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

Hello, and welcome to the Alfen Update Call. My name is George, I'll be coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I'd like to hand the call over to your host today, Mr. Marco Roeleveld, CEO. Please go ahead.

Thank you, George. First, I want to thank you for being present in this call, and we will try to be clear as possible on, say, the update -- press release we sent out in this update call are present the full Management Board of Alfen, being Michelle Lesh, CCO; Onno Krap, CFO; and myself, Marco Roeleveld, CEO. But we then go to the content of the press release, the fundamental step is that due to the slower anticipated market growth of '24. We have to lower our outlook for '24, where we lowered it from the numbers that we initiated more or less at February last year, and we lowered it now to EUR 485 million to EUR 520 million. The fundamental aspect that follows that is that we had to -- also to adjust our adjusted EBITDA margin to mid- to single-digit numbers. If we then go to the step where does it come from? It's the fundamental step in revenue come from a number of large energy systems that originally were anticipated to be signed in Q2 are being postponed and will likely only contribute to 2025 revenue causing more or less the revenue for energy storage to be declining with approximately 20% compared to 2023. And when you look at, say, the individual quarters of this year, we expect the second quarter to be about double of the first quarter. The third quarter will be more or less a little bit below the first quarter number and the fourth quarter will be about double of the third quarter. Therefore, the revenue will be backloaded even though in the second half year. and come up with an overall number that's 20% below the number of '23. If we look at Smart Grid Solutions, we have seen that the effort we have to do both on site and also here in our factory to be able to resolve the concrete issues. It leads to 2 elements. One hand is that extra costs have to be incurred. And therefore, we have to step up the provision with another -- a little bit more than EUR 7 million and also due to the fact that we cannot ramp at this moment. And also we have the closed holiday period due to the several reasons. We cannot ramp up that quickly as anticipated. And therefore, the overall revenue growth will be limited to about 5%. And then, if you look to the quarterly division, we will exceed that the second quarter will be lower than the first quarter. The third quarter, we will have a slow ramp-up due mainly to the fact that we have to compensate for most weeks of closing time at our concrete manufacturer. And the fourth quarter will be ramping up quite strongly, but not enough to compensate for the second and the third quarter lower revenues. As indicated, the revenue guidance in whole will, therefore, as a consequence, will go down from EUR 590 million to EUR 660 million towards EUR 485 million to EUR 500 million, and the EBITDA level will be in the range of the mid-single-digit number. And we have taken into account that we also have what we call the 2 one-offs totaling EUR 11.1 million, consisting of 2 elements. On the one hand, a little bit more than EUR 7 million and an additional provision for the [indiscernible] problem. And second one is related to obsolete inventory of components of charging stations. Those components where we initially thought that work within, say, an accessible timeframe, we would be able to use them all. We have now concluded that we -- in order to not to have a too long time horizon. We needed to build up some provisions for obsolete inventory to cope with more or less an out of order elements of inventory. We also have to step away from, say, the medium-term objectives, not the fundamental direction, but we need due to, let say, the low revenue need to adjust also the timelines in order to be able to have the proper appreciation of the medium-term objectives and we use the second half year to balance out more growth perspectives and also the cost perspective in order to be able to have a modest validation of our profitable growth strategy, we will realign more the strategy of growth in relationship to organizational and cost growth. That's more as a summary of our press release we have put forward, and we will now open the line for questions. George, can you take over the line for opening for questions.

So ladies and gentlemen, this is a quick reminder [Operator Instructions] Our first question will be coming from Joren Van Aken, calling from Degroof Petercam.

A couple of questions, please. First on the RCF, can you confirm that the size is EUR 100 million? And could you give us an idea of how much of that is already drawn today? Then secondly, on -- in your annual report, you mentioned both the credit facility and also a CapEx facility terms seem quite similar. So does that mean that both the CapEx facility and the RCF are under discussions now with the banks. The covenant do they use also the adjusted EBITDA or the actual EBITDA? And then finally, if I may, should we put basically today's announcement in the context of the previous CFO leaving basically in the sense that there was a disagreement on how to bring this news today.

Maybe to start with the latest question first. There is no relationship to say, the element of, say, the previous CFO leaving. There were, say, personal reasons for Jeroen van Rossen to leave, the fact that we more or didn't continue with Boudewijn Tans was nothing which say strategic approach or the fundamental disagreement on, say, the numbers we have because also the elements that came now more into play for us to start this discussion now for the specialties. They were most elements that came into play in the course of the second quarter. So there was nothing related to the previous situation with either Jeroen van Rossen or Boudewijn Tans in relationship to this situation. And with relationship to the RCF, I will ask...

I will take that one.

Onno to continue.

Okay. Good Morning. Yes, let me talk about the RCF. You have a total debt facility at this moment in time of EUR 150 million. EUR 50 million of that is related to longer-term debt and EUR 100 million is related to the RCF. We are currently drawing as of today, around EUR 28 million out of that RCF. So by far, not the full EUR 100 million that is available from a debt capacity perspective. But we are running into the covenant issue that is a [indiscernible] versus EBITDA. And that is the reported EBITDA, not the adjusted EBITDA. I mean in the market, there are typically, what you see is that covenants are related to adjusted EBITDA. In our case, it's reported EBITDA. So that basically means that the onetime adjustments are included into our covenant calculation, and that is also the reason that we are not making the Q2 covenant requirements with our bank. If there would not be there, if we would be able to adjust for onetime items, then we would be able to maneuver along the Q2 test for our CF covenant. That to be said on the longer-term, it is important that the profitability of an improvement. And I think that's also what we have indicated in the press release. And if that's happening, then we feel that the current debt facility is enough to facilitate the financing of the company overall. From a CapEx facility perspective, yes, that's in our annual report, and that was related to the building of our new facility here in Almere. It is one of the buildings, special construction that was dissolved at beginning of this year. So that's no longer in place, and it's not applicable to the current discussion to answer -- did I answer your question?

We'll now move to Jeremy Lindsay Kincaid of Van Lanschot Kempen.

First question for me is just on the waiver. So why do you not have a waiver yet from the banks and what is required to get one?

What we try to do as soon as possible as we had the complete picture available, we are required and also we wanted to inform all of you to make sure that you are up to date on kind of the current situation of [ openness ] as possible. That automatically also means that not everything has been resolved yet with the banks. So we are in constructive dialogue with them. And we have -- yes, we fully expect that we will be able to resolve the situation and that we will get a waiver. But we are in discussion at this moment.

Sure. And then we've obviously heard that you might be disclosing the energy storage backlog more regularly. Could you provide us some details on what that is and whether or not any additional orders need to be filled or brought into the backlog in order to meet your guidance of minus 20% for the full year?

Yes. So our backlog currently sits at EUR 85 million. Not all of that will convert this year, obviously. And for example, where we have mobile, which is a flow business, those orders, we still need to get in. We have 1 or 2 smaller orders, one closed yesterday, others that should close this week. So there are still a couple of things that need to be closed. But fundamentally, we are in that final signing stage, whereas at the beginning of the year, we had many more immature deals that needed to get closed, and that's what has shifted and changed. So yes, there still are a couple that need to close, mobiles being an example of that. But in total, we have EUR 85 million of backlog.

And could you just give us an idea of what the largest project size is there and maybe when that largest projects could close? Like is there any chance that closed in December and then gets pushed out to FY '25 if it's a large project?

No. Right now, everything we're expecting to close other than mobiles -- mobiles are more of a flow and that those could close later, but we have a much shorter cycle in terms of recognizing revenue on those since it's a flow products for the utility scale business, those are within weeks. So we have already accounted for all of the risk to make sure that we are not relying on deals that still need to close late Q3, Q4 on the utility scale projects. We really run out of time to order the main components to hit that primary revenue milestone. So for the most part, everything that closes from here on out with the exception of 1 or 2 will be 2025 revenue. But we've accounted for all of that in our guidance.

[Operator Instructions] Our next question will be coming from these Berkelder of ABN AMRO, ODDO BHF.

Yes, maybe good to remind the listeners on, let's say, your guidance for the full year. So you're now guiding mid-single-digit EBITDA margin almost, let's say, EUR 500 million of revenues, so roughly EUR 25 million adjusted EBITDA. You now already have guided for EUR 16 million or so of one-off expenses, and we can expect another figure there to put in the second half for further restructuring and we'll have to see what other things. So conclusion on my side, therefore, is reported EBITDA probably around 0. Can you maybe give us insight in when we can expect further updates on further one-off items, further impairments on EV charging inventory and/or also possibly on energy storage inventory and on the restructuring of the staff base. Second question is what number is the staff base more or less right now overall number split between stage and flexible? Third question is you mentioned energy storage backlog of EUR 85 million. What part of the EUR 85 million is hard signed and which is still waiting for final investment decision. And then for now maybe final question, also coming back on the CFO question earlier asked do you know or do you have a grip on whether a former CFO, Jeroen van Rossen, still holds his Alfen shares, yes or no?

Let me take the energy storage type. EUR 85 million. It's all fully signed, fully booked orders in hand.

Maybe then related to your last question related to the shares of Jeroen. So fundamentally, those share he -- he has private ownership, and we have no track record of, say, formally being able to clear on the ownership situation. But those shares are also registered in the event [indiscernible] disclosure section. So it could say, public available information related to say, what's the latest state. If you then talk to one-off costs, what we did is we tried to assess more the whole broader say, financial picture within Alfen and try to assess more as all the elements that are relevant as we know at this moment. So we try to take into account all elements that we are aware of or should be aware of to take those into account and bring them together more is at the table now. The element you mentioned on restructuring, that's also why we said is that we want to do that, say, in a, say, more a comprehensive approach that we don't want to make a direct connection because we still have to value a little bit more or less the growth in the different business areas, how we will cope that relationship with the, say, personnel costs. And at this moment, I don't have say, a straightforward on hand data on the available personnel buildup. And you have to bear in mind, let's say, the number that is easily to bear modest reference on, say, more than 30% of our people are related to, say, have in contract for less than a year. And we have about, say, 20% of our direct workforce is related to temporary workforce based on a temporary working contract.

Okay. I have a follow-up question on EV charging, you're also lowering your revenue guidance for EV charging. The press release reached as if it's purely a matter of not enough BEVs being sold in Europe right now, and that's that we see coming out every day. Can you maybe also give a bit comment on the pricing of EV chargers in your various segments, the new public AFIR chargers -- is price pressure there may be also coming in and similar also for the high-end home chargers segment. Lack of demand typically leads suppliers to put prices to be able to still make the volume and get to production efficiencies?

Yes. So we're always looking at our pricing and understanding if we've got any elasticity that we can optimize. But fundamentally, we don't see a need to cut prices right now. If anything, with AFIR, we're one of the few that has the dynamic QR code option that is a priced option for our customers. So no, this is really looking at the market, understanding that we think there will potentially be an impact from this new EV data and then looking at our run rate. And we had previously communicated stronger quarter-on-quarter growth what we're seeing is modest. And we just wanted to account for that. But right now, we don't necessarily see price as a lever to offset that given that there's a market challenge.

We now have a follow-up question coming from Joren Van Aken of Degroof Petercam.

Just one final question. Do you already have just an idea of what the size of the possible penalty could be for the breach of covenants with the banks? Or is it too early?

It's too early. We didn't have that discussion with them yet. But in the end, I think in the overall scheme of things, it's not going to be material.

As we have no further questions at this time, I will turn the call back over to Mr. Roeleveld for any additional or closing remarks.

Okay. Thank you for joining in this webcast and we appreciate the fact that you've taken the effort more as to try to listen to the elements and also raise questions to further clarify -- further clarification on the elements we want to bring forward. I want to thank you again all and then we can close this line now.

Thank you so much, sir. Ladies and gentlemen, that will conclude today's presentation. Thank you for your attendance. You may disconnect. Have a good day and goodbye.