Hello and welcome to the Ebusco Full Year Results 2023 call. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Peter Bijvelds, Co-CEO, to begin today's conference. Thank you.
Thank you, Operator. Good morning, everybody, and welcome to the Ebusco Full Year 2023 webcast. My name is Peter Bijvelds and I'm the founder and Co-CEO of Ebusco, and with me here in the room are Frank Meurs, our Co-CEO ad interim, Jurjen Jongma, our CFO, and Bob Fleuren, our COO. In the next slide you will find the usual disclaimer. The agenda is reflected on page four. As we have done in the previous call, I will take you through the operational items and the order book and touch high level on the financials, after which I will hand over to Frank to discuss the recent management actions that we have taken to improve performance in 2024 and beyond. Following that, Jurjen will discuss the financials in detail and I will conclude with the outlook and wrap up.
Before I discuss our main topics for 2023, let me state that it's very clear to me and the management that 2023 was a difficult and disappointing year for Ebusco and all its stakeholders. We have been sitting still and addressed the issues we face head-on. I'm convinced that through the actions we have taken, we will be able to improve the performance and predictability of our company in 2024 and beyond. Now let me go to the main 2023 topics. First of all, the growth in the order book, which grew from slightly below 1,500 buses to over 1,719 buses, resulting in production demand well into 2025. I will provide more details on the order book later on. The second operational point has been the rollout of our new assembly strategy, which we implemented in the middle of last year. Frank will speak about this in more detail.
For now, let me say that the new strategy is showing good traction with the first buses back in Europe for delivery in early Q2. The next two points I will take together as they are about the 3.0. Our customers have clocked over 900,000 kilometers with the Ebusco 3.0 in 2023. This shows that once we have the buses on the road, they perform very well in the operation of customers. Not only do the buses provide a steady performance in kilometers driven, the low energy consumption is also very impressive, reaching 0.65 kilowatt-hours per kilometer, which is unrivaled in the bus industry. This high efficiency adds incremental value to our customers as energy consumption is a very important TCO driver. The quality and market-leading performance of our product is a key pillar of our confidence in the future.
On the final point, it is also good to say that we have opened our factory in Rouen, France, which has become operational on time and on budget. The Rouen facility is an important building block of the adapted assembly strategy. On the next slide, there is a split out of the order book and categories you are familiar with. You see that the order book in total increased to 1,719 as we signed new contracts during 2023, with amongst other Svealandstrafiken, Qbuzz, and Keolis for 3.0s. In addition, the framework contract with Deutsche Bahn and the follow-up order from Multiobus contributed to the 2.2 fixed order book. The energy business is also showing good order intake and will start to contribute to results in 2024. The growth in the order book, despite the issues we have faced in 2023, gives us visibility for our production well into 2025.
On the next slide, I will briefly touch up on the financials on slide 8. The limited production output during 2023 impacted both the P&L and the balance sheet. Our revenue 2023 arrived at EUR 102.4 million. This lower revenue resulted in a limited coverage of our operational expenditures, resulting in a negative EBITDA of EUR 95.7 million. Next to the operational loss, inventories increased significantly to EUR 106.5 million, which consumed liquidity. We ended the year with EUR 27.9 million in cash and cash equivalents following the successful ABB and convertible bonds issued at the end of December. As indicated, we are disappointed in the performance over 2023. We have taken several measures to ensure that our performance improves compared to 2023. Frank will take you through these actions in more detail.
Thank you, Peter. Also welcome to all the listeners on the call on my behalf. For the people who haven't had the pleasure of meeting yet, I joined Ebusco in January this year as the ad interim Co-CEO of the company. My main focus is on the internal organization with the aim to drive efficiency and share the workload more evenly across the management board. Prior to joining Ebusco, I had a long career at Royal TenCate, where I led the advanced composite division through different scale-up and growth phases before it was sold to Toray. On slide 9, we have reflected the most important management actions that we have taken to date that should put us on the right track for both improved performance and predictability of our company. First, new leadership team. Secondly, the new assembly strategy. And third is cost and working capital reductions.
Now let me go into detail on each of these actions and what we aim to achieve with them on the next couple of slides, starting with slide 10. Here you will see our new leadership team and organizational design. To start with the team, next to Jurjen, joining last September, and myself earlier this year, we are very pleased to be able to announce this morning that Roald Dogge will start as our new COO on June first, replacing Bob Fleuren. Roald is a highly experienced COO with both international OEM and bus production experience. In his new role, Roald will lead the production, supply chain, and procurement activity, which were previously managed separately. We have created an executive team, which includes the roles of CTO and CHRO, for which we found great internal candidates.
By broadening the team, communications between departments should improve again with the aim to improve efficiency. We are currently looking to hire a Chief Commercial Officer to sharpen our commercial efforts, who will also be part of the executive team. With this setup, we have shorter lines and more clear roles and responsibilities and more efficient decision-making throughout the organization. I'm now on slide 11. We show you the design of our adjusted assembly strategy, which we launched mid-2023. With this adapted assembly strategy, we basically move to a contract manufacturing strategy where we can profit from the experience and infrastructure from our assembly partners, with whom we have a longstanding relationship. This should result in improved delivery reliability and shorter lead times, a less complex and lower-risk supply chain, a more flexible cost base, and higher unit economics.
We already see the first positive results from this adapted strategy in terms of lead time, delivery reliability, and flexible cost base, and expect the unit cost economics to improve once we work through part of our existing inventories, as we've already localized a large part of the supply chain, enabling us to lower cost. As you can expect from us, we have also taken a closer look at our cost base, which mainly consists of employee expenses and other expenses after the strong growth of the last years. We've identified several efficiencies on which we've taken action. Furthermore, with the shift in assembly strategy, we were also able to lower our flexible workforce. We are already seeing the first results of these actions, but the full impact of these measures will be seen in the second half of the year.
Due to the slower-than-expected output, our inventories have continued to grow. With the shift in assembly strategy, the inventories are set to come down as they are converted into buses. Furthermore, the assembly partners will source commodity parts themselves. This means our supply chain gets less complex and we need to hold lower inventories. A second part of the working capital are our contract assets, consisting of buses on the production line. We're seeing that these buses are close to the delivery and we expect over 125 deliveries in the near term. In total, we have over 280 Ebusco 3.0s and over 100 Ebusco 2.2s in various stages of completeness in Deurne, Venray, Rouen, and at our assembly partners. On the next slide, we have graphically indicated how our production pipeline looks. We have over 280 Ebusco 3.0 buses in different stages of production, next to 100 Ebusco 2.2s.
In pre-production, which means the engineering stage, we have an additional 200 buses. I already got very close to CFO territory and I want to hand over to Jurjen to take a deep dive in the 2023 results.
Yeah, thanks, Frank, and good morning to all. Thanks for having me. So let me guide you through our financials, starting obviously with our profits and loss statements. While Peter already alluded to our key financials, which are indeed very disappointing, let me walk you through these in more granular detail. First of all, sales came in at EUR 102.4 million, down from EUR 111.6 million in the last year. And I will walk you through the missing sales against our earlier guidance in more detail in the next slide. But here, it is important to realize also that we record late delivery penalties against sales as a negative to the sales.
When it comes to gross profit or gross margin, as we call it, at negative EUR 6.8 million, I've listed here the main negative items impacting margin, but I also have a separate slide on margin where we normalize our gross margin on buses specifically. As you can see, margin was negatively impacted by many things, amongst others, direct damages, inventory and warranty-related charges, mixed effects, and higher costs. If we then move to operating expenses, these predominantly relate to the expansion of staff in Deurne, which we now address, as Frank also alluded to. We're actively reducing our flexible workforce, both in contingent workers and in temporary staff. And of course, this largely relates to direct staff in bus production, but it also sees to indirect staff. The results, disappointingly, end at a negative EBITDA of EUR 95.7 million.
If we then move to the next slide and we take a little bit closer look to revenue, we guided in December that we would end the year with a revenue number of around EUR 145 million. Unfortunately, we ended the year at a revenue of EUR 102.4 million, as I just said. Let me now guide you through the main elements of this so that you understand the main impacts and what this means also for 2024. Bus revenue fell short by EUR 27.6 million. As we recognize revenue as a percentage of completion, it has proven to be very difficult for us to measure progress effectively, especially in China from an accounting point of view. All these buses were on production lines by year-end and they will be delivered in the first months of 2024.
The second element is that we cannot record revenues that, from an accounting point of view, belong to the future. So revenues, for example, like extended warranty, will be recorded as a revenue at a later stage in time. This and some unaccounted-for penalties for delayed delivery were incorrectly reflected in the initial guidance and amounts to EUR 5 million. If we then move to the third category, our mobile energy containers, towards the end of last year, we were confronted with the fact that certain certificates that were necessary for recognizing the revenue were only updated early January. Hence, revenue could not be recognized in 2023. And similar to the bus revenue, will fall in 2024. If we then move to our margin normalization, and I showed you the negative gross profit in the P&L, but for us, it is critical to reconcile margin on our buses.
Going forward, obviously, we seek to benefit from more normalized margin than we recorded in 2023. There are several elements that negatively impact bus margin, many of which we are now addressing while executing our changed production strategy. If we look at bus margin, then the net margin recorded for buses came in at EUR 5.7 million. As many of our buses are or will be delivered late, EUR 5.3 million of late delivery penalties negatively impact normalized margin. As I explained earlier, also future performance obligations have a negative impact of EUR 4.5 million. Unfortunately, also on the back of both delay penalties and other customer late delivery-related charges, some projects carry margin losses that we have to charge against our P&L. Lastly, the change in manufacturing strategy does lead to startup losses amounting to approximately EUR 6 million.
So if we correct for all these effects, we see a bus margin of EUR 24.3 million or close to 24%. As we wind down existing inventories, we will suffer from higher component costs for a while, but we see this changing as soon as the bulk of inventories is consumed. If we then move to cash flow, then obviously, our negative EBITDA and increase in working capital have driven a large operational cash outflow of EUR 103.8 million. Regular CapEx of EUR 17 million aside, the inflow of both the equity raise of EUR 24.6 million and the convertible of EUR 35 million resulted in a net cash outflow of EUR 67.3 million, bringing our cash position at year-end to a level of close to EUR 28 million.
Then if we move to the balance sheet, where most of the items, as far as I'm concerned, are self-explanatory, I won't dive deep, but I think it is good to briefly point out the two key items in our current assets, besides the recording of the convertible that I mentioned already while addressing cash flow. These are inventories on the one hand, so EUR 106.5 million, which didn't come down as planned due to delays in producing buses, as also illustrated by the revenue mix. In addition, current assets include EUR 67.6 million of so-called contract assets or work in progress, all buses in production to be delivered to the customer. With that, let me hand back to Peter.
Thanks, Jurjen, for these details. I hope the presentation gave insights in what we are doing as a company and management team and how we will grow in the coming year. For the outlook, for the full year 2024, based on the current order book and planning, we are expected to reach EUR 325 million in revenue. This growth, combined with a reduction in operational expenditures for employees and other costs, is expected to result in a full year 2024 positive EBITDA. Having said this, as it takes time to see the full impact of the management actions, these results will be weighed towards the second half of the year. Unfortunately, Bob Fleuren will not be part of the journey in 2024 as he decided to pursue other opportunities. I would like to thank Bob for the invaluable contribution he has made towards Ebusco.
Before I open the floor for questions, let me summarize. 2023 was a difficult year and concrete actions have been taken by management that would lead to an improved performance and better predictability in 2024 and beyond. Operator, back to you to open the floor for the Q&A.
Thank you very much. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad for questions. Thank you. We'll now take our first question from Luuk van Beek with Degroof Petercam. Your line is open. Please go ahead.
Yes, good morning. My first question is on the supply chain shortages. You no longer mentioned that in your press release. Does that mean that you no longer expect it to be an issue? And as a follow-up to that, what do you consider the most challenging thing to deliver in 2024?
Yes. What we have seen as a fact is, as we were building the 3.0s in Europe, having the whole supply chain from Europe excluding the batteries, and we were building the 2.2s at our assembly partner in, for example, Asia, we would still send partly the parts from Europe to China. But we saw that, for example, on low-voltage wiring looms, high-voltage wiring looms, high-voltage components, the delivery time and the predictability of delivery was a lot better, let's say, in China than in Europe. And that's why we also changed, just over half a year already, the strategy to also be able to produce 3.0s in China. And as we mentioned to you before, we already have received the first mass production order of batch of 12 vehicles from the 3.0 out of China.
Yes. As a follow-up on that, because if I remember correctly, there were also issues with 2.2 buses that had been built in China where you were still missing components. Is that not something that you expect to recur in the future?
Sorry, I did not completely get your question because the line is hampering. Can you please repeat it?
Yes. So if I remember correctly, you also had some missing components on 2.2 buses in the past and those were also built in China. So is that something that you do not expect to recur in the future?
Correct. We have seen that it's already getting a lot less. For example, we have physical evidence. For example, we got an order last year, Frankfurt, in April last year. Those buses were delivered in the Netherlands at our PDI facility in November and they were delivered and paid in December, so in one month. So there is always a risk because still a lot of the important parts are sent from Europe. But on those parts, we don't see a lot of supply chain disruptions. It's mainly in the parts and components that I mentioned before, like high-voltage wiring looms, high-voltage components, high-voltage connectors, those kind of components. And those will be delivered from our assembly partners directly in China. For example, they have around 4 weeks-6 weeks delivery time compared to Europe from 4 months-6 months.
Okay. That is clear. What do you see as the most important challenge for 2024?
Let's say, as we also mentioned before, the order book is very good. We have grown our order book from 1,400 buses- 1,700 buses because of the operational performance that is available now in facts and figures. We are now mainly focusing on getting the buses built. We have seen logistic issues and, let's say, also supply chain. But with the new strategy, we see that we are able to build buses in a much faster pace.
Okay. I'll leave it here for now and I'll probably come back with some follow-ups later.
Thank you. Thank you.
Thank you. We'll now take our next question from Tijs Hollestelle with ING. Your line is open. Please go ahead.
Yeah. Thanks, Operator. Good morning, gentlemen. Also have a couple of questions. Peter, the remark about the order book, is it fair to assume that if you, let's say, deliver the 388 buses in, let's say, the first months of this year, that the fixed order book then drops to 345?
All the buses that we deliver are deducted out of the order book. That's correct.
Yeah. So then it's not.
So let's say if we would deliver 300 buses and would not get any new orders, then you're completely right. So if you also the buses that we delivered in 2023, for example, have been deducted from the order book. So taking that into account, yeah, we have raised more new orders to go from 1,400- 1,700.
Yeah. Okay. I prefer to look at the fixed order book, but have you, let's say, also, let's say, increased your commercial activities? Because if I remember correctly, last year, you were becoming a bit more cautious because of all the delays. But now the commercial guys are now allowed to also wheel in bigger orders?
Let's say it's completely right, Tijs, that we are more cautious. And for sure, we also did partly cherry-picking on, let's say, having higher average sales prices. So yes, we have been more cautious on that.
Yeah. But also right now, or is it now because things are expected to normalize that I guess you can also then handle larger orders again?
Yes. Yes. Correct. So we are now looking at, let's say, new bigger orders, bigger tenders to deliver those. But as you also know, we are still having orders in our order book far into 2025, not far, but let's say into 2025.
Yeah. Okay.
For us, it's also important that we honor. Now our highest priority, Tijs, is that we honor our existing commitments toward our customers.
Yeah. Okay. That's clear. And yeah, I mean, I also.
And let's say after the operational performance that is available on the 3.0 now, that is also getting more known in the market. Let's say it sounds maybe arrogant, but sales will not be the highest issue. Yes? Delivering now and giving the commitments that we have already made in the order book towards our customer is our highest priority at the moment.
And then also, I understand, let's say, your explanation on the cost base and also, let's say, the positive EBITDA target for this year that it will be tilted to the second half. But can you give us a bit more guidance on what the OPEX levels are doing in the first half? Because you still, I guess, have a lot of employees helping you to get all the bus orders out, all the late ones. So is there still, let's say, an increase in OPEX levels and employee costs and other operating expenses in the first half of this year compared to the second half of last year? Or is it already declining? And then it would also be helpful if you can give us a little bit the size of the steps of the reduction in the cost levels.
Yeah. So thanks for the question. It's a fair question. Indeed, we have to make sure that we build the remaining buses here in Deurne, after which also we continue on a limited basis. And of course, we'll continue production of Ebusco's here in Deurne. When it comes to full-year cost, I expect that these operating expenses are approximately EUR 10 million below the level of last year. On an annualized basis, the impact is higher and it's more close to EUR 20 million. But indeed, the majority of the effect will be in the second half of the year.
That's quite helpful. And yeah. And then an additional question, and there's no friendly way of asking it, so sorry for that. But if I'm looking at the gross margin adjustments on page 4 of the press release, what is, let's say, the message you want to give us? Because I've seen now for a couple of times Ebusco reporting all kinds of one-off negatives on the gross margin. And then when the company reports, it's a new list of negative one-offs, which basically crush the gross margin to negative or very low levels. So you want to give the stock market the signal that you expect, let's say, a 24% gross margin over 2024? And have you accounted for potentially other negatives that can happen? Because yeah, Ebusco is still in a transitional period also, I think, this year. Yeah.
What is the message you want to give us with this slide?
Now, the message is that if we know it's like it is, so it's a normalized margin level. I think that is one. I definitely do not want to make the statement that the 2024 is a percentage that should be expected for 2024. What I can say is that, and it's also a little bit my view after now eight months in the company, that our in-house production gave way to lots of inefficiencies that distorted margin. If there is one thing clear, then buying buses, if you want to really simplify the definition of contract manufacturing, gives us more grip on standard cost prices and cost price agreements with our contract manufacturers. That is definitely a helping effect. That being said, it's also important to realize that we have a high inventory that we have to clear. Those components were purchased from the past.
I know Peter is stressing the fact that our cost price elements are much more cost-efficient when we source them in China. But obviously, these older inventories will have to go away. On margin specifically, we really want to provide more clarity also on unit cost on a comparison and like-for-like basis during the capital markets day that was announced for June 2020.
Yeah. Okay. Yeah. That's helpful. So the overall predictability for you guys working with the assembly partners is definitely increasing. And therefore, yeah, you have a better future gross margin. Okay. And then if I'm allowed, also basically the same topic, but then on the cash flow. So I'm also hearing your comments on what should happen to the trade working capital line items, the balance sheet, the conversion of cash for the contract assets and the receivables. What I'm trying to get a sense of is that Ebusco, looking at your medium-term target, still wants to grow bus volumes quite significantly.
So how does that, let's say, potentially bite the fact that although you're maybe collecting a lot of cash flow from the late delivered buses, but as you win big orders, even if it's at more efficient trade working capital requirements, potentially can also lead to a cash outflow then again in the balance sheet in 2024? Or do I miss something here?
No. And that is what we're effectively trying to do. And we're trying to push our inventories to our contract partners so that they purchase those smaller parts from us so that we'll alleviate some of the cash flow burden. And it's also good to be reminded of the financing structure that we still have in place and that we are discussing going forward where we can finance that longer, let's say, or that longer working capital cycle in principle by means of a letter of credit facility. So your point is right. But still, obviously, there's quite some cushion in the current inventory levels. And when we free that up, that should also then give room for financing for the growth.
Yeah. Yeah. Okay. So asking the question the different way, might you win a huge bus order today? You're not hampered by, let's say, your balance sheet in order to execute that order?
No. A lot depends, of course, also on the terms that we have. There are some others, although in my view, from a finance point of view, too little where we if it's a really, really big order, then we should also definitely try and negotiate with our customers that we have free payments. That is, I think, element one. Second, I think if we look at the relationship between profitability on the one hand and cash generation on the other hand, it should also be very clear that because of our way of recognizing revenue and profitability, the cash effect comes a lot later. It's crucial for us that we clear away the current pipeline of buses and pipeline of inventories. Then in combination with, let's say, the letter of credit facility, accepting big orders going forward should not be a challenge.
In that respect, it's maybe also good because Peter speaks a lot of 3.0s. And 3.0s is super important. And we see also recognition of the quality of the buses in the market. But we should not forget the fact that we have an established flow of 2.2s where the challenges that we face are of a lot less significant level. And in that respect, I'm super happy, for instance, that in the next weeks, we will deliver, for instance, 32 2.2 buses to Deutsche Bahn, which then also helps short-term cash flow.
Okay. That's very helpful. Thank you.
Thank you. Once again, ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll now take our next question, a follow-up from Luuk van Beek at Degroof Petercam. Your line is open, Luuk. Please go ahead.
Yes. I have one follow-up question about your backlog. Because the portion of call-offs and options declined, is that all because of customers actually ordering buses? Or are there also some options and call-offs that expired?
So no. No, the call-off, yes, are expired. So only, let's say, like I explained before, the order book is lowering by delivered buses. So they move from call-off to fix. So you see that, for example, Deutsche Bahn orders regularly buses, yes? And those buses, move them from the call-off column to the fixed column. So the call-off has not been canceled.
And the option portion?
Yeah. The option portion, there have been some changes.
Okay. And you also mentioned in your press release that you will reduce your commercial activities outside Europe. What do you mean exactly by that? Will you close offices? Or what's the message there?
No. What we will do, because we have seen that supply chain in Europe is still challenging, also, let's say, getting skilled workers, it's a combination of those two. And we saw that in the production of the 2.2, we had far less issues. So half a year ago, we also started, let's say, setting up the production lines for the 3.0.
Okay. Cool. Wow.
Sorry. I think I missed your questions on the sales, yes, commercially. Do you mean on Australia and the U.S.? Is that what you're referring to?
Yes. What you're doing there.
Okay. So that's correct. Because we have already an old, let's say, a full order book, we want to have full focus on Europe. So we have scaled down operations in both Australia and in the U.S.
On your headcount, can you give an indication about how much it is today and what you expect for, say, mid-2024?
I don't know exactly the number. But I'm looking at our CFO.
I think so. And we disclosed also the number quite specifically in the press release. Yeah. We'll get back on the question. So I'm just looking at numbers. I think we disclosed it quite extensively. So I have more to go over.
Yeah. But today, I mean, say, end of March and not end of December.
Oh, end of March. I say if the total level of FTEs end of February I have here is 879.
What do we expect for mid-2024?
Mid-'24?
Yes.
Quite a bit below that. But let me get back on the details.
And then I have a question on the inventory. You mentioned several times that you want to reduce it. Can you give a rough indication of what will be a realistic sustainable level going forward?
Yeah. That is also my big, big challenge. The question that I'm struggling with is a little bit the question that was asked earlier also as to how do we deal with inventories and growth? And how do we deal with inventories and a potentially longer supply chain in China? It is clear that the current levels are too high. I would like to see for inventories to come down significantly. But also here, it's important that we will provide clearer and more guidance on that during the capital markets day.
Okay. Thank you.
Thank you. And we'll now take our next question from Osama Tariq with ABN AMRO – ODDO BHF. Your line is open. Please go ahead.
Hi. Good morning, team. Can you hear me?
Yes. We can hear you.
Yes. Thank you for the opportunity. I have two small questions. Number one from gross margin. Of course, it's negative. The one that affects is the late delivery penalties. Just in general, when do you expect this to run down going forward? When can you expect which year, if you could mark, when this won't exist? Do you have internally sort of a benchmark in place that, "Okay. This year, we expect everything to be streamlined"? My second small question would be with regards to the co-CEO role. Is there a development in that regard? Because Frank is on an interim basis. And my third and last question would be a bit more on strategy. If you look at the cash flow statement, you indicate that in the cash flow from investing activities, you increase participation in ZES.
For me, it's difficult to understand the rationale behind doing this kind of purchases when the core business of delivering buses is not going well. So could you give a little bit of color as to why do you need to do that? Thank you.
Yeah. So let me take the question on margin and penalties. And then Frank can allude to the status of the co-CEO and then Peter can towards the end comment on ZES. So when it comes to margin and penalties, it is clear that today, we're delivering from a backlog. So many of the planned deliveries, even though that we're happy to see that we now progress and deliver buses to customers, are too late. So penalties and late delivery penalties will be with us, unfortunately, for a while. Some impacts are less. But for your, let's say, modeling, it is absolutely safe to assume that approximately 5% of our top-line revenue will be impacted by late delivery penalties. So Frank, maybe on the co-CEO role.
Yeah. The co-CEO role. So in my current role, I focus on the internal organization mostly and also bridging the gap in the operational organization between Bob Fleuren and the new COO. In the meantime, so I haven't given a fixed period. So in the meantime, together with the Supervisory Board, we are looking for a more structural solution for the future structure of the co-CEO roles.
Would there be a deadline for it?
Sorry for interrupting.
There is no deadline. Quality.
On the participation on ZES, for your knowledge, we have already done this in early 2023. Besides that, ZES, of course, helps us develop our energy business heavily. At this moment, this business gives us high purchase power with our battery suppliers. In the next months, we will also voice some really groundbreaking technologies that we will show there.
Okay. Thank you.
A part of that, we see that Ebusco Energy is really also a heavily growing segment. Also, if you look at profitability, it's very interesting.
Thank you.
Thank you. And we'll now take our next question from Maarten Verbeek with The Idea. Your line is open. Please go ahead, Martin.
Good morning. It's Maarten Verbeek of The Idea. A couple of questions from my side, please. Firstly, you provided the table with the adjusted BUS gross margin. And on top of that, you start with the reported gross profit of BUS, which is a plus of EUR 5.7. However, in your full P&L, you have a loss of some EUR 6.8. So there's a gap in gross profit of some EUR 12.6 million. Could you give some more clarity what that exactly is? Then secondly, you target a positive EBITDA for the full year weighted towards H2. Do you also expect already to be a little bit positive in EBITDA in H1?
Then lastly, linked to that, since you will complete a lot of buses in the first half of this year, which will have a positive impact on your working capital, on the other hand, when you grow your business, it might have a little bit of a negative impact. But do you expect to be cash flow positive in the current fiscal year?
Okay. On margin, I think the explanation actually on the slide itself that has been shared with you relates to, like I said, direct damages, increase for provisions for warranty and inventory. If you look at the overall impact, it is actually quite significant. Yeah. So that basically explains the difference.
Sorry to interrupt you. But those charges, what you mentioned, are already mentioned in this table from the reported gross profit towards the adjusted gross profit.
No. Let's say that's not the case because there is an element in that bridge that I showed that relates to the top line, that relates to the sales line. That particularly relates to buses. If you look at other impacts, I have not taken that back to, let's say, specifically the bus revenue. The only thing that I included in the bus revenue actually has to do with onerous contracts and with some unforeseen costs. Out of the total of the delta, which adds up, let's say, to the differences that you also mentioned, these I have not attributed specifically to bus margin. I can give you some of the amounts. Then, for instance, provisions that we take for direct damages, inventory provisions, I've not taken back into that bus margin modification.
These are all amounting to fairly significant amounts of EUR 2 million-EUR 3 million each. With that, the delta is playing. I've really taken the clean bus margin as a starting point and calculated back from that.
Okay. Thank you.
So the second question, I think, was on profitability in the first half versus the second half. I cannot comment on it at this point in time. As you know, we only report half-year numbers. We've been super, super stressed and busy with closing the year. Of course, I can see traction in terms of delivery of buses. But it's not possible for me to make any comment on profitability in the first half. When it comes to cash flow, with the amount of buses that we are set to deliver, I do expect to be cash flow generative in 2024.
Thank you. We'll now take our next question, a follow-up from Tijs Hollestelle with ING. Your line is open. Please go ahead.
Thank you. Yeah. Also, a housekeeping question. The Deferred Tax Assets, there were EUR 26 million at the end of June on the balance sheet. And in December, they disappeared. Is there a cash flow effect? And where is it showing up?
No. There's no cash effect. Indeed, also based on discussions with our auditor, and we had extensive discussions on the DTA. So it's important to realize that we've been loss-making for the last three years. So the previously recognized deferred tax assets are fully expensed to zero. From a fiscal point of view, I do want to point out, and it was a very interesting dialogue also with our auditor, that from a fiscal point of view, these assets are fully recoverable. So at the moment, we start to make and show profits. We can also recognize it back as an asset in our balance sheet again, but no cash impact.
Thank you. And then a final question on the convertible. Can you help me by describing what are the actual steps? You have to pay the quarterly coupon. And then you have the option to do that in cash or in shares. Can you also, let's say, account for it like PIK interest as you add it to the total debt position? So what is actually happening in the quarters?
So I think that is also for us, of course, the attractiveness of the facility. The amortization is at our election. So whether we pay in cash or in shares. So obviously, the whole discussion starts with what is the actual cash level. And yeah. For instance, in the first quarter, we have opted for the conversion in the amortization in shares. But it is at our discretion. So towards the end of the quarter of any quarter when amortization is due, we make that choice.
Yeah. And then you can wait by actually issuing the shares. Is that also then an option? So it's just accumulating?
What do you mean by waiting?
Sorry.
What do you mean by waiting?
Yeah. So you actually then issue the shares? Or can you also then, let's say, accumulate them on your balance sheet and, let's say, do the share issuance at a much later stage?
No. We have to issue the shares and deliver the shares to Heights Capital Management, provided the facility.
Okay. Yeah.
Effectively, I think trying to read the background of the question, if they hold onto the shares and do not liquidate on it, yeah, then effectively, they become a shareholder in the company.
Yeah. Thank you.
I think theoretically.
Thank you.
Maybe one more comment to it, although it doesn't really help from a cash flow point of view. Theoretically, we can buy the shares in the market and deliver it to them. But then obviously, the cash flow equation doesn't go anymore.
Thank you. There are no further questions, in queue. I will now hand it back to Peter for closing remarks. Thank you.
Yes. Again, thank you all for taking the time and listening to us. As we already acknowledged before, 2023 was a disappointing year. But we are quite positive about the changes we have made already 6 months, 7 months ago, that this will help us heavily in 2024. As last remark, I want to thank Bob Fleuren once again as really a huge help to the company in the last three years after the IPO. And of course, we wish him all the best for the coming years to come. Thank you. Let's stay in good contact.
Thank you, ladies and gentlemen. This concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.