CTEK AB (publ) (CTEK) Earnings Call Transcript & Summary

Welcome to CTEK's Q2 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 also a warm welcome to the second quarter report review from CTEK. Today's presenter will be myself, and I also have Thom Mathisen, our CFO. And as usual, we will start with some background information about CTEK. CTEK Tech was founded for over 25 years ago by Bengt Wahlqvist, the inventor of the first ever battery charger to use electronic pulse technology, and this revolutionized the market. We are designing and developing and testing all our products in Sweden. We are putting a lot of efforts to the quality levels, and we have about one-third of our employees working in research and development in Falun, Norrköping and Shenzhen. We are also committed to sustainability targets, and we are focusing on reducing air freights and make our products more repairable and the use of recycled materials wherever possible. We are very proud to have more than 50 of the world's most premium vehicle manufacturers as a customer where we are building their branded 12-volt chargers. Especially proud to be double-branded together with premium brands like Lamborghini, as you can see on this picture. This has helped us to build a very strong consumer brand. And with the passion and with the CTEK family that we have, we have built a very strong global consumer brand as well. CTEK has mainly 2 technologies. Low Voltage is the 12- and 24-volt chargers for cars, and we sell them to consumers. We sell them to client brands. We sell them to workshops and also to other installations like caravans, lifts, et cetera, wherever you have a battery that needs charging. The other technology that we have is chargers for electrical vehicles. And there, we are focusing on Destination charging. Our go-to-market strategy, we are divided into 2 divisions, Consumer divisions that are selling directly to end consumers through retailers and through distributors and through online marketplaces. We have our Professional divisions that is focusing on business to business where we are selling Low Voltage chargers to OEMs, premium brands, and we're also selling our Destination chargers to parking operators and others. CTEK, we are focusing on niche customer segments where we find the ability to pay, willingness to pay higher and we are focusing on these niche segments for Low Voltage that could be sport cars, that could be motorcycles. And all of these users really appreciate the chargers and know that they are dependent on them. For electrical car charging, we are focusing on parking operators, energy companies that are really appreciating high uptime and are also prepared to pay for that. In May this year, we presented our new financial targets for 2028 at our Capital Markets Day. And that consists of having a revenue of SEK 2 billion and an EBITDA margin of 20%, and the net debt below 3x and we are aiming to have a possibility to divide 30% of our net earnings. We will do this by developing our existing business, but we will also introduce two adjacent product categories. The first one is Premium Boosters that is an emergency help if you have a breakdown and the battery is flat. So you can start your car immediately and go back home and charge it with a CTEK charger. The other one is Power Solution that is focusing when you have a secondary battery solution in, for example, in boats, caravan, or motor home or a service van. This, we will introduce products in these categories and also in our existing charging category, starting this autumn and the big impact will come later this year, but mainly in the coming years, 2026 and onwards. So as you can see here, we will grow in our existing business, but we will also grow with Premium Boosters and Power Solutions. So with that, over to the quarter. In the second quarter, we have seen a revenue of SEK 197 million, a bit lower than last year when we had SEK 212 million. We have seen growth in Low Voltage but lower sales and revenues in EVSE, mainly due to the GM contracting canceled. The gross margin was improved to 56.3% due to the product mix. We have an adjusted EBITDA of SEK 14 million, that is 6.9% compared to 7.1% in the comparing quarter. We have increased the EBIT to SEK 9 million, that is 4.3% and we have a net cash flow of SEK 31 million. And with that, we end up with a net debt ratio of 1.8. The key takeaways for this quarter, it was a very reluctant and hesitant start of the quarter due to the macro economical situation. A lot of our customers were hesitant to order for stock, but it turned out to be quite an improvement in recovery at the end of the quarter. I'm happy to see that we are continuing to grow within our low-voltage business. And this quarter, it was mainly the client brand that has a very good quarter. We also see good sales in the online and I'm also happy to see that it's the second consecutive profitable quarter for the Professional division on the EBITDA level. We have turned around that segment and are showing profit on EBITDA level. We have also seen some improved gross margins in our new EV chargers, CC3, Chargestorm Connected 3. And we have also seen existing and new customers that are interested in that one. And as I mentioned, we are working hard now to introduce our new adjacent product categories, and that will come at the end of this year, and I hope to see an impact later on this year, but mainly 2026. So with that, I leave the word to you, Thom.

Thank you, Henrik. So then I will do some deep dives into the financials for quarter 2 and starting with some more details around the divisions. So first, the Consumer division. As you can see from the graph, it stands for around 65% of our revenues. And the net sales were lower in absolute terms, SEK 128 million versus SEK 135 million. But organically, without any FX impact we actually grow 0.3%. EBITDA amounted to SEK 42 million, which is a 33% EBITDA margin. However, that margin is -- it's a high margin still, but a little bit higher than -- but a little bit lower than last comparing quarter, and that is due to somewhat lower margins but also to a mix impact from geographies that we have had higher mix of high-margin markets last year. And then last, also a periodization of our performance marketing that has had an impact. So still good margins, a little bit lower than last quarter, but in basis, it's stable and good margins. And I go over to the Professional, sorry. I turn to slide there, Professional division. It stands then for 35% of our volumes. Here, we saw a decreased volume with 6% organically. And these decreases, as Henrik mentioned before, mainly related to that GM contract has ceased as from this year. The EBITDA level is, however, increasing to the second quarter in a row with a positive margin. That is -- we are very happy to notice [Technical Difficulty] going forward. Cash flow and CapEx, as Henrik mentioned, the CapEx is a big part of our business. One third of our team are working with developing new products and maintaining the ones we have. And from the graph on the lower end of this slide, you can see that this CapEx has been on a very high level back in '22, '23 and as we have earlier communicated, it will go back to more normal, but still high levels. We are now on 8%, and we foresee that, that will continue down to the -- in the range of 5% to 7% over the years going forward. So our cash flow from operating activities is now SEK 31 million compared to SEK 22 million in the comparable [Technical Difficulty] from net cash, we have reached now from SEK 4 million last year to SEK 15 million this year, in this quarter 2. We have, as Henrik also mentioned, net debt ratio now at 1.8. It's an improvement versus similar quarter last year, and that's well below the free time that we have in our financial targets. So with that, I hand it over back to you, Henrik.

Thank you, Thom, and the summary then for the quarter, key highlights. Strong recovery in the end of the quarter, started a bit hesitant, but then we saw that our customers were more confident at the end of the quarter. Continuous growth within Low Voltage. I think we have 8 quarters now with growth in Low Voltage business. And that is, of course, very good. This time, it was driven by a good demand from client brand, both existing and new customers and also online sales. And second consecutive quarter of profitable growth -- profit, not growth, but profitability on an EBITDA level for the Professional division. And improved gross margins for our new Chargestorm Connected 3 EV charger and new contracts rewarded as well. And as I mentioned, we are focusing very hard now on the new -- two new adjacent product categories that we will start to show by the end of this year and then have focus on for the coming years to come. And with those new product categories, we are tripling our addressable market in order to meet our financial targets. So with that, back to you, operator, and we'll open up for questions.

[Operator Instructions] The next question comes from Sofia Sörling from DNB Carnegie Investment Bank.

This is Sofia from DNB Carnegie. Can you hear me?

Yes, we can.

Yes, absolutely.

Okay. So my first question is related to the Professional division. So can you please give us some more details of how much of the sales decline in Q2 in this division was related to the General Motors EVSE space?

Yes, we can do that. We have in the comparable quarter, I think the sales to General Motors was SEK 15 million, about SEK 15 million.

Okay. Yes. And if I can challenge you a little bit on the profitability level in this Professional division. Since this GM orders are now not included anymore, why isn't EBITDA margin higher than 3% in this quarter, given also that it was actually 6% in Q1? If you can give some more details on that?

Yes, I would say that is volume based. We have the right cost base now. And we also have the right profitability in the products, both in Low Voltage, of course, but also in the EV products. But now we need some more volumes to make it even more profitable.

And then basically more the WAM business is good. The Low Voltage business is good in Professional, but the EVSE business, we need more volumes.

Yes.

Okay. Yes, because that was actually my following question what actually needs to happen ahead for you to increase profitability, but then it's more the volumes in EVSE segment in this division.

Yes, absolutely correct. We see a very good development in the client brand business. We are gaining new customers and also our existing customers are developing very nicely. But when it comes to EV business, we still see a very low activity on the market, and that needs to change to have some more volumes there. And of course, we are also increasing our focuses on the U.K. market. And later this year, we will also have a product for the German market. So that, of course, will increase our addressable market for the EV side as well.

Okay. And -- okay. So the German market, when do you expect this to have a reflection in sales?

We will introduce the product late this year. So I will say it will impact mainly from 2026.

Okay. And what would you say is EBITDA margin level, what is possible here within the Professional division in the long term? Or what are you satisfied with?

We haven't said anything, but we -- and I believe that the Professional division should support our financial targets to have an EBITDA level of 20%.

Okay. Yes. Let's see, maybe you mentioned this a little bit, but can you give some more details on how the sales of CC3 charger is progressing, feedback from customers? And also, if you can comment, is there any need for another updated version near term or midterm, if not, why?

I would see -- I would say that with this Chargestorm Connected 3, we have a market-leading product when it comes to technology. It's prepared for all the new V12s and whatever that is coming in the future and also have a very high cyber security level. We will update it later this year with the display and the Eichrecht for the German market. And its display is mostly to comply with AFIR regulation. But after that, I see that we have a product that will be very future-proof. Then you never know about legislation and how that will change. But as it is now, it will be a very future-proof product. And I see that the customers that have bought it so far has -- we have received very good customer feedback. It's easier to install, very reliable, high uptime as also the CC2 had. So overall, very good feedback. But as I said that the activity in the whole business is a bit low at the moment.

Okay. And this -- no, sorry, you already answered the new product categories. Yes. And just a comment on the financial targets. You had a good page there about how CTEK will reach its financial targets. But it seems like the EVSE segment is expected by you to [indiscernible] acceleration during '27 and '28. Do you expect -- I guess my question is, what is your market assumptions behind these numbers? Do you expect that it will come back to the, I would say, previous market expectation of around like 30% CAGR? Or what is your assumptions behind your own numbers?

The assumption is mainly that we are entering into both U.K. and Germany, which are much bigger than our current markets, main markets, that is Sweden and Nordic. But of course, we also foresee that the very hesitant market situation that we have right now will ease up and come back.

Okay. And a final question from my side. You had -- you mentioned that you had a very strong financial situation at the moment or financing situation. Do you see any potential M&As ahead?

As we said at our Capital Markets Day in May, we do see M&A as a possible accelerator to reach our financial goals. The financial -- stable financial situation that we have right now makes that possible for us to look into M&As, yes.

Okay. Already near term? Or is it more of a midterm horizon here?

That depends on how and when we find suitable subjects.

[Operator Instructions] The next question comes from Mattias Ehrenborg from Redeye.

Yes. I think a lot of my questions have already been answered. But I'm curious to hear what do you think that needs to happen within the Consumer segment for your customers to become a bit less hesitant. Obviously, you've been mentioning the current macroeconomic situation, but is it more than that? Curious to hear what you think.

Yes. Thank you, Mattias. I think what we saw in the beginning of the quarter was mainly our distributors and retailers that were a bit reluctant to take on stock. And that is, of course, due to the macro economical situation. We have, throughout the quarter, seen a stable demand from our online sales channel, where we more directly see the end consumer demand. So that has been stable throughout the quarter. So I think the main hesitation was among our distributors and retailers if they would take on stock. So what I would say is if we get more certainty when it comes to tariffs, that will probably increase the consumer demand and also make our customers more confidence to take the necessary stock for the quarters to come.

And you mentioned there that the online sales have still been solid and improving also. Is it possible to shed extra light on this? What are your expectations going forward for online sales?

The online sales is a very important channel for us, and we see that, that has been developing very, very strongly during the quarters, and we continue to see that as a strong development going forward.

Okay. Also, you mentioned that the geographical mix has had a negative effect on the gross margin in the Consumer segment. Is it possible for you to share what markets are more high margin and vice versa?

Yes. We last -- in the comparison quarter, we had high sales to Australia due to some new product introduction into Australia at that time. And Australia is a high gross margin market. And then we have other various -- generally, we have very high gross margins in all our market for consumer, but there are some variation. And Australia is a positive variation.

Okay. Understood. Just one question regarding the EVSE segment. Obviously, the Professional segment as a whole, very strong development in the quarter, primarily driven by the Low Voltage sales. But then I think you may have answered this question earlier, but U.K. in this quarter for the EVSE, what was the development, yes, in the region? Because now your CC3 has been available for the market for quite a few quarters, I believe. So I'm curious to hear what the development looks like.

Now we see development slightly positive development and from very low figures and not really vibrant, but we see an interest from customers in the U.K. We also see interest from our existing big global parking operators that are active in U.K. So we see a positive trend, but from low numbers.

Okay. And the final question from my side. As you mentioned on your Capital Markets Day, you will launch a couple of new product areas now in H2. And -- are there any markets in particular that you are excited about going into the second half of this year, launching products in those markets? I guess I noticed that your DACH sales in this quarter was once again very strong and continued to grow year-over-year. Is there a market that's particularly interesting or what do you think?

That is definitely a big market for us and a market of continued interest. And if we look into the two different adjacent product categories, boosters, we will, of course, sell in all our existing channels and all our existing markets. When it comes to Power Solutions, that's also the long-term plan. There might be some certification delays to some of other products. But of course, Germany, especially with a lot of RV manufacturers is and will be a very important market for those kind of products as well.

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

Thank you. And we have two written questions first from Johan Eliason. Your new product, will they drive up CapEx a lot in second half year? The question -- the answer to that is no. We will keep our CapEx budget. We will not increase. We are reallocating focus on our existing CapEx on that one. Second written question is from ST. Given your comments on retailers and distributors' willingness to take on stock and the improvement in the end of Q2, do you expect a bounce back in demand in Q3 when then -- or is your judgment that inventory levels are normal again? We -- it's very hard to guide and we do not guide for the future, but I see it more as a normalization from low levels to normalizations. And at this point in time, we do not see any possible bounce back. And that were the two written questions that we had so far. And if there's no further questions, I would like to thank you for listening in, and wish you a good day. Thank you very much from our side.

Thank you.