Wallbox N.V. (WBX) Q4 2023 Earnings Report, Transcript and Summary

Hello, everyone. And welcome to Wallbox's Fourth Quarter and Full Year 2023 Earnings Conference Call and Webcast. My name is Charlie, and I'll be the operator for today's call. At this time, all participants lines have been placed in listen only mode to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session [Operator Instructions]. I would now like to turn the call over to Matt Tractenberg, Wallbox's Vice President of Investor Relations to begin. Matt, please go ahead.

Thank you, Charlie. And good morning and good afternoon, to everyone listening in. Thank you for joining today's webcast to discuss Wallbox's fourth quarter and full year 2023 results. This event is being broadcast over the Web and can be accessed from the Investor 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 fourth quarter and year ended December 31, 2023, which can also be found on our Web site. Before we begin, I'd like to remind everyone that certain statements made on today's call are forward-looking that 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 SEC, including in the annual report on 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 Web site. Also, a copy of these prepared remarks can be obtained from the Investor Relations Web site under 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 full year and fourth quarter 2023, we'll spend some time discussing the current EV market and our position in it. We will also dig into the Generac announcement from December and why we are so excited about joining forces. Jordi will review our cost reduction achievements. He will offer some additional color on our quarterly financial performance and share some thoughts on our balance sheet as we prepare for a new year. And finally, we'll return to discuss our view of the market and what we are focused on in 2024. We'll end by taking questions from our covering research analysts. So let's get started. 2023 was a bitter year for us with some challenges driving both reflection and action, as well as exciting milestones and celebration. Revenue for the full year totaled EUR143.8 million, essentially flat from the prior year. This was a result of a softer demand environment that many anticipated paired with corresponding inventory adjustments by our channel partners. While the EV adoption curve is in the process of crossing the chasm and moving from early adopters to mainstream. These items drove variability in our forecast and results. And although those disruptions make for a challenging year, we focus on executing our long term strategic plan and achieve several outstanding milestones. We delivered 166,000 AC units and more than 1,400 DC units during the year, a solid outcome. We launched exotic new products to streamline our cost base to accelerate our path to profitability and forge meaningful new partnerships with global brands, including Generac, Costco, Kia, and Free2Move. We acquired an industry leader in ABL, placing us at the forefront of the largest EV market in Europe. And we raised almost EUR143 million of cash through debt and equity financing. It was a year of efficiency and innovation of operational improvements, of cost reductions and it has set us up extremely well for a successful 2024. Turning to the quarter. Revenue came in within our expected range of EUR43.3 million, up almost 34% from the year ago period, driven both by organic and inorganic growth. ABL contributed EUR6 million of inorganic revenue as anticipated. Organic growth was once again a result of strong performance from our DC offering with sales growth of almost 150% year-over-year. Our AC portfolio saw some moderate destocking in Europe and North America but AC unit growth was almost 38% quarter-over-quarter in Europe on a selling basis, which we view as a positive sign for the region. Sell through was healthy as well and points towards continued growth. In total, we delivered almost 44,000 AC units globally, including ABL and almost 500 units of DC during the period. Gross margins were 32.8% in the fourth quarter, impacted by product mix shift and warranty and obsolescence cost. We continue to believe that through cost engineering, changes to our product mix and strategic sourcing, gross margins in the midterm can return to the 38% to 40% range. We'll already have to implement actions in 2024 [Indiscernible]. Our cost reduction program in 2023 was front and center and allow us to reduce all of quarterly cash expenses by an additional EUR4.8 million sequentially. We are proud to announce that we have exceeded the original EUR50 million reduction targets previously discussed, and have achieved a total production of more than EUR60 million in 2023. Jordi will spend more time on that in a minute. Fourth quarter adjusted EBITDA loss was EUR14.7 million on a consolidated basis, which includes the impact of ABL, representing a year -over-year improvement of 54%. Due to the timing of the transaction and iteration, ABL broke with it one month of sales and two months of costs. Excluding ABL, Wallbox standalone adjusted EBITDA loss was EUR11.9 million in the quarter, representing a 63% improvement from Q4 of 2022. We continue to be focused on achieving positive adjusted EBITDA in the June quarter and look forward to celebrating the important milestone with you on the Q2 call. For the fourth quarter of 2023, Europe contributed EUR34.3 million of consolidated sales or 79% of total revenue; North America contributed EYR6.4 million or 15%; APAC was EUR1.5 million or 4%; and LATAM was EUR1 million or 2%. These mix shifts were largely driven by the addition of ABL whose sales are entirely in the EMEA region. AC sales of EUR26.5 million represented approximately 61% of our global consolidated revenue, down 7 percentage points, driven by strength from our DC offering. Supernova 150, our second generation DC fast charger, continues to see strong reception from customers and drove the DC revenue contribution to 27%, up 12 percentage points. So for services and accessories contributed the remaining 11%. 2023 saw numerous new large customers including Iberdrola, Atlante [Indiscernible] [B-CHARGE]. In November, we announced that Atlante, which recently was selected to receive EUR49.9 million grant from the EU aims to install 5,000 fast charging points by 2025 and over 35,000 points by 2030 across Spain, Italy, France and Portugal. And they’ve chosen Wallbox as a preferred partner in the project due to our production capacity and high quality innovative offering. Margins continue to be impacted by product mix, which we expect to ease as we make our way through 2024. To apply color, approximately 60% of these units sold in the quarter were Supernova 150, similar to last quarter. Recall that while the 150 brings higher gross margins profile than Supernova 60, our first generation product, it's still lower than AC. So in time, as that mix shift continues and the cost profile of the new product declines, we anticipate that impact to lessen. Generac is one of the most well respected names in the energy transition space. The transaction is one of the most exciting and impactful events in our history, and has the power to accelerate our commercial presence in North America at a critical time by opening important global opportunities for both companies. The announcement included a $31.6 million strategic investment led by Generac and an upcoming commercial agreement. The minority investment was completed at a price of [$3.05] per share, highlighting the inherent value both companies see and includes a seat on Wallbox Board of Directors. Through the execution of the commercial relationship, Generac will offer its customers our full suite of EV charging solutions, including Pulsar Plus for residential, Pulsar Pro commercial and multi-tenant applications our bidirectional charger Quasar 2 and our DC fast charging Supernova, as well installation services through COIL. Generac’s 60 plus years of experience distributing energy resilience devices and its extensive network of over 87,000 dealers will be a strategic addition to Wallbox’s dealer network in the US. The European brand [Pramac] will offer these fast chargers through their energy storage sales network in some selected markets, strengthening the offering for commercial and industries customers. In turn, our strong relationship with tier one utilities and OEMs will open new doors. Bidirectional charging enabled by Quasar 2 will be extremely important for both companies, providing EV owners independence and security against outages, while saving money and tapping renewable sources is quickly becoming a reality, and giving utilities access to a vast network of stored energy during peak load times will allow huge populations to balance demand with supply, removing the need for new investment in power generation. Governments are starting to see the light and it's remarkable to watch. It has the unique ability to change the way we store and consume energy. Together, we plan on bringing that solution to market in 2024, so look for it. We're also exploring new architectures to adapt to the needs of applications in environments that lack the necessary power. [Indiscernible] Supernova with battery storage from Generac has the potential to reduce reliance on the grid, reducing installation cost and utility requirements, and accelerate time to market. That's just one of numerous new configurations given the combined capabilities we have. It's exciting to watch and I think customers will like what they see. We look forward to collaborating with the leadership team, aligning product roadmaps and aggressively competing in the global marketplace. The combination will be [Indiscernible] [install]. I want to spend a moment discussing the markets which we operate in. As you know, there is a high correlation of sales of our AC products to EV deliveries. Deliveries have been lumpy based on geography in 2023 and price actions and commentary by large OEMs have created some noise. There were almost 13.6 million EV sold globally in 2023. Promotion forecast global EV deliveries are set to reach 18 million units in 2024, representing growth of more than 32% year-over-year. To OEMs spending millions of new factories and developing new models, the number might be disappointing. To us, this continue to present attractive opportunities. There are a number of elements that we see as key to driving continued adoption, including the success of new models like Kia’s EV9 and Nissan’s Ariya. Innovative technological breakthroughs that improve range and quality, accessible and reliable power recharge infrastructure, which we expect Wallbox will be a major driver of economies of scale, which will help bring down vehicle costs and improve industry margins and continued financial incentives for EV buyers to bring price [parity] with IC vehicles. We believe that early adopters are fully bolting into the value proposition of EVs. [Indiscernible] [Their pocket] you are reading about in the media is a function of where we are in the adoption curve. It's understandable and expected in an any large scaled technology adoption and we are prepared and well positioned to exit the current environment stronger than we entered, and well ahead of the competition. Jordi, I'll turn it over to you to comment further on our financial details.

Thank you, Enric. Good morning and good afternoon, to everyone. Our fourth quarter results came in as anticipated, driven by strong DC sales, stability within Europe and AC demand and contribution from ABL. Margins were softer than expected but we have identified a remediation plan and intent to make improvement through the remainder of the year. Cost controls continue to yield solid results and additional opportunities may present themselves in 2024. I'll provide more detail on these results and share some thoughts on the upcoming year. For the fourth quarter 2023, revenue was EUR43.3 million, up 33% sequentially and up 34% year-over-year. On a year-over-year basis, total revenue increasing both DC fast charging and AC, the latter a result of the channel destocking discussed on previous calls. Consolidated gross margin for the quarter was 32.8% and were impacted by continued product mix shift and the timing of warranty and obsolescence charge. We were able to further reduce both employee related cash expenses and OpEx, which amounted to EUR28.4 million in the period, excluding ABL. I want to thank all Wallbox-ers for their dedication and commitment to this initiative. It's taken everyone together to reach this target and we appreciate what you've helped us achieve. Going forward, including ABL, we anticipate both employee benefit or payroll expenses and OpEx combined to be approximately EUR30 million per quarter. This when paired with the gross margin improvement plan we've implemented is expected to allow us to achieve positive adjusted EBITDA in the second quarter and full year 2024. We commit to shareholders to keep this initiative in focus as we reaccelerate growth. Consolidated adjusted EBITDA loss for the quarter, including ABL, was EUR14.7 million, representing a 54% improvement over the prior year quarter. On a standalone basis, excluding ABL, we were able to reduce our adjusted EBITDA loss by 28% from the previous quarter and 63% from the prior year period. We remain extremely focused on cost and conserving cash and have seen tangible benefits of those efforts. Here, you see the three main metrics we have been focused on over the last year; revenue, cost and the resulting adjusted EBITDA. As you can see, cash personnel costs have been reduced from EUR23 million to EUR19 million and cash OpEx has gone from EUR27 million to EUR9 million. Combined, this represents a 44% reduction to Wallbox cash costs, excluding ABL. We've made exceptional progress against our goals. The trends are all moving in the right direction. And with ABL bringing increased revenue at a reasonable cost base, we believe profitability is within reach. The trends you see here should continue in 2024. The financing events in 2023 paired with aggressive cost reductions we went after allowed us to end December with approximately EUR107 million of cash, cash equivalents and financial instruments. Long term debt was approximately EUR81 million at the end of the year. We did not utilize the ATM during the [fourth] period as we continue to believe that our current stock price is not reflective of the shareholder value we are creating. CapEx, excluding capitalized R&D, was again, very light with EUR4.6 million in the fourth quarter with EUR3.4 million of that spent on property, plant and equipment. For the full year, we have spent EUR16.2 million in 2023 versus EUR46 million in 2022 after opening two new factories. I'm pleased with our ability to quickly adjust the spend levels with the current demand environment as evidenced by the GAAP versus our original EUR26 million target for 2023. Inventory reduction is another initiative we made significant progress on with Wallbox levels falling by 11% or more than EUR10 million from the third quarter and ended the year at EUR83.9 million. ABL brought EUR8.6 million of inventory, which is an appropriate amount given their projections. Our goal is to continue to bring a total inventory down by the end of the year. This will also contribute meaningfully to reducing our cash [Indiscernible] [part] rate. Full time headcount, excluding ABL decreased by 82 people or 7% on a quarter-over-quarter basis. We are slightly above the level reached in Q1 of 2022 and may see the number come down in specific areas. ABL brought with 281 people. With that, Enric, I'll turn it back to you to provide some closing commentary.

Thanks Jordi. I'm optimistic as we enter 2024. Wwe worked very hard to position ourselves well for that coming year. Our growth will be fueled by new products like Pulsar Pro, Pulsar Socket, Supernova 240 in Europe or 108 in the US, by Quasar 2 with Kia and Generac. ABL's strong offering and our ability to cross sell both their products to our customers and our products to theirs will contribute meaningfully. It will be fueled by Wallbox's products sold through Generac’s extensive distribution network, and it will be fueled by new partnerships with leading brands like Atlante, Free2move, Costco and Kia. Our gross margins will be improved through cost engineering of existing products by better leveraging areas and their capabilities, by continued vertical integration of key components and by more strategic sourcing and price negotiations. Our personnel and operating costs will continue to be optimized through disciplined controls and headcount management. As a result of this, 2024 will be a year in which Wallbox achieves profitability, an important milestone in our history. And while much of our investment in infrastructure is complete, reducing the need for additional CapEx we will explore opportunities to further realize our global footprint, leveraging efficiencies and cost benefits. We'll also continue to reduce inventories by utilizing common components across multiple platforms, strategic vendor management and leveraging growth. For the reasons, positive free cash flow is within reach, which will set us apart from competitors and highlight the resiliency of our business model. And we will allocate that capital to the higher return projects, including M&A, new product innovation and capturing market share. In summary, meaningful growing revenues through both organic and inorganic means, new products and big commercial partnerships while improving gross margins, all off a lower operating spends base while conserving cash will create significant value for shareholders this year. That's our plan and we are aggressively executing it to the shareholders, partners and employees who have trust us and believe in us. We thank you and we are grateful to have you with us. We'll work hard to ensure you are rewarded. With that, we are ready for the questions from our analysts.

Welcome back everyone. To our analysts we ask that you pose one question with a follow up if needed. Then reenter the queue if you have more questions. This will allow each of you to ask your questions upfront and we’ll to as many questions as time allows. Charlie, I think you have some instructions for our analysts.

[Operator Instructions] Our first question comes from George Gianarikas of Canaccord.

If you could just share please a little detail on the broad strokes of the Generac relationship? And I know you're still working on the commercial agreement. But whose product or whose name plate is going into different channels, what is the relationship going to be when there may be some channel conflict and [Technical Difficulty] retailers, any details that would be helpful?

So right now the main focus of the agreement is on the Level 2 chargers for North America. Obviously, this 8,700 installers, electricians that has access to will immediately allow an important growth of this channel. Next step at which we are working in parallel actually it's fast charging sales, Supernova sales, because this something they can sell in the US in their commercial industrial business, but also in Europe, they are very strong in the commercial industrial space. They are actually working on a product they already have that includes a generator plus storage, plus solar storage that can be paired with Supernovas. So we are working also together to make sure we integrate this product. So these are the two first things. The third thing is going to be Quasar, which as we commented in April, we are starting to deliver it with Kia, which we are very excited, Quasar to do start in the US delivering it. And to ensure we don't [Indiscernible] at the end both companies have the same goal. We have the goal to make both companies successful. We are making a product under their brand and with Wallbox branding, we are connecting with their software platform. Obviously, we provide our infrastructure and our software work, we make sure they take advantage of their ecosystem. So if you want the Wallbox ecosystem, you can buy Wallbox with the Wallbox app and all the things that has the Wallbox ecosystem. If you want the Generac ecosystem, you can do the same.

And maybe as a follow up, just to focus on ABL. Could you just kind of give us some comments on how that's going? And also the financial contribution for 2024, from a revenue perspective, you mentioned EUR7 million in Q4, I think you said one month. What broadly can we expect from a revenue perspective from ABL in 2024?

So basically, we announced that we will be between EUR60 million and EUR75 million of revenue, we are still in that range. When we look into the February numbers, it looks like the company is working towards that direction, and it's normal. The first quarter has been only one month of revenue. Even the fact that we had to integrate the systems, we moved from an old company to a new company. We had to move customers, we had to move different agreements and contacts with customers, so that took one month. And then we had Christmas, which was the last week of December, which in Germany, there's not really much sales activity. So when we look right now, things look like we'll be on that EUR60 million to EUR75 million. And the main focus now is making sure we make a successful cross selling. Our priority number one, apart from what we’ve done now, which is restart annual operations. The second thing is that we can take advantage of the eM4 four, which is ABLs product. So we are starting very soon to sell it to other markets where Wallbox has presence and ABL has not, because ABL is a mostly a [DACH] region company. And we’re also bringing a Wallbox Pulsar ABL version for the German market. So customers are very enthusiastic. They are looking for both products in both ends of the spectrum in home charging and commercial charging. And I think that it will provide an extra revenue that we have not accounted in our focus.

[Operator Instructions] Our next question comes from Ben Khalo of Baird.

Maybe just with the tough backdrop for some charging companies, can you just maybe update us on how you think the competitive market has changed and kind where you guys sit at it both in home charging and commercial charging?

So I think we have to differentiate AC charging Level 2 from DC fast charging. So in general, if you are a DC fast charging company today that has an acceptable gross margin like we, over 30% and very high up time, the market is a blue ocean. Basically, we've seen that we've grown 325% in a year and we continue expecting import and growth given the fact that we just recently launched our Supernova in the US and we're launching Supernova with higher power in Europe, Supernova 200 plus, 240 kilowatts. In terms of AC charging, I think it has been more challenging, 2023. The channel destocking has impacted most of the companies. And when we look our public peers in Europe, we've seen an average at 25% to 50% Level 2 drop in selling in sales. We've been hit less than others given our European presence and the presence in many, many, many markets. And if you look at the revenue improvement in Q4, we already can see that the channel inventory issue, it's easing, and we had EUR5 million of improvement coming from organic sales.

And the OEM partnership channel, just how much is that contributing and how much time you saw -- I saw the Lucid is going to start offering a Wallbox charger. I think, they announced that. And I'm just wondering if of your channels where you're seeing the most, I guess, take out of it or growth out of the different channels?

I think, the OEMs have tried many times to their own product. And at the end, it's very challenging to have compliance in all countries compliance with the installation. You have to do the actual installation. And to be competitive, you have to be able to claim different subsidies in different regions. You have to be able to connect with utilities. So there's companies that have longer term in the space like Nissan and we're working with them globally or Kia, one of the major players in the EV space, we are also working with them, or BYD it’s also -- we work with them in some markets. So it's very challenging to be a global EV charging player that can be competitive in every market. And that's what the focus of OEMs. We keep working with them. We collaborate with them. And an example of that is Free2move, for example, which is part of Stellantis [Indiscernible]. And what we are doing is making sure we provide the most competitive products for the different brands of the company. But we believe that that's the way forward given all the challenges that you need to be a competitor [Indiscernible].

Thanks Ben. Charlie, I think that that's all the questions that we have in our queue. So if that's the case, we're going to let everybody go. We hope that you found today's call a good use of your time. Please watch our Web site for details if you're interested in meeting with us, because we're going to be at multiple investor events in March. So let us know if we can help you in any way. Have a great day, everyone.

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