Hello, everyone, and welcome to Wallbox's Second Quarter 2023 Earnings Conference Call and Webcast. My name is Nadia, and I'll be your operator for today's call. At this time, all participants; lines have been placed in a listen-only mode to prevent any background noise. After the speakers' remarks, there will be question-and-answer session. [Operator Instructions] I would now like to turn the call over to Matt Tractenberg, Wallbox' Vice President of Investor Relations. Please go ahead.

Thank you and good morning and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss Wallbox's second quarter 2023 results. This event is being broadcasted over the web and can be accessed from the Investors section of our website at investors.wallbox.com. I'm joined today by Enric Asuncion, Wallbox's CEO; Jordi Lainz, our CFO. Earlier today, we issued our press release announcing results from the second quarter ended June 30th, 2023, which can also be found on our website. Before we begin, I'd like to remind everyone that certain statements made on today's call are forward-looking, that may be subject to risks and uncertainties relating to future events and/or the future financial performance of the company. Actual results could differ materially from those anticipated. The risk factors that may affect results are detailed in the company's most recent public filings with the US Securities and Exchange Commission, including the Post-Effective Amendment No. 3, to our Registration Statement on Form 20-F filed on March 31st, 2023, which can be found on our website at investors.wallbox.com. and on the SEC website at www.sec.gov. We will be presenting unaudited financial statements in IFRS format that reflect management's best assessment of actual results. Also, please note that we use certain non-IFRS financial measures on this call, and reconciliations of these measures are included in the presentation posted on the Investors section of our website. Also, a copy of these prepared remarks can be obtained from the Investor Relations website under the Quarterly Results section, so you can more easily follow along with us today. So, with that out of the way, I'll turn it over to Enric.

Thank you, Matt and thanks everyone for joining us today. In addition to reviewing highlights from the second quarter 2023, we’ll talk a bit about how the current EV market is evolving and how we’re effectively competing. I will also provide an update on some key operational initiatives including our cost reduction program, inventory management, and new product launches. Jordi will then offer additional detail on our quarterly performance and offer some insight on our balance sheet. And finally, I’ll return to discuss our current market outlook and how it impacts our results for the remainder of the year. We will end by taking questions from our covering research analysts, so let's get started. The first quarter finished below our expected range, at €33 million. This includes an adjustment of €1.8 million for rebates and returns. When adjusting for those one-time costs, revenue in the quarter was approximately €35 million, relatively flat on a sequential basis. As we’ve said this year, a large inventory build occurred within our distribution partners in both Q2 and Q3 last year in anticipation of stronger European EV deliveries in 2022, which ultimately did not play out as planned. This creates difficult comps, both in revenue and unit volumes, on a year-over-year basis, for both Q2 and Q3 this year. However, when we dig into the data and examine the number of AC chargers being currently activated by installers or end customers, we see encouraging signs of solid demand and growth in-line or in-excess of the market, depending on the region. We continue to believe that the inventory within those channels is approaching a healthy level, and believe we will see less of a difference between sell-in and sell-out in the second half of the year. As we look at the market more broadly, we…

Thank you, Enric. Good morning and good afternoon to everyone. Our second quarter results came in lighter than expected, driven by channel inventory adjustments, some regional softness, and the timing of several large orders. Some one-time adjustments to gross margin and sales, including rebates and replacement costs, negatively impacted gross margins in the quarter, but are temporary in nature. I’ll provide more detail on these results, discuss some financing activities we’ve announced, and share some thoughts on the remainder of the year. For the second quarter 2023, revenue was €33.0 million, and €34.8 million after adding back the one-time rebates and returns from prior periods. The seasonal pattern did not play out as anticipated, mainly because many European distributors continued to reduce AC inventory to reach more appropriate levels. Our AC growth, on a sell-through basis, continues to be in-line or in-excess of EV deliveries. Our DC growth, albeit off a small base, is exceptional, and gives us optimism for stronger sales from the business unit than thought earlier. In general, the commercial opportunities we see ahead are big and meaningful. It will allow us to scale the business and generate positive adjusted EBITDA in the near-term and positive free cash flow in the medium term. However, we operate in an early and evolving market and are impacted by slight changes within the demand environment. Gross margin for the quarter was 30%. During the quarter, performance issues with a specific supplier’s component were brought to our attention. Those chargers were identified and brought back. The return and warranty costs of those actions negatively impacted our gross margin in the quarter by 600 basis points. Excluding this impact, gross margin would have been 36%. We believe we have this remedied and do not expect a material impact in future quarters. The…

Thanks Jordi. The long-term fundamentals of the markets we operate in continue to be overwhelmingly positive. The topic of EVs is on the front page of most daily media outlets. It is a key strategic initiative by names like GM, Ford, Volkswagen, Nissan, and Stelantis. Meaningful investment is taking place and huge volume commitments have been made. But these big, meaningful disruptions do not move in a controlled manner, and it is still early days. Wallbox is a leading, global brand with an exceptional portfolio in an enviable position. Our focus today is on achieving profitability, introducing new products, and improving key operational efficiency metrics regarding inventory and cash. Balancing the short-term needs of the business, while strengthening our long-term competitive position is very important to us. To retain the flexibility to achieve our goals, we believe it's necessary to remove the restrictions that sometimes a public sales target might place on a company. This may result in sales occurring a quarter later than originally planned, and we are comfortable with that tradeoff. Our commitment is that we’ll make the best decisions possible for the health of the business and take exceptional care of our customers. This includes taking the time to deliver the best products we can. That’s the right thing to do and in the long-run, shareholders will benefit. We will share key metrics with you regarding units, customers, production milestones, and partnerships, so you are better able to follow our successes. The pieces are falling into place for a very strong 2024 and 2025, from subsidies and CO2 targets that will drive a meaningful uptick in demand for EVs and charging infrastructure, both in Europe and the US. So we will use the remainder of 2023 to get in shape, because we have very high expectations for…

Welcome back everyone. To our analysts, we ask that you pose one question, with a follow up if needed, then re-enter the queue if there’s more. This will allow each of you to ask your questions up front, and we’ll get to as many additional questions as time allows. Nadia, I think you have some instructions for our analysts?

[Operator Instructions]

Great. Thank you, Nadia. So, our first question is from.

From George Gianarikas of Cannacord Genuity. George, please go ahead. Your line is open.

Hi, George.

Hi, everyone. thank you taking my question. So, just on the Q2 revenue, you did a nice job of explaining the inventory reductions that you've seen over the last couple of quarters, but it was still materially off of what you predicted as we entered the quarter a few months ago. So, I'm curious as to, why you think that Delta is there and what gives you confidence that we've finally reached the end of this inventory reduction?

Thank you, George. This is Enric. So, first of all, I think it's very important to say that the demand that our distributors are seeing in every region, including Europe is higher than ever and that can be seen by the sell-out and the sell-through. For example, we we've grown in sell-in and sell-out 67% in the US. We are seeing fast charging growing 700% on a year-over-year basis. And when we look at the European deliveries of our distributors, we are doing growing 18%. What happened basically is that this inventory reduction happen -- almost all of that -- of all of it during this quarter. Our distribution channel partners reduced 19,000 units, the number of charges, which that means around €12 million of gap between what they sell-out and we sell-in. So, with that revenue will have been recognized to us, we will be around €43 million to €45 million of revenue for this quarter. The positive thing here is that we are working very close with our distributors. We are improving the way they manage their inventory and we have visibility on that from the last quarter. And now we have a very good knowledge on what's the channel inventory. We can see that it's over and they have went through. There's some in some distributors that have more or less, but the metric channel challenging mentor it's done. And that's why we have confidence for the second half of the year that we will see all these demand happening into order -- into revenue for Wallbox.

Thank you. And as a follow-up we're all paying attention to the NEVI awards, which appear to have even though they're delayed, just started. What gives you confidence as we enter 2024 that you'll be one of the chosen options from a hardware perspective?

Yes. So there's many things here. So first of all, we are working with many of the OEMs here in Europe, and we partner with them to sell currently our Supernova 150 and 60 kilobytes. So essentially the Supernova 180 we are now certifying in the US and starting to be delivered at the end of this year. It's a very similar product to the one we have in Europe so we are building already the trust with these customers, many of them manufacturers, utility companies, charge point operators that have global presence. So they know the product and they are testing it. Second, we have, we're making a product which is the Supernova 180, which it's perfectly well positioned for Navy. It achieves the power requirements. It has the Build America requirements because we have the factory and we are building all these supply chain around the US. And finally, there's a very good thing we have here which is our compatibility with Max. Now is the North America charging standard becoming more demanded by other car manufacturers. For us it's just changing a plug, and we've been doing that in many countries, in many continents around the world. We have all the supply chain ready and prepared and the operations and the products prepared to make this kind of product. So, we are building and we're working to make sure we can deliver fast charges with Max Connector. I think these three things are very compelling for our customers and we're already working with them to make sure we are part of that conversation and grants.

Yes, George, I think in addition to the production capabilities and our ability to have that product certified and meet the requirements of the program. And of course, the reliability rates and our ability to develop and bring to market an exceptional product. We've been having conversations, really constructive dialogue with all the relevant parties for the last almost year and a half. So they know we're here, they know of our capabilities, they know that we have product that will be ready to slot into those projects, and we're aggressively going after those projects. And so when the construction companies, when the large project coordinators receive the sign-off from the states on funding those projects, they're going to then reach out to hardware vendors. And we are ready for those conversations and we're ready to bring those products to market and get them in on those projects. So we're excited.

Thank you.

Nadia, next question.

Thank you. The next question goes to Brian Dobson of Chardan. Please go ahead, your line is open.

Hi, thanks for taking my call. So just in terms of broader industry context, last week Ford made some sheepish comments regarding EV sales in the United States slowing, or rather slower than expected. How are you thinking about EV sales as you're contemplating EBITDA profitability in the back half of the year and profitability in 2024 and also your call it recent suspension of balance.

Yes, thank you, Brian. So I think that we are in very different segments of our space and we have to treat them differently. So for example, fast charging is not really depending on EV sales and this is an area of our business that last year was 2% of our business and today is 20% and growing, so we are seeing growth of 700% a year over a year. And in this part of the business what we are doing, we're improving our gross margins, for example, the gross margin for fast charging improved 10% points versus the previous quarter. So that's one way we are driving profitability with this part of our business that actually it's growing very fast. The second is the U.S. Here also we are seeing that we are increasing market share, growing 67% and also that it's directly contributing to the profitability. For the rest of the world and Europe especially, what we are doing is focus on what we can control. And the way we are doing that is we are doing the cost reduction, we are working to improve our gross margins and the things we already commented during the call, the US expected growth, the DC fast charging growth and compensating now the channel inventory we have in Europe, we can see in Q4 already this break-even and continue with that optimization we are doing, we also can see this profitability in Q4. So basically, yes, we see a slightly soft EV market, but we have presence in several places, in several countries, and in several segments that allow us to grow, achieve scale, and in the meantime, we're reducing the cost and improving our operations to be profitable.

Brian, the only thing that I would add is that the EV market is still young and it's evolving, and what we see based on OEM is that they are working hard to find the sweet spot with regards to price, and some consumers are sensitive to price. So Ford said that, the rollout of EVs was going to go slower than initially planned. And then they also, a couple of days later, said that there was a 6x demand increase once they cut the price of the Ford F-150 Lightning. And so I think we've seen a number of price cuts and price increases, depending on the OEM, over the last couple months. And there is some variability, but we also believe over the longer term that the EV market in general is strongly positive and we're well positioned. So, we're enthusiastic about it.

Excellent, thanks very much. And you've recently undergone some strategic changes to your marketing. Do you think perhaps you can give us a little bit of color on how that's going and I'd expect it to impact margin through the back half?

Sorry, strategic changes to our marketing plan?

As far as bringing products to market through, call it single channels or direct sales. or direct sales, I can make the comments call.

Yes, so good point. So I think, thank you again, Brian, for bringing this. So yes, I think Costco, it's the best example of this focus on retail. And I want to be clear, this is a huge win for us. I want to congratulate all the Wallbox team for bringing this home, because it's very, very meaningful to us. 700 locations, 125 million members, it's a big deal. So we are going to start seeing the revenues of the Costco deal during this quarter. We are now, during Q3, we are very excited and we will give you more color as the quarter evolves.

Thanks, Brian. Nadia?

Thank you. And the next question goes to Abhi Sinha of Northland Capital Markets. Abhi, please go ahead. Your line is open.

Yes. Hi. Thanks for taking my question. Just wanted to understand if you could elaborate more on, like, what would be your greatest risk for your EBITDA break-even? Like, is there any minimum revenue threshold that you guys are focusing? Like what do you think might happen that might lead you not to reach the EBITDA break-even?

Yes, thank you, Abhi. So I think right now all the cost reduction program, it's performing well as expected. So I don't see a risk here. We continue to optimizing our OpEx, optimizing our operations, our personal cost. Here, the key, as you're pointing out, is the revenue for the quarter. We are making a company that with around 60 million to 70 million of revenue should achieve break-even. That's what our cost reduction program is putting us. So we are minimizing the risk in case revenue come a little bit lower as expected.

Sure, thanks. And then if you could elaborate a little bit more on like, I mean, you have been able to reduce the commissioning time for Supernova chargers, like drastically from eight hours to two hours, and then now you're aiming for one hour. So what exactly is the driver behind that? Like, if you could elaborate a little bit more, like what, how you have been able to reduce the time so much, so drastically?

Yes, so it has been a great coup in terms of Supernova. We already installed several hundreds and sold more than a thousand. We are close to the hour now and basically it has to do with the update process and the configuration process for the specific CPU. So when the CPU buys the charger, it has to point out to their special backend, the product has to be, the software has to be updated, there's some safety checks that need to happen, and all these things are being automatized. So at the beginning, it require a lot of involvement of an engineer or a technician to make sure this was commissioned. Right now it's getting a lot of automation. And our goal is that it's 100% automatic in the following quarters, in a couple of quarters. So that you just connect it, it goes to our backend, downloads the configuration and it gets commissioned. So it's about automatization and obviously it's engineering time and product development that we have been doing.

Thanks, Abhi. Nadia?

Thank you. Thank you, the next question goes to Ben Kallo of Baird. Ben, please go ahead. Your line is open.

Hey, Ben.

Hey, good morning. Thanks for taking my question. Just first, just on visibility for Q3 and Q4, can you talk about your level of visibility overall and then specifically for Supernova versus other chargers, which you have more visibility on? And then I have a follow-up. Thank you.

Yes, so obviously we have with Supernova a very high level of visibility and basically almost all our forecast for Supernova for the year has a name and an order number. So we are very confident on our Supernova sales for the year, because we have six to nine months of orders, visibility. They place the order and there's a date of installation, and we make sure it's delivered that day. So for Supernova, we have very good visibility. When it goes to AC chargers, these are 90-day cycles. So right now we have visibility on what's happening this quarter. Obviously, we still have OEM deals that have a little bit more visibility, but they are not as meaningful as our distribution partners. The best way to have the visibility right now is looking at the sell-in, sell-out. So seeing how many chargers are our partners selling today. And that gives us a good idea of what's going to be their order once inventory is done. So I say we have visibility on for AC chargers and we have full year visibility for fast chargers.

Thank you. When I think about the new products that you guys are bringing to market, how much does that impact this year versus next year? Because I thought I remember that there was some impact to this year, but it sounds like it's really 2024. Then how do we think about margin as new products come to the market as they ramp?

Yes. I think that's a good question, Ben, and that's one of the reasons that we're not providing explicit financial guidance, because those products are meaningful and they are coming to market this year and we want to make sure that we bring them to market and we release them when they're ready, right. The goal here is to provide the highest quality products to our customer and make sure that we retain their trust. And so making sure that they are released when they're ready rather than before, I think is important to us. There is going to be financial impact from those new products this year. It's just too hard. I think it's too early to say how much and when. I think the vast majority of that impact will be felt next year, especially as we start to get into some of the certifications with DC and North America and some of the new products, both Orion, which is our commercial product and Pulsar Pro.

Yes, I think to add to what Matt said, so it's important that we launch this year Supernova 150 kilowatts, and this is a new product we launched this year, and already is the one that's mainly contributing to the 300% growth on DC fast charging. So new products are already contributing. Pro was launched a couple of weeks ago, Pulsar Pro, and we are already starting deliveries. But as Matt said, we expect the biggest impact for Pro, DC in the US and Orion, which are our three new products, mostly coming in 2024.

Thanks, Ben.

Thank you, guys.

Thank you. [Operator Instructions] Our next question goes to Stephen Gengaro of Stifel. Stephen, please go ahead. Your line is open.

Thanks. Good morning, everybody. So I was curious if you could just give us a sense, and we can think about this not necessarily as the next quarter, but as we look at the back half of this year in 2024 and 2025, how do we think about the mix of fast versus home chargers? And then how do you see the margin on the fast charging evolving? I think it's dilutive right now, but so how should we think about how the interplay there is between fast charging growth and margins and when we think about how the interplay there is between fast charging growth and margins and when we and what that sort of suggests for margins over, back half of this year and the next couple of years?

Yes. Hi, Stephen. Thank you for the question. So in one year, two years' time, AC and DC should be balanced. So 40% sales coming from AC chargers, 40% of the sales coming from DC, and around 20% coming from software and services, which include installations from coil. Gross margins for AC, today we are seeing our most mature products with gross margins between 45% and 50%. So we are aiming as volume increases and platforms get more mature, hardware platforms I mean, to be around this number for AC charging 45%. And for DC fast charging, as I said before, we have been able to increase 10 point increase 10% our margin for fast charging. So we are already seeing for Supernova 150 kilowatts margins above 30%. So our goal in one year or the next few quarters, it should be around 38% to 40% gross margin in DC fast charging. So everything should be about 40% in a year time.

Thanks. And just as a quick follow-up, the Hypernova product, like when you think about what NEVI funding is going to be directed at, do you see Supernova getting sort of pushed to the back burner with Hypernova as people sort of think about installing hardware for a long period of time? Do they want faster? I guess is the question.

Yes. So I think there are different kinds of customers. So, Hypernova is a faster charger. Hypernova is a 400 to 600 kilowatt charger that can be upgraded. And Supernova we're going for 180 kilowatts. So right now, most installations, because power limitations for fast chargers are around 180. But as the market evolves, highways will have Hypernovas and small roads, fuel stations, and commercial centers will have Supernovas from 60 to 180 kilowatts. So I think there's going to be different kinds of customers and they are not going to be cannibalized.

Thank you. That's helpful.

Nadia, I think that that's our last question. Is that correct?

Thank you. Yes. We have no further questions.

Okay, great. So thank you all for joining us today. We hope you found today's call a good use of your time. Also, please note that we will be active at Investor events in August and September. So watch our website for details if you're interested in meeting with us. Let us know if we can help you in any way. Have a great day, everyone.