Hello, welcome to the Alfen 2026 Q1 results conference call hosted by Michael Colijn, CEO, and Onno Krap, CFO. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. If you wish to ask a question, please press pound key five on your telephone keypad. I would now like to hand the call over to Michael Colijn. Mr. Colijn, please go ahead.
Thank you, Bart Jan. Good morning, everybody, and welcome to Alfen's 2026 Q1 earnings call. Thank you all for taking the time to join us. I'm Michael Colijn, CEO of Alfen, and I'm delighted to be leading this trading update with you today. Joining me is Onno Krap, our Chief Financial Officer, who will walk you through our financial performance later on in this presentation. Today's agenda is structured to give you a comprehensive view of developments during the 1st quarter of 2026. I'll begin with the highlights. We'll then dive into each of our three business lines. Onno will follow with our financials. I'll then outline advancements on the transformation, and we will conclude with our outlook before opening the floor for your questions during our Q&A.
I'm pleased to report that Alfen delivered a good start to 2026, with total revenue reaching EUR 129.7 million in the first quarter, representing a 25% increase compared to Q1 2025. This is primarily driven by Energy Storage Systems and Smart Grid Solutions project business. Looking at group gross margins, our adjusted gross margin was EUR 34 million, representing a EUR 3 million absolute increase compared to EUR 31 million in Q1 2025. The lower group margin percentage represents the business line mix shift towards Energy Storage Systems. We deliver a solid Adjusted EBITDA with absolute and margin improvements. This demonstrates the operational leverage inherent in our business model and our continued focus on cost discipline while investing for growth. Beyond our financial performance, we've made significant strides in our transformation and renewed strategy.
Most notably, we successfully implemented a business unit organization, marking a milestone in our journey towards greater customer centricity and accelerating strategy execution. Looking ahead, Alfen reiterates its 2026 guidance across the board. Let me turn to our Smart Grid Solutions business. Our great Smart Grid Solutions business delivered solid performance in the first quarter, with revenue reaching EUR 55.8 million, representing a 2.7% increase compared with last year, which was also a strong quarter then. This growth reflects the strength of our project execution capabilities in both regular projects as well as transformer substations for a Dutch grid operator. We invested significant effort to accelerate these larger stations. By combining project capabilities solution and a longstanding partnership, we delivered a turnkey approach that increases deployment speed by approximately tenfold.
Revenue from transport distribution stations starts to show in our figures. This effect is structural in a year-on-year comparison throughout 2026. From an operational perspective, we delivered 833 substations during the quarter. We delivered 590 substations in the Netherlands and 243 from Finland. The significant increase in Finnish substations is attributed to a substantial mix shift towards grid operator products for Alfen Elkamo, our Finnish subsidiary. To reflect this in our revenue mix, we now split revenue from Elkamo in grid operator products and projects, whereas last year we allocated it fully to projects. This results in 71% of revenue coming from grid operators and 29% from projects. Gross margin improved to 25.2% from 23.9% last year, in part driven by a higher share of project sales.
Further, we saw the first signs of our international expansion strategy on SGS, securing project orders from Germany and France. While these initial orders are modest in scale, do represent the first proof points of our strategy. While we're pleased with our smart grid performance this quarter, I want to provide you with a slightly more balanced perspective on our market dynamics that we are observing. On the positive side, we're seeing meaningful regulatory improvements that support our medium to long-term outlook. The regulatory environment has clearly reached elevated levels of ambition to support grid infrastructure developments. At the same time, we saw a notable acceleration of substation infrastructure rollouts in the 2026 investment plans of Dutch grid operators. This represents significant progress in addressing grid capacity challenges.
We're witnessing similar positive momentum in Finland, where Fingrid has expressed optimism about mid to long-term outlook for grid infrastructure investments. However, the key constraining factors still impact our Smart Grid Solutions clients today. Permit acquisition difficulties, transmission grid capacity limitations, land availability for substation placement, component availability issues and human labor capacity constraints for installations. The recent example is the news from the province of Utrecht in the Netherlands, where small consumers, including new housing and people who want a heavier connection at home, will face a connection freeze. These types of grid capacity limitations illustrate both the urgent need for our infrastructure solutions and the complex challenges our customers face. Let me conclude this slide on a positive note by saying we are more optimistic about the market environment compared to 2025.
Moving over to EV Charging, we faced a decline in the first quarter, with revenue down 19% to EUR 23.3 million, which was in line with expectations as we renew our portfolio. This quarter's performance reflects three dynamics. First, the gradual ramp-up of features on our new products impacting order volume. Second, an uneven order pattern in the public segment. Third, the continued competitive pressure in home charging. Our gross margin percentage improved year-on-year to 39.9%, which is at the midpoint of our guided range. From a production perspective, we delivered approximately 25,000 charge points during the quarter, representing a 12% decrease from the 28,400 units produced in Q1 2025. We are taking every effort to return the EV Charging to revenue growth by renewing our portfolio and enhancing our existing offerings.
I want to share initiatives we are working on. From a product perspective, we are accelerating new product development to answer the competitive pressure in the home segment. With a similar disciplined focus, we are accelerating the rollout of new features for our recently introduced Plus models to enable smarter charging capabilities. On the digital front, we have a new digital platform that will enhance the customer experience installation. We're significantly reducing installation time through our updated Eve Install app. Lastly, we made improvements on our service experience through localization and digitalization initiatives that customers are already feeling today. Together, these initiatives structurally strengthen Alfen's competitive position in the EV Charging market. The work and dedication I've seen in recent months make me confident that we will turn this around. I would now like to dive deeper into the market context.
Across Europe, battery electric vehicle registrations continue their upward trajectory, although the country-specific picture is mixed. Our core markets of the Netherlands and Belgium experienced a year-on-year quarterly decline, reflecting their status as early adopters. Conversely, Southern European countries are demonstrating strong momentum, with Italy and Spain showing robust year-on-year improvements in the battery electric vehicle registrations. Current geopolitical tensions have created a re-acceleration of demand, with fuel price hikes driving renewed consumer interest in electric mobility. At the same time, we are seeing renewed policy support across European markets this year. As a result, this positively influences the total cost of ownership, which was already compelling for battery electric vehicles versus the combustion engine counterparts. This is starting to become a reality for all vehicle segments as new models hit the market that are cheaper and deliver superior performance.
It reinforces our view that electric vehicle adoption will increasingly be driven by consumer adoption rather than regulatory support alone. In all, we are on an undeniable path towards electric transport, and this will translate into sustained demand for charging infrastructure across all our European markets in the coming years. Our Energy Storage Systems business delivered a significant increase, with revenue surging 145% to EUR 50.7 million, driven by successful milestone achievements in two large-scale projects. From a profitability perspective, our gross margin in Energy Storage Systems was 21.1% during the quarter. Last year's margin of 32.5% was exceptionally high due to a one-off release of project contingencies. The current quarter's margins were above the midpoint of the expected range of 15%-25%, which we consider strong given the share of large projects in the product mix.
Looking at our backlog, which grew quarter-over-quarter to EUR 130 million, with EUR 82 million scheduled for delivery in 2026 and EUR 48 million extending into 2027. This is impressive given the EUR 0.7 million converted to revenue during quarter one. Backlog is accompanied by pipeline going forward. We are seeing market traction in all of our target segments, utility scale, Commercial and Industrials, and mobile storage applications. We want to be transparent about timing dynamics in this business. The natural window is closing to convert pipeline opportunities into revenue in 2026, given the project timelines and component lead times inherent in large-scale energy storage deployments. Mobile storage opportunities present shorter execution cycles, offering some flexibility for near-term revenue conversion. From a market perspective, we're observing a notable reversal in the pricing environment that has characterized recent years.
According to Bloomberg New Energy Finance, battery system prices have increased by 10%-20% compared to Q1 2025, driven by higher raw material prices, particularly lithium, and China's reduction of export tax rebates. We observe a smaller system price increase in our supply chain channels compared to Bloomberg figures, and want to mention that this has no impact on orders that are already in our backlog. As part of our strategy implementation, Alfen continues to work on lowering the total cost of ownership of energy storage projects for our customers, which accounts for more than battery pricing alone. I will now hand over to Onno for our financials.
Thank you, Michael. I now walk you through our group financial performance for the first quarter. Starting with our top line, we delivered a revenue increase of 25% to EUR 129.7 million, compared with EUR 103.8 million in the prior year, driven primarily by strong performance in Energy Storage Systems and Smart Grid Solutions projects. As we've previously indicated, Energy Storage revenue is front-loaded in 2026. This quarter's performance reflects that better. Our adjusted gross margin reached EUR 34 million, representing 26.2% of revenue, compared with EUR 31 million or 29.8% in Q1 2025. While the absolute gross margin increased substantially, the percentage decline reflects our business line mix shift towards Energy Storage Systems, which typically carries different margin characteristics than other, in our other segments. This mix effect was anticipated.
At business unit level, I'm pleased with the underlying gross margins that were at or above the midpoint of our expected ranges. Margins in energy storage were lower than Q1 prior year due to one-offs related to the release of project contingencies in Q1 2025. Regular EBITDA was EUR 6.8 million in Q1 2026 compared to EUR 4.2 million in Q1 2025. Moving to Adjusted EBITDA performance, which improved to 6.3% in Q1 2026 from 5.3% to comparable prior year lending. This 100 basis point improvement demonstrates the operational leverage inherent in our business model and also validates our disciplined approach to cost management. OpEx increased with 2% to EUR 27.2 million, equal to 21% of revenue. The continued cost measures were offset by an increase in personnel expenses of 2.6% following collective labor agreement indexation. The latter represented more than 5% increase compared to Q1 2025.
Other operating expenses remained stable at EUR 6.8 million. From a cash flow perspective, we generated EUR 6.3 million in cash from operating activities. Our cash improved by approximately EUR 1.9 million during the quarter. The restructuring provision of approximately EUR 4.5 million that was announced at our 2025 full-year results will be booked progressively from Q2 onwards as we implement our organizational transformation. Lastly, I want to mention that we stayed well within our bank covenants this quarter. I will now hand back the call to Michael, who will talk you through the strategy and transformation update and our outlook.
Thank you, Onno. I am pleased to report that we have made substantial progress on our transformation and renewed strategy over the past months. As we have previously outlined, this transformation is guided by four principles. I just want to take you through a small recap. Firstly, total customer confidence. We are committed to building complete trust by being reliable, responsive, and locally present across Europe, ensuring we retain customers for the long term and grow alongside them. Secondly, perfect product foundations. It means consistently delivering high-quality products that meet customer needs today while anticipating their requirements tomorrow, all while optimizing total cost of ownership. Smart services innovation, focusing on adding more value to customers through bundled, relevant, and dependable solutions, enabling a step change in how we support them, especially with digital solutions.
Finally, our fighting fit model principle drives us to evolve our structures and ways of working to enable the first three principles. This has resulted in a business unit model structure. In short, getting closer to our customers, achieving product excellence, and digitalizing our offering. Let me share our concrete progress against these transformation principles. Under total customer confidence, we've initiated a comprehensive quarterly business review process with the top 20 customers in each business unit, creating structured touch points to deepen our customer relationships and ensure we're consistently aligned with their evolving needs. Simultaneously, we're building out our 24/7 customer response capabilities, enhancing our service availability and responsiveness across all European markets.
Lastly, we've achieved a major milestone under our fighting fit model with the implementation of our business unit organization structure starting May 1st. This restructuring represents a fundamental shift towards greater customer centricity, empowering each business unit to operate with enhanced agility, clearer accountability, and deeper market focus. Before addressing our outlook, I want to acknowledge the current geopolitical environment and the implications for our business. Alfen is aware of potential risks and look at when we look at it in three different layers. The first is the availability of components and associated lead times. Second, the pricing impact. Third, our ability to translate these to our customers. On the first two, we see pressure both in lead times of select components, such as memory chips in EV Charging and inverters in Energy Storage. More general, across the board, we see higher transportation costs.
So far, the impact on our results and outlook has remained limited. We will continue to monitor our supply chain proactively and maintain close cooperation with our partners to implement appropriate measures where needed. Looking to our outlook, we reiterate our full 2026 guidance. We expect revenue to be between EUR 435 million and EUR 475 million. Our Adjusted EBITDA margin guidance for 2026 is between 4% and 7%, and our CapEx is expected to remain below 4% of revenue. On business line level, Smart Grid Solutions revenue is anticipated to increase for both grid operator products and projects. While we're making every effort to restore EV Charging revenue to growth, for our 2026 planning, we assume a decline as we upgrade our portfolio and services.
For Energy Storage Systems, 2026 revenue will be front-loaded in the first half of the year, reflecting the timing of project execution. We expect the second quarter to deliver performance in line with the first quarter for this business unit. For 2027, we remain confident that the transformation, combined with our outlined growth strategies, will reignite consistent profitable growth, resulting in year-over-year improvements in both revenue and Adjusted EBITDA margin. Lastly, we are convinced that the European energy system will continue to electrify over the coming decades. With Alfen's three complementary business units, we are strategically positioned at the heart of the transition towards electrification. 2026 is our transformation year focused on establishing the capabilities and market position that will drive long-term profitable growth. The progress we've made this quarter reinforces our confidence in executing this successfully. Thank you.
We'll now open the floor for questions from our analysts.
Ladies and gentlemen, we are ready to take your questions. If you wish to ask a question, please press pound key five on your telephone keypad. If you wish to withdraw your question, please press pound key six on your telephone keypad. Our first question comes from Nikita Papaccio from Deutsche Bank. Nikita, go ahead.
Yeah, good morning. Thanks for taking my questions. I would have three, we'll go through them one by one. The 1st one is on your charging segment. If we're looking at the implied average selling price, it declined almost by 10% year-over-year and is also down sequentially. Could you give us here more color on the competition you're seeing? If this is specific to certain countries or if it's Europe as a whole, what are your concrete pricing actions here to tackle the issue?
Yeah, to a certain extent, it has to do with mix. It's actually two effects. We have less public, that basically where the public charging poles have a typically higher selling price. At the same time, I think we have been talking also in previous calls that we are working on our pricing strategy and making sure that we offering prices in the market that are competitive to our competitors. You don't really see that coming back into our margins because at the same time, we're also seeing that our components cost prices are declining versus the relatively high component cost prices that we still had on stock. You see gradual declining in component prices.
It's a mix. It's a mix effect. It's a pricing effect, and you don't really see it coming back in margin because of the fact that we also see a counter effect in cost prices.
Okay. The rising competition is really in all countries. It's not specifically Germany, France. It's across the whole segment in Europe.
I would say that in general, the market is entering a new stage of maturity. That also means that, on average, you would expect slightly more competitive prices to develop in all the markets we are working in.
Okay. Understood. Thank you. The second question is on the internationalization strategy in smart grids. Could you give us more color here? You started first orders in Germany and France. Will this only be project, or could you expect a grid operating business in future? How is the timeline? Would you expect substantial contribution from 2027 onwards, or is it really like the end of the decade?
I think, thank you for that question. There are two elements to it. When we think about expanding our SGS market for grid operators, that model we see is quite successful for us with our subsidiary, Elkamo, that tailors the offering to the requirements of grid operators in Finland and in Sweden. If we look at a country, particularly, Germany, with more than 600 [Non-English content], it is quite a challenge to have a standardized offering that meets the requirements of all those different grid operators. Where we see potential for further growth is behind the meter solutions, whereby we can use standardized products from our Almere factory facility and use them, for example, in solar projects, to support the connection to the grid, but behind the meter.
Similarly, we are looking for those type of opportunities in France, and perhaps other countries in Europe. It is at this moment, specifically behind the meter standardized solutions.
Okay. Understood. Thank you. My final question is on the cost-saving measures you said on the storage projects. You want to decline costs also for your customers. Could you give us here any color on potential measures, and also here, what could have this on impact on your financials? Thank you.
I didn't fully understand the first part of your question. What cost-saving measures on what?
On the storage projects. Yeah.
Maybe we had a combination. I think, in general, in terms of the business, we are running a tight ship in terms of keeping cost control quite tight so that we don't want to have unexpected cost increases in our general OpEx. For storage, specifically, we do look at a total cost of ownership. I think one of the areas that we're looking to make our products more total cost of ownership friendly is by standardizing also there where we can. We believe that if we standardize our offering, then that benefits average cost price of projects that we roll out. But it is an ongoing effort, not specifically related to 2026.
Okay. Thank you very much.
Thanks, Nikita.
Thank you, Nikita.
Our next question comes from Luuk van Beek from Degroof Petercam. Luuk, go ahead.
Yeah. Well, good morning. First of all, a question about your inventories, both of components and fixed products. On the components, you just mentioned that you see a risk of price increases on component prices. At the same time, you have a relatively expensive inventory that you're still selling, which brings down the average price. How do you look at the developments, taking those two steps into account? Also, if you standardize your product portfolio, you may have some older products that are not yet up to the new spec. Can you sell them at a normal price? Would there be any risk of discounting? That's my first question.
Okay. Yeah. What you see is that over the last quarters, we have been able to bring down our inventory quite significantly. Actually, I mean, we didn't publicly announce that yet, but I mean, we more or less the inventory from further year end is more or less similar to the inventory that we have at the end of this quarter. The dynamic is slightly changing. When I was referring to the inventory there of which component cost prices are now starting to decrease, I was mainly talking about EV Charging.
There, kind of during the boom of the EV Charging market of 2021, 2022, also being corona, we ran into a situation where we overstocked on components and which we are now kind of in the process of making sure that we are using those in our, in our finished products, and we're basically reducing those. Now, we made quite some progress there, to be honest. We're not fully there yet. I think we also talked about that in previous calls that we had at the beginning of the year around, let's say, around EUR 10 million of inventory still that we, that we see that is somewhat overstocked. We brought down inventory during the quarter again with another EUR 3 million in EV Charging.
On your question of overstocking of sort, basically, obsolescence of inventory, That's one of the indicators that we monitor very, very closely. Every quarter, we make a calculation of what we expect to sell from finished product, which contains those components, and then versus what we have on stock. Any time that we would see a situation where that inventory could be obsolete, we take a provision, and we haven't taken a provision this quarter.
Okay. You also mentioned that contrary to last year, the battery prices are now starting to increase. Can you comment on how the customers respond? Are they trying to accelerate projects to take advantage of the remaining available batteries at low prices, or are they becoming more cautious on projects?
Good question. I think the answer is slightly dependent on geography and on the size of the project. Geography determines also the earnings potential in the local trading conditions for battery type of projects, so at utility scale. The size of the project also influenced in the total relative cost. What we see is that there might be a slight upside for customers to order earlier. We do see that, for instance, the removal of export rebates from China might be a driver to place orders before the end of this year. It might be a small plus, on the long run, the trading model is more essential than the slight increase of battery pricing.
It doesn't generate revenue for us in 2026 if they place the orders at the end of this year.
Okay. Finally, on Elkamo, there was quite a strong rise in deliveries, also to grid operators. Do you see that as something structural because they are also speeding up, or is that just a fluctuation, quality fluctuation?
That is to be seen. What is interesting is that grid renewal projects and grid expansion projects, we believe we observe a general trend for an acceleration there across Europe, and Finland is no exception there. We have exposure there because of our subsidiary. At the same time, of course, as part of our renewed strategy, we're placing emphasis on being more customer-centric, and we hope that this trend continues in the next quarters.
Yeah. What we also see is that the weather in Finland, which of course plays an even more significant part in Finland than for us, was slightly more modest, which basically led to a larger number of installations in the first quarter, where otherwise the ground would have been frozen. In general, what we do see from a revenue perspective that Elkamo is trending in the right direction, in a positive direction. At the same time, what we also see in Finland as well as what we see in the Netherlands, is that additional sale to grid operators is typically not the highest margin business.
That is it's a positive from a revenue perspective, but we also have to make sure and careful that we maintain the right margin levels.
Okay. Thank you.
Our next question comes from Jeremy Kincaid from Van Lanschot Kempen. Jeremy, go ahead.
Good morning, Michael and Onno . My first question is just on your EV Charging business and your inventories. Obviously, in 2022, Onno , as you mentioned, yeah, your EV sales were quite strong because you had sufficient inventory, whereas your peers experienced component shortages and were unable to produce at times as much as they wanted to. Now again, Michael , you're mentioning that there is the risk of potential component shortages within the industry, and you mentioned memory chips. I'm just curious to know, to dig into this a little bit more, could you talk about how you were able to access components in the past, whereas your peers weren't as successful?
Can you sort of frame that in the current environment and give us an idea if you think you're better positioned or worse, and whether or not you think, you know, this memory chip issue could be actually a benefit or a headwind for Alfen in particular?
Sure. Thanks for the question, Jeremy. I think there are a couple of elements there. If we look at the first one, general, supply chain, outlook, I would say, and it's not a novel idea, I guess, for you either, but I would say that we have entered the era of resource scarcity with a longer outlook. A decade or the next two decades might be always showing some scarcity of component availability or materials availability. We operate in that world. When there are spikes in supply chain shortages that we see, there are a couple of things that we can do. Have firm relationships with our suppliers, have framework contracts in place with delivery guarantees, hedge on pricing or fixed pricing for longer term, offtake, volumes.
Of course, physically buying components, which we have done in the past as well, secures that we have them in-house, when times are constrained. At this moment, we're looking at a market where we hear some noises about particular components being scarcer or having longer lead times. We actively communicate with our customers, and we actively engage with our suppliers to secure production slots so that we can meet our requirements to the market. When they get tighter, then we will have to take other measures. At this moment, we don't see that they are getting tighter beyond what we currently mentioned.
Okay. Thank you. My second question is on your EV Charging initiatives, and additional product features that you're rolling out this year. Are you able to provide some broad timeline on when we can expect each of these various features or initiatives to be rolled out?
Sure. In the last part of last year, so end of November, we launched our Single Plus and Double Plus product. Those were launched specifically with the Dutch market in mind initially. Geographically, we're expanding into the countries around us, notably Belgium, Germany, France, et cetera. Next to that, we started adding more features. Features such as solar charging, V2G, fixed IP, making pricing more easily available through the app, launching our Eve Install and Eve Connect apps so that customers have an easier interaction and installers can see a reduced installation time. Those apps are predominantly being rolled out in the first half of this year, then some will be towards the autumn.
But the goal is to have all of them rolled out before the end of the year, where we also look to have the launch of a new product focused specifically on the home charging market, which has all the features and that brings Alfen really back to the forefront of innovation in EV charging, where we always were and where we maybe lagged behind in the last couple of years. But we're really reclaiming the ground on innovation, and by the end of the year, we should have that catch up.
Great. Thanks very much.
The next question comes from Paul de Froment from Stifel. Paul, go ahead.
Yes. Hi. two questions from me. The first one on EV Charging. Could you be more specific on the EV Charging strategy? What I see that you keep relatively high growth margin, but growth is still declining. Do you plan to change anything to try to relaunch sales growth? The second question is on storage. What's your visibility on 2026? We saw two important projects in Q1, could we expect other significant projects to be achieved over the next quarters? Thanks.
Okay. I'll answer. Thanks, Paul. I will answer the first question and then Onno will take the second question. First question on EVC, on pricing and growth. Yes, we are looking at a slightly more aggressive pricing for our product, and of course, are testing if that results in growth. We want to do that in combination with products that have all the features and friendliness that allow us to also respond more tailored to in geographies and by tender and segment type. It has our attention, we continue to push, but it's a combination of pricing with the features that we're looking to get our traction back.
Yeah. On the, on energy storage, I think we had about EUR 50.7 million. We had EUR 50.7 million of revenue recognized in Q1. We expect for Q2 to ballpark similar numbers. That sort of basically means that with the backlog that we currently have in place, that the overall revenue will be, and you can calculate that out of the numbers that we provided, more or less around EUR 130 million, and I'm rounding it. If you take where we are at this moment in time, we are halfway during Q2.
The window of booking orders and still being able to realize revenue in 2026 is more or less closing, and that has partly to do with the fact that there is lead time in batteries. There's even more lead time in inverters, the machines that are converting the direct current into alternating current. So that there's relatively long lead times on those, so that automatically more or less pushes these type of the revenue realization of orders that we take at this moment in time into 2027. There is a slight exception, but that's where we are still see some commercial opportunities in mobiles, where our delivery times are somewhat sooner.
That is more or less the bandwidth that we are looking at at this moment in time. Does that answer your question?
Yeah. Thank you very much. Thank you.
Thank you for your question.
The next question comes from Ruben Devos. Ruben, go ahead.
Yes, good morning. I had two questions on energy storage. I think with regards to energy storage, you've been historically quite capital light, right, relative to peers, relying more on a sort of system integration model. Just thinking when project scale increases, as and the requirements get more complex, is there sort of a point where the current capacity and footprint becomes a constraint to growth? I'm just thinking about maybe annualizing what you saw in Q1. Obviously, it's front-loaded now, but thinking towards a future where you could have EUR 200 million annualized revenues.
Incremental capital commitment. Yeah, that's the first question.
Okay.
I should.
I mean, we are quite comfortable there that we are able to handle that type of growth. We have a good credit facility to help us there. We have engagement with the financing banks and what we see is that the way we structure the projects, it allows us to have a solid cash flow to finance also the purchasing and building out of the systems without affecting our cash need negatively.
Okay.
For the moment, we don't see any restraint there to the growth.
I think at different time, like every company that's out there that is in this field, it's important that you attract the right talent, to manage these projects and et cetera. Scaling that up is a primary, I don't wanna say concern, but let's say focus for us to make sure that we have the right people, the right capacity to be able to scale up when demands is at that level.
Okay. I think you talked about targeting more the commercial industrial segment as a growth, as a growth driver, beyond utility scale. Are these types of projects more margin accretive than large utility projects? I'm thinking it's faster to execute. They're typically smaller. Basically, how significant is that opportunity maybe in your, in your pipeline currently?
We are making the first stages of C&I market battery solutions. Those are particularly relevant in countries where we see grid congestion issues, and our solutions are really focused on behind the meter support of local connections. We do expect to see some competition in those in those markets. We also have a unique opportunity because we supply also the transformer grid connection stations that are needed at the same time. It's a combination where we are optimistic about our ability to deliver extra value to the customer.
Okay. Then, the final question, just on smart grids. I mean, I think you've got like, obviously this project business, right? You both sell them to the private domain as to the grid operators, and you also have the pure, let's say, transformer substation business with the grid operators. Just wondering, like these transport distribution stations you're referring to what degree does that differ from your transformer substations in terms of scope and type of delivery model? Like how does that differentiate?
Okay. If Perhaps there was, just to reiterate your question, it's on Smart Grid Solutions and how do the transport distribution solutions differ from our standardized, distribution or transformer distribution stations. The latter are larger projects. They're in the same markets as the grid operators are in. We have an EPC scope there whereby we not only do the engineering, the manufacturing and the installation, but even the whole site development. That gives a bigger scope in terms of activities, but also a much larger revenue per unit. What we have done there is to redesign the solution by having prefab solutions allowing for much faster installation time.
They're really a project business for us, whereas our other transformer substation business is all factory based and much more standardized, and we deliver, but we do not install.
Okay, great. Thank you. Thank you very much.
Thank you.
Just as a reminder, you can press pound key five on your telephone keypad at any time to ask a question. Our next question comes from David Kerstens from Jefferies. David, go ahead.
Good morning, gentlemen. I have two questions please. First, a follow-up on the EV Charging in the energy storage backlog. I hear what you're saying, that the window is closing for projects to come in to be completed in 2026, and that doesn't leave much in terms of revenue for the second half of the year. What would be the impact of that on profitability? I suspect it will be positive on the mix, on the gross profit, but will you have on the utilization of your staff in the second half of the year, and how do you mitigate that effect? It's the first question.
That's a good question. I mean, to a certain extent, I mean, the same comment that we made on the leverage of Q1 is of course also true in the reverse direction. At the same time, I mean, your At the same time, I just talked about scarcity of people, and especially those people within our Energy Storage Systems can also be used in installation for our SGS projects. We will definitely make sure that people are not sitting idle at the bank and on the bank and basically we will may put them to use in another business unit to make sure that. Because these are not the type of people that we have been sitting around and doing nothing.
No, that's good to hear. With these larger projects, is it becoming much more lumpy, the energy storage business on a quarter-to-quarter basis, that you have these big swings in the first half versus the second half?
I mean, the bigger the projects get, I mean, yes, that is a possibility. At the same time, I think you've also heard Michael saying that we are also looking for projects that are somewhat smaller in size and are somewhat focused on other markets. One of the reasons that we wanna do that is also because we wanna try to see what we can do to reduce the lumpiness a little bit. But in essence, what you're saying is of course true. I mean, these larger projects tend to fall at a certain moment in time and therefore have a relatively large effect on revenue.
I think that's also the reason that we are indicating to you, our thoughts at this moment in time on project execution, so that you can anticipate when revenue will be recognized.
No, that's clear in terms of recognition. Thanks, Onno . My second question is on EV Charging. It seems that the market is quite supportive, right? Maybe new registrations in the Netherlands, they are not up as much as in Germany or in France or the U.K., but their second-hand sales, I think, doubled. I think if I buy a second-hand EV, I still probably will need a charger as well. The market seems quite supportive. I was wondering, when will you see that impact on your business? Your main competitor in Norway has had a stellar Q1 performance, and they're also in a mature market, right? What really drives that difference? It can't be a difference in geographical mix.
Does it really come down to the product and the price? How do you explain that difference in performance with your main competitor?
Absolutely and really valid points. Where I think we saw that we were always a frontrunner in innovation for many, many years, for the best part of a decade, we lagged a little bit behind in 2023, 2024, 2025. At the end of 2025, we launched the new products, but not yet all the features, and we didn't roll it out to all countries. During product, during the rollout of the Plus products, we now will add the features during the first half of this year and all the features before the autumn of this year.
We are launching a home charger that really positions us back at the forefront of innovation, also in the autumn of this year. That responds directly to our main competitors', stellar growth that you mentioned, because we see that we have a superior solution offering in the making. That's also our answer. It's really about the product, the features, and then the rollout timing. We will see the full effect of coming back into the ring for the full 2027 year figures. We're ramping up activities around service and features during 2026.
Yeah. Yeah. Sounds good. Thanks, Michael. Thank you very much.
You're very welcome. Thank you.
Thank you. With that, I will now turn the call back to Mr. Colijn for any closing remarks.
Thank you for joining us, today. I really look forward to updating you on the half-year trading update that takes place on the 19th of August. Bye for now.
Thank you.