment of €1.8 million for rebates and returns. When adjusting for those one-time costs, revenue in the quarter was approximately €35 million, relatively flat on a sequential basis. As we’ve said this year, a large inventory build occurred within our distribution partners in both Q2 and Q3 last year in anticipation of stronger European EV deliveries in 2022, which ultimately did not play out as planned. This creates difficult comps, both in revenue and unit volumes, on a year-over-year basis for both Q2 and Q3 this year. However, when we dig into the data and examine the number of AC chargers being currently activated by installers or end customers, we see encouraging signs of solid demand and growth in line or in excess of the market, depending on the region. We continue to believe that the inventory within those channels is approaching a healthy level, and believe we will see less of a difference between sell-in and sell-out in the second half of the year. As we look at the market more broadly, we see pockets of both strength and softness. This is always the case but the amount of noise this spring has been noticeable. The US and our DC portfolio are both doing exceptionally well and both have meaningful new opportunities as we enter the back half of the year. The EnergyStar version of Pulsar Plus is shipping, and the team is aggressively pursuing new projects. However, general macro uncertainty, when paired with higher interest rates, which increase the financing cost of a new vehicle, have put downward pressure on EV demand in some parts of the world. While global EV demand remains strong relative to ICE vehicles, in some countries, when combined with the timing of subsidy programs, that growth can appear sporadic, leading to periods of hypergrowth and stalls. We have seen news from OEMs regarding building inventory or adjustment of production forecasts, but we remain confident that the shift to EVs will continue for the coming years and that we are in an enviable position to enable that transition. One contributing factor to that adoption curve is the availability of public charging infrastructure. You’ve likely seen mention of both Ford and General Motors adopting the North American Charging Standard, or NACS. You’ve also likely seen confusion about what it means for network operators or hardware vendors like Wallbox, so I wanted to offer some clarity to everyone. First and foremost, our goal has always been to offer the highest quality, innovative EV charging technology and remain compatible with all standards, no matter the make or model, including Tesla and NACS. If our customers, CPOs, utilities, etc., want a DC fast charger with a NACS connector, we are happy to provide that. But it clearly illustrates how rapidly both the regulatory landscape and consumer preferences are evolving. Our unique vertically integrated manufacturing model positions us well to navigate these changes and adapt. Remember, we operate in most countries around the world, and changes occur regularly, sometimes without much notice. These rapid changes are not new for us; we’ve been here before and have a proven process in place to pivot quickly. And finally indirectly, if potential EV buyers feel more confident in the charging infrastructure and hence are willing to purchase sooner, then we, and the entire industry, will benefit. Net-net, we are happy to support any decision our customers make and are well-positioned to integrate NACS into our offering. Another encouraging development announced last week is that of the North American EV Charging Network Alliance created by BMW, GM, Honda, Hyundai, Kia, Mercedes-Benz, and Stellantis. The purchase, installation, and management of 30,000 ultra-fast chargers by this group highlights the commitment to EV adoption and the need for more robust infrastructure. This is great news for hardware vendors like us who are not a CPO. We don't compete with our customers. We have great relationships with most of these companies, and look forward to discussing how well COIL, Supernova, and Hypernova will meet their needs. Our ability to offer Open Charge Point Protocol, or OCPP products, which allow our customers to deploy custom network management applications is a differentiation and valuable tool in our conversations. We’ve also discussed our global footprint and comprehensive portfolio frequently with you, and it is more important today than it ever has been. Air pockets within a region, market segment, or product category always have an impact on financial performance. But as we continue to grow and expand, that will lessen. Two examples I want to share are the US and DC fast charging. The US grew at 67% year over year, faster than the overall market. Now, representing 20% of our sales, the U.S. balanced out markets that saw more tepid growth, including Benelux and the Nordics. Similarly, DC fast charging delivered strong results in the second quarter, growing at 61% sequentially, now at 20% of our revenue mix. Customer feedback on our Supernova 150 is exceeding our expectations, and that leads us to be more bullish on Supernova 180 in North America. I’m excited to finalize certification and get it into our customers' hands. It's going to be a very important product. Our results were driven by solid performance in the U.S., growing revenue by 67% from the year-ago period. We are encouraged by the momentum with large strategic partners, including retailers, OEMs, and utilities. Several of these customers are placing large orders, in excess of $10 million worth of product, both DC and AC, some of which has already begun delivery. Pulsar Plus with EnergyStar has seen very strong uptake and we expect it to allow us into projects that have not been opened historically. We’ve already been included in utility programs like Sonoma Clean Power, which is deploying demand response technologies to better balance generation with customer needs. Supernova 180 certification is progressing well, and we continue to aim for the first deliveries before year-end. We announced in June the addition of Erik Fogelberg to the Wallbox team. Erik will be responsible for our North American business and brings a wealth of experience and industry relationships from a long, successful career within EV charging, OEM, and the solar space. We’re excited to have him on the team. In Europe, when we examine the sell-through performance of our distribution, we saw unit growth of 18% from the year-ago period. On a sell-in basis, revenue declined by 25%, driven by that large channel inventory build this time last year. We believe revenue will follow a more similar path to distributor unit growth moving forward. North America contributed 21% of total revenue, a sales mix increase of eight percentage points over the prior year period. Europe represents 72% of the sales mix. Asia Pacific provided 6% of consolidated revenues in Q2, and Latin America was approximately 1%. We expect to see fluctuations in geographic mix as regional subsidies are turned on and off. The NEVI program continues to move ahead, and we expect more states to approve plans in the second half of the year, accelerating in the first half of 2024. The large construction project managers will then select the hardware and services vendors, which is where we play. We hope to have some visibility into projects later this year. Our Supernova and Hypernova platforms are very well-positioned, are achieving very high reliability rates, and qualify for all subsidies. I’m confident we’ll be a strong competitor. You may have seen some reports in the media last week regarding new legislation which includes specific EV charging targets that the EU must meet by the end of 2025 and 2030, of 1 million and 3 million units respectively. It requires the building of fast charging stations of at least 150 kilowatts every 60 kilometers along the EU’s main transport corridors. It looks and feels very similar to the US NEVI program. The introduction of these stations will likely have manufacturing provisions that favor local vendors, which Wallbox is. We’re encouraged by this commitment and believe it reinforces our positive long-term outlook of the business opportunity we see ahead. Similar legislation in the UK presents an equally attractive opportunity for our DC offering. DC fast charging is now contributing 20% of total revenue, up from only 2% last year, a very strong performance. Our AC charging portfolio contributed 63% of our total revenue in the period, down from 96% this time last year. That drastic mix shift is an exciting testament to the transformation we are going through, not only in product but in software and services, which now account for 17% of total revenue. We believe this shift will continue and over the longer term, will achieve balance between our AC and DC mix. And finally, we sold almost 40,000 chargers in the quarter. As expected, AC volumes were impacted by the continued channel inventory adjustments within our European distribution network, but that is transitory in nature. For each of the last three quarters, as measured by activations, our partners installed more chargers than ever before. Remember, sell-out, or sell-through provides a more accurate view of end demand by removing the working capital preferences of thousands of distributors and their view of economic noise. Looking at the data, we see that the net result, sell-in less sell-out in Q1 of 2022 was a positive 4,400. Said another way 4,400 more chargers were sold into the channel than they sold to end customers, and so they built additional inventory. Q2 was 17,800, and Q3 was 20,100. In Q4 2022, sell-out then exceeded sell-in, or a reduction of inventory began to occur. That Q4 2022 figure was negative 12,700. Q1 was negative 9,200, and the most recent quarter was negative 19,000. Essentially, over the past six quarters, our distribution channel has sold almost exactly what we have delivered them on a cumulative basis. 308,000 units sold into the channel versus 306,000 units sold out of the channel. This is why we believe they have reached appropriate levels. For this reason, I'm encouraged by what we see for the second half of the year and look forward to sharing more as we make our way through the quarter. Shifting the discussion to operational metrics, first with gross margin. The operating leverage our gross margin profile provides, which will ultimately allow us to achieve profitability in the coming quarters, is very important to us and is a critical metric we manage. Gross margin during the quarter came in lower than anticipated, largely driven by higher revenue contribution from DC charging, and a component supplier issue that Jordi will discuss later. Excluding these items, gross margins would have ended in the expected range. I’m pleased to see that inventory continued to decline, and ended down €11 million from the prior quarter. We expect inventories to continue to decline as we move through the second half of 2023. This is a key priority for us this year. Cash operating costs, which are broken into employee benefits, or personnel-related costs, and OpEx, have continued to decline this year as expected. Using the fourth quarter 2022 cash operating costs of €50 million as our jumping-off point, we reduced our cash operating costs by €9.8 million in Q1 and an additional €12.3 million in Q2. This €22.1 million reduction puts us in a good position to achieve the full-year €50 million reduction in 2023 that we’ve committed to. We believe there are additional opportunities to reduce costs and will be proactive in going after it. And we also remain committed to achieving breakeven adjusted EBITDA as we exit the year. This will be done through disciplined cost control, personnel cost management, and improvement of gross margin through leverage and mix shift. We’ve spoken this year about large OEMs choosing Wallbox for their AC and DC charging needs. We’ve discussed a large US utility deploying our products and unlocking new subscription business models. We’ve announced new customers like Costco, BestBuy, and Walmart. We’ve also announced new products like Pulsar Pro and Orion, our new public AC solution for apartments, businesses, and fleets. Those products are expected later this year, and we expect them to contribute materially in 2024. We announced the addition of Costco to our customer list this quarter. Costco has almost 700 locations across the US and Canada and almost 125 million customers worldwide. We’re very proud of the trust they’ve placed in us and look forward to providing their members with exceptional products at a competitive price. This partnership is meaningful and will start to impact sales in the current quarter. Another commercial win I’d like to mention is our participation at Intersolar this spring. A very important industry event for our customers and partners, it was used to demonstrate our technological leadership in bidirectional charging. We showed how Quasar was able to effectively discharge a SEAT Cupra EV, part of Volkswagen Group. While we’ve been discussing bidirectional charging for some time now, putting it into action is not easily done for most competitors. This important milestone shows how truly far out in front we are. For most, discharging a CCS vehicle would take the better part of a day to configure; something we’re able to do in a few short minutes. The head start we have allows us to have a seat at the table with governments, regulators, OEMs, utilities, and major names across the ecosystem. This is why Wallbox was a signatory to the US Department of Energy’s Vehicle to Everything MOU last month. It's exciting to finally see this technology come to market, and I believe 2024 will be a major turning point.

Thank you, Enric. Good morning and good afternoon to everyone. Our second quarter results came in lighter than expected, driven by channel inventory adjustments, some regional softness, and the timing of several large orders. Some one-time adjustments to gross margin and sales, including rebates and replacement costs, negatively impacted gross margins in the quarter but are temporary in nature. I’ll provide more detail on these results, discuss some financing activities we’ve announced, and share some thoughts on the remainder of the year. For the second quarter 2023, revenue was €33.0 million and €34.8 million after adding back the one-time rebates and returns from prior periods. The seasonal pattern did not play out as anticipated, mainly because many European distributors continued to reduce AC inventory to reach more appropriate levels. Our AC growth, on a sell-through basis, continues to be in line or in excess of EV deliveries. Our DC growth, albeit off a small base, is exceptional and gives us optimism for stronger sales from the business unit than thought earlier. In general, the commercial opportunities we see ahead are big and meaningful. It will allow us to scale the business and generate positive adjusted EBITDA in the near term and positive free cash flow in the medium term. However, we operate in an early and evolving market and are impacted by slight changes within the demand environment. Gross margin for the quarter was 30%. During the quarter, performance issues with a specific supplier’s component were brought to our attention. Those chargers were identified and brought back. The return and warranty costs of those actions negatively impacted our gross margin in the quarter by 600 basis points. Excluding this impact, gross margin would have been 36%. We believe we have this remedied and do not expect a material impact in future quarters. The period was also impacted by a product mix of higher DC sales, some of which is still Supernova 60 rather than Supernova 150. As we look out over the remainder of the year and move past some of these one-time adjustments, we believe we will see gradual improvement, ending the year back in the mid to high-30s. Our focus this year is on reducing inventories, introducing new products, and cutting costs. Some of these have a direct temporary impact on our margins, but will benefit us in the longer term. We were able to reduce both employee-related cash expenses and OpEx. The run rate is now a €12.3 million reduction over Q4 2022. We do see additional opportunities to reduce costs further, and will aggressively go after them depending on the demand environment in the third and fourth quarter. We expect to meet our previous commitment to you of a €50 million reduction in cash costs from the end of 2022, for both personnel and OpEx on a combined basis. Operating loss in the quarter was €31 million, a 15% improvement over the previous quarterly loss of €36.6 million. Adjusted EBITDA loss for the period was €21.2 million, a slight improvement on a sequential basis. We remain extremely focused on costs and conserving cash, and have seen tangible benefits of those efforts. We’ve also improved our balance sheet in the quarter. In the second quarter, we completed a private placement of $48.6 million worth of class A shares to previous investors and insiders. Our ATM program, which we announced in the spring, brought in $7.8 million through the sale of 2.6 million shares within the quarter. There is $92.2 million remaining under the authorization. That program will be used in a patient and thoughtful manner, rather than providing quick access to large sums. We ended the period with €111 million of cash and equivalents and €70 million of long-term debt. CapEx was again very light, with approximately €4.5 million spent on Property, Plant, and Equipment in the period. We expect an additional €10 million to €12 million of PP&E spend in the second half of 2023, less than the €26 million previously planned. Full-time headcount increased slightly on a quarter-over-quarter basis, driven by some additions at the Arlington factory to prepare for the demand we see there going forward. Globally, we anticipate this headcount coming down as we move our way through the year.

With that, I will now turn it back to Enric to provide you with some closing commentary. Thanks, Jordi. The long-term fundamentals of the markets we operate in continue to be overwhelmingly positive. The topic of EVs is on the front page of most daily media outlets. It is a key strategic initiative by names like GM, Ford, Volkswagen, Nissan, and Stellantis. Meaningful investment is taking place and huge volume commitments have been made. But these big, meaningful disruptions do not move in a controlled manner and it is still early days. Wallbox is a leading global brand with an exceptional portfolio in an enviable position. Our focus today is on achieving profitability, introducing new products, and improving key operational efficiency metrics regarding inventory and cash. Balancing the short-term needs of the business while strengthening our long-term competitive position is very important to us. To retain the flexibility to achieve our goals, we believe it's necessary to remove the restrictions that sometimes a public sales target might place on a company. This may result in sales occurring a quarter later than originally planned, and we are comfortable with that tradeoff. Our commitment is that we’ll make the best decisions possible for the health of the business and take exceptional care of our customers. This includes taking the time to deliver the best products we can. That’s the right thing to do, and in the long run, shareholders will benefit. We will share key metrics with you regarding units, customers, production milestones, and partnerships, so you are better able to follow our successes. The pieces are falling into place for a very strong 2024 and 2025, from subsidies and CO2 targets that will drive a meaningful uptick in demand for EVs and charging infrastructure, both in Europe and the US. So we will use the remainder of 2023 to get in shape because we have very high expectations for 2024. Our new products will be in the market, our cost structure will be where it needs to be, and the economy may yet behave itself. But we need to focus on getting there and making the right decisions along the way. For this reason, we are not providing explicit financial guidance for the third quarter or full year at this time. We will revisit that decision as we look into 2024, but believe it's the right thing to do today. We will focus on reducing inventories, controlling costs, introducing new products, and achieving breakeven adjusted EBITDA in the fourth quarter of 2023 and on a full-year basis in 2024. What we can share with you about the rest of the year is this; revenue will increase sequentially in both the third and fourth quarters of 2023. We expect to grow our sales from DC fast charging by at least 300% from 2022. We will grow US revenue in excess of the market, expanding our share. And we will maintain or expand our market share in Europe, as measured by sell-through. In the longer term, we remain confident in the opportunity we see ahead and the exceptional business we’re building and believe we can achieve annual revenues in excess of €1 billion in the next four years. I’ll leave you with some constructive thoughts before we move on to Q&A. Our partners continue to install more chargers than we’ve ever seen, which is quickly bringing channel inventory to the right levels. We believe we’re close to that, yet remain conservative in our outlook. Second, we’ve made great progress on our cost reductions, and that operating leverage will pay off in the coming quarters as we achieve profitability. Third, we have a comfortable level of cash that will allow us to operate the business as needed. Fourth, the new partnerships with large global brands will begin to show in our financials in the second half of the year. Fifth, we’re making great progress in bringing new products to market this year and next. AC, DC, and software & service offerings that will expand our total addressable market and open new revenue streams. Finally, we have the production capacity and capabilities we need to deliver high-quality products at scale. With that, we’re ready to take questions from our analysts.

Welcome back everyone. To our analysts, we ask that you pose one question, with a follow-up if needed, then re-enter the queue if there’s more. This will allow each of you to ask your questions upfront, and we’ll get to as many additional questions as time allows. Nadia, I think you have some instructions for our analysts?

Welcome back everyone. To our analysts, we ask that you pose one question, with a follow-up if needed, then re-enter the queue if there’s more. This will allow each of you to ask your questions upfront, and we’ll get to as many additional questions as time allows. Nadia, I think you have some instructions for our analysts?

Great. Thank you, Nadia. So, our first question is from.

From George Gianarikas of Cannacord Genuity. George, please go ahead. Your line is open.

Hi, George.

Hi, everyone. Thank you for taking my question. So, just on the Q2 revenue, you did a nice job of explaining the inventory reductions that you've seen over the last couple of quarters, but it was still materially off of what you predicted as we entered the quarter a few months ago. So, I'm curious as to why you think that delta is there and what gives you confidence that we've finally reached the end of this inventory reduction?

Thank you, George. This is Enric. So, first of all, I think it's very important to say that the demand that our distributors are seeing in every region, including Europe, is higher than ever and that can be seen by the sell-out and the sell-through. For example, we have grown in sell-in and sell-out 67% in the US. We are seeing fast charging growing 700% on a year-over-year basis. And when we look at the European deliveries of our distributors, we are seeing growth of 18%. What happened basically is that this inventory reduction happened—almost all of that—during this quarter. Our distribution channel partners reduced 19,000 units, the number of chargers, which means around €12 million of gap between what they sell-out and we sell-in. So, with that revenue would have been recognized to us, we would be around €43 million to €45 million of revenue for this quarter. The positive thing here is that we are working very closely with our distributors. We are improving the way they manage their inventory and we have visibility on that from the last quarter. Now we have a very good understanding of what's going on in channel inventory. We can see that it's over, and they have gone through. There's some distributors that have more or less, but the metric channel inventory challenge is done. That's why we are confident for the second half of the year that we will see all this demand materializing into revenue for Wallbox.

Thank you. And as a follow-up, we’re all paying attention to the NEVI awards, which appear to have, even though they're delayed, just started. What gives you confidence as we enter 2024 that you'll be one of the chosen options from a hardware perspective?

Yes. So there's many things here. First of all, we are working with many of the OEMs here in Europe, and we partner with them to sell our Supernova 150 and 60 kilowatts. Essentially, the Supernova 180 we are now certifying in the US and expecting to deliver by the end of this year. It's a very similar product to the one we have in Europe, so we are building trust with these customers; many of them manufacturers, utility companies, and charge point operators that have global presence. They know the product and are testing it. Second, we are making a product which is the Supernova 180, which is perfectly positioned for NEVI. It achieves the power requirements. It meets the Build America requirements because we have the factory and we are building all these supply chains around the US. Finally, we are compatible with NACS. Now, as the North American charging standard becomes more demanded by other car manufacturers, it’s just a matter of changing a plug. We've been doing that in many countries and on many continents around the world. We have all the supply chain ready and prepared, and the operations and the products are prepared to make this kind of offering. We are building and working to ensure we can deliver fast chargers with the NACS connector. I think these three aspects are very compelling for our customers, and we're already in conversations to be part of that conversation.

Yes, George. I think in addition to the production capabilities and our ability to have that product certified and meet the requirements of the program, and of course, the reliability rates, our ability to develop and bring to market an exceptional product. We've been having conversations, really constructive dialogue with all the relevant parties for the last almost year and a half. So they know we're here, they know of our capabilities, they know that we have products that will be ready to slot into those projects, and we're going aggressively after those projects. So when the construction companies and the large project coordinators receive the sign-off from the states on funding those projects, they will then reach out to hardware vendors. We are ready for those conversations and excited to bring those products to market and get them into those projects.

Hi, thanks for taking my call. So just in terms of broader industry context, last week Ford made some comments regarding EV sales in the United States slowing, or rather slower than expected. How are you thinking about EV sales as you're contemplating EBITDA profitability in the back half of the year and profitability in 2024 and also your call it recent suspension of balance?

Yes, thank you, Brian. I think that we are in very different segments of our space, and we have to treat them differently. For example, fast charging is not really depending on EV sales, and this is an area of our business that last year was 2% of our business, and today it is 20% and growing, so we are seeing growth of 700% year over year. In this part of the business, what we are doing, is improving our gross margins; for example, the gross margin for fast charging improved by 10 percentage points versus the previous quarter. So that's one way we are driving profitability with this part of our business, which is actually growing very fast. The second is the U.S. Here too, we are increasing market share, and growing 67%, and also that is directly contributing to profitability. For the rest of the world and Europe especially, we are focusing on what we can control. The way we are doing that is by reducing costs, improving our gross margins, and the things we already commented during the call—the expected growth in the U.S., the DC fast charging growth, compensating the channel inventory we have in Europe. We can see Q4 already as break-even and continue with that optimization, and we also see profitability in Q4. So basically, yes, we see a slightly soft EV market, but we have a presence in multiple countries and segments that allow us to grow, achieve scale, and in the meantime, we are reducing costs and improving our operations to be profitable.

Brian, the only thing that I would add is that the EV market is still young and it's evolving, and what we see based on OEM is that they are working hard to find the sweet spot regarding price, and some consumers are sensitive to price. Ford said that the rollout of EVs was going to go slower than initially planned. A couple of days later, they mentioned there was a 6x demand increase once they cut the price of the Ford F-150 Lightning. So, I think we've seen a number of price adjustments by OEMs over the last couple of months. While there is some variability, we also believe over the longer term that the EV market in general is strongly positive and we're well positioned. We’re enthusiastic about it.

Excellent, thanks very much. And you've recently undergone some strategic changes to your marketing. Do you think perhaps you can give us a little bit of color on how that's going and how you expect it to impact margin through the back half?

Sorry, strategic changes to our marketing plan?

Yes, so good point. Thank you again, Brian, for bringing this up. Yes, I think Costco is the best example of this focus on retail. I want to be clear, this is a huge win for us. I want to congratulate the entire Wallbox team for bringing this home, as it is very, very meaningful to us. With almost 700 locations and 125 million members, it's a big deal. We are going to start seeing the revenues from the Costco deal during this quarter. We are quite excited and we will give you more details as the quarter progresses.

Yes. Hi, thanks for taking my question. Just wanted to understand if you could elaborate more on what would be your greatest risk for your EBITDA break-even? Is there any minimum revenue threshold that you guys are focusing on? What do you think might happen that might lead you not to reach the EBITDA break-even?

Yes, thank you, Abhi. Right now, all the cost reduction programs are performing well as expected, so I don't see a risk here. We continue to optimize our OpEx, and our personal costs. The key, as you're pointing out, is the revenue for the quarter. We are structuring the company such that with around €60 million to €70 million of revenue, we should achieve breakeven. That's what our cost reduction program is putting us at, so we are minimizing the risk in case revenue comes in a little lower than expected.

Sure, thanks. And then if you could elaborate a little bit more on like, you have been able to reduce the commissioning time for Supernova chargers, like drastically from eight hours to two hours, and now you're aiming for one hour. What exactly is the driver behind that? If you could elaborate a little bit more on how you have been able to reduce the time so drastically.

Yes, it has been a great achievement in terms of Supernova. We already installed several hundreds and sold more than a thousand. We are close to that hour now, and basically it has to do with the update process and the configuration process for the specific CPU. When the customer buys the charger, it has to point out to their specific backend, the product has to be—the software has to be updated, and there are some safety checks that need to occur. All these processes are being automated now. At the beginning, it required a lot of involvement from an engineer or technician to ensure this commission. Right now, it's becoming much more automated, and our goal is that it be 100% automatic in the following quarters. So that, you just connect it, it goes to our backend, downloads the configuration, and gets commissioned. It’s all about automation and the engineering time and product development that we have been doing.

Hey, good morning. Thanks for taking my question. Just first, on visibility for Q3 and Q4, can you talk about your level of visibility overall and then specifically for Supernova versus other chargers, which you have more visibility on? And then I have a follow-up. Thank you.

Yes, so obviously we have with Supernova a very high level of visibility, and almost all our forecasts for Supernova for the year have a name and an order number. So we are very confident on our Supernova sales for the year because we have six to nine months of order visibility. Customers place orders with installation dates, and we ensure it is delivered on that day. So for Supernova, we have great visibility. When it comes to AC chargers, these operate on 90-day cycles. Right now, we have visibility on what's happening this quarter. Obviously, we still have OEM deals that have a bit more visibility, but they're not as impactful as our distribution partners. The best way to gauge the visibility right now is by looking at the sell-in and sell-out, meaning how many chargers are our partners selling today. That gives us a good idea of what their orders will look like once inventory is gone. So I say we have full visibility for Supernova and visibility for AC chargers and full-year visibility for fast chargers.

Thank you. When I think about the new products that you guys are bringing to market, how much does that impact this year versus next year? Because I thought I remember that there was some impact this year, but it sounds like it's really 2024. Then how do we think about margin as new products come to the market as they ramp?

Yes. I think that's a good question, Ben, and that's one of the reasons that we're not providing explicit financial guidance because those products are meaningful and they are coming to market this year. We want to ensure that we bring them to market and release them when they're ready, right? The goal here is to provide the highest quality products to our customers and ensure that we retain their trust. Making sure that they are released when they're ready rather than before, I think is important to us. There will be a financial impact from those new products this year. It's just too early to say how much and when. I think the vast majority of that impact will be felt next year, especially as we start to get into some of the certifications with DC and North America and the new products, both Orion, which is our commercial product, and Pulsar Pro.

Yes, to add to what Matt said, it’s important that we launch this year Supernova 150 kilowatts, and this is a new product we launched this year, and it is already contributing to the 300% growth on DC fast charging. So new products are already contributing. Pro was launched a couple of weeks ago, Pulsar Pro, and we are already starting deliveries. But as Matt said, we expect the biggest impact for Pro, DC in the US, and Orion, which are our three new products, to mainly come in 2024.

Thanks. Good morning, everybody. So I was curious if you could just give us a sense, and we can think about this not necessarily just in the next quarter, but as we look at the back half of this year in 2024 and 2025, how do we think about the mix of fast versus home chargers? And how do you see the margin on fast charging evolving? I think it's dilutive right now, but how should we think about the interplay there between fast charging growth and margins and what that suggests for margins over the back half of this year and the next couple of years?

Yes. Hi, Stephen. Thank you for the question. So in one year, two years' time, AC and DC should be balanced. So we expect 40% of sales coming from AC chargers, 40% from DC, and around 20% from software and services, which include installations from COIL. Gross margins for AC, today we are seeing our most mature products with gross margins between 45% and 50%. We are aiming, as volume increases and platforms get more mature (hardware platforms), to be around this number for AC charging: 45%. For DC fast charging, as I said before, we have been able to increase our margin by 10 percentage points for fast charging. So we are already seeing for Supernova 150 kilowatts margins above 30%. Our goal in one year or in the next few quarters is to have margins around 38% to 40% in DC fast charging. So everything should be around 40% in a year. So I think there are different kinds of customers. Hypernova is a faster charger. Hypernova is a 400 to 600 kilowatt charger that can be upgraded. Supernova is going for 180 kilowatts. Right now, most installations, because of power limitations for fast chargers, are around 180. But as the market evolves, highways will feature Hypernovas, while small roads, fueling stations, and commercial centers will have Supernovas from 60 to 180 kilowatts. I think there will be different kinds of customers and they are not going to be cannibalized.

Nadia, I think that's our last question. Is that correct?

Thank you. Yes, we have no further questions.

Okay, great. So thank you all for joining us today. We hope you found today's call to be a good use of your time. Also, please note that we will be active at Investor events in August and September. So watch our website for details if you're interested in meeting with us. Let us know if we can help you in any way. Have a great day, everyone.