CTEK AB (publ) (CTEK.ST) Q3 FY2025 Earnings Call Transcript & Summary

Welcome to CTEK Q3 Report 2025. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Henrik Fagrenius; and CFO, Thom Mathisen. Please go ahead.

Thank you very much, operator, and a warm welcome to CTEK's Q3 earnings call. Today's presentators are myself, Henrik Fagrenius. And beside me, I have our CFO, Thom Mathisen. Before we start, I do, as usual, take a short introduction of CTEK. CTEK was founded more than 25 years ago in Vikmanshyttan by the entrepreneur Bengt Wahlqvist, who was the inventor of the first pulse charging -- charger. We have 3 integrated center of excellences in Falun, Norrköping and Shenzhen, where we do all the R&D, testing and quality. We have mainly 2 technologies. And in those technologies, we have different subsegments. So we have a consumer client brand, Professional and Power Solution for Low Voltage. And in the EVSE, we have destination charging, client brand, load balancing and service and support. We go to the market through 2 divisions: our consumer divisions that are focused on retail and e-tailers and importers and partners. And then we have our professional division that is focusing on B2B business, where we have our client brand business and also our EVSE business. We have been chosen by the best customers. We have more than 50 premium sport cars manufacturers as our client brand business. And as you can see on the picture, Lamborghini is 1 of them powered by CTEK. So who are using our products. It's a lot of different customer segments that are using our products, both from motorcycle, cars, sports cars, workshop, commercial vehicles, boats, RV vehicles. And then for our EVSE business, its parking operators, charge point operators and others. And as you can see, our main segment today is the chargers and they are covering most of our different consumers and also boosters are going to be covered by the same. And then we have Power Solution overlapping, and we have the EVSE for charge points operators and parking operators. As you might know, we announced our financial goals in May this year, and we have done this illustration to show the way forward toward our goals. And we have covered the 3 first steps. And during Q4, we will also be able to cover the next step launch of new products and product categories. With that, we are then digging into the third quarter. Our turnover was SEK 212 million, organic growth of minus 1%. However, if we exclude the GM business that we discontinued, it was an organic growth of 4%. And the growth were mainly coming from the Low Voltage segment, which also then helped us to achieve very high margin of over 59%. The adjusted EBITDA landed on SEK 32 million, which is just a 15%. And the cash flow was minus SEK 19 million, and we have a net debt ratio of [ 2x ]. So the key takeaways is that the Low Voltage segment is continuing to grow. It was a lot of sales to Amazon in the quarter. They have changed their purchasing pattern a bit. They are now taking direct deliveries from Asia, which means that they are ordering a bit in advance. So that will have an impact in Q4. We are growing with Amazon as a customer, and we have been growing with them for over 5 years now. And we are growing also this year, but there is a little bit of a different pattern in the -- in their ordering. We also see good traction in our client brand. When it comes to our EV charging, it's slower market, but we have a very good offer there, and we get good customer feedback, and we are also launching new products. When it comes to cash flow, Q3 is not our best quarter when it comes to cash flow. This quarter, we also had a late payment from one of our big customers of SEK 20 million that came in the second of October instead of the week before, that impacted the quarter. And -- but we see that -- we will come back to more details for the cash flow. We are also on plan when it comes to our upcoming product launches, and we are increasing the nearby addressable markets significantly. And in the fourth quarter, we will introduce CS ONE with WiFi function, the NXT series and, of course, our Premium Boosters. So with that, I hand it over to you, Thom.

Yes. Thank you, Henrik. So I'll dig a little bit deeper into the financials for quarter 3. We can see in the Consumer division, that stands for about 3/4 of our turnover. We have higher net sales than the same quarter last year, 12% organic growth. As Henrik said, partly related to a different sales -- purchasing pattern from Amazon, but still good sales. We continue to have a strong and high EBITDA levels in this division of above 41%. For the Professional division, as you -- which obviously then stands for 1/4 of our turnover, we see a different pattern, it's net sales decrease of around 27%, and this comes partly from the ceased collaboration with GM, but also from the more activity in the EVSE market. EBITDA is on a 0 level. I think it's important to notice that in these numbers, we have taken a hit of SEK 2 million related to refractive correction of import duties in Europe. Without that, we would have had a -- continue to have a positive EBITDA margin of around 4%. Coming then to cashflow and CapEx. So as Henrik mentioned, not the strongest quarter for us, and that is a seasonal pattern that we have seen in the recent years, that -- in quarter 3 we usually have negative cash, but then it comes back in quarter 4. And in this particular quarter 3, we have on top of the normal seasonality also the changed Amazon pattern with strong sales to Amazon during quarter 3, but they have also longer payment terms than the average. And on top of that, we had a big customer with some late payments that also impacted the cash flow in the quarter. So we expect, as previous years to have a positive net cash in quarter 4 going forward. CapEx. As you see in the graph below, we continue, as we have communicated before to go back to more normal levels. We should invest in CapEx [indiscernible] investment in new products. We should have a rather high but not as big the peak we had in '22, '23. So we are now back to more normal levels. And as Henrik also mentioned, we still get out new products that we are launching now in the quarter 4. We continue to keep the net ratio on 2x. This is well below the financial targets of 3x. So with that, I hand it back to you, Henrik.

Thank you, Thom. And then to summarize the quarter. We took a big step towards our financial goal when it comes to profitability. That was thanks to good sales in the Low Voltage segment. And we had a record high gross margin. We are also looking forward to the upcoming product launches and the increase in the addressable market, which will help us to also reach our goal when it comes to turnover for the next coming years. So the highlights then for the coming quarter is the CS ONE WiFi introduction, the NXT introduction and the Premium Booster introduction that will come at the end of the year and have significant growth in 2026. So with that operator, we hand over to questions and answers.

[Operator Instructions] The next question comes Tom Guinchard from Pareto.

Just a few questions from my end. Starting off on the Amazon delivery and order patterns. Can you quantify that to some extent, the impact in Q3 and expected impact in Q4 here on a year-on-year or sequential basis?

Yes, it is a bit hard to quantify it for Q4 because we don't know how Q4 will end. It's a lot about depending on how Cyber Monday and Black Friday and those events are going. But we have seen that we are growing with Amazon so far, but I would say that the impact for Q3 and for the year would have been SEK 20 million to SEK 30 million in preponed and majority of that in Q3.

All right. Perfect. And then just on the sort of timing on the new product launches, how fast can you get them to market once the product is launched? Do you have any indicative sort of lag between product launch and revenues?

There we are a little bit dependent on our partners and how quick they can get it into their stores. We will start the selling as we speak of the NXT Series and the Booster will then be in December, and the CC3 [indiscernible] will be very late in this year. So we do not foresee any major impact in Q4, but then ramping up beginning of next year.

All right. So gradual scaling throughout 2026. Do you have any volume indications on sort of year-end '26 or full year '27?

No, we do not do any guides -- guiding there.

The next question comes from Sofia Sörling from DNB Carnegie.

Henrik and Tom. My first question then -- so if you look at the steps to your financial targets, you mentioned that we expect some SEK 50 million sales within EVSE supported by the U.K. and Germany market during 2026. And -- so my question is, first, on the U.K. market. It has been quite challenging if you look 1 year back for you? And how is that progressing during the quarter? Have you seen any improvement albeit at low levels, but have you seen any improvement in the U.K. market that actually supports the sales into 2026?

It's still a tough market situation. We have seen a little bit of stronger customer interest in our products. So we've seen customers coming back to us, but I think it's still a tough market situation. But the feedback that we have received from our customers is they like the products very much. It's a robust product with very high uptime. And I think when we see the market turn, we will also see some orders coming in also in U.K.

All right. And in the -- in Germany, have you already planned for the -- and have you had any feedback from potential customers ahead in Germany when you will launch a specific product in that market?

We have started the discussion, of course, with our pan-European existing customers. And that's our goal to start with them also in Germany. And as I mentioned, we have received good feedback on our products. They are, of course, eagerly waiting for the products to come out physically.

Okay. Great. And you talked a lot about the new product category of premium boosters, but what about Power Solutions. Can you elaborate a little bit on that Phase I and [indiscernible].

We are heavily in work with us. We are now in the development phase of Phase 1 of the Power Solution, and that is planned later for 2026.

Okay. Is that a new communication from your side that you're planning later on 2026 for Power Solutions?

Now Power Solutions, we -- if you look at the spare that we have made, it is there in the 2026. I would also say that already in January, February, we are launching some products in the Power Solutions segment, our high charges so -- but a more broadened product portfolio will be able during later in 2026.

[Operator Instructions] The next question comes from Tom Guinchard from Pareto.

A follow-up on Power Solutions. Just wondering how closely related is your sort of projected volumes in Europe, if you look at RV sales and also in the maritime sector, the market development there? And how closely tied is it in new build in your outlook and estimates here?

I would say about 50/50. 50% towards new build and 50% towards the aftermarket. And the aftermarket is, of course, very big portion of that. I think it's about 50 million RVs registered and 50 million boats registered in.

And in terms of geographical split here, primarily Europe-focused or any specific geographies you're targeting there?

We have said that we are targeting Europe as priority #1. and then also Australia since we are strong in Australia and after that, also U.S.

So the market in Australia has picked up quite significantly post COVID if I'm not mistaken, right?

Yes.

But then relatively flat to muted new build demand in Europe and quite weak in the U.S.? Is that a correct picture?

Yes.

The next question comes from Mattias Ehrenborg from Redeye.

I was just curious to hear about the reason behind the improved profitability in the Professional segment in this quarter despite the lower sales volumes. I note that other external expenses was quite low in the quarter on a group level. I was just wondering if there's any correlation there?

Yes. Q3 is, of course, a good quarter when it comes to OpEx because we have a lot of people on vacation. So we have normally a bit -- a little bit lower OpEx in Q3. When it comes to the Professional segment, I would say that there is a higher share of Low Voltage products. And also, we have better share -- better margins on our newly launched EVSE charger CC3.

Okay. And just going back to the other external expenses being down a few millions year-over-year. I suppose you still have the holiday effects -- last year. So is there anything in particular that affects this quarter? Or how can could we view that?

No, I would say this quarter it's a little bit how this vacation period are spread over the quarter as well. But it's also a little bit the reason. We have still continued to take down some of our OpEx expenses, less of consultants during the year, et cetera. So that also have an impact on the OpEx for the quarter.

Okay. Excellent. And also looking at your geographical sales split. We note that the DACH region was quite strong in this quarter, whereas the rest of Europe was quite soft. I suppose the former was driven by Amazon, if that's correct. But what is the reason for rest of Europe being relatively weak.

You're right, DACH region is, among others, Amazon are strong in the DACH region. And the rest of Europe, I would say that we have seen it gradually better in Scandinavia if we take from the start of the year, but it is still not a super market out there. People are a bit hesitant, but we see Scandinavia is going back. They had a weak start of the year, but they are coming back. And I would say, the rest of Europe is scattered.

Okay. So no major accounts being the driver here, so to speak?

No, no.

Okay. Excellent. And also, just wanted to get back to the Power Booster launch. Maybe it has been answered already, but do you expect a gradual ramp-up in sales? Or will it be -- do you expect an inventory buildup from your customers' perspective going into Q4, for example?

Now since this is a new segment for us, I would say that it will be a gradual ramp-up. It takes some time for the customers to test them and get them out and get end consumer feedback, et cetera. So it will be a gradual ramp-up.

Okay. going to the EVSE sales in the quarter. I know you often emphasize that it's more driven by infrastructure investments and new build rather than EV sales in specific quarters. I suppose this should correlate over time, of course. What are your current main and near-term challenge, would you say, for the EVSE segment?

As I stated, I think we have a very good product out there, and we have a very good and solid offering to our customers, and they seem to appreciate that. We have got some awards for the best uptime and I would say it's -- we need people to start to build more garages and refurbish existing garages. So it's really about what needs to start. And then, of course, we are looking forward to open up Germany as a big market and also continue our efforts in U.K.

Okay. And just a final question from my side. We've seen several big car OEMs recently pushing their EV targets in time and also increasing R&D spending on hybrids and even combustion engines. What is your view on the current state of the Low Voltage market? Low Voltage market is also consider a short-term perspective and a long-term perspective.

Short term and long term, it's very positive. We see that the market for our Low Voltage product is mainly on seldom used vehicles like sport vehicles, like boats, et cetera. And of course, the growth of hybrid is also positive for us because they use both the EV charger and the Low Voltage charger, which is also the same for EV -- complete EV vehicles. So I don't see that we are so vulnerable to those trends. We have product offering for whichever direction it will go into. And we are certain that there will be long-term demand for our Low Voltage products.

But do you see a weak [indiscernible] market that being positive for the -- for your Low Voltage market in a long-term perspective? Or can the both markets exist in -- coexist in long-term perspective?

Yes. both can coexist. There is also a 12-month battery in EV cars. So both markets can coexist, and I wouldn't say that it's one or the other is better for us.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you very much for listening and looking forward to hear from you soon again. Thank you, operator.