Alfen N.V. (ALFEN) Earnings Call Transcript & Summary

Hello, and welcome to Alfen 2021 Full Year Results. [Operator Instructions] I will now hand over to your host, Marco Roeleveld, CEO of Alfen, to begin today's conference.

Thank you, Stefano. Good morning, and welcome to this Alfen's Full Year 2021 Webcast. Let me firstly introduce the participants on our side. This webcast and the questions that may come forward will be handled by the Management Board of Alfen, Jeroen van Rossen, CFO; Michelle Lesh, CCO; and myself, Marco Roeleveld, CEO. Despite the impact of COVID on the whole society, the wider economy and everybody's well-being, we are proudly presenting the results of Alfen for the full year of 2021. We, as a company, are confident that in the course of 2022, we will be able to leverage on the increased European focus on the energy transition, although the supply chain is still challenging. Assuming you've noted the usual disclaimer, we can now start with the presentation. First, I will start with the highlights of 2021, then Michelle Lesh will continue with setting the stage for further growth and in the last section of this webcast, Jeroen van Rossen will go in more detail on the financials and the outlook for 2022. We now can go to Sheet 4 with the financial and commercial highlights of '21. Our revenue in 2021 has risen to EUR 249.7 million. This represents a growth of 32% compared to 2020. The adjusted EBITDA in 2021 came out on EUR 36.8 million. This is a growth of 51% compared to 2020. Also in 2021, we continue to our strong growth with existing clients of Europe and imported new client wins. Some examples will be addressed in more detail later on in this presentation. As proof of the growing momentum in the energy storage market, I would like to mention the contract with Agreco Products, where we provide -- where we will provide 3 stationary storage solutions, including grid integration as well as for mobile energy storage systems. By actively managing our supply chain, we continue to safeguard supply deliveries, and where, above all, we prioritize deliveries to our customers. With regard to the revenue outlook for 2022, our projected range is EUR 330 million to EUR 370 million. This revenue growth is driven by the growing momentum of the energy transition and especially for EV charging and energy storage, we project strong revenue growth. We reconfirm our strategy of profitable growth and our ambition to strive for the medium-term objectives, as stated at the IPO in 2018. We can now go to Sheet 5 with the revenue split. As already mentioned in the highlights, overall revenue has grown with 32% in 2021. For Energy storage, the revenue growth was limited and amounted to EUR 17.7 million. However, we saw the battery energy storage market picking up momentum after COVID-19 headwinds. With markets being less effective, we see momentum getting stronger and stronger, and we have seen our qualified lead pipelines grow strongly in 2021. An example for the improved market condition, I can refer to the U.K. where the government simplified planning permission processes, reduce in lead times from about 2 years to a few months. Another example for the improved market conditions is that our request for generating capacities where battery energy storage solutions are considered for a relevant part of this plant generating capacity. Altogether for energy storage, we are convinced of the market potential and our strong market position. For EV charging, we benefited from increased volumes on the framework agreements as well as from new clients and the revenue has doubled to EUR 103.8 million. Across Europe, we see positive market developments for electrical driving. More and more car manufacturers commit to electrifying their cars, while governments keep on stimulating electrical driving through subsidies and other incentives. And our internationalization strategy continued to deliver growth across Europe in 2021 and around 60% of our EV charging revenue was generated outside of the Netherlands. The Smart grid revenue grew in 2021 with 8% to EUR 128.2 million, where we've seen temporary challenges as project delays and supply chain pressure. The impact of the energy transition on the grid becomes increasingly clear. Grid operators progressively talk about how the grid is reaching its limitations and how it needs to be reinforced and expanded. Towards 2050, in the Netherlands alone, around EUR 100 billion of investments are needed to make the grid future proof. Now we can continue on Sheet 6 with a strong EBITDA growth. Based on our operational leverage strategy, in 2021, our adjusted EBITDA increased to EUR 36.8 million. This represents a 50% -- 51% increase compared to the EUR 24.4 million in 2020. As a percentage of revenue, the EBITDA grew from 12.9% in 2020 to 14.8% in 2021. And we continue to drive forward our strategy of levering our fixed cost base to further improve profitability. On Sheet 7, we go in more detail on the supply chain. We have a strong focus on mitigating actions against supply chain challenges. The pressure on the supply chain can be seen throughout the world as a result of high demand for components and special electrical ones. Over the course of 2021, we took 3 actions to manage supply chain challenges, and we have been able to mitigate the specs up to this point, as can be seen in our revenue growth. The first action was the formation of an integrated team with purchasing, R&D, sales and operations. And on a daily basis, this team monitors and engages the supply chain and takes purchasing and logistical decisions. This allows us to quickly react on changing circumstances. As a second action, we increased engagement with our suppliers. And besides our Tier 1 suppliers, we also engage with some of our Tier 2 and Tier 3 supplies in order to increase our circle of influence and to secure supplies. Thirdly, we made strategical down payments for batteries and electrical components in order to safeguard and enhance resilience in our global supply chain. We anticipate that the supply chain pressures will continue well into 2022 and potentially even into 2023 before the situation will be normalized. And as stated already in the highlights, above all, we prioritize delivery to our customers. And of course, as long as the situation lasts, we keep monitoring and managing our supply chain closely. On Sheet 8, we've summarized the progress on our CSR strategy. Corporate social responsibility is a key focus point of Alfen. In 2019, we formulated our new CSR strategy. Based on a stakeholder survey, we've focused our CSR strategy on 4 elements that we're also aligned with the relevant United Nations Sustainable Development goals. Any progress on our CSR strategy is, therefore, presented based on those 4 focus elements. I will not go in detail on all -- on the complete summary on this slide, but limited to the top left regarding the #7 UN Sustainable Development Goal that stands for affordable and clean energy. Looking at our progress on this element, we conclude that; one, we have helped to avoid the emission of about 2.2 million tonnes of CO2 with our installed charging stations for electrical vehicles; and secondly, that we have helped to avoid harmful emissions with our smart grid projects, where we've been able to make solar energy available for about 206,000 households. For all aspects of the progress on our CSR strategy, I would like to refer to the relevant section in our annual report of 2021 that's available on our website. In 2022, we plan to set environmental, social and governance targets for our own business activities to further drive our sustainable performance. Michelle will now continue with setting the stage for future growth.

Thanks, Marco. Now I'd like to talk through how we're setting the stage for growth in 2022 and beyond. First, on Slide 10. We continue to deliver strong international revenue growth, 72% CAGR in the last 5 years. And at 38% overall international revenue, we are moving towards our goal of 50% of our revenue from outside the Netherlands. The growth is primarily driven by the expansion of our EV charging business line. And in addition to the market opportunity, we've strengthened our sales and service organization across Europe. We've also seen our customers expand their reach, which is evidenced by our products being in approximately 30 European countries. As we move to Slide 11, we'd like to share a sample of our commercial success that reinforce our growth across all 3 of our business lines. In Smart grids, we secured a domestic contract with Liander to supply secondary substations, as previously announced as well as a new international contract with Vattenfall for secondary substations in Sweden and a contract with CHINT to provide transformer substations to multiple solar projects. In EV charging, we continue to solidify our international footprint. For example, we had wins with OTTO Group in Germany, No Limit in Poland and 50Five in Belgium with a project to support lease provider ARVAL. In energy storage, we had wins for both our stationary and mobile solutions. First, as previously mentioned, we secured a contract with Agreco Products to provide 3 stationary storage solutions ranging in size up to 40-megawatt hours as well as 4 mobile systems. With Greener and Bredenoord, we secured contracts to supply our mobile battery solutions, expanding Greener's fleet to more than 60 mobile systems and supporting Bredenoord's accelerated path to sustainability. In addition to these selected wins, as we move to the next slide, we continue to see our markets develop favorably with double-digit CAGRs into the future in all 3 business lines. In EV charging and battery storage, we also see success in key European markets and expected growth projections by country. In EV charging, for example, this is driven by multiple market stimulants, both financial and regulatory, to support the transition to EVs. Now moving to Slide 13, we'd like to share the investments we continue to make in our solution portfolio to serve the market. First, in Smart grids. We developed a new variant of our state-of-the-art Pacto substation, especially for the new Liander framework agreement. We also launched a new innovative prefab walk-in station, especially designed for the Benelux market. In addition, we've also driven continuous improvement in our manufacturing facilities to safely drive speed and efficiency to support future growth. In EV charging, we introduced our next-generation hardware architecture that provides increased flexibility to accommodate different market requirements and allows for accelerated corresponding software developments. We also implemented the ISO 15118 standard that provides more extensive communication between the charge points and EVs. For Energy storage, highlights for 2021 include the newly engineered scalable battery energy storage solution that we developed for utility scale applications, but also an innovative mobile fast-charging solution, where we developed a mobile skid with a 300-kilowatt fast charger and combined it with the battery mobile so that we can charge heavy-duty vehicles anytime, anywhere. As we continue to Slide 14, we'd like to share in addition to the market growth and investment in technology, we also continue to invest in other areas. We've expanded our personnel to 636 FTEs in 2021, up from 571 in 2020. We've invested in our manufacturing capability, both efficiency improvements and more production lines to support our EV charging business and Smart grid's business. And we have also concluded a lease for a new building of more than 30,000 square meters, which doubles our footprint in [ America ]. This supports our further expansion of our manufacturing, production and office requirements. And now I'd like to hand it to Jeroen to walk through our financials.

Thank you, Michelle. We're now on Slide 16, and let me start by stating that we are proud of the financial results in 2021, which was a record year in the history of Alfen, and where we once again delivered profitable growth. Now we'll go into more details, starting with the revenue and other income. Net revenue and other income increased from EUR 189 million in 2020 to EUR 249.7 million in 2021, an increase of 32%, driven by growth across all our business lines. The gross margin slightly declined from 36.7% in 2020 to 36% in 2021. And we continue to benefit from our strong market position and leverage from increased scale, but this was partly offset by a challenging supply chain as well as by product mix effects. Personnel costs increased by 16% and from $34.4 million in 2020 to EUR 40.1 million in 2021, showing operational leverage. The average FTEs increased from 571 in '20 to 636 in 2021. Other operating costs increased from EUR 11.1 million in 2020 to EUR 13.5 million in 2021, also showing further operational leverage. If we then exclude one-off costs and special items, we arrive at our adjusted EBITDA, that increased from EUR 24.4 million, which was 12.9% of revenues in 2020, to EUR 36.8 million being 14.8% of revenues in 2021, an increase of 51%, driven by our operational leverage strategy. Finally, our adjusted net profit increased from EUR 12.5 million in 2020 to EUR 22.1 million in 2021. And from the income statement, we now go to the balance sheet on Slide #17. I'll start with the noncurrent assets. They increased from EUR 37.8 million at year-end 2020 to EUR 43.1 million at year-end 2021. And our capital expenditures amounted to EUR 11.7 million, which was 4.7% of revenues compared to the EUR 9.6 million, which was 5.1% of revenues in 2020. These capital expenditures included investments in our IT infrastructure and data security, in our R&D test facilities in new malls for the Smart grid business line as well as in production and warehousing-related improvements. Included in the EUR 11.7 million are EUR 7.7 million of capitalized development costs, which demonstrates our continued efforts to invest in innovations for the future. Working capital increased from EUR 2.5 million at year-end '20 to EUR 23.8 million at year-end 2021. And this increase is related to an increase of our stock levels. Given the supply chain challenges, we maintain higher safety stock levels, which is further supported by strategic stock down payments for batteries and electrical components to safeguard our supply chain. Finally, we go to the outlook for 2022 on the next slide. We anticipate that markets for all of our business lines will continue to develop favorably, driven by the energy transition. As we do not yet see a reduction of supply chain challenges and these challenges may continue well into 2022, we also continue to deploy mitigating actions against these supply chain pressures, of which the details are explained earlier on in this webcast by Marco. As we anticipate further growth of our business in 2022, we will also further invest in our organization, in our facilities, in the production and in new innovations. Finally, from a revenue perspective, we expect our revenues to be in the range of EUR 330 million to EUR 370 million in 2022. We are now at the end of the presentation, where I will hand over to the moderator for any questions. Moderator, could you please take over?

[Operator Instructions] We're going to have 2 questions on the line. The first question comes from the line of Emmanuel Carlier from Kempen.

A few questions. I will take them one by one. The first one is on your sales growth guidance for 2022. Could you provide a little bit more color on how you expect the growth rates to be for the different divisions? So you mentioned to see especially strong growth at Energy storage and EV charging, but maybe you could be a little bit more specific on that?

Marco speaking. Let me first start with -- stating that we have already included in the sheets also that we see that the market on all our business lines show double-digit growth percentages. But the growth -- biggest growth potential is there with Energy storage and EV charging because there we don't only look at our domestic market, but also the growth potential throughout Europe where, say, if you take EV charging, we've already [indiscernible] market share in the Netherlands. But if you look at, say, the impact of Netherlands across the whole of Europe, then, of course, there is much potential in there. And we see also then as a consequence that the market is picking up, especially in the bigger countries in Europe, being U.K., France and Germany. And due to the fact that we've already set our market position there for many years ago, we can leverage not only on the market growth, but also on our already built market position in those countries so that we not only grow with the market, but also we think that we are able to leverage on our existing customer base and be growing more than only the market percentage. If you look to Energy storage, that market was, for us, affected most by the COVID situation, but we've already stated in the third quarter results of last year, we thought that momentum was coming back into the market. Our qualified pipeline was 3x higher than in the year before. And now we're happy that we can see that we only -- that we also have been able to transfer into orders and that we are, as consequence, are confident of the outlook for 2022 for Energy storage. And to give you a little bit more flavor, at this moment of time, our order book with, say, fixed order, our order backlog is higher than the revenue we had last year for energy storage.

Yes. Is it fair to say that the biggest step-up, I guess, will come from Energy storage in terms of growth rates in 2022 because EV charging was already very high in 2021? Is that correct?

We don't give, say, percentages per business line, but we also are optimistic that all our business lines will contribute to the growth. But what I already said is that due to the fact that we can leverage on our footprint throughout Europe, the biggest growth potential is there for EV charging and energy storage. And I would not say that EV charging is limited in growth. What we already see is that maybe the Netherlands is quite more advanced in relationship to the electrical driving. We see that all other countries are now stepping up. And we see that there is a huge potential, not only for '22, but also in the years after to grow our revenue portfolio throughout Europe.

Yes. Okay. Then the second question is on profitability. There are actually 2 questions included in the question. So you expect strong sales growth. So from that point, I would expect to see continued positive operational leverage effects. On the other hand, there are also 2 potential negatives. One is the fact that as you grow more in energy storage, that might weigh on profitability, in my opinion? And secondly, we have seen plenty of competitors getting listed in the last couple of quarters and all these companies are targeting market share gains. So the question is, do you believe that the competitive intensity will pick up and that this might have an impact on your gross profit margin going forward and total profitability as well, of course?

Well, there are a couple of questions in that question, but I'll try to answer them. It's fair to say we have a profitable growth model and already at the time of the IPO, we said we want to gradually increase our gross margins, but the major contributor will be operational leverage in supporting that further growth of profitability. And I think that's also what we see and what is showing. I hope you appreciate that we never give a guidance on profitability per business line, but I can assure you they all contribute. But of course, in a project business, not every gross margin per project is equal, yes? So that's what we try to do. But having said that, we are always trying to optimize our gross margin, but the major contribution to further profitability will come from operational leverage indeed. And as said, we also said here that we reconfirm our medium-term objectives, as stated at the IPO. So still, the goal is to drive our adjusted EBITDA to mid- to high-teens, yes, so between the 15% and 20%. With respect to your question on the competitive landscape, it's true that you see that a couple of the competitors also are more in the public profile, but it's not new. We saw that already also in the past with investment rounds or whatsoever. And they are seeking that public profile to also further internationalize. But it's not that easy to spread across Europe in an instance. So we already build up our presence for a decade throughout Europe. And that's why we feel we are very well positioned. So yes, we see it but it's not new to us because it was also there in the past.

[Operator Instructions] The next question comes from the line of Thijs Berkelder from ODDO.

Congratulations on the great performance. First question, indeed coming back on the outlook, if I simply look at Q4 revenues multiplied by 4 EV charging, then in 2022, your already are at 50% growth rate. How much capacity potential is there in EV charging from the EUR 37 million revenue level in Q4? At what point in time do you need the new factory to come in? And when can we expect the new factory to be opened?

Marco here. At this moment, we are more or less preparing the sites for the new building. But the [indiscernible] firstly, will be used by the Smart Grid Solutions business unit because, yes, we have to accommodate also for the growing demands that we expect from grid operators to accommodate the growth that is necessary for them to cope with the grid transition. If we look to the charging stations, we have to bear in mind that the building, we're now in operation has only been there in operation for the last 1.5 year. So we have still room to expand our production capacity quite strongly there. So what we're trying to do is try to envision the revenue growth for the coming years. And what we've always said, we don't want to have that production capacity is a limiting factor for our revenue growth. What we will always try to do is to make investments quite well in advance to be able to cope with the revenue growth. And especially for EV charging, we've always stated that it is asset-light, and we can relatively quickly expand our production capacity. So although it will not go by itself, we have to do, of course, to take measures to able to handle the revenue growth in a sensible way. We are quite confident that within, say, the given outside we have we were able to cover not only the revenue growth in 2022, but also the revenue growth that we expect in the years after.

Okay. Then on gross margins, you do not give explicit guidance. It primarily depends upon the split per segment and per projects probably, is that a logical assumption? Or should we expect due to, let's say, higher pricing in the supply chains right now that in 2022, it's quite logical that we first will start with lower gross margins?

Well, I think -- I indeed appreciate that we do not give an outlook on gross margin. But if you look at Q4, I think it's fair to say that to some extent, you see there are somewhat higher costs due to the decisions that we take, especially in logistical costs where you sometimes see that we speed up the supply chain to make sure that we have the components in time, but then accept a slightly higher logistical cost, for example. But the majority there is related to product mix effects, which can, from time to time, have an impact on the gross margins. So looking forward, you could expect to some extent, a bit of impact on the gross margins. At the same time, of course, we are continuing to execute our strategy of profitable growth and also to leverage our skill further. So we try to keep that in balance as much as possible. And of course, also, we are looking at situations where we can further optimize our margins and our prices into the market. So it's a combination of it all. We monitor it very closely, but it's not a one-dimensional answer I can give because there are multiple elements influencing it. But having said that, as we also said in the past, the major contributor of further rise of the profitability will come from operational leverage.

Yes. Clear. And then next question is on personnel. You indicate average personnel you've increased to 636. At year-end, what kind of personnel number we're looking at? And let's say, what do you need to recruit in 2022 to engage the products you want to deliver?

Well, at year-end, we were around 700 people, yes, somewhat in that area, and we are driving that further up. But as said in the past as well, the direct staffing has a bit more direct relationship with the growth in revenue, but the indirect staffing definitely has not. So we -- it's not our aim to drive the number of people as much as we drive the growth on the top line, but of course, we do need some extra people to help us in the support of further growth, but that's not new for us. So we are used to having people come in and absorb them and make sure that they contribute to the company.

Okay. Can you indicate how much people are working in R&D right now?

Yes, more than 80 people are working in the R&D department, if you only look at [indiscernible] we have [indiscernible] so we hired some people, so around 100 in total [indiscernible].

And do you also, let's say, you mentioned an IT budget of EUR [ 60 ] million somewhere, what part of that EUR [ 60 ] million is, let's say, higher in externally, so maybe in your cost of sales and what part is hard CapEx and what part is people, your own people, roughly?

I think you were referring to the EUR [ 60 ] million mentioned in the webcast on the total spend on R&D. So that's including the EUR 7.7 million of capitalized development costs. So it's a combination there. And the other is in the research area, but also the amortization of the earlier capitalized development costs are included in that number. So it's a combination of the elements there, but it's to express the total spend that we have more or less on the whole R&D.

Yes. And maybe for Marco, can you explain what you're really now developing in R&D? Is it just on the products mentioned in your, let's say, your slides deck currently are ongoing or are you also looking at potential addition of new product lines? Many clients always ask, so I have to ask it, are you also preparing for fast-charging and what is the plan there?

I appreciate your question. I also can appreciate that whether we are at this month, busy developing new product lines that sensitive information and that we will only go with to the market with this information as -- and when it is clear, and we are projecting the market introduction? I think you can more or less conclude that we are continuously monitoring some more or less the development within the overall market scheme and also we are looking which element of products or market areas could be entered by Alfen by levering more or less existing knowledge and adding x element to that. So it will be possible that in the coming year, there will be where -- elements where we can use our technology and market position to expect further expand. On the other hand, our main focus at the moment is in further developing the existing product lines and making them better suited for different markets to increase, for example, the speed of development in the -- as I mentioned, the introduction of the new hardware platform, we have chosen [ Forum A ] to have it more open to step up in increasing speed for bringing new [indiscernible] market so that the system is more open to add elements in it on a timely manner. Also with the battery, we see -- we have announced not only that we have now a new way to combine systems to be have a grid products for the market, but also for the mobile, where we see that not only that we think there should be a market for the product, but that we have tuned the products to be an optimal fit. And we have built that experience in the last years, but also see what things are necessary to have a mobile container because it sounds easy to just put equipment in a container and now it is a mobile equipment. But we have also seen, if you put such a type of equipment on different type of applications, different sites, you have to accommodate the product to be safe, to be reliable, to be tuned for this application. And we are confident that we've been able to then transfer our experiences in an optimal way so that the projects is meeting the demands of our customers. And this is also proven by the fact that not only Greener is buying projects for, say, the third or fourth time and now expanding to more than 60 units, but also Bredenoord that is in the Netherlands, Germany and Denmark, one of the major suppliers of temporary power is now making -- has now made a choice to do that with Alfen energy storage equipment that we can proof on the track record we have built in the last years, not only to be able to build systems, but also to make the system resilience for all kind of different applications that can be encountered on sites, whether it's festivals or build construction sites or all kind of different applications where the mobile systems are being used in.

Yes. Then 1, maybe for now, a final question is on -- you said you're preparing your EV charging equipment for [ 4 ] new markets, are these markets still only inside Europe or are you also preparing for markets such as potentially the U.S. and/or Asia?

So right now, Europe continues to be our area of focus. We see significant market opportunity here, and we'll continue to see some on our further development in Europe.

The next question comes from the line of Jan Richard from Berenberg.

Yes. I have 3 of them. The first one is on the gross margin. Could you help us -- or could you talk us through the extent to which a different revenue mix in 2022 with maybe a bit more with maybe a higher share of storage, the extent to which this different mix could impact the group gross margin? That would be helpful if you could help us understand this better.

Yes. Once again, Jan, I appreciate the question, but we don't give a gross margin outlook per business line. Of course, it's fair to say I think we also know that not a single product or a single project as a comparable gross margin. We explained before that there are product within each business line as well. I also explained earlier on that a transformer substation of a specific type can be different. If you sell it from one customer to another one with some addition, so then it also has a different gross margin. So going forward, I think most important is, is that we always said we do our utmost to optimize our margins where we can, whether it's in selling prices to the market, in our positioning, in increasing scale, in purchasing power, all these elements are in the equation. But the major contributor is, will and remains to be operational leverage. So that is the big contributor to driving our profitability further ahead in time. So the focus will be on all elements, but it's very difficult to precisely predict because it also depends on the product mix.

Okay. But in terms of gross margin per segment, I mean, are we still looking in 2022 at a roughly similar gross margin across all -- each business lines or not?

If you compare it to 2021, I think that's a fair statement.

Understood. The second question is on supply chain. So you did talk about issues -- or in supply chain bottlenecks continuing well into 2022, nothing new here potentially into 2023, which isn't more new from your side. I mean if we just look at some of the core components, so which ones do you expect supply chain tensions to ease first? And so which components do you think it could take a bit longer for supply and demand to adjust again?

Well, I think I reversed that question to where do you might expect that some challenges are remaining. And I think that's especially in the electrical components. And why do we say might also go into 2023 because there are a lot of companies also already announcing, especially in the chip area, where they say, "Hey, we do see that there is no reduction of pressure yet there." I think the CEO of [ ASML ] also mentioned that he said, "Well, might take into 2023 before it's normalized again." So it's very, very difficult to predict. For us, it's not new. It's business as usual. We're used to it now. We explained in the webcast the number of actions that we take. I think we are on top of it. We are acting very quick. We can take actions on a daily basis to adjust to have drop and replace components to make sure that we have it in time, further diversifying our supplier base. So yes, we do everything to support our growth. We overcome all the challenges. We do not expect that, that it will be different in 2022. So we're optimistic in that area. We will continue to stay on top of it. But it's also fair to say that at the moment, we do not see a reduction yet. And that's why we will continue in taking the actions that we take under the direct supervision of us as Board. So safeguarding the supply thing was high on the Board agenda and will remain to be high on the Board agenda. That's what we want to emphasize. But it's more or less business as usual today.

Okay. And last one. EV charging will be, again, -- I mean probably will again grow very, very strongly in 2022, and the question is in 2 parts. First one is, what investments have you mean into your international organization ahead of the growth, which you expected for this year 2022? And then second, as far as investments into the EV charging organization are concerned in this year, where do you see -- where are you going to put the biggest effort? Is it on either by functions or by geographies? Where do you see some of -- maybe some weak spots, which would like to address this year?

Yes. I think where we've really focused our efforts in building out our international organization is in our commercial organization. both sales and service, really making sure we've got localized people on the ground, able to serve those markets, understand the market needs, bring that back to the business and help develop those markets. I think as you look ahead in 2022, continue to focus on key markets, such as the U.K., France, Germany as well as other parts of Western Europe, again, with a focus on how do we build out our commercial sales and service organization to support our customers in those countries.

Okay. So more Western Europe and -- okay, understood. Yes. Very clear.

The next question comes from the line of Maarten Verbeek from The Idea.

It's Maarten Verbeek for The Idea. Sorry to bother you again on the gross margin. Firstly, I would like to look at the development of the gross margin in Q4 which was about 400 basis points below Q4 of last year. So I was just wondering, you discussed it already a little bit, what was the impact of the cost of sales and what was the impact of the business mix? Could you elaborate on that?

Yes. I cannot give you the precise slit on that one, but they both contributed to that decline. And I think looking backwards in history, the gross margin in the fourth quarter last year was very high, also driven by product mix effects. And now we saw product mix effects, which had a bit of a declining effect in this fourth quarter. So that's what I can tell you about that. And further on, I think I explained how we look at gross margin, how we monitor it and how we look at it. And -- but it is fair to say that what we said at the end of Q3, we take some decisions, especially to safeguard supply chain or have components timely in and take some higher logistical costs. It takes some time to also pass those on further in the market. And the effect of those decisions were not that yet shown in the Q1 to Q3 because there's always a kind of time lag before you use components in your production process. So with a bit longer lead times in the supply chain, it also takes a bit longer time before you see those effects included in your gross margin. And I think that's, to some extent, also the effect that you saw in Q4 of this year. But having said so, we continue to position ourselves in an optimal way, have further leverage from increased scale because it also makes a difference if you buy components for 10,000 charges or for [ 100,000-plus ] charges. So we also see some opposite effects.

And maybe [indiscernible] that we also restated our objectives that we released at the IPO. And one of the objectives was that we -- the aim to raise our EBITDA in the range of 15% to 20%. And we still have that objective, and we think we will be able to strive for that objective.

Okay. Just once again, getting back to the gross margin statement you just made. You mentioned that the full year 2020 is expected to be gross margin virtually unchanged for -- against the full year '21. Was that statement for the group as a whole or per business unit?

I think the question was, do you see different gross margins per business line, if you compare it now until what you saw in Q4, for example? And there, the answer was no, we don't see different gross margins per business line. I did not say that the gross margin will be the same in '22 as it was in '21.

Okay. Okay. Then what's your view currently about acquisitions? Are you still looking for those? Or do you think you deprioritized organic growth and you feel that should keep you busy enough?

Like we've said already for the many years is that our prime focus is autonomous growth and also said that we're not against maybe an acquisition, but it is not our prime focus. And what we've been doing in the last year is step-by-step expanding our international position in each individual country. And if the country goes into the next phase, then we are expanding our organization to cover, say, whatever Michelle already said, our sales capacity and also our service capacities in those countries. And for the coming time, this is also the emphasis we want to bring forward is that we are basing our strategy on autonomous growth. Although it cannot be excluded, but it's not our prime focus.

And then lastly, you mentioned -- you reiterated your midterm targets for -- you made -- you reiterated your midterm targets you stated at the IPO. According to me, there was a slight difference, and I just want to know what I should read into that? When you IPO-ed, you mentioned you expect the compound average growth above the 40% and now on average 40%.

I think more or less, there's always a question of what is the difference between an aim and a target in certain minimum. We again agree with you that the wording we had at IPO were whether this at least or more then. I think also, we're not stepping away from this element. I think what the reference says is that during the impact of COVID, we saw that the growth went down and we're now more or less back to the track that we think that when COVID now more or less has been overcome, we will go back to the ambition growth percentages as we said during the IPO. And what you see now in our projected range, it's from a little bit below the 40% to maybe above 40%, but there's also with the reference that COVID is not over yet. Also, what we see is that in the supply chain, there is still some area of doubt whether everything can be mitigated. And then we think that based on what we have seen in the developed auto market in the last, say, month, what we see now and what we think we can achieve, the target range is what we see and more or less a good representation of the Alfen capabilities within this given market growth environment.

The next question comes from the line of Emmanuel Carlier from Kempen.

I still have 2 questions left. One is on EV charging. Just want to check if your view has changed on the fact that you believe AC charging will be the dominant form of charging in terms of electricity consumption? Because you have quite some reports where more and more saying that super fast charging will be needed. And then secondly is on energy storage. I think for all of us, this is probably the segment that we still know the least about. I think it would be very helpful to maybe reiterate what's really the competitive advantage you have in that segment? For the other 2, I think it's quite clear, but for this one, [indiscernible]

Okay. Maybe first I'll react on the EV charging question. When you look at the EV market. We know that in the home ecosystem of EV charging, AC and DC charging have both to be there. But on the other hand, what we see is also that if you see all the reports that whether it is 80%, 85% or 90% of the charging stations are being projected to be at, say, AC charging -- in AC charging range. And I think if you talk to any EV driver, he wants to charge his car when he's not driving. So he wants to charge his car at home. He wants to charge this car at the office. He wants to charge his car at the leisure center, at the hotel, at the shopping mall. So we are convinced that -- whether that 80%, 85% or 90% of the requirements will be on AC charging. But of course, there will be many locations also where DC fast-charging is a necessity because you have to -- with a limited range of cars you need -- say, if you have a longer trip, you need the possibility to be able to fast-charge your car. Maybe on not some locations, that isn't a convenient solution, but we have seen that the customers or as a company also, we have more than [ 50 ] electrical cars in operations. Almost all of our users favor AC charging when they are not driving, whether it's at the office, at the home. And of course, sometimes there is no escape you have do the [indiscernible] fast-charging or the fast-charging along the highway or some other locations, but that's for us what we see the minority of the situation. And our client base has a strong focus also in trying to resolve these charging stations at home, the public and semipublic locations.

Yes. Maybe to add to Marco, we said it before. These HPC charges also needs a grid in action. So the majority of them are our customers. So we grid-connect those fast-charging stations to the grid.

Okay. Then we go to your question relating to energy storage. It's a combination of elements, where, of course, we are not only there for a year, but we have more than 10 years' experience in this marketplace. We've been able to use that experience to get to a point of high-quality, high-reliable products with a proven concept and proven line of operation, where we also can easily adopt now our systems to the changes in the market environment, but also changes in the availability of batteries, availability of other components and a very reliable software layer where we can integrate all the different components, adopt also the performance of our systems towards the different application of our clients. And we have seen also in the last month where we have been able to transfer several quotations also in a competitive environment to orders. Because, the client is not only looking at does the system work, but also is levering its using our proven track record, our quality of the product and our proven service organization to choose for Alfen as the supplier for their requirement on energy storage solutions.

Is your -- is this -- can you offer these solutions you believe at a lower cost versus competition or is that not too important for your clients at this moment?

I think all clients are sensitive for costs. But to bear in mind, it is not in a piece of equipment where you can say, okay, if it is not -- I'm not fully happy, I buy a new one next year. This isn't decision for our clients they make for uses of the battery storage system for at least the coming [ 10 ] years. So they extremely value the reliability of the partner that they are choosing. They want to be able to understand why we can, as a company, can not only the supply a project, but also warrant the performance of the project for that long time period. And we have seen is that we -- our customers value, not only the fact that we can bring a good solution, but also valued experiences and the translation of those experiences in high-quality, high-reliable product to -- that we have been building up in the last years.

There are no further questions on the line. I will hand over now to your host to conclude today's conference.

Thank you, Stefano. I would like everybody for their participation in this webcast. There were some good questions, I think, where those gave us an opportunity maybe to pinpoint a little bit better where to emphasize the performance is often how that can be valued. And I want to close this meeting by thanking maybe again and that we speak again in future to see whether our promising future will be reality. Thank you all.

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