Alfen N.V.

Thank you, Laura. Good morning and welcome to this webcast regarding the first half of 2024 results of Alfen.

We appreciate the fact that you have taken the effort to participate in this webcast. The questions that -- the webcast and the questions that may come forward are handled by the management Board of Alfen, being Michelle Lesh, CCO; Onno Krap, CFO; and myself, Marco Roeleveld, CEO.

I'm especially happy that in this half year release, we’re able to confirm that Onno Krap will join the Statutory Board of Alfen. In this webcast, we’ll start with the highlights of the first-half year, followed by a short review by business line.

And next we will go in more detail regarding our financials and outlook. We now continue with Slide 3 with the highlights of the first half year of 2024.

Compared to last year in the first half of 2024, the revenue increased 10% to EUR245.7 million, mainly driven by Energy Storage Systems and Smart Grid Solutions. The Group adjusted gross margin corrected for one-offs was 28.9% compared to 30.5% in the same period last year.

This was mainly caused by the shift in our production -- business line mix and a lower margin in the Smart Grid Solutions. As a percentage of revenue, the adjusted EBITDA declined from 9.4% in the first half year to -- last year to 5.5% in the same period this year.

And as indicated in June, we have started the strategy validation and organizational rightsizing project. We will communicate and update on this project during the Q3 trading update on the 7th of November this year.

We have obtained a preemptive waiver for the expected breach of our bank covenant in Q3. We will continue the constructive conversations with the bank to conclude an updated covenant.

It will be based on a revised business plan, in which the outcome of our strategy validation and organizational rightsizing project will be taken into account. With regard to the full year outlook, we confirm our June 2024 updated outlook, being a revenue outlook in the range of EUR485 million to EUR520 million, a mid-single-digit adjusted EBITDA margin outlook, and we expect that the free cash flow outlook will be negative, but with an improvement compared to the minus EUR27.2 million in 2023.

Later on, in this presentation, Onno will go in more detail on the financials. And now I will -- now Michelle will continue this webcast with the segmental review.

Thanks, Marco. Now we'll talk through each of our product lines, starting with EV charging on Page 4.

In EV charging, we saw revenues of EUR80.1 million, which is up 1% year-on-year, and an adjusted gross margin of 38% which is in-line with our expected gross margin range for our EV charging business. This is lower than last year for the same period primarily driven by mix due to a larger share of mid-range home product -- home chargers, which is our S-line.

We also generated 60% of revenue internationally, which is consistent with the same period in the prior year. Overall, for the EV market we see variability country-to-country, with momentum in countries such as Belgium and France and less so in Germany, where the market is more challenging.

And in general, we have seen the EV market slow with only 2% growth in registered EVs in first half of 2024 for Europe compared to first half of 2023, which we previously communicated in June. And we maintain that view as we move through Q3, where we expect revenue to be slightly below Q2.

This is a segment with less visibility compared to our other product lines, and while we have secured public tender wins with volume into the future, most of our business is slow and we still have order intake to secure that will convert to revenue in 2024. Longer term, we still see a positive growth trend for EV, expecting a CAGR of 15% to 20% from 2023 to 2030, and a likely acceleration again in 2025.

As we move to Page 5, we'll talk to Smart Grid Solutions. In Smart Grid Solutions, we achieved EUR93.5 million revenue for first half of 2024, which is a year-on-year increase of 9%.

This is supported by our grid operator and private networks business. And while in Q1, we saw 18% year-on-year growth, Q2 was impacted by lower production quantities due to our production stop and ramp-up related to the moisture issue with Alfen's Pacto substations.

Our adjusted gross margin was 27%, which is on the low end of the 25% to 40% range. This is really driven by inefficiencies in our process due to the moisture issue and an increased share of revenue from the grid operators.

In addition, a short update on the moisture issue. We have three workstreams: we have new builds, we have rebuild of existing stations that are not installed in the field yet, and substations that are installed in the field.

Our first workstream and first priority was to get production up and running on our new builds, which we have done. And what we'll focus on for the rest of the year is continuing to optimize our processes for those new build concrete stations.

The second workstream is to rebuild substations not yet installed. For these stations, we have spread that work out from now until Q1 of 2025.

This also allows us to put the priority on building the new stations in Q4. Then for the third workstream this is the on-site repairs.

In this workstream, we have executed some repairs on site, but this work will also run into next year. Overall, we're using Q3 to ramp up so that we can be at our anticipated capacity of 100 stations a week in Q4.

Now let's move to Energy Storage on Page 6. In Energy Storage Systems for first half 2024, we saw revenues of EUR72.2 million, which is up 23% year-on-year and does include the large project milestone that was delayed from Q1.

The strong first half growth in first half is due to 2023 being heavily back-end loaded. And in 2024, we see more equally distributed revenue relative to 2023.

But we still expect Energy Storage to be down 20% for 2024 overall and we expect Q3 to be in line with Q1. Our gross margin was 22%, which is as expected and supports Alfen's ability to realize medium-sized utility-scale projects that are able to maintain a fair gross margin.

We did close the four open deals we communicated about at the end of June, and currently have sufficient backlog to support our Energy Storage revenue guidance for 2024. At the end of Q2, our backlog was EUR72.4 million contributing to both '24 and '25 revenue.

And just for context, as of mid-August, we have EUR88.3 million in backlog. In future quarters, we will continue to share our quarter ending backlog for the Energy Storage business.

In terms of market, while we had seen some deal delays as we communicated in June, we do still see momentum in our funnel, with a considerable increase of qualified opportunities compared to this time last year. As we move to Slide 7, we would like to share a sample of our commercial successes that reinforced our position across all three of our product lines.

This is again a mix of new and existing customers. First, in EV charging, we continue to see wins with existing customers across Europe, first, in the public charging space with OpCharge, and also saw two wins in our business segments supporting parking applications with EFFIA and Drivee.

In Smart Grids, we secured strong wins in adjacent segments, first with a new customer, TEC in Belgium, which is to support grid connecting their e-bus stations. Then we also supported our existing customer, Enexis, with a 10kV distribution transport station.

This is outside of our standard contract, and we hope there will be additional supply to Enexis in the upcoming years. We also continue to support an existing greenhouse customer with their substation needs.

In Energy Storage, we secured wins with Rabbalshede, also a new agreement with Ellevio and a project with Odura for a system here in the Netherlands. As we move to Slide 8, we'll share a short update on some recent innovations.

First, in Smart Grid. We are partnering with one of the local universities and grid operators to further investigate developing a solid state transformer substation.

This would really be a significant development in substation design, which would allow the grid operators more nuanced grid control capabilities than they're able to get today with traditional transformer design. Then in EV charging, we're the first to have both core and advanced security in OCPP 2.0.1.

And as you know, Alfen was one of the originators of OCPP. So we're very happy to continue to be supporting this protocol development and be one of the first to help continue to support this protocol in the market.

And in Energy Storage, we also have a first in regard to our mobile storage systems. We were the first mobile storage system provider to have a fire propagation certificate for our Mobile X product.

And now, I'll hand it to Onno to continue with our financials.

Thank you, Michelle and good morning, everybody. Before I go into the details of the financials, I would like to state that I feel honored that the Management Board and Supervisory Board members have asked me to join the Statutory Board of Alfen.

I'm convinced that we as a team are able to position Alfen for the next phase of profitable growth. I'm also looking forward to work with all of you on the phone to present Alfen's performance in a clear and transparent way and to learn from your feedback.

And now back to the financials on Page 9 of this webcast. I would like to start with some comments on our H1 P&L performance.

Revenue increased by 9.7% from EUR223.9 million in H1 2023 to EUR245.7 million in H1 2024, driven by Smart Grids and Energy Storage, while EV charging revenue essentially remained flat. Gross margin dropped from 30.5% in the first half year of 2023 to 22.3% in the first half of 2024, mainly driven by significant one-off items related to the EUR12.5 million warranty provision for the moisture issues on substation including our Smart Grid Solutions business line.

The usage of this moisture provision in the first half year of 2024 was EUR1.1 million. In addition, we took a EUR3.6 million provision for inventory obsolescence in the EV charging business line, which was booked as a reduction of inventory.

Gross margin adjusted excluding one-off costs stands at EUR71 million, which is 28.9% of revenue versus 30.5% in prior year half year. The decrease as compared to the first half year of 2023 can be explained by the shift in our business line mix, among others, from EV Charging Equipment to Energy Storage Systems.

In addition to the mix effect between product lines, we've also seen a product mix variation within two of our product lines. In EV charging, we saw a higher share of S-line units versus last year, which have traditionally a lower margin.

For Smart Grid Solutions, we’ve seen an increase in the share of substations slotted towards grid operation -- grid operators, which have a somewhat lower than average margin versus specialty projects. In addition, we have seen inefficiencies in our production process related to the moisture issues as well as additional cost to the steel reinforcements of our concrete.

Personnel increased by 22% from EUR42.6 million compared to EUR34.9 million in the first half of 2023. Alfen grew from 931 FTEs at December 31st to 1,059 FTEs as of June 2024.

As previously indicated, the organization has outgrown the revenue performance, and we therefore are taking actions to right-size the organization. EBITDA decreased significantly from EUR2.4 million positive in the first half year of 2023 to EUR3.8 million negative in the first half year of 2024, driven by the impact of the provisions on our margins, as well as the increase in our cost base.

Adjusted EBITDA amounted to EUR13.5 million, a decrease of 36% versus EUR21.1 million in the first half year of 2023. Higher gross margins due to the increased revenues were more than offset by increases in our cost base.

Please turn to the next page for some detail on the EBITDA adjustments. EBITDA adjustments in the first half year of 2024 amounted to EUR17.3 million versus EUR0.7 million in the first half year of 2023, and comprised of the provision from moisture of EUR12.5 million and a provision for obsolete EV charging inventory of $3.6 million.

EBITDA has also been adjusted by EUR0.9 million for a relatively small restructuring event focused on a limited group of people during H1. In addition, EBITDA has been adjusted for share-based payment expenses for $0.3 million associated with the long-term incentive plans.

Net profit is a negative EUR11.1 million and adjusted net profit is EUR1.9 million, and a net adjustment of EUR13 million seems to be the same adjustment previously discussed, but now corrected for the tax effect. Share-based payments are not tax deductible and have therefore not been adjusted for tax.

Please to the next page for some comments on the balance sheet. Before diving into the balance sheet, it is important to realize that the balance sheet movements from the 31st of December, 2023 towards June 30, 2024, are affected by three relatively large events.

One -- the first one is the commissioning of our new headquarters and manufacturing facilities as of Q1 2024. The construction of this building was financed by a loan to our constructor, which was converted into a lease agreement as soon as the building was commissioned, affecting the balance sheet in at least four different places.

Second, working capital movements, which I’ll explain on the next page in more detail. And three, additional tax entries with respect to payment of taxes over 2023, as well as tax refunds outstanding based on our current loss position.

Since there are quite some variations, I would also like to refer you to our semiannual report, which presents the balance sheet movements in quite some detail. And now we'll go over some of the changes on the sheet that you see in front of you.

Our non-current assets increased by EUR38 million, of which EUR20 million is related to the commissioning of our HQ and manufacturing facilities. In addition, capital expenditures amounted to EUR15.6 million as compared to EUR20.1 million in the same period in 2023.

The additional CapEx in H1 2024 includes investments for our new production locations and offices, and basically contained the leasehold improvements. Furthermore, investments were made in IT infrastructure, data security, as well as in molds for our Smart Grids business-line.

With respect to current assets, they decreased by EUR50 million, of which EUR30.6 million is related to inventory, including stock downpayments, and EUR25.7 million related to the settlement of the previously amended loan we provided to our contractor. These two amounts are partly offset by the delta for the current tax receivable.

On the non-current liabilities, they increased by EUR38.5 million, of which EUR26.9 million is related to additional lease obligations for the lease of our building and some other equipment. The remaining increase of EUR11 million is related to the additional provisions for the moisture issue.

EUR12.5 million total provision, of which we used EUR1.1 million already for doing repairs. On the current liabilities, they decreased by EUR57.2 million related to 3 items.

One is -- the first one is a EUR30 million reduction of our accounts payable, which we will also discuss on the next page; a EUR3.1 million reduction of current tax liability, as we paid our taxes due and EUR23.2 million reduction in loans for buildings that we repaid to the bank when the contractor repaid the loan that we provided to him. Bank overdrafts increased by EUR17.8 million as we draw on our revolving credit facility.

Please go to next slide for some comments on the working capital. This is a new slide that we present to you which gives some more insight on our working capital movements.

Inventory plus down payments decreased by EUR30.6 million versus December 31, 2023. EV charging inventory has been reduced by EUR13.5 million, including the EUR3.6 million inventory provision that we took towards the end of H1 2024.

SGS inventory increased by EUR9.5 million as production delays caused component inventory to increase as expected substation output was not achieved, but previously ordered components continued to be received in our warehouse. ESS inventory came down by EUR26.7 million as some large battery projects were shipped towards the end of Q2 2024 and are allocated to projects.

The current tax receivable increased significantly compared to 31st of December 2024. This is completely related to the reversal of provision income tax prepayments for fiscal year 2024 in conjunction with the recognition of the taxable loss realized in the first half year of 2024, as a current tax receivable, in alignment with carry-back principle.

Regular trade and other receivables improved, and therefore, decreased by EUR8.8 million, which is EUR4.3 million plus the EUR4.5 million you see under this heading. This has been partly offset by the increase in amounts due from customers for contract work, which is related to the net balance of individual customer projects.

We have accumulated more work in process than we have actually been able to invoice. Trade payables decreased by EUR30 million as a result of cut-off timing effect on the reduction of customer prepayments for contract work that is related to the net balance of individual customer projects.

We have invoiced a higher amount due to milestone payments than we actually performed on the project. Tax liability has been reduced as we paid our income taxes.

This ends the financial part of the presentation. I will now hand back to Marco for some final comments.

Thank you, Onno. On Sheet 13, we will continue with the outlook, where we can see that last June, we updated our full year 2024 outlook and guidance.

We still expect the full year revenue to be in the range of EUR485 million to EUR520 million. The adjusted EBITDA margin for 2024 is expected to be mid-single digit, and we expect the free cash flow to be negative, but improved compared to the EUR27.2 million negative of last year.

A preemptive waiver from the bank has been obtained for Q3. And in Q4, we will plan to finalize constructive conversations with the bank to conclude an updated covenant.

This updated covenant will be based on a revised business plan, in which our organizational rightsizing effort has been taken into account. Related to the organizational rightsizing, we expect one-off restructuring costs to occur in H2 2024 with cash outflow mainly in Q1 2025.

The extent of those costs is dependent on the outcome of the revised business plan and organizational rightsizing project. The long-term market development for all of our business lines are positive, and we will continue to anticipate on further growth of our three business lines, and we plan to further invest in a balanced manner in our people, production and innovations.

Before handing over to the operator for your questions, I want to anticipate one of your possible questions and pre-answer that based on the just mentioned four aspects, being the free cash flow development, the constructive conversations with the bank, the rightsizing projects, and a positive long-term market outlook, and you can state that we don't see a need for a capital raise in the foreseeable future. We are now at the end of the webcast.

Moderator, can you take over and open the line for questions.

Yes, good morning. Thanks for taking my questions.

I just had two for now. Just regarding the discussions with the banks regarding the covenant waiver, what are the key elements of the revised business plan that you expect to influence negotiation of the updated covenant in Q4?

That's the first question. And just secondly, on basically your cost base.

I think if my math is right, I think the operational costs were up about 20% year-over-year in H1, where sales were up 10%. I think in Q2, it was still about EUR30 million in OpEx.

So I was just wondering how much is still affected by inefficiencies, let's say? And what do we have to work with for our modeling as of H2?

And maybe could you talk a bit more about sort of savings you've achieved in travel, procurement costs? And what your policy is on hirings?

Thank you.

Yeah, thanks for your question Ruben. This is Onno.

So as discussed, we started the discussion with the bank end of June. It was -- has always been the intention, as all we know, the line of discussion that we will do this in a two-step process, one to obtain a temporary waiver for the Q3 breach of covenants.

And as you know, we withdrew our mid-term guidance by the end of June. And the bank, of course -- and logically said, we want to kind of continue the discussion with you on a kind of a definite financing arrangement as soon as the new mid-term guidance has been established.

We just started also with an external party to develop -- help us develop a new midterm plan, which includes an organizational rightsizing effort. And from that perspective -- I mean that does -- so basically the new kind of organizational base that we expect to implement by 2025 is, of course an important input for the discussion with the banks.

And at the same time, of course, growth rates, profitability rates, et cetera, which will be part of our midterm plan, is also input for that discussion. On the operational cost, I mean, of course, when you have to do an adjustment that we -- as we made by the end of June -- and you right away take a number of actions to make sure that you save as much money as possible.

So we very, very carefully look at our hiring process and went to a very -- scrutinized, more or less, every open vacancies that we -- open vacancy that we have. And we have a very strict policy currently in place if -- for anybody to be hired, that automatically helps to contain cost from a travel expense perspective.

Of course, you take a look at those. You can't take a look at every discretionary cost.

But in the end that is relatively limited impact that you can still make in the second half of this year. Of course, a couple of millions, but not a whole lot more than that in order to really get to the appropriate savings that we feel that we need.

There is -- you have to do somewhat of a reset of where you want to be and what you want to -- and how you want to look at your organization. And that's exactly what we're doing at this moment with outside help.

Okay. Thank you.

And just one additional question on the Smart Grids. I think with the moisture issue, you talk about three separate workstreams.

Can you sort of share the expected, let's say, time line for completing the rebuilds of existing stations and then the repairs on the substations in the field? That would be helpful.

Thank you.

As already maybe indicated in the webcast by Michelle, I have said the first priority is to have production up and running for the exist for, say newbuild station. And that means also that we, more or less have started rebuild of, say, some stations that have not been installed and also the first repairs on site.

But it will run into the -- also 2024 and 2025. We do that in a timely manner also, not just say, the system -- the process of it with our customers.

But where we may be in April anticipate, okay maybe we'll do a quick repair. We now we came to the conclusion that it is more timely to spread it out in time to have a good alignment on what is necessary, in which timing to execute that.

And that will be -- some of it will be this year, but also a big part will be next year. There is also more the discussion about the provision we have, where we now use a bit over EUR1 million of the provision to be able to compensate elements that we have now executed.

We will deplete that provision in line with the execution of the works. Therefore, also a bigger part of that money will also be spent in next year when we do say, repairs on site or rebuilds of, say damaged -- or not -- fully up to quality substations.

Okay, thank you very much.

Yeah, good morning. Thank you for taking my questions.

I have also two left. So on the restructuring measures, I just wanted to ask if you intend to review also your targeted markets?

And could this also lead to divestments or a step back of certain underlying markets? And my second question is regarding the waiver.

I understood that you will continue to renegotiate after the mid-term targets in November? And do you also intend to switch from EBITDA to net -- to adjusted EBITDA in your leverage definition with the bank?

Yes, Nikita, I'll take the restructuring one. So I think as part of our strategy validation, we'll obviously look at all markets, the markets we're currently serving, and make sure that we align ourselves to best serve where Alfen can add the most value.

So I can't comment beyond that. But of course, we will be looking at how do we best have the right product market fit for the future.

And I'll take the question on the waiver. I think in a previous call, I already expressed a little bit of my surprise on the fact that we were talking about a reported EBITDA and not on an adjusted EBITDA.

I think that's not very common in the market. At the same time -- I mean, when you negotiate, you are trying to talking to two parties.

But at least our starting point will be that we will start using an adjusted margin -- adjusted EBITDA to calculate the covenants.

Okay, thank you.

Hi, good morning everybody. I've got two questions, please.

First question on the rebound of activity levels. How quickly do you expect revenues in EV charging, and as a result, also battery prices and revenues in Energy Storage to recover on the back of the launch of a range of more affordable electric vehicles next year?

And the second question is on the balance sheet and the covenant waiver. Given this recovery that you anticipate for 2025, how long do you expect that you will need the waiver?

Is that a maximum of 4 quarters until the first half -- until the end of the first half of next year? And given the fact that you didn't pay for the temporary waiver in Q3, what should we anticipate for potential additional interest costs for the remainder of the period that you will need a covenant waiver?

Thank you very much.

Yes. So let me start with the market piece.

I think what we'll start to see is some of the recovery in 2025, but it will really depend on the segments. And like we're seeing France and Belgium have some momentum this year, Germany, not as much.

So I think as more lower-priced EVs come on to the market that it will continue to drive demand. And there is been some good reports published recently that really talk about kind of we're at this bottom and should see another trend up 2025 to 2030.

So we're positive in those long-term growth trends, but I think it will vary segment-by-segment.

Maybe as a follow-up on the outlook for EV charging. Your guidance implies a rebound to double-digit growth in the second half of the year.

Is that based on a recovery from last year's destocking? Or is that already based on an expected market recovery ahead of launch of new EVs?

No, it is more based on the comparative basis. And we're seeing Q3 be a little bit lower.

We have gotten some public tender wins, and so we're definitely seeing growth there. But I wouldn't underpin it by the market is coming back yet.

Okay. Understood.

And maybe on the covenant waiver?

On the covenant waiver, yes. To be quite honest, I mean, we didn't start the discussion on covenant solution yet.

As we said that we are going to make that -- align that with the presentation of our new adjusted guidance. So I cannot tell you anything about cost or additional interest cost.

What I can say is that there are potentially two routes to kind of do this negotiation. One is, to your point, I mean do we need continued waivers on the existing credit facility?

Because of the fact that the covenant is calculated based on the last 12 months calculation, the results that are -- that we're currently seeing are normally included in the calculation. Or are we sitting together with Rabobank and discuss kind of a completely new facility agreement with -- kind of to -- and also in line with the previous question, where we can -- we will be able to use an adjusted EBITDA type of a calculation.

We haven't discussed the approach on that one yet. But those are the two routes that I currently see to basically resolve this issue.

Understood. Thank you very much.

Yes, I think I also got a question for Onno. So Alfen currently has only one bank relationship with Rabobank.

Is that correct?

That's correct.

And in the new plan is there also, let's say, planning for more diversification?

That's currently something I don't really want to answer.

Okay. Because I agree that it is quite uncommon that you have the covenants as they are, so that this is even a bit of a surprise.

I have a follow-up on that. There is a correction on the reported EBITDA from capitalized R&D costs, which I thought I read in the press release.

It was EUR5.4 million in the first half. Is that correct?

Yes, we can -- part of the covenant calculations that we can capitalize, maximum 20% of our EBITDA as part of -- as part of the covenant calculation. And that hurts if your EBITDA is relatively low.

Yes, I can imagine. Okay.

And that is, of course, also on an LTM basis is also impacting the second half '23. Okay.

Are there any of this kind of adjustments needed for the net debt position?

What do you mean by that?

Yes, I don't know, because it's -- has Rabobank come up with some other adjustments on the reported net debt that we have to take into account if you look at the covenant calculation?

No, no.

Okay. Okay.

That's clearer for me. And then one follow-up.

I think also -- Ruben also touched upon it. The employee costs do not really contain one-off items.

So it's just more an effect of ramping up the organization too fast in previous quarters. Probably some wage inflation that--.

There are certain costs that are growing. I mean, in times of relatively high inflation and relatively high interest rates, that automatically basically leads to an increase in cost.

But I think the major driver is that the organization has been preparing for growth, and that growth is not coming as fast as we had hoped it to be.

Okay, clear. Thank you.

Good morning everyone. Looking at the gross profit margin for Smart Grid Solutions, you reported 27%.

This was excluding the adjustments. This is rather at the low end of your guided range.

If we look the ratio between public and private, it's kind of important. You mentioned that public was relatively strong.

Are we right now back to the two-thirds public, one-third private level? And is the current level that you see a sustainable ratio between public and private?

I think we have -- I don't have the numbers directly at hand. But if you see -- more or less, in this whole year, we see, more or less that in the first quarter, we had a relative high number of, say, grid operator revenue that went of course, down in second quarter.

The third quarter will be, more or less close to what we did in the second quarter, because in say, the first weeks of the third quarter, we were not able to ramp up because we had limited, say, concrete elements available because we had not been able to build -- I got a safety stock for the close down period as the company's manufacturing needs in summer to accommodate holidays and also to accommodate big maintenance elements in it. So in the third quarter, our revenue will not be fundamentally higher than the second quarter.

And the fourth quarter, we see a ramp up. How then the overall value in between, say projects and grid operators will play out, we have to see how that runs out, that number.

But you have to bear in mind also that, say, in the second quarter, say all that extra cost we needed to include in the new stations to be able to cope with the degreaser elements, those are also into the say, cost levels. That means also they have an impact on our gross margin in the second quarter.

But for the additional costs related to the moisture problem, therefore, you do the adjustment. And that's not included in the 27%, correct?

Right. Say, the rebuild is being paid out of the provision.

Some of the extra costs inefficiencies, the hired labor, they are still in the cost level.

Okay. And can we expect those additional costs to maintain in the second half of '24?

Yes.

Okay. That's clear.

And then a second question is looking at Energy Storage Systems. In June, you reduced the outlook significantly.

If I'm not mistaken, there were around four projects of a combined value of around EUR80 million that seems to be pushed towards 2025. If I look at the current backlog and the current revenue expectations, I'm a little bit puzzled.

It seems that kind of backlog for 2025 has been decreased. Did I misread something in June of the pushout of the EUR80 million projects?

Or --.

Yes. So we had projects that pushed out.

But then we also communicated we had four deals still to close that would contribute to 2024. So we've closed those four deals.

And that's what you've -- in the backlog mid-August. That EUR88.3 million, that is inclusive of those three deals.

That does not mean all of those deals will be 100% revenue in 2024, but we'll hit a major milestone. So we've accounted for that.

Some of them will be completed in '24 and a couple of projects will still have final acceptance test and finalization in Q1, Q2 next year. We do have sufficient backlog to support our revenue guidance for Energy Storage for 2024.

Okay. And then maybe a final question within the EV charging.

How do you see that the inventories of your customers are evolving?

We feel we're in a normalized situation. So if we think about the destocking that we had in previous years, we're through that.

We might have one-off customers whose business model is such that they're carrying inventory, but that's an exception for us. It feels normalized again.

Okay, thank you. That’s all for now.

First a remark. In the accounts, I see you label your provisions as non-current, while I think they should be labeled current.

But that's just an administrative remark. More relevant, maybe can you make a bit more explicit your revenue guidance for Q3 per segment?

Secondly, you are indicating the ramp-up scheme for Smart Grids from 37 stations-- substations per week right now to 100 by end of Q4. But roughly where do you aim for at the start of Q4 in terms of run rate already?

Third question is on Energy Storage. Can you provide us with a split of the EUR88 million backlog remaining for '24 and what's reserved for '25?

And then I have a couple of other questions primarily related to the restructuring.

Yes. So Thijs, let me start with the revenue guidance for Q3.

So what we're expecting in EV charging is that Q3 will be below Q2, and then we should see a pick up again in Q4. In Energy Storage, we're expecting Q3 to be in line with Q1.

So again, in Energy Storage you'll see Q4 as the stronger quarter in the second half. And then in Smart Grids, Q3 will be between Q1 and Q2, with Q4 obviously being the strongest of the year.

Yes.

And I think from the 37 to 100 stations ramp, you can assume a straight line. And so you can extrapolate where we should be at the beginning of the quarter as we go into Q4.

And then in terms of the backlog split, I can say that there is a split, and we've got sufficient backlog to cover the guidance for this year.

Okay. Then on the restructuring, let's say, cutting 10% of your staff base and giving each of them, let's say, an annual salary will cost you something like EUR7 million, EUR8 million.

On top, you will have to pay the consultants, probably also single-digit millions. So is it strange to assume, let's say, EUR10 million of restructuring costs in your view?

And on top, you probably will have to pay an extra fee to your bank. We'll have to see there.

I had one question. Can you provide us with CapEx guidance for the second half?

You talked about OpEx, but what kind of CapEx should we expect in the second half?

I can maybe start with the last question. There will be some CapEx elements like, for example, two new molds for the complete manufacturing of substations.

They were already planned, but they arrived at the concrete manufacturer in August. And that means that in that way they -- of course, they will be shown in the figures in CapEx also in the third quarter.

And the same is with some other facilities. With our ramp up, we also of course, have some equipment that was an addition to what we already have.

We have no plans for fundamental big investments in CapEx other than say, the development cost. But also to one of the questions related to that, we are now limited in that one also with respect to our covenants.

And say the other elements of the restructuring and -- what we try to say is we want to have a balanced approach. And we also – it is like complicated to make a proper assessment of what might be a provision.

Therefore, we really need more or less, a translation of where we want to do some elements of, say, rightsizing. And bear in mind, we also have to see -- we have also quite a high number of, say, contracts which are limited in time.

We have, say hired people that are not yet, say on our own pay list. So it is not a straightforward picture that we have a straightforward running business, and therefore, we also can recalculate the provisions easily.

That's why we need a little bit more time, also to make the translation also of our, say, strategy reassessments, what are relevant growth percentages or no growth percentages, where are we in the right competitive position to be able to benefit from the market development, and then assess, more or less, the direct translation of the operational cost for us and also the personnel costs.

Yes. And then maybe a slight addition to that, we plan to have the parting in such a way that we expect to take a provision towards the end of this year.

So it will hit our P&L this year. Most of the cash outlay will be next year.

And to basically use your non-current provision comment, I don't want to get into an accounting debate with you in this call, but it's a good opportunity to indicate and make clear to you that -- and we took the provision of EUR12.5 million. We have used EUR1.1 million of that already.

We expect to still use some of that provision in the second half of this year, but not too much. Most of the work will actually be done in 2025 and probably even beyond.

So the cash outlay out of this provision will be spread over time. And therefore, it's classified as non-current.

Okay. Then maybe a final one, because you mentioned so many numbers at the same time.

Can you maybe simply give a split up of the current inventory per business segment?

We have EUR35 million for Smart Grid Solutions, and that is an increase of about EUR9.5 million versus December '23. We have EUR56 million in EV charging versus EUR69 million -- EUR69.6 million in December '23.

So that's minus EUR13 million -- EUR13.5 million. And we have EUR52 million -- EUR52.5 million of Energy Storage.

It was EUR79 million by the end of the year. So that's a decrease of EUR26 million.

So the overall decrease in inventory was EUR30 million.

Great. Thanks.

Good morning all. Just one question for me just on the EV charging guidance.

Obviously, you're saying the third quarter should be a little bit lower than the second quarter, but you maintained the 5% to 10% growth range for the year. And also you commented that EV registrations in Europe were at 2%, which is obviously quite low.

So you are looking for a large fourth quarter. Can you just provide some commentary around why you had some confidence that the fourth quarter will pick up?

And in particular, if you could provide commentary around what percentage of the EV charging guidance is covered by backlog? Thank you.

Yes. Yes.

So we definitely see registrations down. And I think what we shared at the end of June, there is a bit of a lag in terms of how that plays out in the market, which is why we think kind of end of Q4, heading into 2025, we might see some of that play.

And then over the course of '25 things will pick up again. So yes.

We also have had some public tender wins and we've got some backlog and order intake that we've already gotten tied to those wins, and we've got line of sight to other parking projects. So for us, it's really driven by business in public.

And that is primarily what's driving the pickup in Q4. You broke up a little bit.

So I think I answered your question. But if I missed a piece, can you repeat?

No, you did. That was very clear.

Thanks Michelle.

Good morning. It's Maarten Verbeek of The Idea.

Firstly, you mentioned that you would start to produce at year-end more than 100 substations. Does this include the production from Elkamo as well?

And then secondly, since those substations will become much larger, also a bit more expensive -- in H1 on average the prices were some 10% higher -- is that a good run rate to use for next year? Or should we envisage that to be even a bit higher?

And then lastly, you're going to take a restructuring provision in H2. What kind of -- although you haven't mentioned it, but what kind of earn back period do you expect to make on such a restructuring charge?

Earn back period. Thank you.

Maybe the first with Smart Grids. I think if you see the average price level this year, you can use that one also for next year.

Maybe a little bit, say, elements of price compensation that will be executed next year. But due to -- there will be a lag because that will only be effective of orders that will be -- also be given into next year.

So our prices will be quite close and relating to the number. That's excluding Elkamo.

And on the earn back period, to be quite honest, we haven't made that calculation yet. But based on past experience, if you do a restructuring like this and an organizational rightsizing, the payback period is less than a year.

Thank you.

Thank you, Laura. I would like to thank everybody for participating in this webcast and also the questions.

And that gives us then also the opportunity maybe to clear up on some elements that might not have been clear in the first instance. I hope also that we've been able to give you as good as possible insight on what we're doing and also to give a clear indication what our steps are in the coming months to come up with, say the support of our say, next step in our profitable growth strategy.

And I’d like to thank then now everybody for participating and hand you -- hand back to the operator to close the call.