Hello, everyone and welcome to Wallbox’s Third Quarter 2024 Earnings Conference Call and Webcast. My name is Charlie and I will be coordinating today’s call. [Operator Instructions] I’d now like to turn the call over to Michael Wilhelm from Wallbox. Michael, please go ahead.

Thank you, Charlie and good morning and good afternoon to everyone listening in. Thank you for joining today’s webcast to discuss Wallbox third quarter 2024 results. This event is being broadcast 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; and Luis Boada, Wallbox’s CFO. Earlier today, we issued a press release announcing results from the third quarter ended September 30, 2024, which can also be found on our website. Before we begin, I would like to remind everyone that certain statements made on today’s call are forward-looking that may be subjected 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 SEC including the annual report on Form 20-F for the fiscal year ended December 31, 2023, filed on March 21, 2024. We will be presenting unaudited financial statements in IFRS format that reflects 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 will turn it over to Enric.

Thank you, Michael, and thanks, everyone, for joining us today. Before we discuss the highlights of the third quarter 2024, I would like to take the time to put in perspective where Wallbox is today in light of the current EV market sentiment, especially in Europe. Year-to-date, up until the end of the third quarter, we had revenue of €126 million, which reflects a 26% growth compared to the same time frame last year. If we look at the EV market in the main regions we operate in, Europe, North America and rest of the world, which are all countries, excluding China, we have outgrown the market significantly as the EV market year-to-date only grew 3% year-over-year. In the same period, we have reduced labor cost and OpEx by 14% and CapEx spending by 48%, even after incorporating ABL, clearly reflecting how we are improving our efficiency while continuing to grow and develop our products. We are a global leader in electric vehicle charging and energy management solutions. We have sold over 1 million chargers in more than 100 countries and we believe that we continue to play a key role in the transition towards electric mobility. It is clear that this transition is happening, but it is going through a much lower cycle towards mass adoption, and this is impacting the entire industry, including our competitors. We continue to work hard in adapting to the continuous changing factors ranging from regulations, subsidies, new technologies, EV market, customer preference, product requirements, the macro environment and more. This volatility on our way to become leaders of a more mature industry is a fact and it impacts our results. We already have been doing a lot in the last 2 years, but I would like to share with you key initiatives we…

Thank you, Enric. Good morning and good afternoon to everyone. Our third quarter results are not as we expected, but have also been impacted by unique factors. The revenue for the quarter generated was €34.7 million, representing a 7% year-over-year growth. We continue to grow in North America and other selected markets, but we saw this growth offset by a softer market in Europe in both AC and DC. Besides the aforementioned, we have recorded a one-off revenue charge of €1.6 million due to a return with one specific customer. Absent this impact, we would have had double-digit growth year-over-year. With 23%, the gross margin is lower than expected. This has to do with the provision Enric talked about before, which we decided to introduce after a careful review of our inventory. We keep developing and improving our products to match new requirements and service new charging segments. As a result, some components acquired at the peak of the supply chain shortage post COVID era, are at risk of not being used in the new versions of our products. The additional inventory provision amount for the quarter is €4 million. This is not a cash out nor a write-off yet. We see an opportunity to sell some of these components and recoup part of the initial investment. We do not expect material excess and obsolete provisions in quarters to come following the careful inventory review. As already highlighted by Enric, if we excluded this additional provision, the gross margin would have been closer to our target range. Q3 labor costs and OpEx were down 2% year-on-year. Costs are decreasing despite the ABL acquisition, which joined Wallbox perimeter in Q4 of 2023. Consolidated adjusted EBITDA loss for the quarter was €21.8 million. Absent of the aforementioned provision, we would have sustained…

Thank you, Luis. Before I share with you my closing thoughts and our expectations for the fourth quarter, early today, we announced the resignation of Anders Petterson as Non-Executive Chairman of the Board of Directors and the appointment of Beatriz Gonzalez as his replacement. We would like to thank Anders for all his contributions and congratulate Beatriz with her new role. Now, I would like to leave you with the following: it is clear that the current EV market is volatile and that this is impacting our performance. We understand that in these times, visibility on the longevity of the company is key. For that reason, we shared with you today the key initiatives allowing us to continue building out our leadership position in a sustainable way. We have been educating here strategic initiatives in the past quarter, which include expanding into new countries and segments, securing new strategic partnerships, reducing cost and strengthening our balance sheet. As part of our initial efforts, we are now adjusting the organizational structure into a business unit-driven model to better align resources with our product portfolio, improving visibility on the top line growth, identifying opportunities to expand gross margins and continue to drive sales. The main objective is to match the cost structure with the current demand to drive our path to profitability and cash generation. We are in a multi-decade transition and we are laying the foundation right now. We are executing well. We have a leading position, and we are building a company that is being set up for success. From that perspective, we want to provide guidance on what we expect for the fourth quarter. Revenue in the €40 million to €45 million range, representing an approximate year-over-year growth rate between 23% and 38%. Gross margin back into the 38% to 40% range. Combined with continued improvement in costs, expecting negative adjusted EBITDA between €7 million and €10 million. With that, we are ready to take questions from our analysts.

[Operator Instructions] Our first question comes from George Gianarikas of Canaccord Genuity. Your line is open. Please proceed with your question.

Hi, everyone. Thank you for taking my question. I would just like to start from a – I know visibility is fairly limited and you have articulated measures through what you plan to reorganize and cut costs. But I would just like – if you could help us understand a little bit of when you hope to get back to sort of – or get to an EBITDA flat to positive situation, and if you could tie that in with your plans around strengthening the balance sheet to give the company runway to capture the future growth in electric vehicles? Thank you.

Thank you for the question. This is Enric. So, I think the key and what we are trying to achieve, and as I said before, now it’s obviously the profitability and the cash generation. And I think the good news is that we are growing in key markets like North America, where we are growing 45% year-over-year. But other markets like Europe, we see a market that is very volatile. And last quarter, we saw a 13% decrease on the EV market. Despite that, we were able to grow, which I think is very important. And it shows that we are constantly increasing the market share, which at the end, it’s what we want in this moment is where we want to increase the market share. Our approach now is instead of thinking that we will catch up with revenue, which we believe, we believe that the revenue will grow and we will be able to continue capturing more market and more growth, at the end any time that a company and our competition struggles, it’s more market we get, it’s more sales we get. So, I think even if the market is not growing as expected, we still have opportunities to continue capturing more market share and grow sales. But our approach right now is, okay, we have to adapt our structure to the revenue we are seeing now for the next quarter, which is 40% to 45%, and the historical revenue we have been having. And obviously, we see an upside, obviously, because we see there is opportunities to grow. But that’s the key. And at the end, we will be profitable. At the moment, we achieve this – we adapt to these levels. So, maybe as a data point, we provided already the Q4, which we are doing huge steps towards profitability, we are improving 50% versus Q2, the EBITDA in the best part of the range. But one thing is very important is 2025 as a year has to be a profitable year, and that’s what we expect. We expect a positive EBITDA year. And that’s the data I can give you. It should not take us more than two quarters or three quarters to get the company into the cost structure given the current revenue. And as I have said, we see upsides in revenue. But right now, we want to take an approach where seeing that the market is very volatile and some – we are able to capture the market that is growing, but we want to make sure we are committing to something given the volatility of the market that we can achieve.

I think you mentioned that there may be some inventory on the DC side. But what about AC, I mean that’s been a pesky issue that you have had for several quarters. Is there still inventory in your opinion in the European theater? And I think that in the U.S. market, you are growing inventory through your Generac channel. It’s a bunch of questions, but am I accurate? Is there any inventory left in Europe?

Yes. No, I don’t think so. I don’t think in AC, there is an inventory issue right now. And the clear proof of that is that we are over-performing in every country and segment, the EV market growth. So, not only we are not – we see that data in the sell-in, sell-out data, but there is no inventory challenge. Obviously, we are in the North America increasing with new customers and new partners. And as you say Generac, it’s a new partner. We are seeing very nice sellout from Generac, but they also have been selling to their dealers, and that creates some inventory in their dealers. But Generac is also making sure they don’t have too much inventory. To give you an idea of the success of this deal, Generac has become in two quarters our top five customer in North America and one of the top in the world. And I think this is a great data point of how this is working. Every quarter, we are seeing orders, and we are adding more products in our portfolio. And as I also say, in the script, we see not only opportunities to increase sales with these partnerships we are doing, but also to reduce costs. We have some key strategic partners, not only Generac, other big OEM customers we have where we can leverage their purchasing power to improve our costs and improve our margins at the end. So, as the industry is becoming more mature, our relationship with our partners are becoming more mature, are becoming – we have bigger volumes, obviously, but also more ways we can have synergies and support each other and a clear success of that is being able to expect to continue improve our gross margin and the growth we are seeing in North America.

Thank you.

[Operator Instructions] Our next question comes from Ben Kallo of Baird. Ben, your line is open. Please go ahead.

Hi. Thank you for taking my question. Good day guys. Just maybe following-up on George’s question, could you guys just maybe taking a step back, just talk about expectations on EV sales across different regions you guys have internally for next year and then maybe ‘26 and anything that you see that could reignite demand for EVs? And then I have a couple of follow-ups.

So, when we look at – well, then, thank you for the question. So, this is Enric. When we look at the different sources in the different markets, we expect a growth everywhere in North America and in Europe. Europe is, we expect it to be fueled by new regulations on emissions for the fleets. I know there is a lot of noise right now if these regulations will come or not come or these fines will come or not come. We believe it will come no matter what. Maybe the fines or the cost is going to be softer in our opinion. But no matter what, we are seeing car manufacturers in Europe preparing for that. So, we have seen a delay on the push for sales for EV at the end of this year and expecting a stronger first half of next year, because at the end what matters is the EV sales you make during 2025 to achieve this regulation. So, that is one of the reasons. We also expect a strong second – first half in the next year because some car manufacturers, if they could choose will prefer to sell EVs in January instead than in December to achieve these regulations. That’s one thing that we see positive for the next year. And North America, there is a lot of new comments – models coming, which we believe also will impact. So, our opinion, we can maybe share later, but we think we can be above the 10% to 15% growth for EV market. But the way we are building our organization and our guidance and everything, we are considering a flat market. And we are making our company to make sure it’s profitable in a flat EV market. Why we are doing that, because we believe that’s the way we can be quickly profitable. And if we offer – if the market over-performs, and we believe we will over-perform, we will make more money. At the end, we will be more profitable. But we are adapting the company to a flat market, just to be ready in case of some unexpected thing. But our forecast right now and what we see is a growth, especially in the first half of next year in Europe and in North America due to new models and changing regulations.

Thank you. Just on the point of your manufacturing footprint, could you talk about both from a geographic standpoint, if it still makes sense to have manufacturing in the U.S. as well as Europe? And then as well as any thoughts about moving to more of an outsourced manufacturing model? Thank you, guys.

So, this is an interesting topic now with the business units. It’s – I think we have recently started doing now, but it gives us more visibility on cost and cost allocation of the different parts of the business, and we have this kind of questions all the time. We believe that having our own supply chain still give us an advantage. And I think we seeing the North American market as a key growth vector for us and we are proving this quarter-over-quarter. It’s key that we have our own manufacturing capacity there. And there might be changes in regulation that also give us an advantage, the fact that we are a North American manufacturer. So, we think that keeping this factory in North America and our one in Barcelona, but especially the one in [indiscernible] it’s a key advantage for us. So, we want to give that. The answer on, if we will outsource third-party manufacturing or not, it will depend on cost and profitability. Right now, we still see a keen advantage. We have interesting gross margins. We also vertically integrate our electronics. We have this company called Ares that we acquired a couple of years ago that makes our PCBs and our electronics. The cost of our product is 50% to 60% electronics, and we control that part, and we get this gross margin. So, with these strategic partnerships we are doing with different partners for purchasing at a better price components and we are controlling our own manufacturing and supply chain, I think we can really exceed the 38% to 40% target in the future. So, that’s the focus, apart from growing sales and reducing cost is to increase margin and controlling our own capacity and supply chain is key to achieve this margin improvement. Yes, maybe – Luis?

Yes. The only thing I would like to add is that we have already incurred that capital expenditure, right. So, when you look at our footprint, we are ready for the growth to come. It’s not coming in the short-term. And as Enric mentioned, we are going to stay consistent with kind of a flattish EV market. When that growth comes, we already have those facilities and those products. So, we are in a very strong position to capture the growth when it comes.

Okay. That was our last question. Thank you all for joining us today. We hope you found today’s call a good use of your time. Let us know if we can help you in any way.

Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.