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

Good morning, ladies and gentlemen, and welcome to NHOA Group Investor Call on the Group's Q1 2024 Trading and Operational Update. The investor call will be opened by Carlalberto Guglielminotti, now Group CEO; and with him to explain all details about the trading update will be Giuseppe Artizzu, CEO of NHOA Energy; Stefano Terranova, CEO of Atlante; and Alessio Caruso, NHOA Group CFO. Guglielminotti will open the call with the May results, and we will then go deeper in the results by business unit with Artizzu and Terranova. At the end of the presentation, the management team will be available to answer any 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 presentations 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 forward-looking statement, which is included on Page 2 of today's presentation. This also includes the risk that the transactions discussed during today's call remain subject to standard conditions for these type of transactions, as well as any other risks and uncertainties associated with execution of transactions of this type. And as customary, the call will be covered by that language. So with that, I will now leave the floor to Carlalberto Guglielminotti. Carlalberto, floor is yours.

Thank you, Chiara, and good morning, everyone. I mean, just 2 months ago, we were here commenting our 2023 results with over EUR 170 million revenues at group level, EUR 3.8 million EBITDA at group level, without, of course, the Atlante perimeter. And we are now back again today to deep dive on our results registered in this first quarter. I don't want to take too much time from my colleagues. The results, I think, speak by themselves. This is a quarter, which is, again, record breaking. In all our business units and at group level, we can see revenues up 57% year-on-year, reaching EUR 58 million, as you can see. NHOA Energy recently commissioned the SuAo system in Taiwan, which was not affected at all together with our systems also in HePing by the earthquake that hit the island of Taiwan, which was a magnitude of 7.4 million. Give you an idea, the earthquake that destroyed L'Aquila in Italy 15 years ago, causing hundreds of death was 6.3 and 7.4 in Taiwan, means considering that the scale is logarithmic, that the earthquake in Taiwan was 32x stronger than the one that destroyed L'Aquila 15 years ago. We have, of course, monitored very close to the situation, and there were no injuries among our people working from Taipei nor on site. Well, in this extraordinary event that caused serious damages to power plants and to the whole power generation and grid network of the country, our systems from the one hand, recorded 0 damages nor failures. But most importantly, are still running, supporting on a daily basis, it heavily impacted Taiwanese grids. And this is a very important testimony, not only to the resilience of our technology, but above all to the crucial role that our source systems play in the stability of a country's grid and network infrastructure like the one in Taiwan. Not to mention that we are talking about clean technology, which at the same time is enabler of countries energy transition, which is not a detail if I may. Having said that, NHOA Energy now counts approximately 1 gigawatt hour online and over 1 gigawatt hour of capacity under construction. Revenue-wise, we booked EUR 40 million with NHOA Energy. So to say plus 19% compared to the first quarter last year. Free2move eSolutions keeps proceeding on its growth path in both Europe and U.S. after having registered EUR 65 million sales last year and now closes the first quarter with 6x growth year-on-year with over EUR 17 million revenues, showing the fact that USAs are ramping up, even if sales in Europe remain modest, and the outlook certainly is not reassuring, if I may. Disappointingly sales in Europe and in particular, in Italy, that impacted also Atlante reason why we see a slight decrease in the utilization rate. However, we stick to the vision of our majority shareholder and continue to invest heavily in infrastructure. Reason why we are very proud of having doubled the online network in just 12 months, reaching over 4,000 points of charge, mainly fast and ultra fast to charge electric vehicles in few minutes between online and under construction and which 2,000 are already serving online and serving EV drivers on a daily basis. So in short, record-breaking results that bring us to the -- to your question on the outlook and future guidance. But given the unprecedented uncertainty, to use the Rubini's words and volatility in the recent months in both the energy source sector, but in particular, in the EV sector, we confirm all our standing guidance's as of today, but for more granular targets also for 2024, we look forward to invite you all to our Annual Capital Markets Day that we will held like last year after the Annual General Meeting in June. And that's all from my side. With that, I will now leave the floor to Giuseppe Artizzu to deep dive on NHOA Energy results. Floor is yours Giuseppe.

Thank you, Carlalberto. Good morning, everybody. Thank you for attending this call. Result of the first quarter are steady, so 20% up compared to last year. I remind you two factors that I mentioned during our last call. So unlike last year, this year, for the first time, we are fully dealing with third parties. So there is no related parties business, and it's a big thing. So all the numbers that you see are coming from -- are not coming from TCC projects, and it is the first time over the last 5, 6 years. Before it was engineered and was TCC, helping our revenue and margin line and now we are fully on the market. And second, I remind you that compared to 1 year ago, system prices have gone down on average by 30% per unit basis. So on a volume basis, clearly there is something that affects. So despite these two factors, we are 20% up year-on-year, which is a testament to the solidity of the growth story. From a backlog perspective, normally, the first quarter is a weak -- the first half of the year normally is a weak period, but we had a couple of good wins not yet in the public domain, we will be -- we will be discussing those over the next several weeks. And the order intake, in fact, has been over the last 12 months, EUR 147 million, which is a 13% growth over the comparable period of last year. So again, it's quite a promising start of the year from a contract acquisition in the part of the year that normally is quite weak. Online capacity is just short of 1 gigawatt hour. It should be fingers crossed over 1 gigawatt hour within a couple of weeks with commissioning of another project. But practically, we have completed unprecedented wave of conditioning that characterized over last 12 months. So we started 2023 with 100 megawatt hour, 150 megawatt hour online. We closed with 1 gigawatt hour. So, in terms of proof of ability to execute the world-class project across continent, we passed the test. And we have 1 gigawatt hour plus under construction. So enough as much as we have built over -- during our history, we are building it now over the next 12 to 18 months. Importantly, the pipeline has gone up by almost 50% in the quarter. Why this? I mean putting online 1 gigawatt hour of system or almost 1 gigawatt hour system last year required a magnificent engineering effort, which, of course, partly subtracted support from a technical sale perspective to our origination team. Now that on one side, we have freed up some engineering resources to support further origination. But second, the references that we have built over the year are also a very powerful tool to generate new business from existing and new clients. The results in terms of participation in tenders is clear. And if on one side, we are suffering from, on a top line basis from the reduction of unit price of system. However, this is a boost to clients' business cases. So we do expect a benefit and we are already seeing the benefit in terms of acceleration of origination activities. This is not only pipeline, say, general number, but also in terms of shortlisting, so products that are getting closer to potential conversion. We are shortlisted in six standards and at least in a couple of those, we are more or less in a preferred business status. So, with good chances of closing imminently. So very good solid start of the year. The challenges on the market are there. Pricing environment is challenging to the battery oversupply, which is polluting price signals for our clients, but so far, so good. Back to you, Carlalberto.

Thank you, Giuseppe. Let's move now to Free2move eSolutions. As said, Free2move eSolutions keeps proceeding on its growth path in both Europe and USA. Last year, we said the EUR 65 million sales closing this quarter with 6x growth on a year-on-year basis, EUR 70 million revenues. This is thanks mainly to the over 28,000 wallbox and charging devices sold in just one quarter, which is more than the number of chargers we sold in the whole 2023. Obviously, this is driven -- you might not reconcile the figures because this is driven by the geography mix. We know that last year, the impact of U.S.A. was huge, where we are electrifying essentially the lands dealers in the U.S., while Europe was progressively ramping up. And this was the message that they passed during the last investor call in terms of color. And this is exactly what happens because in Europe, out of EUR 17 million this quarter, close to 7 are already booked in Europe with 26,000 wallbox and residential charges devices, of which 17,000 are easy wallbox and 9,000 the most expensive ePro. Utilization rate is increasing. It's increasing. You will remember was 3% in H1, 13% at the end of the year over 2023. And we are now well above 15% close to 17%. So this means that what we imagined last year happened. We passed the message, we clearly see a progressive reduction of such charges and electrification of dealers, obviously, because this is not one-off electrification by definition. But meanwhile, Europe will raise up, and also U.S.A. because also in U.S.A., we have a utilization -- sorry, update rates over still any sales, which is increasing as well, which is, as of today, close to 6%. And considering that in the U.S., we currently have just PHV offering from Stellantis. So situation were radically different as long as the lenders will launch in the U.S. market, full electric models for each brand that is by definition well positioning in the U.S. So essentially, 6% means 1,000 wallbox overall in the U.S. So ramping up again and approximately hundreds of fast chargers. So this is a picture in which the relaunch of Free2Move eSolutions is confirmed, the growth path and also significant growth this year that we are expecting is confirmed. The positioning in the market has proven to be successful. And even if we are, as I mentioned earlier, an outlook, which is not encouraging, certainly from the EV's perspective, certainly in Europe and potentially also in U.S. Reality is that thanks to the partnership with still land is even if the volumes are not enthusiastic, if I may, reality is that Free2Move will continue to grow and will continue to grow in a profitable way. I now leave the floor to Stefano to give us an overview of Atlante, and then ready to take any question you may have.

Yes. Thank you, Carlalberto. Good morning, everyone. So Atlante, as the headline number that I would like to start with is what Carlalberto mentioned, we have doubled the number of points of charge online. As of the end of the first quarter of 2024, we had, in fact, more than 2,000 charge points, which is a doubling of -- with respect to the same time last year. So an amazing pace of growth that continues -- as you can see from the geographical background, the growth is very much focused on 3 countries, Italy, France and Portugal. In Spain, the pace of growth is quite slow, I would say, because of the fact that we haven't really a major grip yet on the country. But overall, in terms of rollout and the numbers of sites and the 4 points of charge, also under construction, you can see that we have kept pretty much with a strong pace to make sure we get to the first major appointment that we have in terms of our long-term target, 5,000 POCs online by the end of next year. So you can see that the pipeline is there to support the ambitious target, something that last year would have still seemed very far away to achieve, 1 year, you can see that the trajectory is very much set. One other point to note is that you will see that instead in terms of growing that pipeline, the pace of the growth of the pipeline has slowed down, but that is absolutely normal. In fact, is what we intend. It's an intended result in the sense that we do not need to continuously add too many opportunities, especially as we become much better at assessing early on what opportunities are viable and what not. Therefore, let's say, that we can be more selective at the time when we decide where the opportunity can be studied or not. Then if I may add a few comments. In terms of the sales, you can see something that looks disappointing headline because sales quarter-by-quarter, vis-à-vis the last quarter -- same quarter last year have gone down overall, but that is because last year, we had the EPC deal with API group that was a one-off project. Obviously, the intention was to create some kind of synergies also with the API group, maybe explore additional future collaborations. You probably had the API group has gone their own way with a financial partner in terms of massive electrification, so we will not continue the adventure of working for them as EPC contractor because it's not in our core business. But in terms net of the non-charging revenues from the charging revenues alone this quarter, vis-a-vis the first quarter of 2023. We would have -- we can measure almost 5x as many charging revenues. So this is for me, it's a sign that we are going precise in the right direction with the doubling of the number of charges online and the revenues from those charges that more than double again. So more than 4x, close to 5x the revenues. So that's a great indication of working in the right direction. This is in an overall environment, as Carlalberto mentioned, which is not particularly positive, especially if I may give you some color in a country-by-country basis. Italy, we recently received the official figures from the association of e-mobility, the motor sea that suggest -- they had confirmed that in the first quarter 2024, sales of bags in market share went back down as if you were in 2 years ago. So, we are in a regression mode. I hope that is just a temporary -- many analysts, I think this is a temporary blip, especially because Italy has announced some incentive schemes for the purchase of bags, which have been announced, but not yet implemented. So, hopefully, that is just a delay in sales that we would say in the second half of the year. But nonetheless, the market overall for sales of full electrical vehicles is not doing great in Italy. Same in Spain, same kind of single-digit market share in terms of sales of the vis-à-vis, the total vehicle sales. Whereas in France and Portugal, we continue to see growth and approaching 20% of sales or base represent almost 20% of the sales of new vehicles in both France and Portugal. So, in our geography, we have 4 countries who are doing quite well to not yet in the exponential growth phase. In terms of good news in each of these countries, if I start with Portugal, we continue to do well. We are now focused on the next phase. As you remember, last year, we acquired the company, which we then -- which was mainly ACs low-charge based and return into a fast-charging business, and that was successfully completed by the end of the year. And now we have -- in Q1, we have started a new phase. So you would have seen probably the news. For example, we have inaugurated recently the first chef-compliant site, the face chef station. So that's a sign of things to come more bigger stations on major traffic routes, so that is what is coming in Portugal. In France, we have continued with some interesting projects, signing up with important partners like ML Frey, and also opening up a storage enable station within a major shopping center. That's something -- it's not a first storage but it's the first one within a major shopping center. And that, again, it's a flavor of many interesting things to come. Again, in Portugal of interest in Q1 2024, we signed up a technological -- a technology-based memorandum of understanding with the grid operator of Portugal, which I'm very proud of. And together, we try to deploy a technology which they have invented the patent to enable fast charging for very large stations, for example, dedicated to e-trucks. So that's in a nutshell how the first quarter evolved. Again, I would say, wrap up summary, the growth of pace of our network deployment is strong, and there's no -- we have no intention to relent. We have the ability of being more selective on growing the pipeline. And of course, also, we have the ability of deciding at what pace to grow in the 4 markets given the underlying dynamics. In terms of sales, as I mentioned, net of EPC and the recognition of the Chef brands, by the way. Net of those 2 items in terms of serving customers, we have sold energy, which is worth 4x, almost 5x as much as the same period in 2023. That simple investors doubling of the network. So I think this is a very important result.

Thank you. Thank you, Stefano. And I think we can now move to our Q&A session. So, let me hand over to Chiara. The line is yours to open the Q&A.

Thanks a lot. We are now ready to open our Q&A session. [Operator Instructions]. We have the first question coming from Mr. Alessandro Pozzi from Mediobanca.

Yes. The first one is on the revenue progression in 2024. I appreciate it's probably too early to give guidance given the number of projects that you have that maybe slip into 2025. I was wondering if you can give us some qualitative kind of indication of the pace of revenues in the energy storage business, also vis-a-vis the reduction in prices and how that will impact the -- or how that will translate into EBITDA in 2024? And also, maybe you can give us your thoughts on the outlook for EV sales in your 4 countries, and whether the slowdown in the EV penetration or BEV penetration, maybe is leading to potentially rethinking about the CapEx to be deployed in Atlante in '24 and '25.

Thank you for your questions, Alessandro. Let me take the first and then instantly handing over to Giuseppe. On the revenue and backlog. As you said, we are not giving specific guidance for a series of reasons that I already mentioned, and Giuseppe will elaborate. Let me just reiterate the message that we passed during last call that for 2024, we do see growth there. So we do not see, obviously, shocking growth because of the market momentum, then Giuseppe will elaborate on that, but we do see growth there, okay? So irrespective of the backlog conversion, I mean, we see we are positive, and we do see growth in the non-energy leve,l and then eventually at the group level. But then, Giuseppe, before I take the second question, maybe you can elaborate a bit more on that.

Sure. So, our 2025 targets are out there and are extremely ambitious, and we are already working towards 2025. I would say that 70%, 80% of our targets that are not public for 2024 because of price movements, but also because it's a bit of a transitional year for us. We have 70%, 80% visibility on achieving the internal target for 2024. But we are already working towards 2025, where if we managed to do the step-up in terms of average types of projects that is the key to our acceleration, then we will also benefit in the second part of this year in the tail, because the front end of those projects will start generating revenues in the second part of the year. So Again, it's too early, and we would respacing the wrong message, being more ground or 2024. But practically, 2024 is largely in the lock room already. We may benefit already in the second part of 2024 of the acceleration that we are targeting -- significant acceleration that we are targeting for 2025 in a way that more than overcomes the two aspects, that I mentioned before that for the first time, we are completely relying on our related party business, and this is a big thing. And second, the fact that we are working in a significantly lower price environment, which on one side affects this year because same volumes bring less revenue. So we need to make more volumes in order to make some revenues and margin. But on the other side, clearly boost the business case in a number of jurisdictions and therefore, we are -- and we are already seeing that from an origination perspective. I hope that it's a sufficient feeling of what I'm talking about.

Okay. And I also noticed that the pipeline has gone up. And maybe can you give us more color on the number of opportunities that you see in the market and where?

Absolutely. I mean, so the acceleration in the pipeline is driven by two factors. So the first factor is the fact that we have had the chance to free up a significant number of further resources to reorient from execution to origination, a significant amount of resources over the last 3, 4 months after the big wave of commissioning that we had last year. So we need engineering support. Our origination model is driven by engineering. We invest engineering Howards in order to localize clients, and therefore, that is something that affects our ability to originate. So there is one internal element, which is we managed to strengthen the technical support to our sales. And again, it's a critical element in our sales model. But the second one is that the precipitous fall in battery prices is enabling business case across geographies, and in particular geographies that are closer to home. So Southern Europe that was not a market. I mean, we are Italian, but we made less than -- I mean, low single digit in terms of revenues and margin percentage. Low single-digit percentage of our revenues and margins have come from Southern Europe over the last 2 years. This is a market that is waking up. And therefore, we are seeing a very significant uptick in markets that -- where we are the obvious incumbent. So, it's Europe and in particular, Southern Europe. It is Australia, where a new capacity scheme has been put in place and largely is this to, we are still not happy where we are in the Americas, even though even there, we are seeing a couple of good signs. But in the Americas, we still have to work.