Kempower Oyj (KEMPOWR) Earnings Call Transcript & Summary

Hi, everyone, and welcome to this webcast where we present Kempower's Financial Results for the Second Quarter 2025. My name is Paula Savonen. I am the VP of Communications at Kempower and the host today. Today, we have 2 presenters. We have our CEO, Bhasker Kaushal; and our CFO, Jukka Kainulainen. [Operator Instructions] But now today, it's a special day for us as our new CEO, Bhasker Kaushal, presents the financial results for the first time. Welcome, Bhasker.

Well, thanks, Paula, and good afternoon, everyone. It's so great to be here. So I joined Kempower on 2nd of June, and I'm truly honored that the Board has entrusted me to lead this company at such an exciting and critical stage in its journey. So since I've joined over the last few weeks, I've spent a lot of time listening and engaging deeply with our teams, with our customers, with our key partners and stakeholders in the industry. And what I'm learning is all about the opportunities and the challenges that we must navigate together. Overall, I'm feeling truly inspired and excited, inspired by leading a team which is so purpose and mission-driven and excited about what we are building together to serve that mission. So what is that mission that excites me, that brought me here? At this stage of my life, I want to dedicate to solving for what I think are 2 of the biggest problems in our planet and world, the transition to sustainable energy and emissions reduction. At the heart of these challenges is the transition to EVs. And at the heart of that transition is having a fast charging infrastructure that enables that transition. And Kempower's mission to build the best-in-class fast-charging systems that are smart, innovative and help solve those problems. So that is that mission that we are all working as a team on and that greatly inspires and drives us. And today, I'm very pleased to announce for the first time as the CEO of Kempower, the quarterly results. And I want to start by thanking the 800 Kempower-ions around the world that helped deliver a strong quarter. So let me start with a few key financial highlights from the second quarter. Our order intake -- we saw strong growth, up 37% year-on-year in Q2. Revenue growth is improving. We're up 9% in the second quarter versus prior year. We saw a significant improvement in the operative EBIT, approximately EUR 7 million improvement year-on-year. And for the quarter, we had a positive operating cash flow. A couple of highlights from the quarter. Our order intake of EUR 74 million was the second highest quarterly order intake in company's history. And second, North America -- our North America business had a standout quarter. Revenues grew 31% year-on-year and order intake was up 150%. We see strong momentum building in that market. Let me talk a little bit about the overall market and what we see there. We're seeing an improvement in the key indicators that drive the EV market and the charging infrastructure. In Europe and North America, year-to-date, we see that the new BEV registrations are up 16% and new public fast-charging installations are up 10%. Now overall, our belief is that electrification remains a question of how fast it will happen, not a question of if it will happen. And there are very few segments that will grow as fast as DC chargers over the course of the next 5 years. And that makes me tremendously optimistic and excited about our industry as well as Kempower's prospects. So next, I want to highlight a few key priorities that based on everything I'm listening and what I see will help Kempower deliver now and position us for the future. And these are: number one, we need to grow by winning with our customers; second is to always lead with differentiated technology through innovation; and third is to deliver through operational excellence. And we need to do that with a winning culture where all Kempower-ions actively contribute and embrace the winning spirit. Let me touch upon each of these. I'll start with winning with customers. We win when our customers win using our solutions. It's our job to make sure that we provide them with differentiated solutions that serve them throughout the life cycle of that solution. And we need to do it with customer-centric teams, whether it's Kempower teams or teams that are our partners. And when we do that, we build deep, long-lasting relationships with our customers, where they see us as essential to their success. And in the second quarter, we're starting to see exactly that, that customers trust and rely on our solutions. I'll share a few examples. Allego, a leading charge point operator, has picked Kempower as one of its preferred suppliers. SKYCHARGER, a fast-growing North American charge point operator, has picked us for their San Francisco International Airport charging hub. EV Realty, a U.S. fleet charging hub leader, and Circle K, a leading global energy retailer, has picked us for our solutions. So the bottom line is that we are winning. By the way, I missed, we also are growing our customer base. We acquired 15 new customers in the quarter. And these customers are coming from different regions and customer segments. Listed here are a few examples of German e-bus charging infrastructure, there's Italian customers, there's Australia, Middle East as well as many in Asia. So we see that we're winning with our customers and that our growth is broad-based across different regions and customer segments. Next, let me talk about our second key priority that I see. Innovation is in the DNA of Kempower. And we always need to lead with differentiated technology. And we see evidence of that through the solutions and products that we've launched in the second quarter. I'll start with Kempower MORE. MORE is more power and more plugs. We can now deliver up to 1.2 megawatt power through up to 12 satellites, which is the industry's highest power in plugs. This solution makes it ideal for large charge point operators and fleets and solidifies our technology leadership in the satellite hardware space and dynamic charging. Second, I want to talk a little bit about Chargie, our charging management software platform. I've led IoT and digital businesses in the past. And what I see in Chargie is something that is differentiated. The features, the functionality, how it integrates with our customer systems, it provides benefits to our customers such as driving higher levels of uptime through predictive maintenance, driving energy cost reductions through energy management features. These are all very vital things that our customers are seeing and they're placing our trust through Chargie. It's a SaaS-based software subscription that our customers are increasingly buying. And overall, we see that Kempower is being recognized as the leader in technology. We were recently ranked #1 by Monta as the #1 DC fast-charging system provider. And this was based on key criteria, key success factors for our customers: uptime; reliability; charge success rate; and user satisfaction. And I believe ABI also ranked us as #1. So the bottom line is innovation needs to deliver differentiated technology, especially in a highly competitive industry such as ours. And that's what we are doing and we'll stay laser-focused on for the future as well. Let me talk a little bit about our third key priority and a couple of updates from the second quarter. That's operational excellence. Where does that show up? That shows up in our delivery performance to our customers. That's the order to delivery, shows up in our quality that we deliver in our products as well as the productivity that we deliver from our operations in Finland and in North Carolina. In the first few weeks, I've observed and seen that we have a strong foundation -- strong operational excellence foundation to build on. During my Gemba walks through our lathe operations, I've observed firsthand the processes and automation that have been put in place to deliver the highest levels of quality consistently. On the right-hand side of this page is our power module stress test stand. Every power module rolling off our lines is stress tested under extreme temperature conditions, under maximum power. And that's the type of testing and processes that are needed to deliver the highest levels of quality and reliability to our customers. So this is clearly an area that is a key enabler of our growth for the future, but also something that we need to deliver best-in-class service to our customers. So continuous improvement, agility, operational excellence will be things that we will continue to focus on as an organization and invest in. Now through all of this, I want to come back to our mission. Are we making progress? Are we having an impact? And the answer is yes. In the second quarter, we crossed 1 billion kilowatt hour of energy delivered through 26-plus million charging sessions around the world. By doing that, we avoided 600,000 tons of CO2. Now that's impact for our planet. Now I want to conclude with the following. First, Q2 is a positive step forward, and it's aligned with our expectations and guidance for this year. Second, we are well positioned to capitalize on the opportunities from the market. And third, we'll continue to stay focused on execution. We'll focus on -- we'll stay focused on the key priorities that I just talked about on winning share, staying agile to make sure that we can react to the market conditions as well. And with that, I will turn it over to Jukka to do a deeper dive on the financials. Thank you.

Thank you, Bhasker. And let's start from key figures. I'm also happy and pleased with the quarterly results, overall, and of course, especially the continued growth in our orders, second quarter in a row. Also, I want to highlight our gross profit margin. We had 50.6% gross profit margin during the quarter 2, more than 50% in H1, considering that we -- there is some price pressure ongoing in the some markets we operate at the moment. So really good result in that sense. We also improved our operative EBIT significantly, which was negative by EUR 1.7 million. So really good development over there as well. Financially, I would highlight the biggest highlight, our positive cash flow for the quarter. Our operating cash flow was plus EUR 4 million positive for quarter 2. So overall, good positive results and according our expectations, like Bhasker mentioned earlier in the presentation. Let's move on to our order intake growth. So really strong order intake growth like we reported in quarter 1 as well. We grew orders 37% during quarter 2. Whole H1, we grew orders 35%. And definitely highlight in the North America, really strong performance in North America, growing orders by 150%, reaching EUR 17.1 million order intake in quarter 2 in North America, which is actually 23% of our total orders in quarter 2. So really, really great performance over there. Also order intake growth in the region Europe outside Nordics was growing more than 50%, which is also actually a continuation from the quarter 1. And I want to highlight this new customer acquisition where we have had high focus already since the beginning of 2024. We have acquired more than 90 customers. And when we look at our order intake for H1, around 30% of the order intake came from the new customers, which is around EUR 40 million. So that's a really good result as well. Then continuing on the revenue, we also grew the revenue 9% for the quarter, driven by both North America and also Europe outside the Nordics. And also want to highlight that the revenue outside Nordics was 66% of our total revenue in quarter 2. So that's highlighting quite well our success outside of our home market basically. So it's a good step for the future as well. Also, North America share of our revenue grew to 12% during the quarter. And also want to highlight, this is now the second quarter in a row when we also grew our revenue. Then moving on our improved profitability and cash flow as well. So we improved our operative EBIT and it was negative by EUR 1.7 million. And the improvement came, of course, from 2 areas. We improved our revenue, growing that by 9%, as I highlighted. And also, we were able to, of course, reduce the fixed costs. We started the savings program autumn last year, which generated this EUR 10 million savings annually. And then operating cash flow, like I highlighted, really great highlight of generating positive cash flow. That was driven by improved profitability, and we were also able to reduce our working capital during the quarter, giving this positive result in our cash side as well. Continuing our 2025 guidance, which is unchanged. Like you see, we are back in the growth track after challenging year 2024 for whole DC charging industry globally. And repeating the guidance, we expect revenue to grow between 10% up to 30% whole year and operative EBIT to improve significantly during the year comparing the previous year. And as you see, our guidance is quite a lot weighted for the second half of the year 2025. Thank you.

Thank you, Jukka. Thank you, Bhasker. And then thank you for all the questions that we have received so far, and you have still time to type new ones in.

So let's go to the questions. The first question is about North America and our strategy over there. What do you see as a strategy to get more successful in the North American market?

Thank you, Paula, and thanks for submitting the question. Look, North America is a very important market for us. I think as with any market to be successful, you want to be firmly established in the market and entrenched with a solid team, solid operations. We opened our operations in 2023. We have built a solid team that is executing. I talked about some of the successes in this quarter. And we have a localized operation in North Carolina and Durham. By the way, not too far from where I studied many years back at North Carolina State University in Raleigh. But -- so we have a localized operation with localized supply base with a very strong team that is very focused on understanding the needs of our customers. That is where it all starts. The second is understanding the specific needs of that particular region. So from a technology perspective, do we need to make any adaptations? And we're actively doing that. And then delivering through operational excellence and the facility and the setup and the localized supply base that we have is performing. We saw evidence of that in the second quarter with many key wins on the order intake side as well as on the revenue delivery side, where revenues were up 31% and order intake up 150%. So yes, we will continue to utilize kind of our priorities that we focused on and the team is already delivering great results in North America, and it will be a critical market for us into the future where we need to win share.

Thank you, Bhasker. Then we move to customer inventories. We have been discussing about that quite much during the last year. So what's the direction with the customer inventories at the moment? How -- Jukka, can you comment on that a little bit?

Yes, sure. It's a good question. So it's declining all the time from one quarter to another with the situation as of now. And we look at it actually from 2 different angles, our new customers' excess inventory and our kind of long-term customers' inventory. And actually, in the new customers, the inventory turnover is quite healthy and normal, but we still have some excess inventory with this older long-term customers. And it probably takes until '26 when those are melted away from the long-term customers. But then it's good to remember that like we reported, we have been acquiring many new customers, more than 90 customers in 1.5 years. So relevance, this whole topic is now less than it was 1 year back. So that is really important to remember.

Thank you, Jukka. Then we have a question about the strategy, Kempower's strategy. How do you see Kempower's current strategy? And what changes, if any, are you planning to the strategy in the midterm targets? Can you comment, Bhasker?

It's a great question. Look, 7 weeks in, I'm not planning to announce any major changes today. Look, as far as the strategy is concerned, as I think about we're in a rapidly evolving and a very competitive industry. And our strategy needs to evolve and mature along with that. And I've reflected and over the last few weeks, I've spent a lot of time with our teams and customers and others to understand all of the opportunities and challenges that we need to face that will essentially be distilled into our strategy. My belief is that strategy needs to be something that paints an exciting path forward, but it also needs to be credible, One without the other is unfulfilling. And that's going to be my focus to work with our leadership team and the broader team to paint exactly that, an exciting and a credible path forward. So that's what we will be focused on, but we are very optimistic based on everything that we see, and we'll make adjustments to the strategy accordingly. And when we are ready, I commit to sharing those updates and coming back here to share those.

Thank you, Bhasker. Moving on to the markets and the BEV registrations. So you highlighted in the presentation that the structural growth in BEV registrations and fast charging installations. So how confident are you that this momentum is continuing?

Yes. Thank you, Paula. Look, I appreciate the question again. I'm sure it's on the minds of many industry participants, what's going to be the growth of our industry. Look, I shared in the second quarter, we see an improvement in some of the key indicators. If I think fundamentally, what it boils down to, it starts with -- to drive the decarbonization of the planet, which is one of the biggest challenges that we face collectively, EVs need to grow and need to grow fast. That transition to EVs is critical because vehicles today are amongst the largest sources of emissions. So we believe that, that's something a structural driver that's going to continue to happen with the transition to the EVs to drive that decarbonization. I mean second, I'd say there's regulatory tailwinds that we have for our sector. Now different countries will have different mandates, different policies at different points in time that makes those tailwinds ebb and flow. But overall, there is strong support from the governments and agencies to support the transition, whether be it federal governments or state governments. And then lastly, I think it comes back to the customers, customers driving adoption because of their own sustainability targets. But more even importantly, total cost of ownership. At the end of the day, it's upfront cost and running costs, and we see there's a lot more BEVs in the market that are much cheaper, so that drives lower upfront costs. And we know that electric vehicles from an operating cost perspective are cheaper. So I think that's going to continue to drive. We see that already. As I'm learning commercial fleets, a number of our customers are driving that transition actively. So I think from a structural -- you asked the structural drivers, I mean, those are the kind of key structural drivers that we feel good about in the mid- to long term should continue to grow. Now having said that, we've seen past cycles have shown us that this market is volatile. And near term, there can be volatility. And that's where we need to make sure that we control the controllables, we go win share and we be agile to go address whatever the market presents us.

Thanks Bhasker. The next question is about the order intake and the revenue growth. So Jukka, given the strong order intake and revenue growth, do you anticipate reaching breakeven in the second half of 2025?

Yes. So need to go back to our guidance, guiding revenue growth between 10% up to 30% for the year and EBIT improvement significant comparing to last year. So we don't guide H2 specifically regarding the profitability.

Okay. Thanks, Jukka. We have received a number of our employees, and there's a question about the recruitment. You have started growing the number of employees again. Where have you added resources? Jukka?

Yes. Happy to answer on that. Actually, when you look permanent employees, and we compare it to the year-end last year, it went down by 8 people. So summertime, when we have a major part of the employees in Finland, we have quite many summer employees. So that is making the peak in our headcount always at the quarter 2. But when looking at permanent employees, like I said, there is a reduction comparing last year-end.

Thanks, Jukka. There is a question about our R&D and maybe also touching on the innovations that you touched upon in the presentation. So how do you see Kempower's R&D compared to other players? Are there any areas where the company should increase efforts?

Yes. Thank you, Paula. That's a great question. Thanks for submitting that question. Look, I mentioned innovation is in Kempower's DNA and differentiated technology through innovation is super important in a competitive -- highly competitive industry such as ours. And by the way, a relatively young industry as well where we are identifying and discovering new problems and problem statements and finding newer sources of efficiency in our system. So are we differentiated? Yes. I mean the proof is from our customers, from independent industry sources. I talked about a couple of those. We're much more differentiated in certain segments, and we see wins in those where we have gaps, we are looking to close those. That's what I'm learning through all of the initial set of discussions. But fundamentally, innovation is going to be critical for us because that's our strength, number one. That's how we win. That's how we compete best. And that's how we will solve some of the biggest problems. And look, I'm still learning the Finnish culture, but the Finnish culture is deeply rooted in deep technical aptitude, and that's the strength that we need to leverage. And by the way, that's what our customers love. The deep technical aptitude that we have around the globe, not just in Finland, but the problem-solving attitude that our company has. That's in our DNA, the collaborative spirit that we have. And those are the kind of things that we need to continue to invest in and nurture.

And also hard to copy.

And hard to copy. Absolutely irreplicable.

Thanks Bhasker. Next question is about the guidance. You keep the guidance range still rather wide even though you have 6 months already behind and rather good visibility on at least the third quarter through order backlog. So why haven't you narrowed the range? What is the reason for keeping it still that wide?

Yes. It's a good question. We also had that in the past quite a wide guidance range. You need to remember that this is a new industry, rapidly moving volatile industry as well, and that is reflected to our guidance as well. So when we go to quarter 3, it might be that we will make it more accurate, but this was the best view we had now and wanted to give to market as well. So no reason to change the guidance for this year.

Thank you, Jukka. Next question is about the key competitive advantages. What are your key competitive advantages in the current market conditions?

Sure. I can start and welcome Jukka to add comments. But look, I mean, in the early few weeks, what I've learned, our competitive advantage starts with technology and our operations and our close relationships and working with customers. We have a good, strong pipeline as well as the flexibility to be able to ramp up, ramp down and that agility in our operations. So Look, I mean, those are our competitive differentiators, starting with technology. We just talked about Kempower MORE, more plugs, more power. And that is going to give us an even bigger edge. So for customers, the large charge point operators, the fleets that are looking to build large charging hubs, we'll love that solution. We would love to hear that from them as well. But that's where we're going to use our advantage and innovation to drive that competitive advantage. Anything to add, Lukka?

Not much, of course. Like we highlighted already, the charge side outsourcing management system, which is also really unique part of our system solution. So not much to add.

Thank you. Then the next question is about the size of the orders. Were your orders affected some larger individual orders? What kind of orders we have had during the quarter? Or did you have stable order intake growth across the client portfolio?

Overall, we had a strong order growth across different regions and different countries. But yes, there were some sizable orders included in the numbers, both in Europe and North America as well. So that was both. But I mean -- I think the most important thing was that we were able to grow across different regions during the quarter. So we are happy -- really happy about that.

Great to hear. Thanks, Jukka. Let's continue, Jukka, with the financials. How sustainable is the current gross margin level, especially in light of the competitive pricing pressure?

Yes. Yes, sure. So we have had quite a long time, quite a healthy sustainable gross margin close to 50% for several years. And like I mentioned, we see that there's some price pressure ongoing on some markets, not in all the markets. And of course, price needs to be always correct. That's not the only factor in the business in selling or purchasing. So we are ready to adjust if needed. And then at the same time, to add on that, we haven't done much work yet with our unit cost savings, so we can have a lot of productivity improvement in the reduced unit cost as well. So we can also mitigate the impact, overall.

P Thank you, Jukka. And there is another question about the guidance still. What are the building blocks for reaching the guidance this year?

Yes. Of course, always in this point of the year, whatever year you go. So we need to still work a lot with the sales. We have a healthy good pipeline, which has developed really positively in the several different regions. But now we need to continue closing the deals, getting the new customers, getting the orders in. So it's business as usual, but that's what is needed during H2.

Thanks, Jukka. We have a question about the subsidies in the U.S. There have been made significant changes to subsidies and regulation related to EVs in the U.S. after our Q1 report. Could you discuss those? And how do you see them affecting you and your market going forward in the U.S.

Yes. So yes, look, North America, a lot of discussion on the policies, the One Big Beautiful Bill, what impact is that going to have, NEVI funding. So here's what we see, a few things. Number one, I think in the One Big Beautiful Bill, some of the tax credits and the -- those have been accelerated or rather the expiration time is sooner. So those expire. So in the mid- to long term, yes, that could have an effect. But in the near term -- in the very near term, that could actually have a positive effect on the market where people look to benefit from those tax credits that are still available, but might expire sooner. Actually -- so that's on the bill. On the NEVI funding, there's actually good news. If you look at the $5 billion that have been earmarked for infrastructure development, fast-charging infrastructure development, based on -- I think earlier in 2025, the Department of Transportation had paused that funding. And through a recent federal court order, that has actually been released. So $1 billion of that $5 billion has been released, and there's, I think, 14-plus states that benefit from it. So that construction has already started with those kind of -- that funding being available. So that's real positive news in the U.S. as well. And then look, I think I'll also say, yes, there's much more -- OEMs are still making investments. There's more BEVs available, more cheaper BEVs available. So I think the total cost of ownership that we talked about starts to come into the equation. And with less expensive BEVs, customers will look to make those investments, both individual customers and fleet customers to benefit from that as well as drive the sustainability impact. So that's what we see at this moment.

Great to hear. Thank you, Bhasker. And then let's talk about the customers. Bhasker, you have been with Kempower only a couple of weeks now. But there is a question, during your first weeks, have you met any customers? And what kind of feedback have you received?

Yes. Thanks, Paula. Thanks for that question. Yes, customers are the lifeblood of our business. And I have met with a handful of customers in the first few weeks or 7 weeks in, still building up my data points. A matter of fact, I'll be in the U.K. next week to meet with several current and prospective customers. So I've gotten great feedback. Overall, the feedback is around technology, around how Kempower works with our customers. Customers are very impressed with our technology, charger technology, everything around scalability, the modular system, the dynamic charging gives them both CapEx, OpEx benefits, software we talked about. So I think the technology is the bedrock. What I've also heard is how Kempower teams work with our customers. It's that collaborative spirit, real deep technical attitude that we bring. And then actually, I've heard examples of when things did not go right, and that happens in business. And the litmus test is how our customers have responded. And what I've heard is very good examples of how our teams have come together with the customers to solve the problems as if they were their own. So that's what I hear, but customers are demanding. I've also heard that they want more. They want things faster. And that's going to be our focus with putting out great technology and delivering them to the needs of our customers and elevating our clock speed to go match their needs. And that's what I've heard thus far, but I'll continue my listening sort of journey tour through our customers.

That's good to hear. Great to hear. And then in the presentation, we mentioned new partnerships, Allego and SKYCHARGE to mention a few. Are these multiyear contracts? And what is the expected revenue contribution from these deals? Maybe Jukka, you can comment.

Yes. We cannot disclose the numbers for this. Single customers. Of course, we have certain criteria when we need to make the stock exchange release and when the size of the orders is fulfilled, then we do the stock exchange release. And -- but overall, of course, it's good to remember our commercial model also that when we do the contracts, quite often frame contracts with our customers, it's not yet the financial commitment. So on top of this frame contracts, we continue working with our customers, they plan the investment plan together with the good partnership. So we always get then the single purchase orders, which is the financial commitment from the customer, which we book in the backlog in our order intake and then we generate the revenue according to the production and delivery schedule. So this is good to remember in Allego and other customers as well. Even though from both of those customers, we, of course, have gotten orders already. But for the long term, that's how our commercial model works overall.

Good to know. Hey, thank you so much for all the questions. And before we close the line, this time, we would like to showcase you an example of last summer when our customer, Candela did a world record in cruising from Stockholm to finish Archipelago in 24 hours with an electric boat powered by Kempower. Thank you so much. Have a great summer.

Thank you.

Thank you.