Wallbox N.V. Q3 FY2023 Earnings Call

Hello, everyone, and welcome to Wallbox's Third Quarter 2023 Earnings Conference Call and Webcast. My name is Charlie, and I'll be your operator for today's call. At this time, all participants’ lines have been placed in a listen-only mode to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session. I will now turn the call over to Matt Tractenberg, Wallbox's Vice President, Investor Relations, to begin. Matt, please go ahead.

Thank you, Charlie, and good morning and good afternoon to everyone listening in today. Thank you for joining today's webcast to discuss Wallbox's third 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; and Jordi Lainz, our CFO. Earlier today, we issued our press release announcing results from the third quarter period ending September 30, 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. Risk factors that may affect results are detailed in the Company's most recent public filings with the SEC, including the annual report, Form 20-F for the fiscal year ended December 31, 2022, filed on March 31, 2023. 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. Additionally, 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 renewing highlights from the third quarter 2023, we will spend some time discussing how the current market environment is evolving and how our strategy fits within it. We will also discuss the ABL transaction and why it has the potential to transform our competitive position in the years to come. Then we will review some recent partnerships and commercial wins. Jordi will then offer some insights on our cost reduction efforts, provide additional detail on our quarterly performance, and share some thoughts on our balance sheet as we close out the year. Finally, I will return to discuss our view of the market and what we are focused on for the remainder of the year and into the next. We will conclude by taking questions from our covering research analysts. So let's get started. While the third quarter revenue finished below our expected range at €32.5 million, down on a year-over-year basis, driven by continued channel destocking, we made significant progress on a number of critical initiatives that are improving profitability, partnerships, balance sheet management, and strategic M&A. As we mentioned this year, a large inventory build occurred within our distribution partners in both Q2 and Q3 last year in anticipation of stronger EV deliveries in 2022, which ultimately did not play out as planned. This created difficult comparisons, both in revenue and unit volumes on a year-over-year basis for both Q2 and Q3 this year. The trend discussed last quarter has continued, and as a result, sell-through via our distributors exceeded the units sold into those channels. That translated to global unit growth of approximately 30% year-over-year, which we consider to be a reasonable growth rate. On a regional basis, sell-through growth was 22% in Europe and APAC combined, and 16% in North America. We continue to work with our distributors to implement systems and processes to provide better visibility and align inventory with end-market demand. We also believe that we are approaching an adjustment point and will provide more information as we have it. It was another solid quarter for our DC business, driving 285% unit growth and 350% revenue growth, both on a year-over-year basis. While we have discussed at length the balance and diversification the DC offering brings to our portfolio, it is worth mentioning again. DC demand is less correlated to deliveries and installations of vehicles. It is largely driven by public infrastructure and often influenced by government and utility initiatives. The robustness of the network is expected to drive its adoption, rather than the other way around. For these reasons, we continue to allocate resources globally to this opportunity and believe we are extremely well-positioned. We expect there will be times when one segment of the portfolio outperforms the others. The fact that we have a comprehensive solution across a global footprint assures investors that we are working to support the energy transition from multiple fronts. We believe this is within our control, and we expect to succeed in the marketplace. The balance we have previously discussed continues to evolve and, in some cases, accelerate. The ABL acquisition provides access to applications and geographies where we were previously underrepresented. As we enter 2024, you will see a business that operates across regions, product categories, applications, customer segments, and economic drivers. The purchasing decisions across residential, commercial, and public charging are as diverse as the entities making them. This differentiation extends to geographic levels, influenced by government initiatives and consumer preferences. This intentional reduction in correlation to European deliveries will ultimately benefit our shareholders in the coming years through consistency and stability. While this will not happen overnight, we are making gradual progress through both organic and inorganic means and are positioned at a significant point in that transformation. As ABL operates in Europe, by the external charging networks, we will see commercial opportunities arise, and as many other new products hit the market, you can expect substantial changes from us. Continuing with our performance, gross margins were 35% in the third quarter, representing a 530 basis points sequential improvement, driven largely by product mix. Our cost reduction program remains a priority, allowing us to reduce cash expenses by an additional €4.5 million sequentially. We expect to achieve the €50 million reduction target previously discussed. Jordi will elaborate further on that shortly. The adjusted EBITDA loss was €16.6 million, an improvement of €4.6 million over the second quarter loss of €21.2 million. This brings us to the topic of EV demand in general. We have all seen comments made by large OEMs regarding challenges they are facing as they navigate the competitive environment, leading to pricing actions. There will be quarters or even years where consumer behavior fluctuates, as expected. However, over the long term, replacing hundreds of millions of ICE vehicles and establishing the infrastructure to support EVs is one of the largest investment opportunities we may ever encounter. The current variability we have observed is not unexpected and has not altered our thesis. In fact, EV demand relative to ICE appears to be relatively healthy. While it may not align with OEMs' initial forecasts, we continue to believe that adoption is on an upward trajectory. I can assure you that the transition from fossil fuels to alternative sources is occurring and will persist for decades. Managing energy will take center stage, with intelligent systems essential for the optimization of generation, storage, and utilization. We are actively building that offering, which resonates with customers. Through financial incentives, governments are expected to encourage consumers to transition from ICE to EVs. This transition will not be smooth and may proceed in fits and starts; however, we believe that momentum will accelerate over the next three to five years. EV prices must reach parity with ICE vehicles, and we expect that EV prices will decline as competition from Asian OEMs increases compared toNorth American and European manufacturers. Low-cost producers will disrupt incumbents, necessitating productivity gains, and ultimately lower prices will attract consumers who might otherwise be left out of the market. A market consolidation is likely to occur within the channel space, making our global footprint and comprehensive portfolio crucial for success. Given the scale and scope of the reductions we foresee, smaller local companies with limited offerings will likely be excluded. Furthermore, our companies combining software and hardware portfolios will be essential. For the third quarter of 2023, Europe contributed €22.7 million, or 70% of total revenue. North America contributed €6.7 million, or 21%. APAC was €2 million, or 6%, and LatAm was €1 million, or 3%. The variability in AC demand due to ongoing destocking was partially offset by strength in public DC charging. Supernova 150, our second-generation DC fast charger, continues to receive strong demand from customers. DC represented 25% of our revenue in the third quarter, with AC at 59%, and software services and accessories making up the remaining 16%. 2023 has seen large DC orders from significant strategic customers, including Iberdrola, Atlante, Powy, Osprey, BeCharge, and others. Some of these orders amount to tens of millions of euros over several years. We foresee great opportunities here and will ramp up production in a controlled manner, prioritizing quality and reliability. This is a critical juncture for both Wallbox and the market, requiring diligent progress. We are observing retraction, yet customers have responded with repeat orders, which is encouraging, and we remain committed to our objectives. Gross margins were 35%, an increase from the previous quarter but still below our long-term target. Margins were impacted by product mix, which we expect to improve as we move into 2024. To provide further detail, approximately 60% of DC units sold in the quarter were Supernova 150, up from 40% in the prior quarter. While Supernova 60, our first-generation product, will offer a higher gross margin profile, it is still lower than AC. Thus, as this mix continues to shift and the cost profile of new products declines, we expect that impact to lessen over time. We also made headway on our cost-saving initiatives. Employee benefits and OpEx combined totaled €33.2 million, €4.5 million better than the previous quarter and €16.8 million better than Q4 2022, our point of measurement. We have eliminated €38.8 million in expenses so far this year. The streamlining of our business given the demand environment has positioned us for strength and has allowed us to see a clear path to profitability in the coming year. The processes and policies we have implemented will create the framework for the next growth phase, while allowing for the flexibility we need to navigate dynamic market conditions. The ABL transaction, which closed on November 2, is one of the most important developments in our company’s history. It presents an opportunity to dramatically alter our financial profile and provide significant commercial, operational, and financial synergies. ABL is the market share leader in Germany, which is one of the most crucial markets globally. The commercial landscape we engage in is less correlated with EV deliveries and residential installations, particularly regarding the demand drivers of DC public charging infrastructure. This transaction further diversifies our portfolio, provides balance, and expands our product and service addressable markets. While the EV demand curve may exhibit variability, this transaction provides further cushioning against those short-term impacts. The size of the German EV market is second only to China and North America, with nearly 2.7 million EVs on the roads today. It’s substantial. As I mentioned earlier, the market does experience variability based on government incentives. Furthermore, Germany mandates a new certification that ensures the electricity delivered to vehicles is accurately measured, facilitating payments. Any commercial or public application involving energy sales requires this certification, as well as many residential use cases where company cars are provided, which is common in Germany. ABL has a long-standing reputation for offering innovative technology. The management team has established itself as a trusted partner to brands and has sold over 600,000 chargers to date. Their product focus has been on these commercial applications, and they offer chargers that Wallbox did not have in its lineup. As such, the product overlap is minimal. This acquisition gives us immediate access to a market where we were previously underrepresented and creates opportunities to expand our offerings into established sales channels. We look forward to introducing Wallbox products like Supernova, Pulsar, and Quasar in Germany and ABL's products to the rest of the world, generating exciting value for both companies. Just as a reminder, Wallbox has already paid €10 million in cash and will pay an additional €5 million in 2024 to acquire the operations and assets of ABL. This was structured as an asset deal, negating the need to assume their liabilities. Instead, we bring their intellectual property, inventory, facilities, equipment, employee contracts, customer relationships, and a talented management team to drive this. Consequently, the Company will emerge as the largest European EV charging name with the most comprehensive product offering and broader geographic reach. We anticipate €60 million to €75 million in revenue and positive adjusted EBITDA in 2024, which will immediately benefit Wallbox in the coming years. In 2022, ABL generated approximately €150 million in sales with positive EBITDA. The Company began investing in new facilities to launch its product, the eM4. That investment occurred just before government subsidies ceased late last year. The timing created opportunities leading to Wallbox and ABL’s partnership. Aligning the objectives of ABL and Wallbox shareholders is crucial. To accomplish this, we are utilizing earn-outs. In summary, ABL management has a minority ownership stake in the business entity we will create. While the sales and margin targets are ambitious, if achieved, both the ABL team and Wallbox shareholders will be rewarded. We are excited for this team to hit the ground running. Now I want to dedicate a few minutes to discussing the benefits we expect to gain from this transaction. The first significant benefit is the commercial synergies. The certification of our product portfolio is the most visible and tangible commercial gain we anticipate. This certification is something we were working on as part of our plans. The experience ABL possesses in navigating standards and requirements will facilitate faster access to the market in 2024. In addition to lithium commercial applications, we can now introduce the full Wallbox offering through established distribution channels in Germany. Our Orion charger, a significant product in our portfolio, will greatly benefit from these strong relationships. Considering the emerging market for intelligent energy management solutions, we are optimistic about this opportunity. Lastly, there are other European markets where ABL’s offerings align more closely with market needs. For instance, ABL's eM4 charger meets the demands of customers looking for robust solutions for fleets, apartments, and workplaces. This market segment is growing rapidly and positions us as a leader. The ability to leverage this solution quickly in countries where ABL operates, where we are not present, represents a unique opportunity for immediate action. Integrating the eM4 into our established channels will accelerate our market entry for these projects. The operational synergies are equally significant. ABL operates two manufacturing locations. The facility in Germany is nearly 100% automated, while the Morocco facility is cost-optimized. These facilities possess capabilities that Wallbox currently lacks, such as injection molding and socket manufacturing. By leveraging these capabilities from ABL, we can enhance operations and improve efficiency on our end as well. The savings here could amount to millions of euros annually. The combined scale and scope of our offerings and footprint will enable both vendor and sourcing consolidation. Simply put, given our size, we will be a major force in EV charging, and we expect to realize volume discounts that will provide immediate benefits to our gross margins. Optimizing R&D and CapEx represents another significant operational advantage we expect to gain. Merging our two product road maps will enable us to, in some cases, do more while spending less. For example, this will impact our Orion charger developments for commercial applications. The ABL eM4 charger immediately meets market demands in Europe and can be marketed through our channels without delay. This refocusing of investment and resources will expand our service and product markets and enhance that synergy we see. Financial synergies will create substantial shareholder value. As I mentioned, ABL reported positive adjusted EBITDA in 2022. As new products gain traction, we anticipate they will achieve targets and generate positive adjusted EBITDA next year. We are even more confident in our ability to deliver positive adjusted EBITDA at the consolidated level in 2024. To clarify further, combined, ABL and Wallbox generated approximately €46 million in revenue during the third quarter. ABL's gross margins are comparable to industry leaders, approximately 40%, and we see further opportunities to enhance those margins. Concerning operating costs at ABL, they underwent a cost improvement program to align the business with market demand before our acquisition. This provides a precise approach to identifying potential savings stemming from our merger. We will take this step-by-step, ensuring we optimize the combined operations to maximize value for all stakeholders. In summary, this transaction can accelerate our strategic plan. It will provide a level of scale that does not currently exist. With this scale, we anticipate increased profitability, bringing unique opportunities to follow through on investments and new products to new markets. This acquisition is transformational for Wallbox, and I’m eager to witness its positive impact.

Thank you, Enric. Good morning and good afternoon to everyone. Our third quarter results came in lighter than expected, driven by additional channel inventory adjustments and some regional variability from residential applications. I'll provide more detail on these results, discuss some financing activities we've announced, and share insights on the remainder of the year. For the third quarter of 2023, revenue was €32.5 million, flat from the previous quarter. On a year-over-year basis, revenue declined in both the U.S. and Europe, driven largely by continued destocking. On a sell-through basis, unit volumes increased by 30%, driven by strength in the U.S. The inventory build that occurred last year continued in the quarter, and while it's difficult to predict based on last year’s patterns, we expect to see less impact going forward. Gross margin for the quarter was 35%, a 130 basis point improvement over the last quarter. Mix shifts from new products continue to impact our margins, but progress is being made. DC margins are now above 30%, up from 10% last year. As we continue the transition from Generation 1 to Generation 2 products, we believe we will see gradual improvements that will enable consolidated gross margins to return to mid to high thirties in the fourth quarter. We were able to further reduce both employee-related cash expenses and OpEx, which totaled €33.2 million in the period. If you recall, our goal for 2023 was to reduce expenses by €50 million using the fourth quarter of 2022 as our baseline. Through the third quarter, we have eliminated €38.8 million in 2023 costs. The latest quarterly cash expenses are €16.8 million lower than Q4 2022. This indicates that we will exceed our planned reductions, something we take pride in sharing. We see additional opportunities to reduce costs further, and we will aggressively pursue them. The adjusted EBITDA loss for the period was €16.6 million, a 22% sequential improvement and a 20% improvement over the same period last year. We remain extremely focused on cost control and conserving cash, which has yielded tangible results. We also improved our balance sheet during the quarter, ending September with approximately €81 million in cash and equivalents. In October, we secured an additional €35 million loan from several European banking partners at a rate of three-month Euribor plus 3.25%. This, along with ABL's attractive purchase pricing, allows us to remain close to the €100 million mark where we feel comfortable. We concluded the third quarter with €65 million in long-term debt, excluding that Q4 funding event, and did not utilize the ATM during the quarter. CapEx was approximately €4.2 million in the period, with €1.2 million spent on property, plant, and equipment. Year-to-date, we have spent €11.6 million, and we anticipate an additional €4 million to €6 million in CapEx for Q4 of 2023, leading to a total yearly figure of less than €20 million, significantly lower than the previously forecasted €26 million. Inventories stood at €94 million, down slightly from the second quarter. Our full-time headcount increased by almost 100 people on a quarter-over-quarter basis. We have returned to the headcount level of Q2 2022 and anticipate that this number will continue to decrease. To provide some details about our balance sheet concerning indebtedness, by September, we incurred around €65 million in interest-bearing long-term loans with maturities greater than one year and €19 million in short-term loans. The €65 million matures over the next five years. Our fixed-rate debt is at 4.1%, and our floating-rate debt averages around three-month Euribor close to 5.8%. These figures exclude the new €35 million loan secured in October. As evident, we maintain careful financial management and do not face any significant near-term interest rate risk. We believe we are well-capitalized and capable of servicing our debt, providing comfort to our investors about our solid position. Enric, I’ll turn it back to you for closing remarks.

Thanks, Jordi. As we exit 2023 and prepare for 2024, it is an extremely important time for Wallbox. We are poised to achieve scale, enabling us to reach profitability very soon. The new products we are launching today provide access to applications and geographies that we have not previously engaged with, including DC public charging in North America, and DC and commercial charging in Germany, among others. We believe these revenue opportunities are significant and that ABL is a vital part of our strategy. We expect revenue growth to resume in the fourth quarter. Managing our cost base is equally critical as we enter 2024. While we have made great strides to right-size the business given the current environment, we foresee additional opportunities ahead. We will adopt a leaner, more efficient, and flexible approach in the coming year. We anticipate breaking even and eventually generating positive adjusted EBITDA just a quarter later than originally planned. We believe that our operating leverage will be greater than previously expected, given ABL's potential. This is an exhilarating time, and we take great pride in our progress. We firmly believe we are doing the right things, measuring our success against our strategic plan by engaging with customers and staying attuned to market transitions that drive our business. Today, we are fully focused on what we can control: taking market share, managing costs, and ensuring we remain on track for profitability in 2024. Each variable of Wallbox's initiatives is aimed toward this goal, and we are ready to take the necessary steps to achieve it. While we cannot control market dynamics, we can compete effectively within that framework. We are diversifying across products, markets, and geographies to reduce risk and enhance stability. As we become increasingly profitable with a more efficient operational footprint and comprehensive offerings, your trust is appreciated and I look forward to turning the corner to profitability in the upcoming year. We believe this will set us apart from the competition and prepare us for the significant wave of developments in channel infrastructure that we foresee over the next decade. We are ready for this transition. With that, we are now ready to address questions from our analysts.

Charlie has some instructions for our analysts on how to get into the queue.

Our first question comes from George Gianarikas of Canaccord Genuity.

So I'd like to ask about your expectations around reaching EBITDA positive for next year. You said in 2024. I was wondering whether that means that you expect to reach profitability for the full year? And also your previous expectation about being EBITDA flat in the fourth quarter of '23?

Thank you, George. This is Enric. We are seeing great traction on cost reduction, and we expect that 2024 will be a profitable year in terms of adjusted EBITDA. Currently, as I mentioned during the call, we are working toward breakeven or actual profitability in Q1 2024. We have seen a 22% improvement in EBITDA for this quarter. We anticipate making substantial progress in Q4, aiming for very small negative numbers, but we will not see positive numbers until Q1 2024.

As a follow-up, I'd like to switch gears and inquire about the inventory destocking. I know last quarter, you mentioned that you thought it was at equilibrium, but you continue to see inventory in the channel. Can you discuss the measures you have implemented to understand the current inventory levels and when you expect to resolve that flush?

Yes. The difference between sell-out and sell-in indicates a €10 million gap, which we did not see materialize this quarter. Upon discussing with our partners and analyzing the data, we observe that they are holding less inventory than usual. Some partners have adopted a leaner approach, making fewer orders each quarter, which allows them to manage their working capital better. This gap primarily affects Europe, mostly for AC charging, amounting to this €10 million. Looking forward, we believe conditions are improving, and we expect Q4 and Q1 to reflect clearer inventory dynamics.

George, the only other point I'd add is that this marks our fourth quarter of channel destocking. The inventory build at our channel partners concluded in the third quarter of last year. While we do not definitively state that it's complete, the data we are observing suggests we are nearing the end of that cycle. This perspective stems from both data analysis and customer conversations. Hopefully, that clarifies things for you.

I just want to understand the ABL acquisition. I recognize that Germany was an important market where you were underrepresented. Is that enough for you to succeed in Germany, or will you require more acquisitions like this? Also, are there other critical markets in Europe where you remain underrepresented, which might benefit from similar acquisitions?

Thank you, Abhi. This is Enric. ABL is the market share leader in Germany. Regarding AC charging, yes, this acquisition is more than sufficient. Their extensive commercial network established over 100 years is significant in Germany. They maintain strong ties with municipalities, distribution channels, and installers. Introducing Supernova and Pulsar products through their network will yield significant synergies. Yes, this acquisition fulfills both AC and DC needs. The ABL team is eager to sell Supernova. Their offering of the eM4 charger aligns perfectly with Orion, which was our commercial charger. So, looking ahead, we are introducing ABL products into other geographies where they have yet to establish a footprint. As for other countries we're underrepresented in, after this acquisition, we become a driving force in Europe. Wallbox is the leading EV charging manufacturer on the continent with offerings covering all segments from home to commercial and fast charging, even bidirectional charging. I would not say we currently need another acquisition like this in Europe, but we recognize that there will be further consolidation in the European market, and we'll remain on the lookout for additional opportunities. However, for now, our focus is on the growth of the ABL business together with Wallbox.

I have two questions. ABL contributed about €13.5 million in the quarter. Is this a reasonable run rate? Also, is there any seasonality we should consider in the ABL business?

Sorry about that. ABL did not contribute any revenue in the third quarter. The figure of approximately €46 million was meant to emphasize the scale of the combined business. Remember, we closed the transaction on November 2. We will include two months of ABL's contribution in Q4's numbers but they did not contribute to the figures reported today. Your question about seasonality or the path forward is valid. We expect ABL to post between €60 million and €75 million during the 2024 period. We have set ambitious targets for them, and we will continue to monitor their performance. Allow us a quarter or two to familiarize ourselves with the business and we will provide more updates on our next call.

For my follow-up, you mentioned the robust performance of ABL in 2022. While I understand Germany is a mature market, I’m trying to clarify the revenue drop. If they achieved half in 2022, what led to that? Are they selling off businesses? Is this just related to the evolution of the German market? Is that €150 million in sales a figure they could potentially recover?

Stephen, this is Enric. This recession was experienced by companies throughout the German market. We noted a drop in sales across the board for companies participating in this sector. This decline was primarily influenced by the cessation of KfW incentives, where the German bank subsidized commercial and residential chargers almost at zero cost, including installation. When that program evaporated last year, it affected the entire market. Now we are beginning to see positive developments, as exciting opportunities arise in Q3 and Q4, coupled with new KfW incentive programs re-emerging. The market seems to be improving, and we believe those ambitious €150 million numbers can be viable as it stabilizes in the coming months.

We want to emphasize that we believe that the team can reach those previous levels of revenue. Alright.

Just focusing on the acquisition, can you provide details on the process? Was it competitive? Regarding the revenue fluctuations from '22 to '23, how did you approach valuation during the acquisition?

Yes, Ben. It was a distinct process since ABL was a family-owned company with a long history. They made significant investments in 2022, anticipating substantial growth for 2023, which sadly didn't materialize. In the first quarter of 2023, their sales dropped by approximately 50%, leading to a distressed situation that transitioned into a bankruptcy proceeding in June 2023. During this process, multiple competitors from Europe and some private equity firms expressed interest in purchasing the company. Wallbox presented the best offer because it was the most complementary to our goals and shared vision for future growth. This competitive process revealed the attractive pricing for the acquisition.

As a follow-up, this decision was also influenced by the absence of overlap between Wallbox and ABL. This complementarity significantly contributed to our acquisition rationale, and indeed, the process was competitive.

Considering gross margin and potential seasonality in the upcoming year, can you highlight any significant factors affecting gross margin and potential levers for improvement?

We do not expect any seasonality factors impacting performance. Instead, we anticipate continual improvement as Generation 2 Supernova becomes a larger portion of our product sales mix. Supernova Gen-2 boasts a higher gross margin compared to Gen-1, driving upward trends in margins. Additionally, our U.S. launch of Supernova is set for this quarter, aligning with a favorable gross margin closer to our target of 40%. The reductions in our internal inventory provide avenues for reducing product costs through design improvements, as we work through existing inventories. Although there may be fluctuations in volume based on product sales trends, our overall trajectory is one of gross margin enhancement.

Our next question comes from Robert Jamieson of UBS.

Just a quick question regarding ABL. Firstly, what was their EBITDA level in 2022? I know it was positive and they achieved €150 million in revenue. Secondly, can you elaborate on the opportunities you see for gross margin improvement, including any benefits from reduced CapEx or OpEx due to ABL?

Robert, it's Jordi Lainz. As mentioned earlier, the company reported positive adjusted EBITDA in 2022, reflecting single digits profit. Their performance holds strong for three years, consistently net positive. However, they experienced reduced EBITDA due to a declining market share. They reiterated positive results at year-end, further underpinning their stability. Historically, they have maintained impressive gross margins, frequently reaching around 40% or even higher.

In terms of gross margin prospects, your observations are accurate. There exists substantial potential for gross margin growth. Notably, for our commercial products, we mentioned Pulsar and socket devices. We typically outsource socket production but now with ABL’s expertise, we can manufacture these components internally. This shift will directly influence the cost structure, enhancing gross margins for those products when this transition becomes effective later in the year. Additionally, integrating our PCB assembly processes presents the same benefit. There are numerous opportunities across various product lines. However, we do not incorporate these enhancements into our immediate targets, so they represent potential upside gains.

Great! I appreciate the response and insights. As a broader question regarding EV deployments in the U.S., what key attributes have you observed customers seeking in charging equipment given the competitive landscape?

Yes, Robert, it's Matt. To summarize three main inquiries. First, customers emphasize the ability to deploy OCPP effectively, indicating they want to control the driver experience. Our platform supports this, and in stark contrast to some competitors, we actively embrace OCPP. Second, scalability is crucial as customers aim to gradually transition to higher power chargers, ensuring they have future-ready infrastructure. Lastly, reliability remains paramount. High-quality equipment with consistent uptime is critical; we have focused on developing top-notch DC fast chargers based on our European experience, keeping customer priorities front and center. Charlie, I believe that wraps up our questions for today. I want to thank everyone for joining us. We hope you found today’s call beneficial. Please watch our website for details if you’re interested in meeting with us. Let us know if we can assist you in any way. Have a wonderful day!

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.