Good morning, everyone. It gives me great pleasure to welcome you to the Q2 2024 quarterly report, an update from Envipco. I'm Simon Bolton, and with my colleague, Mikael Clement, we'll be running through some of the highlights from this quarter and some of the outlook. As normal, a normal disclaimer. Highlights Q2 2024. So we've had a solid quarter. The group revenues are EUR 26.6 million. We're up over 61%, and what's pleasing is we see the growth that for many of you who have followed the company over the last few quarters that really started a couple of years ago, that's continuing through. So now, last 12 months revenue is just under EUR 150 million, which is over 100% up versus a year ago.
Gross margins, one of our objectives is to grow gross margins. If you recall, our guidance is to have that as we exit 2025, 40%. So, gross margins at 35.6% continue the growth and trajectory. EBITDA this quarter, EUR 2.6 million, and just under 10% EBITDA margin. The growth continues to come from Europe. So, as we've explained before, this year is about executing on our existing contracts: Greece, Romania, Hungary, Ireland, and we're doing that. So revenue in the quarter was just over EUR 17 million. What's pleasing is we're getting back to growth in the U.S.
So North America revenues were up 40%, year-on-year, particularly with some RVM sales, and also we're seeing some nice developments of program services as states, particularly Connecticut, start to refresh and push their bottle bills. A couple of things we wanna update you on that happened after the end of the quarter. One of them was we continued to do really well in Romania, so we're very pleased to receive an order for, you know, over 200 of our Optima RVMs for a very large local retail network. So that's really great, and those will start to be delivered in the second half of the year. And also, we have acquired a company, Sensibin, trades under Sensi, which we'll talk about a little bit later.
Really, a nice innovative product in the small C-store format that continues to develop and expand our product range. I know a number of people tune in who have followed the business for a number of quarters. For those who haven't, we are a global recycling technology business. We do products and systems that support and automate deposit return schemes to aid the recovery of beverage containers, and really, this market is seeing transformational growth driven by legislation, particularly in the E.U. New regulation has been approved a couple of months ago, the Packaging and Packaging Waste Regulation, and that's driving now implementation deposit return schemes, and with billions of containers circulating, even in small European markets, they need the products and services that Envipco delivers.
We have a very strong and stable U.S. business, which, as we'll talk about in a moment, we're seeing some nice growth movement. And we have the manufacturing capacity in the U.S., in Germany, and also in Romania, to be able to deliver on this market opportunity. Overall then, we've our revenues are 3 times versus 2021, and 35.6% gross margin that I've just mentioned. We maintain our 2025 ambition. If you recall, we put these in in 2021, so a few years ago now, 4x-6x on revenue, 30% plus market share, for these greenfield markets as they open up and new countries adopt deposit return schemes, and again, building up step-by-step, gross margin to exit 2025 at 40%.
What's happening? Well, we're delivering on our growth plan. So as you see, we've had a strong and stable business in the U.S., and since 2021, that's now accelerated through with Europe, again, with 3x what we were in 2021 in terms of revenue versus last 12 months, and this has been driven by these new greenfield opportunities, of which there's many more to come, and we'll tell you about a little bit about that later on. In terms of the operational review, very briefly, you know, North America had a great quarter. We're very excited about the changes in and the refresh in some of the deposit legislation in the U.S. First of those is Connecticut.
That increased the deposit on the beverage containers from $0.05 to $0.10, and that already we can see has had a real impact in container volumes going through our business in Connecticut. What's exciting is that, neighboring states, Massachusetts, New York, are also looking to refresh and update their bottle bills. So we're very excited about that Northeast area. We're also, you know, broadly exploring more business opportunities outside current markets and also other refresh in the U.S., such as California. Europe, as you see, growth is coming. We're moving to profitability after a very focused investment period over the last couple of years. We're very pleased with Romania. Romania had a good quarter. Great work delivering with tier one retailers and exciting new contracts coming in.
Hungary, as we've mentioned before, the DRS started at the beginning of the year, but there's been a kind of a slow build-up as the overall system starts to prepare. We see that now kicking into and accelerating, so we expect there to be a busy activity in H2. Greece, we certainly see continued, you know, positive progress, good pipeline, slightly quieter first half of the year, a bit like last year, but we expect a busy H2. And overall, whereas 2024 is about existing markets, 2025, we'll see new markets come on, particularly Poland and Portugal. So with that operational review, pleased to hand over to Mikael to talk us through some of the finances. Mikael?
Thank you, Simon. Good morning. Let's start out with the P&L. Group revenues in the second quarter, as Simon mentioned, EUR 26.6 million, a growth of 61% from the corresponding quarter last year. Gross earnings, EUR 9.5 million for a margin of 35.6%, up a little bit more than half percentage point from Q1, and up a little bit more than 1% from Q2 of last year. OpEx, flat sequentially over the last couple of two, three quarters, EUR 8.8 million, resulting in EBITDA of EUR 2.6 million. This compares to a loss of EUR 0.1 million in Q2 of last year. Operating earnings, EUR 0.6 million in the quarter, with net profit at -EUR 0.5 million.
This compares to a loss of EUR 1.8 million in Q2 of 2023. Year to date, for the first half, revenues were up more than double at EUR 54 million. Gross margins were at 35.3%, up year-over-year as well. Strong driver in the first half, as Simon mentioned, key European markets driving growth. European revenue is up close to 250% to EUR 37.2 million in the first half. And Envipco generated an EBITDA of EUR 5.6 million in the first half of the year. As mentioned, Europe is our key, the strongest growth driver currently, with revenues of EUR 17.3 million in the second quarter, up 106%.
Key markets driving that growth are Hungary, Romania, and Greece, our largest markets in the European region. We see that it's RVM sales that are driving revenues still in the initial phases of DRS introduction and warranty periods. Envipco generates limited program services and service revenues. Over the last 12 months, European revenues are at EUR 83 million, up 263% year-over-year. We're very happy to also see some good progress in North American operations. Revenues in Q2 were EUR 9.3 million, a positive growth of 14% year-over-year.
We're seeing the North American operations turning the negative growth trend seen over the last couple of years, and we're posting positive revenue growth in both RVM sales, 85%, driven by some RVM deliveries in both Oregon and also in Connecticut, but also the underlying positive volume trend driving positive growth in program services. Envipco is positioning in Europe, and we need to invest in our operation to do that. We will also continue to invest in our operations. Over the last year, we've seen underlying operating costs come up EUR 8.8 million in Q2 of 2024, a growth of 23% from EUR 7.2 million in the corresponding quarter last year. Over the last three quarters, our OpEx has been fairly stable at EUR 8.8 million.
As a percentage of revenue, OpEx was at 33% this quarter, up slightly from 32% in Q2, but down significantly from 44% at Q2 last year. We exited Q2 with 416 employees in the group. Over to the balance sheets. Total assets at the end of Q2 was EUR 120 million, down from EUR 128 million at the end of Q1. Non-current assets down slightly at EUR 32.5 million. Non-current assets are primarily made up of PPE and intangible assets. Intangible assets are largely activated development costs. Current assets are down from EUR 94.4 million- EUR 87.9 million, with the reduction being in cash balance, ending at EUR 24.4 million at the end of Q2. We have invested further in inventories, and our receivables are also up.
We need to have some strong responsiveness to new, key customer demands and requests. And we also are seeing an increase in activity into the second half, leading to the higher inventories at the end of the quarter. Further, driving down cash this quarter is a reduction in accounts payable from EUR 20.5 at the end of Q1 to EUR 15.2 at the end of Q2. Total equity exiting Q2 was EUR 67 million, for an equity ratio of 56%. Total borrowings, down EUR 0.4 million at EUR 19.2 million at the end of Q2. Finally, the cash flow. Cash flow in the quarter, cash from operations, -EUR 6.8 million. A positive EBITDA of EUR 2.6 million was offset by the said working capital build-up of EUR 8.1 million.
Lower payables, higher inventories, and receivables exiting Q2. Cash flow from investment activities was negative EUR 1.3 million, with EUR 0.2 million being capitalized R&D, and EUR 1.1 million being CapEx, largely driven by investments in RVMs, to handle lease contracts. Cash flow from financing, negative EUR 1 million on a slight reduction in borrowings, as well as lease liabilities, leading to a net change in cash of negative EUR 19.1 million, exiting the quarter with EUR 24.4 million in cash. Thank you. Further on to you, Simon?
Yep. Great, Mikael. Thanks very much. Thank you. Just a couple of slides then to end, give some views on outlook, and then, the platform is open for questions, so please do add those into the chat, and, and we'll get to those straight away. Good. So, I think, yeah, solid Q2, and really it continues our step through our current growth journey. You know, it's being driven by E.U. legislation, legislation in general, so we're very pleased to see that continued momentum.
As we've announced before, and has been, you know, widely shared in the media, the Packaging and Packaging Waste Regulation is really an important part of the legislation, as is individual country announcements and communications, like the U.K., with Deposit Return Schemes coming in in 2027 and being supported by the new Labour government that came in a month ago. We've got promising outlook. As we said, 2024 is about delivering on existing markets that are transitioning and accelerating their deposit schemes, Hungary, Romania, Ireland, and of course, pre-DRS in Greece. And we really like the new momentum in general that's building around DRS, particularly in Portugal and Poland.
We're, you know, we're back on track to continue to develop gross margins up this quarter, and that will be, you know, one of our main focus has been a focus and will remain a focus throughout the next quarters. Overall then, you know, reconfirm our guidance. We really want to have a good position in these new markets, 30%+ market share, 4x-6x growth, 2021 versus 2025, and as mentioned, gross margin of 40%. You know, most of this work is, or most of this growth is organic, new markets, our own teams' development. But as we've said previously, and part of our strategy is where there's a really good opportunity to to have inorganic growth, then we'll look at that.
Obviously, the recent capital raise gives us some opportunity to do so. So we've, you know, we've followed, and we've interacted with Sensibin, trading under Sensi. It's a great small technology business in Ireland. Nathan Misischi and Seamus have done a fantastic job, really having a low-cost RVM to the very small convenience segment. So that's where it's kind of a few hundred containers per month. This is very big in Europe. A lot of even the big chains are moving into these kind of city-based small convenience stores.
So for us to be able to, you know, acquire this business and then over time, work with the Sensi team together on developing their offering, and also obviously allowing that to be distributed and marketed through the whole of the Envipco network, we're really excited about. So, we've got some details of, you know, the financial considerations of the business, but certainly more information to come. We just closed it yesterday. But certainly, we're very excited, and we certainly welcome the Sensi team to the Envipco family, and we'll look forward to giving you updates in the future. Won't go through these slides in detail, but just to reconfirm those who may be slightly less familiar, the current regulation mandates 90% recovery of beverage containers by 2029.
Really, the only way to do that is to put in a deposit return scheme. So 13 countries in the E.U. that don't have a deposit return scheme, they're really our focus going forward. Great news from the U.K. You know, you know, as we've said before, we were disappointed that Scotland didn't introduce a scheme last year, but now all of the devolved governments and Westminster have got together. They've, and they've made a very strong announcement to drive to DRS by 2027. And of course, we had great commercial success in Scotland, and we'll look to pick that up, and have similar success for the wider U.K. This legislation is driving this huge growth in our market, so from 100-300,000 RVMs over the next few years.
Our focus is in those new greenfield markets. As Mikael was saying, our focus is not to just to grow, but to do it in a profitable way, in a sustainable way. And you can see, while we still make investments in the business, both the development of gross margin and also the operating leverage, that sustained profitability is starting to come through, and we continue to... As we expand, we continue to develop our business foundations. That's very important, including development of technology. And as you see in this quarter, we do take the opportunity to do that inorganically, where we see some very high-quality opportunities, as we did with Sensi. That's the few slides we have for Q2 2024.
Again, very solid quarter, and another step on our development and our growth journey. Q3 is in November 21, and I will now hand over. Mikael, I think we have some questions, I hope.
Uh, yes.
Great.
They're coming now.
They come fast.
They come fast.
Great.
A number of them, and I think we'll just try starting to address some of them. How do you view revenues in the U.S., from here, throughout 2024?
Yeah. Yeah, certainly, look, I, as we said, I think it's, it's been a really good quarter for the U.S. As Mikael was saying, 40% growth both in program services and in RVM sales. You know, there we've got a very high component of program services. So you will see, as you've seen previously, there's some seasonality. So you'll see that seasonal curve on the U.S. revenue. However, we certainly see, you know, step by step, you know, the overall level in the U.S. increasing, and we hope, in the medium term, some of these refresh states, or even in the long term, new states coming in to drive the U.S. business. So as we think U.S., and more broadly, kind of North America,
Mm
... not the same tearaway growth as Europe, but certainly a positive trend.
Yeah. Yeah, Q3 is a quarter of high consumption of beverages-
Yeah, exactly
... naturally, so we tend to see some higher volumes in Q3.
Yeah.
New markets, could you provide the latest color around Poland and also other markets, such as the U.K. and Portugal?
Yeah, sure. Certainly. So, you know, as we briefly mentioned in the presentation, we still remain very positive about, Poland and Portugal. Poland, they remain the official, the official, go-live date is the beginning of 2025. There's a lot of work to do, so we think it's gonna follow a, a little bit of a model like some of the other markets, where it goes live, and then there's a period, during the year, whilst the system is set up, approved, beverages that have a deposit marking, et cetera, are put onto the market. So, so we see that happening. However, certainly the indications that we have from Poland are positive, and the scheme will be in place.
In Portugal, we see that coming in kind of towards the beginning of 2026. In both cases, as we exit this year, there'll be commercial cases and then delivery, you know, we believe in 2025.
European RVM revenues were down from Q1 to Q2. Which markets drive this development? I think,
Yeah
... it's primarily driven by Greece and Hungary. Greece is a little bit lumpy, and we remain very optimistic and confident to the opportunities that we see in Greece for the remainder of the year, also into next year. As to Hungary, as you know, there was a kind of a soft startup of the DRS in Hungary, so a few volumes of container volumes being redeemed during the second half. That has changed dramatically from July. So that somewhat explains kind of the slower pace in our deliveries in the second quarter.
Mm, okay.
Could you give some color on the activities beyond current markets?
Yeah
... we're exploring?
Yeah, yeah. Yeah, good question. As we tend to organize the business, European region, and then the U.S., headquarters based obviously in Connecticut, looks at North America generally and the rest of the world. So obviously our focus, our biggest business is in the U.S., but North America is obviously more than the U.S., and rest of the world, keeping an eye on things like South America, opportunities there. So what we did is we're just saying, "Look, whilst U.S. and Europe is our key focus, we're keeping an eye on other markets.
And look, while nothing is to an extent to report or any kind of serious business development work, if it does come up, then obviously we have a great team in the U.S., and they'll be leading that effort.
Yeah. Then there are a couple of questions in regards to Hungary.
Sure.
Both in regards to, kind of, our outlook, in terms of the, both the current existing contract, but also-
Yeah
... the extension contract.
Yeah, yeah.
If I'm trying to collect-
Yeah, yeah
... a few questions here.
Sure. Yeah, look, I think, you know, as we've mentioned, the system in Hungary went live in January, you know, was switched on in January, but really had very few containers actually active within the system. So that's developed over time, step-by-step, and MOHU's done a great job at also now engaging retailers, engaging the beverage industry. And so we saw a lot of volume start to come through in July and August, and we expect that to certainly drive RVM take-up. Remember, the Hungarian contracts for us and other suppliers is slightly different. Normally we sell and we work directly with retailers. In Hungary, we work with the operator, very much like we did in Malta.
So there's a kind of extra step in the process where MOHU then needs to organize, develop, and obviously discuss with the retailers positioning of the equipment. So we see that increasing. Obviously, we're there to support MOHU, you know, whatever they need.
Yeah. And then further on in terms, kind of extension orders-
Yeah
... et cetera, to address that as well.
Yeah. No, definitely. So, certainly indications we have from MOHU is that they will need more products in the medium term to capture and achieve their targets on recovery. At the moment, the focus is on, should we say, traditional retail, but certainly, as kind of time goes on, and probably as we get into next year, we'll look at maybe non-traditional locations, you know, schools, universities, gas stations, things like that.
Yeah.
We, you know, we still see, you know, very positive about, you know, both parts of that contract.
Yeah. Then there are a couple of questions in regards to working capital and-
Sure
... and cash. I can address that. I mean, inventories were a little bit up, receivables were a little bit up, and we had some down payments on payables, exiting the quarter with EUR 24.4 million. And that is for also for preparation of anticipated volumes into the second half.
Yeah.
It is to have some type of readiness to be able to execute on new opportunities. We have many discussions with new potential customers asking us for our delivery-
Yeah
... capacity. So that's the type of readiness. As we move through the second half, we expect to work our way through that working capital, converting the inventories to receivables and eventually cash. And I mean, given our current outlook for the remainder of the year, we see the potential for a higher cash balance at the end of the year than we exited Q2 with.
Yep.
Netherlands, could you give some color on-
Yep
... what type of opportunities we see there?
Yeah, definitely. So, Netherlands is interesting. Yeah, as we've explained before, our focus is on greenfield markets, and clearly Netherlands is not a greenfield market. It's had a deposit return scheme in since the 1990s. However, a bit like Sweden, there are opportunities to use technology to support the system and to cope with the, actually the increasing volume that's passing through Netherlands' system, particularly in the form of cans and smaller bottles, which have been more recently introduced to the scheme. So, we're working with the operator, Statiegeld Nederland, and we have now several Quantum machines working very well, having great feedback from both the operator and also the users and customers of the system, to take back this higher volume in an outside location.
You know, while you know kind of normal RVMs is not necessarily our focus in Netherlands, although we are delivering a few of those, focus is using our technology footprint to maybe solve some of the issues of the existing scheme, and I think Quantum is a great opportunity to do that, like we did-
Mm
... in Sweden.
How much of the contract in Romania is expected for the second half? All of the announced contract is expected to be delivered in-
Yep
... the second half of the year.
Yep.
Could you please provide further details around Sensi, revenues, EBITDA, installed base of RVMs?
Yeah. Yeah, certainly. So, Sensi is a small business, has been going about five years. Again, you know, great team, Nathan Misischi and Seamus. Relatively a small install base at the moment in Ireland, but certainly has proved themselves. We've got, you know, commercial conversations going on in different countries. It's a, it's something that will fit within our existing footprint in Ireland. We don't expect it to have a kind of material impact in terms of our outlook, you know, 4x-6x revenue to 2025. But we definitely see the way they've gone about thinking about the low-cost convenience segment, very interesting. Some of the innovative technology they have on the product, we see potentially has further application more widely.
Mm.
So we're excited about the product. It broadens our offering, specifically for that segment, and of course, larger customers operate now, kind of everything from hypermarkets to very small convenience stores in cities. So the broader footprint we have of technology to offer those customers, then we think better position we are for the future. Very exciting.
Mm.
And, you know, certainly very welcome to the team.
Turkey, do we-
Yep.
Is that of commercial interest for Envipco?
Yeah. So good question. Obviously, Turkey not subject to the same strict regulation, but Turkey has expressed an interest and a vision to tackle plastic waste using a deposit return scheme. So we are, we're having conversations. We're looking at the market very closely. It's a, you know, it's a complicated market, as you expect. Big country, high population, very dispersed. So we're figuring out what's our best approach.
Mm.
But certainly we're engaged with the market, we're engaged with the key stakeholders. If you recall, we've used quite, quite often now this kind of Gantt chart with different countries, and you'll see kind of Turkey is moved towards the back of, you know, 2027, 2028, 2029, as that starts to organize themselves for a Deposit Return Scheme.
Mm.
We're engaged there. We think it's interesting and, you know, potentially, you know, these very low-cost solutions, simple solutions like, you know, Sensi could be quite interesting in such a market.
Yeah. Can you... How would you quantify opportunities in New York and Massachusetts relative to Connecticut?
Mm.
Can we do that?
Yeah, that's an interesting one. I think overall our program services includes all of the lease and service-type products for the U.S. Connecticut is important for us. Massachusetts and New York are also really quite important. You know, we see again with Connecticut refreshing the bottle bill, we see really an improvement in redemption rates, so that's kind of 20%-30%, 30%+ in some weeks, which is great. Connecticut is relatively speaking a smaller part of our install base versus the others. So clearly, if Massachusetts and New York, which have active legislative programs, if they in the short, medium term come through, then we expect the whole of the volume in the northeast to increase, which will be very exciting because that volume goes through existing infrastructure.
Sure.
So, yep.
Final question here, also in regards to Sensibin.
Yeah.
Sensi, why are they currently the lowest cost RVM in the market?
You want to, you want to take that one?
Sure. I mean, Sensi, the Sensi team have taken a very fresh approach to addressing the technology using some very new advanced technologies and approaching this in a slightly different way with the focus of creating a product that clearly addresses a very price-sensitive part of the market. I think some of these technologies are very interesting for us to, in time-
Mm
... see how we can utilize-
Yeah
... further. But I think that's largely how they've been able to come up with a very price competitive product in the marketplace.
Yep.
Good. With that, we're at the end of the Q&A.
Perfect. Great. So once again, thank you, Mikael, for, for that. So, thank you very much, everyone. Thanks for your continued interest in Envipco. Again, Q2, a good, solid quarter. We next have an update for Q3 in November 2021. So thanks for your continued interest. Obviously, if you have any other further questions, then we're available. You con- the investor relations details in this presentation or our website. We look forward to staying in contact, and thanks very much. Goodbye.