Kempower Oyj ($KEMPOWR)

Good afternoon, everyone, and welcome to Kempower's Q1 2026 Results Presentation. My name is Calle Loikkanen. I'm Director of Investor Relations, and it is my pleasure to introduce today's speakers, CEO, Bhasker Kaushal; and CFO, Jukka Kainulainen. The gentlemen will walk us through the highlights and results of the quarter. And after the presentation, we will end with a Q&A session. But without any further ado, let me hand over to Bhasker. So Bhasker, please, the floor is yours.

Well, thank you, Calle, and good afternoon, everyone, and thank you for taking the time to be with us today for Kempower's first quarter results in 2026. We have good news to share this morning, and let me start with the headline. Q1 was a strong start to the year. Revenue grew 54% year-on-year. North America tripled -- more than tripled, up 230%. And these are share gains, and we are outperforming the market. Gross margin held flat sequentially versus the fourth quarter of 2025. Our product cost reduction program is offsetting the price pressure, and we expect that program to ramp up further in the second half. Significant operative EBIT margin improvement, which is up 11.6 percentage points, and this was driven by revenue being up 54% versus the fixed cost being up just 20%. Now this is the operating leverage model working as designed. And finally, the order book. Our backlog stands at EUR 141 million, which is up 32% year-on-year. And order intake of EUR 69 million is a record for the first quarter. And this gives us a strong foundation for the rest of 2026. Next, let's look at the financial highlights. And let me take you through the 4 headline metrics. I'll start with order intake first, which is up 16% year-on-year and driven by continued momentum across key European markets. Second, revenue, up 54% year-on-year. Our growth has been broad-based. North America more than tripled. We see strong growth in Europe outside the Nordics and services revenue up 45%. Third, profitability. Revenue grew 54% versus the fixed cost up just 20%, which is the operating leverage that I referenced. Gross margin was a key contributor. It was 45.3%, which is flat quarter-on-quarter, but lower year-on-year. Our operative EBIT margin improved by 11.6 percentage points overall. And finally, cash flow. Cash flow from operating activities improved by EUR 6.4 million year-on-year, and this was driven by the improved profitability. Our liquidity position also remained strong. And I'd say, overall, a very solid set of numbers across the board. Next, let me put our performance in the context of the market. So let's start looking at the growth in BEVs and new public fast charging installations. New BEV registrations, which is the chart on the left, Europe up 26% with North America down 27%. The new public DC fast charging installations, the chart on the right, Europe up 56% and North America down 1%. So you see 2 very different market backdrops. In Europe, the policy environment is supportive. Around EUR 5 billion of new public funding has been announced in the beginning of 2026, EUR 3 billion in Germany and GBP 1 billion in the U.K. In North America, the picture is a bit more mixed. We see the slowdown in EV passenger car sales, which is somewhat expected, given the federal subsidy expiration in September of 2025 and the surge in EV demand prior to that expiration. But even in a soft registration market, the funding fundamentals have been intact. We see the federal NEVI program rules have been streamlined and the funding is available. It's actively being dispersed, being actually used by a number of our customers. California introduced a new voucher program to drive the adoption of clean trucks and buses. Now in North America, for Kempower, our focus has been to grow faster than the market, and that's through share gain, given that we entered the market about 2 years back. And we are doing this very well. We're gaining share, and I'll talk more about that in a minute. A quick note on commercial vehicles. E-truck and e-bus registrations grew 52% in the fourth quarter of 2025. Now that market data is published with a bit of lag, but this reflects the acceleration in the heavy-duty market. Next, let me go a little bit deeper into our regional performance. I'll start with Europe, and our strategy there has been clear; grow across Continental Europe and diversify beyond the Nordics. Q1 shows that our strategy is working. Revenue in Europe outside the Nordics is up 87% and order intake in Europe outside Nordics up 16%. We've seen strong growth across France, the U.K. and Germany. In Q1, Nordics is now about 24% of our revenue. And a year ago, it was 32%. So year-over-year, Nordics revenues and order intake declined, which is somewhat expected as the demand in that market has somewhat normalized in passenger cars. But we are seeing signs of acceleration in e-trucks and the next wave of charging infrastructure for heavy-duty vehicles. A couple of customer highlights in Europe. We strengthened our airport presence with an installation with Hilton Heathrow Terminal 5. And our partner, Plugit, deployed Finland's first public MCS site for electric trucks, and that's at the Port of HaminaKotka. And that's a real sign that heavy-duty charging is moving from concept to deployment now. On to North America. And there, our strategy has been clear that we outpaced the market through share gains. And the headline number, which is revenue up 230%, shows that we're executing on our strategy. That revenue growth has more than tripled year-on-year. Order intake is up 16% and the underlying momentum there remains strong. I mean growth is coming from across our customer base, including public charging and fleet customers. And we added 4 new customers in the quarter. The standout in North America was our partnership with EV Realty. We supplied their multi-fleet truck charging hub in San Bernardino, California. And I was there at the site 2 weeks back and what a tremendous site, more than 70 plugs, and that site is ready to help drive the adoption and scaling of e-trucks in that market. And as we've been talking about, heavy-duty fleet electrification is a major opportunity for us in addition to public charging. And this deployment validates our position in that segment. We also showcased our products at the EV Charging Summit in Las Vegas, which I attended as well. And there was strong engagement with charge point operators and fleet customers. And our booth had one of the best attendance and footfall at the show. So, overall, in North America, our pipeline is healthy. We see strong opportunities to continue to gain share. Now let me step back and talk about our strategic priorities. It's 4 pillars, all are progressing well, and we are making measurable gains there. First, winning with customers. We acquired 8 new customers in Q1. Our MCS deployments are transitioning from pilots to full-scale orders now in both Europe and North America. And as a reminder, Megawatt Charging Technology allows charging speeds of up to 1.2 megawatts, and it's the new standard for heavy-duty charging. Second, on differentiated technology, we launched the analytics view of our ChargEye software in Q1. That gives operators uptime, performance and fault analytics. And we're very excited about continuing to bring more advanced analytics features to ChargEye. Also, in terms of the MORE Plugs solution that we launched late last year, customer deployments continue to advance there as well. Third, operational excellence. On-time delivery performance was strong. That's what allowed us to deliver 54% revenue growth year-on-year. And our product cost reduction program is on plan, and I'll talk more about that in a second here. Fourth, winning culture and team. We rolled out a new organization structure during the quarter, which is focused on driving clearer accountability, faster decisions and aligned to our strategic priorities. Next, gross margins deserves a closer look. This chart here on the left shows our trajectory over the last 3 years. And in Q1, gross margin held flat sequentially quarter-over-quarter at around 45%. And the story behind that number is important. There are 3 drivers at play here. First is the price, and there's continued pressure on price in the market given the intense competition. Second, there's regional sales mix. As we are scaling into newer markets, the early phase in that carries a different margin profile than our established regions, which is very normal in any geographic expansion, and that margin will improve as we scale and optimize in those regions. And third is productivity. Our unit cost reduction program is offsetting these price and mix headwinds. And that cost reduction program was launched in the second half of last year, as we talked about. It has 3 work streams. For example, in procurement, we ran multiple rounds of RFQs across categories in Q1 and seen cost reductions there. In production, we're consolidating subcontractors. We're rebalancing our workforce across factories to have labor productivity. In product design, we're running should-cost analysis, testing alternative components that are less expensive but still offer the same features, functionality. So these benefits will continue to ramp and materialize through the course of the year as these actions that I just talked about mature and the inventory turns. So we expect the gross margin to step up from there and improve. Now, I'll hand it over to Jukka to take you through the financials in more detail.

Okay. Thank you, Bhasker. Okay. So let's look quarter 1 financials more in details. So we continued executing our growth strategy also in quarter 1. We had a strong performance in sales, like Bhasker already commented. We grew the order intake 16%. We grew the revenue 54% and driven by several regions outside Nordics, North America, Europe, actually our region APAC and EMEA was growing nicely orders as well. So really strong performance sales-wise. Also, we were able to improve our profitability significantly. We improved the operative EBIT by EUR 3.8 million. which was a good result as well, even though still negative by EUR 3.5 million. Then at the same time, we also improved our cash flow from operating activities from EUR 7.5 million negative to EUR 1.1 million negative. So when summarizing quarter 1 financials, top line-wise, strong start for the year. And also at the same time, we improved operative EBIT significantly as we have been guiding for the whole year as well. A little bit more about the order intake. So order intake growth, 16% for the quarter 1. Actually, it was the highest quarterly -- quarter 1 order intake in Kempower history, which is a nice milestone as well. And highlighting few areas where the growth was coming in Europe; DACH area, Eastern Europe was growing strongly, especially the public charging side. And like I highlighted already, the APAC and Middle East, Africa region actually growing nicely as well, more than 200% -- sorry, more than 100%. That was driven mainly by the bus charging segment in that region. North America growing 16% in order intake-wise. But actually, if we look only the U.S., so U.S. orders were growing almost 200% during the quarter. So good result over there as well. And then, when looking at the coming quarters, our order backlog is 32% higher than the year-on-year. So that gives a good foundation for growing in the coming quarters as well. Then about the revenue. Like I mentioned, significant growth, 54% in the revenue, and that was driven by the growth in North America, more than 200% growth over there and also Europe outside Nordics growing strongly as well. And then one highlight also when looking at our recurring revenue on our services and aftermarket, that revenue in quarter 1 grew also 45%, reaching almost EUR 5 million, EUR 4.6 million to be exact. This is 7% of our total revenue when looking at our quarter 1, 2026 numbers. Then about the profitability. Regarding gross profit margin, sequentially, we kept that flat. So more or less on the same level than in quarter 4 2025. But year-on-year, that dropped by 4.2% units. And like Bhasker commented, there's price erosion ongoing in the market, which continues, and there was some regional mix impacting as well, and we had few little bit lower margin customer deals also impacting on the margin. Operative EBIT, like I mentioned, improved significantly, almost EUR 4 million year-on-year, being negative by EUR 3.5 million. That was driven by increased volumes, but partly offsetting by the lower gross margin and higher fixed cost base, what we had during the quarter 1, 2026. And when looking at our guidance and our targets, we, of course, continue focusing on our top line growth, revenue performance. But of course, at the same time, we continue controlling our fixed cost and managing the fixed cost in order to improve the profitability for the coming quarters as well. Then going to cash flow and liquidity more in details, like I mentioned, cash flow from operating activities improved from negative EUR 8 million quarter 1, 2025 to negative EUR 1 million during quarter 1, 2026. So that was driven by improved profitability and the positive change in the net working capital altogether. And then when looking at our liquidity level, which includes our cash, our money market investments and our RCFs, we actually improved our liquidity situation. So our liquidity has increased to EUR 119 million, so improvement year-on-year. And we are quite confident that this is one of the strongest liquidity levels among the peers in the DC charging industry in North America and Europe. And now I hand over back to Bhasker.

Thank you, Jukka. Let me conclude with a summary. Our outlook for the full year is unchanged. We expect revenue to grow between 10% and 30% versus 2025. And for reference, 2025 revenue was EUR 251.3 million. Operative EBIT is expected to improve significantly versus 2025. Last year, operative EBIT was negative EUR 12.4 million. We will continue to invest strategically in technology, in sales, in services because these investments strengthen our long-term position. We do recognize that these do weigh on profitability in the short term. And that's a deliberate choice that we are making to position us for the long run, and we believe it's the right one. So 3 things to take away from the first quarter. First, strong organic growth and momentum. You see revenues are up 54%, North America up 230% and services up 45%, which is -- and the order intake for the first quarter is a record of EUR 69 million. Second, we continue our execution of the strategic priorities. We are continuing to gain share in a competitive market. The 8 new customers in Q1 demonstrates that. North America outperforming the market demonstrates that. And we are leading in megawatt charging, and MCS is moving from pilots to commercial deployments. Third, we are laser-focused on financial discipline and delivering to it. The operative EBIT improvement of EUR 3.8 million year-on-year shows that. We are continuing to balance gaining share with our focus on gross margins. And on that, our cost program is ramping up well. And our cost -- and our cash conversion is steady. So, overall, a strong start to the year, and we are executing our plan. Now, before we move to the questions, a quick reminder. Our Capital Markets Day is coming up on the 26th and 27th of May in Oslo. We are hosting it at the MUNCH museum, and we will present our updated strategy and financial targets. Day 1 is presentations and dinner with the management team. You can join the presentations on site or via the webcast. And day 2 is on-site only. This is customer site visits where we hope these will give you a glimpse into the future of electrification, and you will see the electric transition firsthand in one of the more advanced markets. So we hope to see many of you there. We're very excited about it. And for registration, the details are on the Investor Relations website. And I would say with that, I think we are ready for Q&A. So Calle, over to you, please.

Thank you. Thank you, Bhasker. Thank you, Jukka, as well for the presentation. And now let's continue with Q&A. We will start by taking the questions from the conference call line and then move on to questions through the webcast. So let me, at this point, hand over to the operator for the instructions. Operator, please go ahead.

[Operator Instructions] The next question comes from Nikko Ruokangas from SEB.

This is Nikko Ruokangas from SEB. I have 3 questions, and I'd like to go one by one, and starting with order intake and delivery times. So you had many orders last year with more than 1 year delivery time. If you now look at the Q1 orders, are you now trending towards shorter delivery times? Or do you continue to receive new orders with long, more than 1 year delivery time?

Yes. I can take that. Nikko, thank you for the question. Look, yes, order intake, there's different delivery times that we get in our order intake. Our total order backlog is now EUR 140 million. I would say this time around, more than 3/4 of that is for 2026 delivery. So yes, that's the trend that we're on. I think we were at about 1/3 of our -- or 2/3 of our backlog was for 2026 delivery at the end of 2025. So that's increased a little bit.

Okay. Then on profitability side and in fact, the fixed cost, as you already touched upon the gross margin quite a bit. So fixed costs were up now, so should we expect similar kind of a pace of fixed cost increasing in the coming quarters as well?

Nikko, thank you for the question. Regarding fixed cost, maybe few items to take into account. There's some bad debt provisions, which caused some costs now in quarter 1, close to EUR 1 million. And then when we look at our comparable period, actually those created income of EUR 1 million. So those created like EUR 2 million delta when you look at the fixed cost kind of year-on-year increase. And this is, of course, the -- we follow the IFRS 9 when we do the accounting. We don't see any major risk increases on that. So we expect to recover most of that. And then, other items impacting our fixed costs, also our personnel costs were slightly higher now in quarter 1. So for us last year, quarter 1, we didn't account any bonuses. And this year, quarter 1, we account around EUR 1 million. So those -- I mean, when we -- when you look at the comparables are impacting when you look the higher fixed cost base now in quarter 1.

Yes, understand. That explains well. Then the last one from me and regarding the gross margin, you already discussed a bit about it. But now from kind of product mix perspective, so could you discuss how much has your sales split between commercial vehicles and personal vehicles changed during the past 1 to 2 years? And then how has this impacted your gross margin mix?

Yes, of course, good question. When looking over the years, so of course, the commercial vehicle segment has becoming also quite a big relevant segment for Kempower looking index-wise and revenue-wise. And we are, of course, really strong player in that segment when looking on distribution solutions, [ charging ] solutions also ChargEye overall, so which is a natural part in that sense. But when looking at quarter 1 gross margin, that was not any reasons for our gross margin development, how it evolved. Like we have commented, there is continued price erosion on the market, there's some kind of regional mix impacting on our gross margin as well. And then there's certain customer deliveries with slightly lower margins also impacting quarter 1. But like we commented, we have this cost savings program ongoing, and we expect that to impact relevant amount to gross margin in quarter 2 and going further.

Yes. Perhaps Nikko, maybe I'll add to what Jukka just mentioned briefly. Look, I think from a mix perspective, for us, regional mix and then product versus aftermarket is more important than just product mix because if you look at our product, it's very modular. So the same modular platform is serving commercial vehicles as well as our public charging. And MCS is an exception where MCS is dedicated to truck charging, but you look at the e-bus charging and even truck charging that we've been doing for years now, that's coming out of the same product platform. So, from that standpoint, there's not a big product mix shift. But regional and then over a period of time, product versus services, which we'll talk more at the CMD will -- is more of effect.

[Operator Instructions] The next question comes from Paul de Froment from Stifel.

Two questions for me. The first one regarding the -- you mentioned pricing pressure. Is it coming from your competitors? Or is it related to new client discounts? And the second question is related to excess inventory on the market. What's your view on that? I mean if you could give us more color on potential excess inventory in 2026?

Yes. Perhaps I can take the pricing and then Jukka take the inventory question. On pricing -- Paul, good to hear from you. Thank you for the question. So look, on pricing, it is an intensely competitive market. And you see a number of players, a lot of players in this market and a number that are subscale that are also striving for relevance in the market. So pricing for them when -- in an undifferentiated space is a lever that they use. But I think for us, we start with differentiated product and technology. And we -- but as we're looking to gain share and in markets that -- in newer markets for us, yes, we do go up against those competitors and some of those are more localized competitors in those spaces. But it starts with customers loving our technology and to start having them get a taste of that technology, we want to first show them the ROI. So yes, we do see pricing pressure. It's intense, and there's a lot of local competitors in now the markets that we are entering. And North America is a great example. The fact that we entered that market just 2 years back, and we are gaining share through a great product, through a great team and price is not the only lever there. I mean we are leading with our product and team and our capabilities. So we see success there, and we will improve margins even there over a period of time.

And Paul, was your another question about the excess inventory? Sorry, I partly missed that. So Paul, if you're still on the line.

Just -- what -- do you still observe excess inventory on the market?

Okay. When we look -- because we can see only our own customers' inventory situation. And what we can comment is that it starts to be quite normalized from our point of view. We see that from the chart data. And another thing we see from the customer behavior and discussion. We have several, let's say, old customers back in ordering, back in normal business as usual kind of discussion. We can comment from our point of view, of course, we cannot comment totally market at the same time. But the situation has normalized from our point of view.

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

All right. Thank you very much for the questions. Now we'll continue with questions through the webcast. And we have a number of questions already coming in. A bit of overlap, so I'll try to filter through those. But if we start with the first one, what kind of growth investments did you make in Q1 considering the clear increase in cost structure? And how much of this is recurring and how much is onetime?

Well, if you look at our investments over our OpEx, CapEx, we, of course, continue to invest in quite a lot on technology. We have quite a all the time critical product development, new features, products, we are investing heavily and want to get those out to the markets. And that's a one critical thing. And about this kind of onetime items, we don't want to call it that way, but like I already commented about the bad debt, like EUR 2 million year-on-year increase. It was income 1 year back. Now it was cost in our P&L. That was the one item. And then the bonuses also, which we didn't accrue in quarter 1, '25, and now we did EUR 1 million. So that's a big picture from our point of view.

Yes, good. And then actually to continue with the bad debt or the credit loss provisions. There's a question that, has some of your customers gone bankrupt? Or why did these credit loss provisions increase?

Yes. So that's based on this IFRS 9 model, what we are following. We are following the payment behavior in different customer groups and in different stages, how overdue the payment is. So, of course, there's all the time risk that some customers go to default. We have own process in place for that. We are using credit insurance. We are using advanced payment as well. Our credit -- our bad debt provision is EUR 4 million at the moment. And of course, there is always some cases which might end up on the default. But regarding quarter 1, we expect to recover most of the impact.

Yes. Then on the gross margin side, what kind of improvement do you expect in the gross margin during the year 2026?

Jukka, do you want to comment?

I can comment. So we don't guide the gross margin. We guide the top line growth between 10% to 30% for the year. Operative EBIT improved significantly. But Bhasker commented the -- our unit cost savings program. So of course, we expect to get the good results from there. So that's, I think, all we can comment.

Yes. Look, I mean, maybe just to add on what Jukka said. Look, we look at all 3; price, mix, cost productivity. And bottom line is our goal is price/cost neutral or positive. And especially as the cost program ramps up, our goal is to be able to improve gross margin. So at the end of it, we are balancing a number of factors here, growing market share, growing our overall operative EBIT profitability and continuing to invest in areas that we think are strategically very important in the long run. We've talked about technology, services, sales. So we always try to balance between those and achieve the plan and the targets that we've set for ourselves.

Yes, absolutely. And then maybe the last one on the kind of fixed costs and the cost side. There's a question that should we pencil in a new higher level of fixed costs in the coming quarters? And also about the warranty cost that what should we expect with the warranty costs going forward?

Yes. So fixed cost and new run rate, of course, good to take into account the comments I mentioned back as an example. Warranty cost we recorded also in our quarter 1 report, EUR 4.1 million warranty cost. This is actually going down year-on-year. It was EUR 4.4 million 1 year before. So we work also, of course, heavily on that area. And then what positive impact on that area, of course, going further is that we, of course, have an asset base, which is all the time with the newer and newer generation of the products and the better and better quality metrics. So we expect that to go down over the time.

Yes. Very good. Then if we move to the guidance range. So there's a question that the -- why is the guidance range for revenue growth still 10% to 30% when growth in Q1 exceeded 50%?

Yes. Perhaps I can comment on that. Look, yes, the first quarter, we had a strong first quarter, up 54%. But I would say, especially in the second half of the year, the comparables get tougher for us. As you saw in the second half of last year, we grew 17% year-on-year. So our comparables are tougher in the second half. The second thing I'll say is the market is dynamic. We have seen that, and we've just completed the first quarter. So we'll reassess after the first half. Second quarter quite important, of course. And -- but at this moment, we feel good about the range that we provided.

Absolutely. And then the final question, this is more kind of a longer-term question. How are you scaling production capacity to address the anticipated growth in global demand for fast charging infrastructure?

Yes. Perhaps I can say, look, we'll talk more about it in our Capital Markets Day here coming up in a few weeks. So I encourage folks who are interested in that to attend. But at a high level, look, we -- especially in -- we have [ capacitized ] for growth. And that is a lever that we continue to use that a lot of the investments that were put in were based on the previous targets, the targets that we've set. So we have plenty of capacity to incorporate for growth, and we'll talk more about specific levels in the CMD.

Perfect. That's all the questions that we have for today. So we can conclude the event. Thank you, Bhasker. Thank you, Jukka, for the presentation. Thank you all the participants for the questions and the activity. And as a reminder, please do sign up for our kind of exciting CMD. I hope to see many of you in Oslo in May. And then finally, before we close the line, we want to end with a short customer video. This time around, the video is related to our operations in North America, and it's about our partnership with PowerUp. And with that, have a good rest of the day. So, thank you very much.