Envipco Holding N.V. ($ENVI)

Good morning. and welcome to Envipco Q1 2026 Earnings Presentation. My name is Mikael Clement, Chief Strategy and IR Officer at Envipco. And with me today, I will present together with Bob Lincoln President of Americas and heading up our U.K. business. As usual, we'll walk you through the highlights of the quarter. We'll talk about our financials, and we will go into deeper discussions of market developments and our outlook. We will open for a Q&A session following the presentation. But first, today, I would like to welcome Mrs. Jose Matthijsse, who joined Envipco as group CEO this week. Jose brings a wealth of experience from related industries. And before we move on, I would like to give Jose an opportunity to introduce herself.

Thank you, Mikael. My name is Jose Matthijsse. And indeed, I joined Envipco as CEO this week, indeed in May. I think it's a very exciting business opportunity that Envipco brings a possibility to contribute to the circular economy shift that's happening in Europe right now. I bring experience indeed, and let me talk a little bit about that -- the last 5 years, I was part of the Executive Board of SIG, a company selling packaging equipment and after sales and service and having long-lasting relationships with customers like Envipco has. Before that, I spent a lot of time in my career in fast-moving consumer goods, working for FrieslandCampina, being responsible for cheese sales for the retail across Europe and before that at Heineken in multiple different countries where I was Managing Director for companies and smaller companies and larger companies with different maturities. So as much as the technology of Envipco is new to me, its customers, the value chain and the business of scaling a commercial business is not. I'm very excited to join Envipco at this stage of their maturity. I'm also very familiar with the different legislations that leads to the rollout of DRS in Europe, which, of course, creates a great momentum for Envipco. And I believe that the team has laid down a very good foundation for that growth to capture that growth. We have good teams across the European countries, and we obviously have a strong team in the U.S. We have a good buildup of capacity to capture the growth that is coming. So I believe we're very well prepared, and we have a very good portfolio that also caters for the different needs of a wide variety of customers. So all in all, I'm very excited to join. I'm very grateful for the trust that the board has given to me, and I'm happy to be here today with the team to present Q1 results. And with that, Mikael, I give it back to you.

So with that, let's move into the financial review and some highlights of the first quarter of 2026. Group revenues in the first quarter of '26 were EUR 19.7 million, a decline of 6% on stable operations in our North America and somewhat mixed performance in Europe. Our gross margins improved sequentially to 34.1%, driven positively by product mix but still reflecting a building of our service organization and underutilization of our assembly operations. With OpEx at EUR 11.2 million, EBITDA came in at negative EUR 2.1 million in the quarter, with operating profit at negative EUR 4.5 million. The quarter has been characterized by strong commercial activity with several new wins and with anticipation of higher activity levels going forward. We have built our inventories and continued to build our team. We exited the quarter with cash balances of EUR 41.6 million. This has been a very active quarter for Envipco and the commercial momentum for the company is building. We're very happy to welcome Jose as the company's new CEO from this week. We have had a number of new commercial wins. In Portugal, we have announced a win with the operator, SDR Portugal for Quantums. We have announced retail wins with [ Kovida ] and also Spar-Portugal. In Poland, we're very happy to team up with Netto Polska and will install up to 700 RVMs across Poland in the current year for Netto. We have had breakthrough orders in the U.K. market and announced 2 major wins in the U.K. with up to 3,800 RVMs being installed from first half of 2027. And in the Netherlands, we've had strong commercial momentum, many new wins and continue to drive deployments of our Quantum technology for bulk feed collection across the Netherlands reaching 50 installations in total now just a few days ago. We continue to build our organization close to 600 employees at the end of Q1 and with the growth in the last period, driven largely from new employees in our assembly facilities and expansion of our field service capacity in new markets. For those of you who are new to Envipco, Envipco is a global recycling technology company. we make reverse vending machines, enabling the automated collection of empty beverage containers used in the DRSs deposit return schemes globally. Historically, a North American-based company, the company pivoted into Europe a few years ago and has since won significant market share in new greenfield DRS markets. Building on a delivery capacity and seeing a very strong tailwind from new deposit legislation across Europe, Envipco is looking very positively to the opportunities ahead. Then let's move a little further into the financials for the first quarter. P&L first. revenues, as mentioned, EUR 19.7 million, down 6% year-over-year. The decline is largely explained by stable operations in North America and somewhat mixed operations in Europe, a few markets such as the Netherlands, and new sales in Poland are positive drivers, whereas some of our existing markets, such as Hungary and Romania are down on a year-over-year basis. Gross margins improved sequentially to 34.1%, but are down on a year-over-year basis. They continue to reflect the lower capacity utilization as we have built our production capacity and the building of our service organization in new markets. Operating expenses were EUR 11.2 million, up EUR 100,000 from Q4, with EBITDA at negative EUR 2.1 million. European revenues were EUR 12 million in the quarter, down 2% year-over-year. and timing of markets continue to cause quarterly variations. That is an important factor for Envipco. This quarter, RVM sales are down somewhat year-over-year, EUR 10.2 million versus EUR 11 million last year with some of the difference being explained by a higher share of deliveries on throughput and lease, thereby giving the revenue recognition over the contract lifetime versus as an upfront sale in the quarter. Slower sales, as mentioned in Hungary and Romania, but with very positive developments in Poland and the Netherlands. Program Services in Europe in the quarter were EUR 1.8 million, up from EUR 1.3 million. in Q1 last year. North American operations revenues of EUR 7.7 million, down 11% year-over-year in euro terms. FX adjusted, the decline is 1%. So U.S. operations are relatively stable versus the first quarter of last year. Program Service revenues were down 5% to EUR 7 million. up on an FX-adjusted basis, whereas RVM sales were down 47% to EUR 0.7 million, difficult comparisons with a few Quantum deliveries in the first quarter of 2025. With new orders in North America, the company expects RVM activity to increase for the remainder of 2026. The gross margin, as mentioned, 34.1%, up sequentially from an adjusted margin of 32.3% in Q4 reported margin in Q4 was 25.1%, including some write-downs on inventories as discussed in March. And then moving on to OpEx. OpEx up marginally on a sequential basis from EUR 11.1 million to EUR 11.2 million this quarter. up 14% year-over-year from EUR 9.8 million in the first quarter of last year. We exited the quarter with 597 employees, of which close to half are in field service and assembly. Over to our financial position. Balance sheet total is down sequentially from EUR 158 million in Q4 to EUR 151.1 million in Q1. We exit Q1 with cash at EUR 41.6 million, down from EUR 59.8 million in Q4. This is partly explained by an increase in working capital. Working capital growth is up EUR 10.8 million to EUR 68.3 million in Q1. Inventories are building up more than EUR 5 million and trade receivables are also increasing on late sales in the quarter. The inventory build is raw materials increasing as the company is securing components for anticipated higher deliveries through the year. Total borrowings are down by EUR 0.7 million to EUR 18.7 million at the end of Q1 on scheduled repayments. There is a reclass in our long-term and short-term borrowings this quarter. Subsequent to our Q4 '25, report, the loan facility was reclassified due to a temporary confident [ beats ] at the year-end. A formal waiver has been obtained, and there have been no consequences and going forward, the company expects to reclassify the loan as long term. Current liabilities at the end of Q1 were EUR 44.4 million, up from EUR 33.1 million at the end of Q4, with trade creditors down EUR 2 million to EUR 13 million. From there, moving into the cash flow. The company started out the quarter with EUR 59.8 million in cash. Cash from operating activities were negative EUR 15.2 million with working capital increase explaining EUR 12.5 million. Cash flow from investing activities, negative EUR 1.3 million in the quarter, capitalized R&D, EUR 0.7 million and regular CapEx of EUR 0.6 million. Cash from financing activities in Q1 were minus EUR 2 million with debt repayments of EUR 0.7 million in the quarter exiting Q1 with EUR 41.6 million in cash balances. Then let's move into some outlook and market discussions. As a reminder, Envipco has a growth platform based on 4 solid pillars. One is, of course, to continue to develop our existing business. So moving from installations to service businesses in existing markets after a period of warranty. Then the largest driver for the company in the last few years and anticipated to be in the next few years, are greenfield growth opportunities, driven forth by new countries putting forth DRS legislation, introducing deposit return schemes. Through our technology, we are also able to develop business and drive selected growth in existing DRS markets through a brownfield growth strategy. What we have done in Sweden, what we are doing in the Netherlands are strong examples of a very successful growth field -- brownfield growth strategy. And on top of that, we have a selected M&A strategy, such as the acquisition of Sensibin in 2024, giving us the compact product for the convenience store segment. There are a number of countries driving new market opportunity for this industry in the years ahead. The EU packaging and packaging waste regulation are setting clear targets for all EU nations to collect 90% of all empty beverage containers by early 2029. This is a regulation mandating the introduction of DRS unless existing systems reach certain collection targets over the next few years. Ahead of us now, we are looking at Greece seeking to introduce DRS -- National DRS this year. U.K. is actively progressing towards the introduction of a national DRS from October 2027. We are seeing that there are movements in Turkey to introduce a staged rollout of the DRS potentially from this year. And then we have a range of other countries coming along in the next few years. There are still some countries that are yet to introduce activity towards introducing a deposit return schemes we expect them also to follow as we get closer to the EU deadline. With that, I think I would like to give the word to Bob for a brief introduction on our products and the U.K. and U.S. markets. Thank you.

Thank you, Mikael, and welcome to everybody that's on the call. I'm going to -- some of you have seen this slide before because it's very important because essentially, we're a product company. And we're very proud of our product portfolio because it allows us to attack every single segment of the retail market regardless of what country we're operating in. I want to spend a little more time on the low end, the compact and Flex products, but I will take you through the rest. When you look at the market composition and you look at how many convenience stores are in Poland and in the U.K. combined, that's about 75,000 locations. And the compact product has been purpose-built to attack that channel. Obviously, that's a huge opportunity. What have we done with this product? Well, we've engineered cost out of it, the detection is done with a single camera versus multiple cameras. We use AI technology for shape and barcode recognition. We've redesigned the compactor as a low-cost compactor. It's designed for stores that are doing several hundred containers a day. It's not designed for supercenters or large retailers. It's a very discrete size, it's plug and play. You can roll on store personnel can move the machine around the store, plugs into standard electric. And in this channel in the convenience channel, the threshold for capital investment is low. And so you need a product that meets the performance to affect meaningful sales and we're very bullish in our ability to promote this product and take advantage of this huge market segment. As retailers get a little bigger or their returns are more than expected, we can move them up to Flex, which is a high-performing multi-camera, more advanced compactor, faster machine. And then as you move into bigger stores, -- we have the Optimum platform, very flexible, it can take a single bin for comingle containers, can and pet together. We can separate the 2 commodities within the machine. Then we can move to Magna, which is a new product -- this is environmentally rated products. So this product can go outdoors and minus 20°C and extreme heat and work perfectly, doesn't require an enclosure and it's very flexible. So this product, you could expand the product in the store in about 3 hours. So if queuing becomes a problem and a store has 3 Magna and they want to add a face, we can do that in 3 hours, which is a very compelling offering. We have a backroom system in modular, which is state-of-the-art and deployed and performs incredibly well. And then on the highest end, we have Quantum. And Quantum has proven to be a very important product for us, not just at retail, which it resonates. I mean, we have them at retail locations in every single country we operate but a clear pattern is emerging with Quantum with the system operators because you cannot get to the threshold, the EU demands on return rate with just direct to retail redemption. So that's what we're seeing in Portugal, where they are acquiring Quantum. That's what we've seen in Sweden. That's what we're seeing in the Netherlands. And what's unique about the product is there's really no competitive answer in our view to how this product performs on speed, capacity and reliability. So when you look across this product portfolio, we are really well positioned to attack any retailer, whether it's exclusive, and they have different form factors within a single Tier 1 chain. We have a product for them or individual sales on the low end with compact and Flex. A bit about the U.S. market. I mean, the market is mature. It's very steady. We have a very nice share of market. We did introduce Quantum in the U.S. market. It's been a big success. We started in New York. The platform is working tremendously well, doing huge volumes, multimillion volumes a month. And now we've further introduced it into the Connecticut market. And this is segmented to high-volume redemption centers they really can't afford a full accounting system in a warehouse. They can put the quantum in the front or inside their facility to get densification and exact accounting. And it's an important product. It's also a product we're looking to California, which is still early days, but we believe the Quantum can play a role in California as well. We did succeed on 2 competitive RFPs with national retailers with locations in Connecticut. We won them both exclusively. It's 200-plus machines. Those are rolling out as we speak and will be complete by the end of this year. We have a continued focus on business development across the board. If any legislative green shoots show up, there's some activity now in Texas, we have a team to go in and make sure we're represented and can kind of direct and control how that law moves forward. As far as outlook, we expect RVM sales to increase during the year, and we feel quite confident that the U.S. business is in a good position. Now to the U.K. We have announced 2 meaningful exclusive commercial deals with a leading U.K. retailer, Iceland, we announced 1,500 compact kind of proving the points I'm making on the portfolio. It's an exclusive deal. It's in every single store. We filed that with a Tier 1 win with 2,300 RVMs across our compact Flex and Optima line, a highly regarded retailer. These are -- we're proud of these wins. They're very difficult competitive situation, and we prepared -- we succeeded on an exclusive basis. The DRS in the U.K. is moving very systematically. We see them being extremely organized this October 2027 date, in our view, is not going to move. The system operator is also looking to incent a much broader network of return points. How are they doing that? Well, they've introduced a scheme on handling fee where 5, 000 which is quite significant, goes to small retailers that do about 200,000 units a year. Well, that is a huge tranche of subsidy to allow us to sell and compact and Flex. It makes the ROI in many cases, immediate. They're also introducing a $60 million subsidy fund which is another incentive to get the low end markets, so they can get as many points of redemption as possible, which is great for the DMO and it's great for Envipco. Now we have a laser-like focus on Tier 1. Those debates have been going on for months. We expect them to conclude in the next several weeks. And as I said in previous calls, -- we have a high degree of optimism about our position on Tier 1 and Tier 1, just to be clear, are the large retailers, the Sainsbury's, Asda, Tesco and so forth. So we feel good about the U.K. And with that, I will turn it back to Mikael. Thank you.

Poland, Envipco keeps building its buses in the Polish markets. And we recently announced an agreement to supply 700 Optima Flex RVMs across Netto Polska's store network in Poland. The Polish DRS went live in October 2025. There is a gradual ramp. It has been a so-called slow or soft start of DRS. In the first 7 months, market intelligence tells us that there is roughly 1 billion containers that have been collected out of the 14 billion container markets. So the ramp-up is gradual. It's slow. Envipco will continue to build its market position through preferred supplier agreements with a number of big retail groups and on the basis of announced orders. In addition, Envipco sees a significant long tail opportunity in fragmented retail in Poland. As we have discussed before, I mean, initial expectations were a market sizing of around 15,000 RVMs through the Polish market. But there are a number of opportunities outside of that number. So that overall market could end up potentially being larger than that initial market assessment. Poland -- excuse me, Portugal, went live in April with the DRS. That's also a soft launch with a grace period for the industry. but installations are coming along in that market. Envipco has announced multiple agreements, positioning the company for a solid market position in Portugal. We are the sole supplier of bulk feed collection systems for the operator, SDR Portugal, supplying up to 50 Quantums across Portugal. We have an exclusive frame agreement with [ Kovidal ] an Iberian retail group. We have recently announced a frame agreement with SPAR Portugal. And on top of that, we have the previously announced LOI that we are delivering on with Intermarche. We recently also moved into new facilities and are building our Portugal team. The Netherlands has been and continues to be a big success for Envipco. The Netherlands introduced cans in through its DRS a couple of years ago. and collection rates dropped. The operator is looking for new ways to increase collection rates and the Quantum bulk technology has proven to be a very effective product in reaching that. We signed a frame agreement with the operator starts to get Netherlands last year. and are continue to deliver on that opportunity. Statiegeld has announced plans of a very broad network of bulk feed, maybe up towards 200 bulk feet collection points during the current year, and Envipco continues to target and build on that opportunity. Greece is progressing towards a soft DRS launch in 2026. Last year, DRS [ Hellis ] was appointed the system operator. an operator backed by major beverage and retail stakeholders. Recently, they have introduced tenders, both for RVMs in-store, out of store and also for accounting centers. Envipco has a very strong position in the Greek market. Having been there a number of years, working closely with our partner -- we've installed around 500 Quantums across the Greek markets in a pre-DRS phase. We are attempting to build further on that and see great opportunities both for our Quantum technology, but also for our broad RVM portfolio. We have a strong market fit with the Quantum S purposely built for the Greek market. So we are very optimistic as to the company's opportunities in the Greek market as well. That brings us to the end. This has been a very active quarter where we are -- have seen a very solid commercial momentum. We continue to see that into the second quarter as announced through recent wins. We are overall seeing very strong market tailwinds with legislation driving new opportunities that is creating very exciting long-term opportunities for the company. For 2026, we expect Poland and Portugal to build. We expect Romania to continue to be robust, however, lower than last year as we are on the tail of market opportunities in the Romanian market. Hungary came down last year, is expected to be relatively steady with last year's activity level, whereas Netherlands is picking up momentum, and we are very optimistic to our opportunities in that market. Greece tenders are advancing, and Greece could offer significant commercial opportunities for the company when that market starts moving ahead. Looking a little bit further down the road. We are very happy with the initial wins in the U.K. market, building visibility, building market position in the U.K. markets. As you heard Bob mentioned we expect more activity from the U.K. market in the next weeks and months as well. We expect a stable U.S. business with some growth in RVM sales based on recent wins. And we will continue to manage our operating costs, manage our working capital. And as always, -- this is a market driven by regulation. We will see quarterly variations, but the long-term progression of this industry is very exciting. So with that, I think, Bob, if I can ask you to come back up. I think we will open for questions.

See if we have some questions coming in here. Here's 1 question. How do you see the competitive landscape in Poland and Portugal? We have -- on several occasions, said that the Polish market is very competitive. There are I think the largest number of RVM supplier is in Poland, then we have seen really in any other markets. So very competitive on all dynamics, Portugal. The number of competitors are fewer, I would say, than in Poland, more on what we usually see in other markets. So the usual names, I would say, we see in the Portuguese market. Let's see here. Contract wins have been significant year-to-date with deliveries picking up from Q2. What should we expect as sales run rate? And how will that affect margins? Well, with deliveries increasing, revenues should increase. However, as we also pointed out in our Capital Markets Day last year and we've repeated on occasion. Keep in mind that there are several outside factors that also influence our quarterly sales, thus the argument of quarterly variations. We are -- the company is reliant upon DRS legislation being enacted. And the timing of that is outside the company's control. And we have seen notoriously that the timing has tended to shift -- the type of agreement we enter into, if it's a sales contract, if it's a throughput contract, if it's a leasing contract, also impacts the short-term or long-term revenue recognition. So these factors will play a part in how the sales will develop. But as pointed out in the question, Commercial activity is sharply up. We are looking positive to the outlook in terms of future commercial activity as well. And thus, that should drive sales. On the margin level then, gross margins, as mentioned, are today also affected by the underutilization of our assembly facilities and the upfront investment in field service capacity to enable this installation, thus a higher revenue should give an uplift in gross margins. And we have operating leverage in terms of OpEx now at EUR 11 million plus per quarter, that will continue to build carefully, but of course, revenue growing for faster than OpEx should give some leverage as well. Let's see here. Are there any reasons to expect a sequential increase in revenues in the second quarter? Yes, Envipco expects a sequential growth in revenues in the second quarter, driven by Poland, driven by Portugal, driven by continued growth in the Netherlands -- those are the key drivers. On top of that, there could be depending on how the process in Greece develops, Greece could become a factor for the company in the next few months as well. Let's see here. What is the accumulated number of installations of RVMs? For Envipco that is roughly 15,000 RVMs installed. Higher share of throughput -- is that primarily related to the Netto Polska agreements? Or is this broad mix? it's not a broader mix shift, but it's a somewhat broader than 1 individual customer. We had 1 LOI announced last year where customers were the customer was given the choice between sale or throughput that share of customers choosing throughput has been higher than we originally anticipated. So it's a little bit broader than just 1 customer this quarter.

And I would add to that, that most of the U.K. and EU opportunity is sales of the service agreement. But there's the throughput deals, we've been doing those in the States for years. They're very good model from a margin perspective, and they're a very good model for us to have experience with in order how to construct it. So if a customer comes to us and wants to do a throughput deal, we're happy to but it's kind of a smaller percentage than sales and service on the front end.

Yes. Can you quantify the Romania impact in the first quarter? What's the expected timing of recovery? Timing of recovery, the customer is already back in a significantly higher activity than what we saw in Q1, and we expect that to continue this year. The exact number, it's a fair share of the DVMs to Q4. See here what we have in -- there are a couple of double questions here. U.K. you mentioned that you see more retailers making decisions. Can you put some more color on what's going on? What's your focus?

Yes. Well, when you have October '27 as a hard deadline, for this scheme to kick off. So these containers are going to be flooding into all these retail locations on day 1. Now there will be a small grace period for smaller brand holders to get the barcode initial -- but the main players will be ready to go. And when you look at that time line, the Tier 1 retailers with multiple locations, multiple different store formats need to make decisions now because the work ahead of them is as significant as a work ahead of us. They have to get the groundworks, the electric, the permitting -- they need to know what machine, what size, how many in every single location. It's a tremendous amount of work that needs to be accomplished between now and go live. That is why we feel that these debates are going to conclude in the next several weeks. They can't conclude much longer or the retailer themselves won't be ready for us, luckily, we have substantial manufacturing capacity. So we're ready to go. But that's why we feel that these debates will end quite quickly.

Good. Can you give some details about the Turkish market and your strategy in this market? Well, Turkey has, for some years, planned the introduction of DRS. Once again, a process that has taken a lot of time and been through several developments. Signals now are for a staged introduction of DRS this year or starting this year. Staged maybe in the sense of requirements for retailers to have a part of their outlets start collecting empty beverage containers and introducing a deposit. Envipco is tailoring a product for the Turkish market. We are working together with a local partner for the Turkish markets and we'll target the Turkish market that way. And we're working where we'll come back to, I guess, more details on the Turkish market as we move through the current year. See, there are many questions here that are overlapping. Yes, how should we think about revenues for the current year? How should we think about Q2, Q3? As mentioned, we expect sequential growth from Q1 into Q2 and remains to be seen how the second half develops, but -- if markets develop the way we've seen so far, they should continue to build. But once again, all these factors impacting near-term sales, will also play a part. Overall, we're optimistic to what we see going forward. Let's see here where are we, many on Q2 U.K. when secured before DRS has even launched how much of the remaining U.K. retail market is still undecided and how is Envipco positioned? A little bit overlapping, but

I think there's been our announcements and another announcement -- so it's moving. I would say that 70%, something in that order is in front of us in terms of concluding. And that -- you have to look at the U.K. market and in really 2 categories. One is Tier 1, which everything is consolidated under 1 buying and operational group. And then you got the wholesaler groups, companies like SPAR and others that negotiate preferred supplier agreements. And that's obviously those wholesaler accounts into small convenience is a huge, as I mentioned, in the U.K., we have that market at 40,000 a locations. So that's going to take a little longer. So I would say that's as good a percentage I can come up with to date that most of it's in front of us.

Yes. Regarding Greece, what do you mean by the statement public tenders scheduled to close shortly? Well, there have been public statements or tenders since April, they were initially expected to close in April. They were extended somewhat into May. I don't have the exact dates on that, but we're, I think, fairly close to the extended deadlines for that. And probably will be some process testing, et cetera. But it seems to be closing in, as we mentioned, fairly shortly. Yes, we're running a little bit out of time. Many questions here. The average service revenue per installed unit is higher in the U.S. than in Europe. How is the service revenue why is that? And how do you see that developing?

Well, the service revenue in the U.S., we have a somewhat aged fleet. So when our service contracts come up, we have escalators and things -- techniques that we will use in the EU to burnish and build our service revenue line. But right now, we're heavily into warranty period. But when we come out of that, we still believe strongly that we'll get 10% service revenue against the ASP of a machine we sell -- so that service revenue will rise closer to U.S. standards over time.

I think with that, we're reaching an end to -- for this presentation. Once again, we're very excited about the commercial momentum that Envipco is building. The company sees a number of opportunities, both short term, medium term and long term. And we'll continue to try to harvest the opportunities that we face. Thank you for your time and attention today. The next time, Q2 will be on August 12 and hope to see you back then. Thank you so much.