NHOA S.A. (NHOA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to our investor call regarding our Q4 2021 Trading and Operational Update in the context of Master Plan 10x. The investor call will be opened by Mr. Carlalberto Guglielminotti, CEO of NHOA Group; and with him to explain all details about the Q4 2021 trading and operational update as anticipated in our last investor call, will be Mr. Giuseppe Artizzu, Chief Executive Officer of NHOA Energy and NHOA Group General Manager; Mr. Roberto Di Stefano, Chief Executive Officer of Free2Move eSolutions; Mr. Stefano Terranova, Chief Executive Officer of Atlante; and Mrs. Ilaria Scarinci, Group Chief Financial Officer; and Mr. Gabriele Tuccillo, Chief of Staff, VP Strategic Planning and Investor Relations. Mr. Guglielminotti will open the call, and then we'll leave the floor to Mr. Artizzu, Mr. Stefano Terranova to deep dive on each global business line. At the end of the call, the management team will be available to answer all questions you may have. Please note that this investor call will be recorded. If you could not attend the whole call, the webcast and the presentation will soon be available on our corporate website on the dedicated page. [Operator Instructions] Before we begin, I just want to point out that any forward-looking statements made during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement, which is included at the end of today's presentation. This also includes the risk that the transactions discussed during today's call remains subject to standard conditions for this type of transaction as well as any other risks and uncertainties associated with the execution of transactions of this type. And as customary, the call will be governed by that language. So with that, I will leave the call to Mr. Carlalberto Guglielminotti.

Thank you very much, Chiara, and good morning, ladies and gentlemen. Thank you for being with us today. We are here to present to you as customaries in the context of our Master Plan 10x our Q4 2021 trading and operational update. And by the way, this is the reason why in the last few days, we didn't reply to some of you to for one-to-one meetings request and my apologies for that. But you can trust me that, Gabriele Tuccillo who is in charge of our Investor Relations will follow-up in case of questions that are not covered in this investor call. Well, let me start with some figures. Just to give you a general overview. Compared to 2020, we experienced with no doubt, a very positive trend on all our business lines. We doubled our revenues in storage, we multiplied by 4 our sales in eMobility, while starting successfully the deployment of our EV fast-charging infrastructure with Atlante. And even more importantly, all figures are perfectly in line with the 2022 guidance and our Master Plan 10x. We've got full visibility on the next 12 to 18 months in terms of results, in terms of performance and the visibility that we never had in our whole equity story. I mean, starting with NHOA Energy. NHOA Energy not only doubled its revenues, but more importantly, increased its order intake to over EUR 200 million, thanks to the flagship projects in Australia with Synergy and Taiwan with TCC. In other terms, we have a backlog just in storage, which is over 30% more than the high end of our 2022 revenue guidance at group level. So first of all, let me congratulate Giuseppe and his team for this amazing results that he achieved while running his double role of Group General Manager and CEO of NHOA Energy. But then let me give the floor to him. Giuseppe, the floor is yours to comment our results. Thank you, Giuseppe.

Thank you, Carlalberto. Good morning, everybody. So yes, I mean, the headline number is the doubling of revenues in reality. If I said that I was proud about the starting point in 2020, I would be lying. So we -- this is just the beginning. I remind you that this was a year in which we spent 3 quarters of the year essentially doing the M&A process, in which we were not only changing shareholder, but we were also losing our anchor internal clients. So essentially, from a commercial perspective, we were in the middle of a restart. And the order intake of around EUR 200 million [ debt ] yes, it's something that is the basis of what NHOA Energy is today and what will be in the short, medium and long run. So essentially, we have reset completely our commercial bar and we are just now starting to collect the results or the results of this effort. So you see that -- so the EUR 200 million order intake is what secures our revenue generation over the next 18 months. More or less, the revenue generation was essentially the result of the origination effort of the prior year, and we have already seen a very significant acceleration in the second part of the year. Currently, we have 6 or 7 projects under execution, at different stages, so projects about to be commissioned from projects that have broken ground, to projects in which we have equipment in construction within our facilities. In parallel, while we convert this -- the backlog of orders into revenues, which is something you see also in the evolution of the backlog in the last quarter of the year, we are maintaining and actually increasing our pipeline. You see that in Q3 2021, which is actually October, I remind you that we have made a trading update on the 27th of October, so this -- the EUR 833 million number for pipeline in 20 -- in Q3 2021 refers to October. And since -- given the conversion that we have -- given the conversion of projects during that period, we have clearly have decrease in pipeline, but on the other hand, that has been largely replenished. So out of the conversion that we had in the last part of the year into orders, we have 3 quarters of [ debt ] will be recovered by new opportunities that have hit our pipeline criteria. So as of today, we are shortly -- we are running around 10 bps currently. And this is our -- the run rate of origination activities for which we are currently set, a different stages of maturity in for of which of different sizes, we are shortlisted. So the development team is already working toward 2023, part of the revenues of 2023 are already secured by the backlog of projects. But again, this is just the beginning and this is a growing trend. In terms of overall market scenario, the sector is extremely healthy in terms of installation. Of course, we are facing challenges from battery pricing. In 2021, lithium prices, both hydroxide and carbonate have gone up by around 400%. Cobalt has gone up by 80% and nickel has gone up between 20% to 25%. This is for cathode, but there are also pricing challenges on the graphite, on electrolyte, on separators, on literally everything. So the market is extremely healthy. New markets are opening every day. We hope that also Europe is waking up to opportunity of storage. On the other hand, we need to keep a firm eye on battery price evolution because, of course, the downward trend that we had seen until late 2020 and the beginning 2021 has been -- is not currently being pursued and clients are assessing business cases against the current battery price environment. Carlalberto, back to you. And then I'll just address the question later.

Thank you. Thank you, Giuseppe. And let's now move to our comments on Free2Move eSolutions, which is our e-mobility joint venture with Stellantis. I mean, in this case, the results are amazing as well. I mean we multiplied by 4x the e-mobility revenues we had in 2020. Confirming also the Q4 take rates evolved 20% for the former FCA brands. And in parallel, we started successfully the commercialization of our products with the PSA brands. And in this respect, just a note in 2022, we will not refer anymore in our trading updates to the former FCA, PSA brands because as those are all Stellantis brand now, okay? So the reason why we gave the breakdown in the first 2 trading update, including this one, was just to share with you, with the market how the current 18% take rate at Stellantis level is built. So for sake of clarity and because as we said and Roberto will elaborate on that, we just started a few months ago to penetrate the PSA brands. So this was the rationale behind, but for the next trading update, we will simply refer to the Stellantis take rate. Then in this context, it's worth noting also that the manufacturing capacity increased by 30% in just 1 quarter, okay? But I have to now hand over to Roberto Di Stefano, the Chief Executive Officer of Free2Move eSolutions for a comment on our figures and all industrial challenges behind. So Roberto, the floor is yours.

Thank you, Carlalberto. Good morning, ladies and gentlemen. Yes. Carlalberto already commented a lot, we did -- let's say, we are starting harvesting what we did in the first part of the year. Here in the last quarter, we were able to execute properly the -- our action plan. Like -- as Carlalberto said, we started in the last quarter, really to sell to PSA brand and now step by step, we are penetrating all the brands and all the markets in Europe with a dedicated strategy brand by brand. And this is something that we will keep doing because we need to keep in mind that we are still in the transition phase, like we said several times because of both FCA and PSA had some previous contracts in place, and they are expecting the contracts. But we are entering, substituting the previous player with our product family and services. Commenting FCA, has been already said, we are above 20%, more or less, we are trending and it will be a rollout because we are bringing again this strategy with both the brands of former FCA and some, it will be clearly for all the brands of PSA. We will see sooner than later that in several markets in Europe, we grew up fastly, even because everyone knows that in this kind of industry, we are facing the same issue that automotive is facing are industry truth of the challenges that we have one is components. And because of it, we did during 2021, we put in place a strong team to keep under control the full supply chain to ensure availability of components. That means at the end, availability of product for our customers. This is a key action that will ensure us again, continuity in production and in sales. Another important activity that we did and we'll keep doing is to increase our output in term of industrial operation, manufacturing capacity. We can see that in the last quarter, we were able to grow up by 30%, and will keep focusing this area because it's really a key to ensure again volumes and quality of the final output. Moreover, for [ sure ] and other comments that I like to make, even if, let's say, let's take a look on the outside of Stellantis, even better in the last quarter, we were able to achieve good results in terms of growth. We achieved on the total sort of 40% on the total revenues. This is giving us even the assessment of our competitiveness, if I can call out of the non-captive market. But again, back to the key point that we did during last year, clearly, the first part of the year has been spent focusing the industrial operation, clearly, keep investing in engineering to fulfill everything that we need to have in product portfolio to be ready from the beginning of 2022. To enter massively in all the markets that, as you know, I guess, in Europe, there are some differences between markets. And now we can say that we have the full catalog of products and services to penetrate all the market in Europe. I guess these are the main comments. Carlalberto, back to you.

Thank you, Roberto, and let's now move to a comment on Atlante. Atlante performance with -- let me say, even before commenting Atlante performance, I would like to highlight what has been mentioned by Roberto and what has been mentioned by Giuseppe. I mean the results we achieved and they achieved were made, regardless the price increase and the shortage of components in the storage sector and regardless the shortage in electronics that Roberto mentioned. So not only we match the guidance, not only we have given this company full visibility on 2022, but even more importantly, we have done that regardless all the major challenges we experienced at global level, securing the industrial ability to continue to do so in the coming months and in the coming years. So I think the job has been done by Giuseppe and Roberto. From the industrial perspective even before then the business perspective has been really, really, really amazing. So thank you, again, for that. As I was saying, commenting on Atlante. Atlante performance can be summarize just in one figure. In less than 3 months, Atlante started the construction phase of 136 points of charge. And in parallel, securing iconic sites, like the ones at the Milan Airports Linate and Malpensa, okay, was a very competitive tender, as you can easily imagine. I mean, to give you a reference point for our figures, especially in Italy to give you an idea, has slightly above 50 sites. Ionity 13, okay. So 136 points of charge in different sites is a figure of a paramount importance showing the ability of Atlante to focus, deliver and execute, which was not obvious for a company that was born a few months ago. This was not obvious. But then I must give the floor to Stefano Terranova, CEO of Atlante and the leader behind this impeccable execution. So thank you, Stefano. The floor is yours.

Okay. Thank you, Carlalberto. Good morning, everyone. And thank you, Roberto, and thank you, Giuseppe for preceding me. Yes, indeed. As Carlalberto was saying, I can confirm that I'm personally very proud of what my team has achieved in such a short time. Let's recall that we mentioned before 2021 is a kind of a prelaunch phase for Atlante, prelaunch season. So while we were just building up the teams, the procedures, the strategies, at the same time, we were deploying, at the same time, we were building, we were developing sites. So at the end of the year, we achieved a great result, I would say, I'm very proud of that. We have a decent pipeline, which you will see grow much faster in the future. Of course, as we add the people to our teams. But in the meantime, more than 800 sites under assessment, out of a much larger pipeline of projects. Out of which, as you can see from the numbers, we have started construction on 22 sites as of the end of the year. So that's a very, very important result. Of course, the number of points of charge is higher because there would be multiple charges per site. And what else can I say? Everything is going very well. Obviously, this is before we added France and Iberia. We have, in the meantime, appointed a CEO for France. We have not announced yet as you can imagine when people change job, there are periods of transition, but by the next trading update, I will be able to unveil probably a full scale team, albeit, of course, not yet at full employment, let's say. For France -- we have appointed a CEO for Iberia, and therefore, we will also fast-track those 2 geographies, 3 countries to geographies well ahead of the initial plan. Why? Because we have confidence in what we have done so far. And as I always tell my own teams internally, we are working on 2 parallel tracks and 2022 is a year where we have to do work on 2 parallel tracks. On one side, we will be continuously setting up the -- to succeed for the future in 2023 onwards, based on our proprietary technology platform, which Roberto and his team are developing on our behalf. And therefore, from 2023 onwards, the stations that we would be deploying will be really unique in many ways. First of all, from a technology platform basis. However, in 2022, we are not sitting idle or just co-developing, helping competitor to develop the technology platform, we are at the same time executing. We are executing on multiple sites. Right now in Italy, we have started in France, and we are starting in Iberia. So expect interesting news from the next trading update. Thank you, Carlalberto. Back to you.

Thank you. Thank you, Stefano. Let me just comment that the 136 new points of charge can be referred to the plus 21 new sites under construction. So referring to the Tesla parameter that I mentioned and the Ionity one essentially in 3 months, Stefano has been able to make what has been done by Tesla in the last 15 years, 50% of that approximately and 2x what has been done by Ionity in the last few years. So that's the reference point that bode well. So unbelievable, and again, thank you to Stefano and to the whole team. I think we can now move to our Q&A session and together with Giuseppe, Roberto and Stefano, together with Ilaria for all financial aspects, we are ready to take any questions you may have. So Chiara, floor is yours to open the Q&A session.

[Operator Instructions] Okay. I think we already had one question from [ Mr. Pozzi ].

Can you hear me?

Yes. Perfectly.

All right. The first one is on battery storage. I was wondering if you can give us a sense of how much of the revenues are underpinned in 2022 by the current backlog? And also if you can maybe provide some color about the commercial -- the new potential commercial activities and pipeline, and how you see the market and where the more interesting opportunities are at the moment? That's my first question.

Thank you. Thank you for this question. I will refer generally to the first one and then leave the floor to Giuseppe for a comment on the second and most important part of your question. I mean on -- we have a guidance, right? So we have given the right level of color on the revenue recognition of the current backlog we have with reference to 2022, when I said that essentially, the backlog is over 30% of the high end of our guidance. However, we are at the very beginning of the year. So that is the reason why we certainly expect over 50% of that backlog to be converted this year. So that's the reference point, okay? Otherwise, if we had more visibility, we would have updated our guidance. So this is not happening right now. Certainly, you can expect well over 50% of that backlog to be converted -- to be converted this year, which means that the low end of our guidance is also -- is more than secured, if I may, within the next few months, a clear potential to go beyond the high end of our guidance. So that's the color we give to the market so far. And I leave the floor to Giuseppe for a comment on the pipeline, commercial activities and how we see the market.

Thank you, Carlalberto. As far as you know, we are focusing on 3 geographies. The 2 such geographies on U.S. and Australia plus the geographically growing presence in Asia Pacific. Europe remains our home market, but also remain a slower market due to market design. Some signs of improvement are feasible also because of the energy crisis -- energy price crisis that the European gas and power market is leading, but market design is still not confusing to the same kind of scale up that we are seeing in the other jurisdictions that I mentioned. As I said during the call, we are setting our development efforts toward to be able to run in parallel around 10 deal activities at any given time and at different degrees of maturity. So to be, in shortly, in the decisive part, so meaning that the decision to be taken by the client, final investment decision and award that within the next 4 to 6 months agenda, and so you see that we have 4 of them. So that the market is healthy. However, from an operational perspective, the challenge is that clearly as we are literally tripling or quadrupling our execution, we are ramping up our technical teams to be able to support the development process, but this is part of the challenge and part of the opportunity. So essentially, to build the platform while at the same time, dramatically scaling up our execution capacity globally. Our commercial presence in -- particularly in Australia and United States is going to establish plus the office in -- in terms operating, and it's actually overseeing the execution of the Synergy project. We have a -- in fact, at the end of this count, we are going to have 5 people team in Houston as well that's where office is operating, the 3 people to more training at the end of this year. In Taiwan, we have a large team of people that work in joint venture with our shareholders and of course, we call the Europe out of Milan. So generally speaking, I would say that from a commercial perspective, we've never been in a better position, more diversified, more widespread with rapid development partnership with other partners for civil works and connection works and service, once we put a systemic operation, we need to service them, which in the near to long run, will also provide some much appreciated recurring revenues. So from that perspective, we have never been in a stronger position, and it's again, it was a challenging opportunity and also quite a rewarding task to build different platform behind the commercial efforts and success that we have had over the last 18 months. The battery in the market, as I said, the market is literally booming. It's booming, of course, both in the eMobility and in storage sector, the 2 shares the demand for batteries. Demand for batteries this year will exceed 500 gigawatt hours most likely. So this is trading the supply chain. So it's a healthy problem but still, it is a problem. It is a problem of availability of supply, which we have addressed through a small number of strategic partnership with battery suppliers, trying to keep a diversified basis in terms of technology and also because price, commodity price evolution is not affecting the different chemistries of cathodes in the same way. So we need to have a diversified technology basis in order to be able to arbitrage between the impact at different commodity price. We maintain on the different cathode chemistries. And from a pricing perspective, there is no single bullet that we need to pay April to fix price of battery supply. And by the way, not only batteries, when we fix price with clients. And this is not the [ energy type ] because the cathode material market is not particularly good market. So battery manufacturers themselves are struggling to hedge their commodity positions and that kind of short-term let me say, from a pricing perspective, is something we have to handle, we have to explain clients. There's a huge educational effort that we are doing with [indiscernible]. I hope I have answered your question.

Yes. Have you experienced delays in the supply chain? Because a number of industrial companies have been reporting so far have experienced cost overruns because of raw material cost inflation. Flight costs as well are going through the roof. And I was wondering how you manage those issues in the current market?

Okay. So from battery delivery, we have had no material delays. I mean, I think that we didn't see seen before as well. I mean the skimming battery production is quite -- first, is quite a medium-term effort for our suppliers. So we haven't seen that effect because we've always been used to very carefully schedule delivery. I mean, collection on our side and delivery on their side, also because battery devaluation. So it's not something that you can keep in warehouses for extended period of time. So it's almost adjusting time supply chain. For other components and in particular, for power electronics components for PLCs for semiconductor, yes, of course, they are part of the same -- we have the same challenges that we see, industry-wide. So far, we have been able to handle that problem because we move a little bit in advance. And for some critical components, we have done some warehousing earlier last year. And now we are trying to keep flexibility. I mean one of the benefits of scaling up both in terms of number of projects running in parallel is you can manage it from the different schedule of the projects and actually redirect components from one project to the other in order to manage criticality and ensure that no shortage become a bottleneck. We are also seeing some modest signs of improvement from that perspective. So not for batteries, for batteries is what I said. But for other components, in particular, for our electronics equipment, we have seen some -- over the last few weeks, we have seen some signs of improvement from some of our key suppliers. But yes, sorry, it is an extremely challenging environment, but it's also an environment in which having an agile approach is also a way to strengthen the -- our ability -- our supply chain and our risk management practices, so not all challenges come or actually, our own challenges but [ supply chain ] challenges are also opportunities.

I don't know if there's time to squeeze in the last one on eMobility. I was wondering, clearly, you had great results there in 2021. Can you give us a bit more color on the conversion rate in Q4? And how you expect to progress into 2022? And also who are the main clients outside the captive market?

I'll take it and then I -- thank you for this question. I'll take it first and then I leave the floor to Roberto for a comment. But first of all, obviously, we typically do not deliver the names of the customer. Let me start from the last part of your question, but we -- Roberto will give you the sector and will give you some color, obviously, on that. And on the take rate I mean that the figures are public and are published. We have to be clear, please expect volatility, right? So we are in a sector which is extremely volatile. I think that these figures are very positive, show us a very clear trend, okay? So first, ability to penetrate brands over 20%. That's a matter of fact, okay? Now that's the ability. This doesn't mean that in any quarter, we will have over 20% with a no. But certainly, the figures we have published, Q3, Q4 give us a more full visibility on the ability of Free2Move to do it. And certainly, there is a huge effort to drive the car towards this direction, let me use this metaphor. But Roberto, I leave to you a comment on that and on the sector of our customers outside the Stellantis Group.

Thank you, Carlalberto. Yes. I will start from the last that means the sector -- the other sectors outside of Stellantis. For sure, there are different sectors, different industry that we are dealing with, so I'm sure there are the industry of the distributors, the industry of who installing photovoltaic and there are even some other brands outside of Stellantis. These are the 3 main customers so far -- industry so far that we are selling products and services. Related to the conversion rate in Stellantis, Carlalberto already said a lot about it. But clearly, it's a matter of in focus on detailed action plan with each brand. Each brand is asking similar but not exactly same strategy, and we have clearly tailor-made brand-by-brand strategy. We are releasing -- we have releasing -- and we are keep releasing field folks to support the brands and the [ national assess ] company of the Stellantis in each main markets. This is the step that is already in executions to ensure that with the right technical support in the dealer shop and where the customer is clearly asking for point of charge when he's buying vehicles, everything will be smoothly transferred to the customer, information, product, timing for installation, everything. I'm expecting like Carlalberto said, a sort of volatility quarter-by-quarter, but what we are clearly executing our strategy and PSA will be suddenly aligned to what has been done in FCA, where we started before then dealing with the former PSA brands. That we will land in a range between 20% -- over 20% for sure. We need to keep in mind that there is a portion of the EV sales that are directed to different channels. That means fleet and so on, where there is a different kind of deal. It's not through dealership or through Stellantis channel. We are working with Stellantis to attack even these additional channels that currently have not -- has been not attacked in 2021. So the conversion rate, what I'm expecting that will take off even the -- on PSA starting from the quarter 1, 2022 and step by step, we will consolidate, again, always above 20%. This is at least our strategy for 2022. But again, it's a matter of execution, properly executing the strategy in each market. And clearly speaking, we have understood, and this cannot be different that each market in Europe is asking for some things slightly different. And without being in the market, it will become really difficult to meet this target. But we are executing exactly this approach to ensure us and to ensure the brands -- to the brands of Stellantis, the proper way, let's say, support to satisfy their customer. Back to you, Carlalberto.