Zaptec ASA

OSE:ZAP

Earnings Call Transcript

[Peter Bardenfleth-Hansen, executive]

Good morning, and welcome to Zaptec's Q1 2022 report. My name is Peter Bardenfleth-Hansen, and I'm the new CEO for Zaptec.

Before we get started, I just wanted to have a very quick comment that this quarter has been obviously geopolitical one with lots of tensions and it has been one where global component shortage has been dominating most of the world. However, Zaptec has performed rock solid through this quarter. And the numbers that we present today will definitely be showing that fantastic, amazing travel that we've been able to achieve despite these adversities.

So we'll dive straight into it. Before we do that, I just want to say that if you have any comments, any questions, you can write them in a chat, and we'll be answering those in the Q&A after the presentation.

So as just alluded, we have now had a cumulative sale of 110,000 charging stations sold. We've done this through six sales companies. More to come in the next couple of quarters. We've increased our order intake with a record high 164%. Our export share has also risen up to now 68%. Our employee platform has also increased more than -- almost 20% since Q4. And there are over 4,000 parking spaces that are now ready to be taken on Pro chargers in the near future.

Our highlights for Q1 '22, as just alluded, strong purchase orders, registration of NOK 193 million, which is up 164%. This is a record high number of order intake. Our revenue growth of 81% despite temporary component shortage, our export share of 68% and a really strong gross margin of 46%. Adjusted EBITDA of NOK 9.1 million. And we are maintaining our trajectory towards our previously announced strong growth projections. And also, and very importantly, I'd like to say that we've made significant investments into our agile organization.

[Kurt Ostrem, executive]

Yes. My name is Kurt Ostrem, CFO in Zaptec. Going through some key numbers.

As mentioned, the revenue was NOK 132 million in the first quarter. This is up from NOK 73 million in the first quarter last year and is an increase from 81%. The export share was 68%, up from 39%. And the gross margin was 46.2%, up from 33.3% in the first quarter last year.

The operating expenses was NOK 51.9 million, up from NOK 18.4 million. But I have to say that the operating expenses is at the same level as the fourth quarter last year and is as planned.

The adjusted EBITDA was NOK 9.1 million, up from NOK 5.5 million in the first quarter last year. And this gives EBITDA margin for 6.9% compared to 7.6% last year.

If you look at the quarterly revenue, you see that the fourth quarter last year was record high with NOK 193 million. This was due to that in addition to the sales in the fourth quarter will also empty the backlog from the third quarter. So if you look at the first quarter this year, the backlog is now NOK 60 million, and this is the same order intake as the revenue in the fourth quarter, a record high. And if we had managed to deliver this backlog, this will give us an extra gross margin and EBITDA for NOK 28 million, and we will then have an EBITDA margin for 19% in the first quarter. This is very strong. The available liquidity at the end of the first quarter was NOK 313 million.

[Peter Bardenfleth-Hansen, executive]

EV markets in Scandinavia and Switzerland have seen a decrease of 25% in Q1 '22. However, that has to be seen in the light of an increase year-on-year of 10% comparatively to Q1 2021. We're also seeing EV markets in U.K. and Germany having reductions, not quite as high as Scandinavia and Switzerland but of 17%, but it's still a 22% increase on Q1 2021.

International expansion is going very strongly for Zaptec. Our export share has now risen to 68%, which is almost 30% higher than Q1 2021. Our largest export markets remain Sweden, Denmark, Switzerland and Iceland.

[Kurt Ostrem, executive]

We managed to prepare a total of 1,470 car parks with the Zaptec Pro chargers during the first quarter. This is up from 844 car park inflation at the same quarter last year. When we talk about car parks, we talk about public parking, company parking, residential building parking and so on.

There are several parking possibilities in each car park. There are typically 20% is equipped with the Zaptec Pro charger when we do the installation. As the EV demand increases, the car park owner can add multiple Zaptec Pro chargers to the same car park several months or years later. That means that we are building a backlog of Zaptec Pro chargers because this is the only charger who fits into the system. And we have already installed more than 11,000 car parks. And as you can see, several more coming on every day. And then we have secured future revenue from the Zaptec Pro chargers that we have already secured several hundred thousand Zaptec Pro chargers in the year to come.

[Peter Bardenfleth-Hansen, executive]

Market developments, these are a couple of examples of latest Q1 developments. There have naturally been more, but these are ones that we have highlighted. Toyota Norway announced to become an official supplier of Zaptec Go in connection with the launch of their neuro-electric or first electric car, Toyota bZ4X. We signed an agreement with Eways in the Swedish market. And both of the companies believe, of course, in the strong collaboration between, and the strengthening positions, in markets. Eways was founded in 2015 and has 85 employees and managed over 16,000 charge points. So very strong partner for us.

Zaptec Go home charger was awarded the 2022 Red Dot Design Award for Best Product design, something that I'm certainly very proud of.

[Kurt Ostrem, executive]

The production in the first quarter was lower than planned due to the component shortage. That lead to a backlog, and we estimate to deliver this backlog during the second quarter and also into the third quarter as we expect very high sales growth also in the second quarter.

The component sourcing continues to be challenging. But we -- but measures are taken, both technically by redesign of chargers, and on supply chain to prevent further production delays. The production capacity is very high and we secured that we will reach our growth targets for 2022.

[Peter Bardenfleth-Hansen, executive]

So our outlook, so as mentioned, regardless of the temporary delays in the EV deliveries, the EV market continues to grow backed by global commitments towards sustainable energy and a shift towards e-mobility. Production restarted last week of April, and Zaptec remains to maintain this very strong trajectory towards previously announced growth projections. Target EBITDA margin will be in the range of 15% to 20% for 2022.

We are now ready to take on some Q&As. So we will try and answer all your questions.

[Kurt Ostrem, executive]

So the first question is, how did Charge365 user numbers evolve?

We have a very nice development of the Charge365, high growth in users and installation. But unfortunately, we are still only offer this product in Norway. So we are now very close to go into other markets, but still it's only Norwegian market. I don't know -- I don't have the exact number for the first quarter just now.

The gross margin is still very high. What is the key driver? And what should we expect going forward?

As we told you in the last quarter presentation in Q4, it was extraordinarily high in the fourth quarter, and we said that we will reduce the price and take down the gross margin in the first quarter, and so we have done. We reduced the price in the end of the February. So we believe that the gross margin for the second quarter will be lower than in first quarter. But we still are aiming to get a gross margin above 40% as a total for 2022.

[Peter Bardenfleth-Hansen, executive]

We have questions in relation to our market expansions, European-wise and globally.

Now Zaptec has ambitions of becoming a global company. And those ambitions, we will and are following very strongly. We will naturally be seeking to open the European markets first. There are another 3 to 4 market establishments in the near future but we'll also be looking as a U.S. expansion in the near future.

And in relation to -- some have asked, in relation to Asia, that is exactly also one of the areas where we will be looking. Now we will be selling our products through our distribution channels as we've done in Europe. When we find that the markets are strong enough, we will be establishing those as core markets for Zaptec.

[Kurt Ostrem, executive]

Yes. So about the production, I think I don't see the question. No, I can -- so geographic expansion, as Peter mentioned, we're going into Netherlands, Austria, Italy this spring. And we have also established in U.S. for further expansion.

Back to the production. Production is back. We started production today, actually. But for how many weeks have you secured components for production? And have you okay visibility of coming components deliveries?

We have now secured the lack of components in a very high number. So we have a very good visibility, the next months, when it comes to production. And we plan for very high production from today. But as you know, the situation in the world is very uncertain. So things can happen.

So I cannot say that we have secured the production for the whole year yet because we do not have order components in stock, but we are working very hard to secure the production, and we believe the signal and what we know, we believe that we will manage to get the target -- production target for 2022.

[Peter Bardenfleth-Hansen, executive]

And a follow-on to the question in relation to our market expansions, and in particular, with our recent openings in U.K. and Germany, we are building up the teams there and the setup in both locations will be coming in to start giving yield towards the end of this year.

[Kurt Ostrem, executive]

So then a question from about revenue guidance? And do you think that NOK 1 billion is still reachable?

Our guidance is the same as it had been, that we say that we should have at least 70% annual growth every year. And we had also said previous that we are aiming from NOK 1 billion in this year. Of course, we are some behind when it comes to deliveries, as you know, as we have the backlog, but we have order and plan for production to deliver NOK 1 billion.

So I think the -- it depend on the production, if we're going to deliver this number. But we are still trying to take back what we have come back now in the first quarter.

[Peter Bardenfleth-Hansen, executive]

Yes. And just to reiterate what's been said by Kurt, production has started. So as we sit and stand and talk today, production is ongoing.

We have a question as to how far we are with our team in the U.S.?

We have not hired a country manager at this stage, but we are actively looking to find the right team to go into that very important market.

[Kurt Ostrem, executive]

And last question about production is that, yes, we have started. And yes, we ramp up very quickly because this is not a new production. This is an experienced team with West Control who have done this before. So we go back in full production from day 1, is the plan.

Can you -- could you please update us with respect the first sales in U.K. and Germany?

We started sales in December and January. So we have sales in U.K. and Germany, but we are focused on building up a strong team in both countries, building up installer network across the countries. So we have not the big sales number yet, but we have sales every week from both country.

And then a question about the growth -- growth rate in Norway compared to outside Norway.

To that, I can tell you that the growth outside Norway is stronger. We have a very strong signs in especially Switzerland, but also in Sweden, Denmark. But one of the reasons that it's a bit lower in Norway is that we have prioritized countries outside Norway when it comes to delivery.

So this is not order intake. It's invoiced and delivered chargers. So we have a positive development also in Norway, but we have prioritized to deliver some more outside Norway.

[Peter Bardenfleth-Hansen, executive]

The last one.

[Kurt Ostrem, executive]

Yes. How much revenue was from NovaVolt? Are you considering breaking up your report into segments?

Yes, we are looking in to do this in the future. So I cannot give you the number today, but that's something we will look into in the future to show you more detail about the segments and what -- how we do it in each country. Yes.

[Peter Bardenfleth-Hansen, executive]

But we can allude that the revenue from NovaVolt is very, very strong and is following the trajectory of growth for the Zaptec Group, perhaps even higher than the average Zaptec Group.

[Kurt Ostrem, executive]

Yes, it's higher. So it's very, very high numbers in Switzerland.

Yes, -- last question. One more. When we get the date for listing on the Oslo stock main list?

I cannot give you a date yet, but we are working towards to get uplisting in the fourth quarter, but we have to come back with the date when we are in a bit more prepared.

Yes. How have you been able to grow purchase orders intake 30% from last quarter, while EV registration are down 25% from last quarter in your main markets?

I'm trying to understand the underlying dynamic and it's mainly driven by market share gain. And are there some significant time delays between e-registration and charger installation? Could be in the Pro business.

Yes, have to say that we are very pleased with order intake. We have expand geographic. We have -- we are more people, both abroad and in Norway. And we have a very strong product range. We have -- and then today, installer get to know our product, they keep on buying our product. So we have just taken market share that we have the strong growth despite of this low number in EV registration.

[Peter Bardenfleth-Hansen, executive]

Yes. And I'd like to sort of add a comment there that one still has to have an eye on the fact that the EV registrations of despite down 25% on the last quarter is still considerably up on 2021. And yes, there is always delays in relation to the registration numbers and so forth. But as Kurt was saying, we are strengthening our market gain day-on-day. Our teams are growing. And so naturally, so will our intake be.

So there's no doubt that we will be able to continue our trajectory. So these are not just happy numbers, if you like, or anything like that, nor will we see that the Q2 or Q3, 4 will have reduced intake because you have a lot of registrations or a lot of sales in Q1. It's definitely important to note that the trajectory of EV adoption in the market, in general, both in Europe, but globally as well, is something that is -- will continue to grow year-on-year for the next foreseeable future.

[Kurt Ostrem, executive]

Yes. And if there is a delay between registration and sales of charger installation, that will be the same each quarter. So this is comparable.

Are your financial guidance for 2022 still standing? Or did you skip the guidance for the year due to component shortages?

As I said, we stand with the guiding. We have a bit behind when it comes to delivery, but we are in order intake, in line. So we still believe that we should manage to ramp up the production and reach our goals for 2022.

[Peter Bardenfleth-Hansen, executive]

It's also not wrong to communicate that through Q1, we've had several days where we've set record sales on 24-hour cycles. Yes.

Well, if those were the last questions, I don't know if we have any more coming in?

[Kurt Ostrem, executive]

No, just like that.

[Peter Bardenfleth-Hansen, executive]

We would like now -- go. Excellent. So we would like to thank you, guys. And if you have questions and so forth, you're always welcome to write us. Thank you.

[Kurt Ostrem, executive]

Thank you.