Good morning everyone, and thank you for joining. I'm Meritxell Pérez Investor Relations Director, and I'm joined by Raúl Morales and José Núñez. After our prepared remarks, we will move on to the Q&A session where we will take your questions. You can submit them from now via our conference website. With this, I leave you the floor, Raúl. Go ahead.
Good morning. Thank you very much for the quick response. Today we have formulated our 2023 annual financial statements. The company, due to a change in the auditor's standpoint, is not booking EUR 192 million of revenue from the supply of solar trackers in 2023, and EUR 144 million of expenses that were included in the 2023 results released to the market on February 28th. We forecast the revenues will be recognized in this year. The discrepancy with the auditors is based on 36 contracts for the supply of solar trackers, which amount to EUR 192 million of revenue and approximately 2 GW of installed capacity. This represents a different view based on the application of the IFRS 15 standard revenue from contracts with customers, with a significant impact on the company's results.
I would like to remark that this is a matter related only to the year in which we account for the revenue. The company released its 2023 results on February 28th with the approval of the board of directors. At that moment in time, the auditor did not raise objections. The substantial change in the auditor's standpoint was expressed just a few days ago. During 2023, Bill and Hold arrangements were signed with customers transferring the control of solar trackers or their components already manufactured and ready to be delivered to them. As the arrangements were closed, the company booked this revenue and the related expenses in accordance with IFRS 15. Bill and Hold is a common procedure in the industry and has been applied by the company in the past. It involves manufacturing and custody of the components of the solar trackers before they are delivered to the project.
This is a complex procedure, subject to interpretation of the IFRS 15 standard revenue from contracts with customers. The standard contracts regulate the transfer of control of the tracker when it is delivered. It is defined according to the Incoterm agreed in each case with the customer. Revenue is recognized, therefore, in each delivery as the customer acquires control of the tracker. In addition to the standard contract that exists for the execution of a project, the parties may agree to modify the date for takeover. In our opinion, we understand we met the conditions stated in the IFRS 15 for Bill and Hold arrangements. During the year 2022, Soltec also booked revenues related to Bill and Hold arrangements, amounting to EUR 36 million. The year 2022 was also audited by EY with an unqualified opinion. Transactions considered in 2022 were similar to the ones in 2023.
Same thing happened in 2021 and 2020, where we booked EUR 13 million and EUR 4 million respectively, related to Bill and Hold arrangements. In this case, annual accounts were audited by Deloitte with also unqualified opinions. Considering the above-mentioned experiences, this procedure was also implemented in the year 2023. Customers may benefit from Bill and Hold arrangements under the following situation: administrative delays, for example, for building permits, as it is the case of DDP, Delivered Duty Paid contracts. Delays in customs clearance out of Soltec's scope in DAP contracts. Volatility in industry prices. On February 27th, before releasing 2023 results to the market, the auditor expressed that although it had not completed its audit process, at that time they had not identified any material matters. After this statement on February 28th, with the previous approval of the board of directors, the company released results to the market.
This substantial change in the auditor's standpoint was expressed just a few days ago. Although we do not share the auditor's criteria, the company has decided to accept this adjustment to avoid the qualification in the audit report, as it is understood to be the most beneficial alternative to safeguard the interests of the company and its stakeholders. With this, I leave the floor to José to explain the impact in the 2023 financial statements.
Thanks, Raúl. Good afternoon, everyone. After the adjustments mentioned by Raúl, the company's backlog defined as contracts signed pending to be executed totals EUR 663 million. These figures include the EUR 182 million that have not been finally booked as revenues in 2023 and are expected to be recognized throughout 2024, starting in Q1. As you can see from our operational metrics, our visibility remains very strong, and our global operations continue to evolve very positively. As for the full year 2023 results, consolidated revenues reached EUR 394.8 million, consolidated adjusted EBITDA was EUR 10.4 million, and net profit was negative EUR 23.4 million. In Q4 2023, revenues reached EUR 90.6 million with an adjusted EBITDA of EUR 9.8 million.
If we have a look now at our tracker business, revenues for the year totaled EUR 376.8 million with an adjusted EBITDA of EUR 2.3 million, representing an EBITDA margin over sales of 0.6% for the year. The full year 2023 figures for our energy division remain the same, as they do not have any changes with respect to the figures released at the end of February 2024. As for the debt profile, there have been no changes with respect to the information already provided. Our tracker business continues to operate with a syndicated facility, which includes a revolving credit facility for up to EUR 90 million, almost fully disposed at the end of the 2023 financial year, and a EUR 110 million bond warranties line.
Although the syndicated facility initially expired on February 11th, 2024, on February 1st, 2024, Soltec and the Syndicate of Financial Institutions agreed to extend it until May 31st without modifying the rest of its terms and conditions, with the intention of providing a reasonable time for the parties to reach a complete agreement. Currently, Soltec Energías Renovables is in negotiations with the financial institutions in order to sign a new contract before May 31st, 2024, by which, in addition to extending their maturity, the amounts of both financing instruments should be increased. The company expects to reach a satisfactory agreement with the Syndicate of Financial Institutions.
Consequently, in the 2023 annual results, the board of directors of the company has applied the principle of going concern since, in the opinion of the administrators, there are no significant doubts about the continuity of Soltec's activity for at least the next 12 months. This judgment is based on the assumption that such an agreement will be reached with the Syndicate of Financial Institutions before May 31st, 2024. On this matter, the negotiations are in line with the national and appropriate course of action for this type of transaction and will imply a mention in the audit report by the company's auditor. Now, I hand it over to Raúl for the closing remarks.
The accounts we have just formulated differ from the results released on February 28th due to the already mentioned auditor's standpoint. It is important to note several very relevant aspects. The revenues that have not been recognized in 2023 belong to actual contracts that are being executed, and they will be booked as soon as we deliver them, forecasted in 2024. On the other hand, our operational evolution continues to advance strongly in our two businesses, trackers and energy, in key regions for the development of solar energy. Additionally, we are conducting an internal exercise to optimize our value generation in our divisions. We are optimizing the structure. We are focused on our most strategic activities. We will continue to conduct strategic asset rotation in the development businesses, and we are focused on generating value for our shareholders. I am at your disposal for any questions you might have.
Thank you.
Okay, thank you very much, Raúl. Let's go to the Q&A. We've got the first question coming from Flora Trindade, CaixaBank. Good morning. Can you please detail the financial ratios involved in the credit facility? Are the negotiations already ongoing? Can you please explain the specifics of the difference between the auditor view and the announced results? In which exact situation were the megawatts that are not accounted? Thanks. Please, José, go ahead.
Okay, good morning, Flora. Regarding the first question, the financial ratio, it's basically one, as we've explained in previous calls. It's essentially net financial debt over equity has to be lower than 1.5. This ratio has been met at the end of 2023. Are the negotiations already ongoing? Yes, obviously. They've been ongoing for quite some time already. In fact, basically at the beginning of February 2024, since we were progressing well with the financial institutions, but we weren't basically able to close the agreement before the initial maturity date of the facility, February 11th, we decided, jointly with the financial institutions, to extend the validity of the Revolving Credit Facility temporarily until the end of May, May 31st, in order to provide enough time to be able to close the new deal. So everything is progressing as expected.
Then the third question, if I recall correctly, was about the specifics of the difference between the auditor and the announced results. Well, basically following the IFRS 15 standard, in order to be able to recognize revenues, one of the main criteria that has to be met is essentially the transfer of control. When we're dealing with Bill and Hold agreements, there are additional requirements that need to be met in order to ensure that transfer control has been completed. And some of them are more straightforward, some of them are more difficult to assess. And that's where basically the difference has been arising. Okay? And then in which exact situation were the megawatts that were or are not accounted? Well, essentially, those megawatts are expected to be recognized as revenue in 2024, as we just explained.
Therefore, the revenues coming from the sale of trackers for this particular exercise, this particular year, 2024, are expected to be increased compared to the initial figure that we basically presented to the market at the end of February.
We've got more questions coming from Virginia Sanz de Madrid from Santander. In your guidance for 2024, had you already assumed a similar accounting method than in 2023?
Good morning, Virginia. Well, essentially, let me just recap a little bit in terms of how we typically account for or book revenues in our tracker business. Typically, revenue is recognized based on the exact manner in which control is transferred, as I said before, and that is basically linked with the Incoterm that has been agreed with the customer. So essentially, revenue is recognized, oversimplifying a little bit things, but just for the sake of explanation, when we deliver the goods to our customer, the different components of the tracker. Now, the Bill and Hold arrangements change a little bit this particular statement or this particular criteria because in this particular case, the transfer of control takes place before the actual delivery of the goods, the actual delivery of the components. Have we considered Bill and Hold arrangements in our guidance for 2024? No.
Did we consider these arrangements for our guidance of 2023? Yes, because we were receiving already requests from customers since the beginning of the year. Raúl can elaborate a little bit more on this, of the particular situations we are currently seeing, mostly in Spain, but also in other markets. We were already counting on these particular revenues to be recognized in this particular way. Okay?
With EUR 192 million revenues moving from 2023 to 2024, do you stick to your guidance?
These amounts, obviously, will increase, as we explained before, the revenues coming from the sale of trackers, and therefore we expect a higher sales figure. But we'll provide more details in a few weeks' time when we release the new business plan for not just the tracker business, but also the energy business.
How does this affect your backlog?
It does increase it quite significantly. Remember that when we released the 2023 results back at the end of February, we were talking about a backlog of EUR 470 million at the end of 2023. With this adjustment, this backlog has increased to EUR 663 million. So therefore, backlog has definitely increased compared to the previous figure that we had.
And the last one from Virginia. Can you provide your new closing net debt number for 2023?
It hasn't changed. This is just an accounting issue. There's no impact to the cash flow of the company. Net financial debt remains the same for the whole group.
We've got more questions on the platform coming from Ignacio Domenech from JB Capital. The first one, what has changed in the eyes of the auditors regarding the application of IFRS 15? How confident are you on the recognition of these revenues and costs in 2024? Any implication on the auditors' change on 2024?
Well, what has changed is what I explained before regarding the question sent by Virginia. Essentially, it's a matter of basically considering whether the transfer of control has taken place or not. How confident are we regarding the recognition of these revenues in 2024? Revenues and costs, obviously. Well, we are very confident because all these contracts, all these components, all these trackers have already been manufactured and will be delivered. Some of them have already been delivered already. So they're going to be recognized in 2024. Then any implications on the auditors' change on 2024? Not necessarily. The auditors' opinion or standpoint is related to these particular 36 contracts. We don't expect to see any potential implications for 2024.
Following this restatement, do you see any difficulty in extending the maturity or negotiating new credit facilities?
No, not really. I mean, the negotiations, as I have explained before, have already been going on for quite some time already. This doesn't change the business situation of the company. It's just a matter of booking the revenues in 2023 or booking the revenues in 2024. It doesn't make any significant difference apart from that. Cash flow remains the same. There's no impact on the liquidity situation of the company.
Do you rule out a capital increase in the next 24 months?
Yes. We've been very clear in the past regarding this particular question. We rule out any potential capital increase.
Next one, can you provide targets for 2024 by division? What are the main changes in the strategy going forward?
Well, good morning. We will update our strategy in the next few weeks, so we will provide the targets by then. The main change is basically to focus ourselves in the tracker business, just tracker, and in the energy with more asset rotation in order to maintain a lean structure.
Regarding the working capital, could you give us some color on the evolution of the working capital during the year?
Well, essentially, nothing has changed compared to the information we provided regarding working capital and the liquidity situation of the company. As I said before, regarding the information we already shared with the market back in February, the situation is exactly the same. This is just an accounting adjustment. It has nothing to do with the working capital needs or the liquidity situation of the company.
The last one coming from Ignacio. In the industrial division, could you walk us through the key milestones in terms of revenue recognition from the sale of trackers?
Well, as I explained before, for the sake of this explanation, let me oversimplify things a little bit. But at the end of the day, when we're talking about our tracker business, we recognize typically revenue based on the deliveries that we're making to our customers based on the Incoterm that has been agreed with them. With Bill and Hold arrangements, this particular situation has changed a little bit because essentially the transfer of control takes place before the actual delivery of the goods. But generally speaking, as I said before, the revenue is recognized based on deliveries.
We've got a new question coming from Richard Dawson from Berenberg. They implied EBITDA margin for the Bill and Hold agreements for the 36 solar tracker contracts is nearly 24%. Why is this so high, and should we add the full EUR 46 million onto the EBITDA of 2024?
As we have explained before, these EUR 182 million plus the associated costs of EUR 144 million, and therefore the gross margin obtained after including both revenues and costs in the 2024 revenues and costs expected for the year, will take place this year. So yes, I mean, at the end of the day, it will be an improvement compared to the previous situation for the 2024 year.
How are negotiations progressing for the new financing facilities and how much larger are they expected to be? What sort of interest rates will they be likely signed at?
As I explained before, negotiations are progressing as expected. We obviously are not just interested in renewing in terms of maturity the two lines, but also in terms of increasing the volumes for both of them, in particular for the bank warranties line because the revolving credit facility at this point is less important. But obviously, the bank warranties line is a required input for our process. In terms of cost, in terms of interest rate, we do not expect to see significant differences compared to what we've seen so far. Remember that this revolving credit facility has basically an interest rate that is essentially Euribor, sorry, one-month plus 2.5%. Our expectations for this particular line are to maintain costs at that level. And we are not foreseeing at this point any significant changes compared to what we've seen so far.
We've got another question from Flora from CaixaBank. Can you do asset rotation to accelerate proceeds?
Hello, Flora. Yes, we are already doing that. So we are rotating assets in different stages, especially in the energy division. So the main difference is if we are rotating just ready to build projects or already built. So right now we are in the first case, but it could happen in the near future.
There's another question coming from Sonia Ruiz de Garibay from Mirabaud. Can we consider your EUR 102 million figure a good proxy for revenues for Q1 2024?
Well, what we said is that we signed contracts for EUR 102 million in Q1, but that does not mean that we are going to recognize revenues of EUR 102 million. So those revenues will be recognized in the course of the year, so probably Q3 or Q4. But it gives us the idea how we are closing new deals. But obviously, Q1 will be much better than last year because we will have part of the Bill and Hold projects already will be recognized, part of them in Q1.
There is another question coming from Richard Dawson from Berenberg. Please, could you provide some detail on why the EBITDA margins are so high for the 36 contracts? Thank you.
They're not really. I mean, if we're talking about, let's talk about gross margins first. The gross margins related to these particular 36 contracts is between 25% and 30%. And these are gross margins, obviously. It's true that once you've covered your general expenses, your overhead expenses, any additional profits that you generate kind of already have a direct impact on the EBITDA margins that you're recognizing. But the gross margins that we're seeing for these particular contracts are between 25% and 30%. And therefore, the EBITDA margins cannot be as high as you were saying before.
Okay. We've got another question regarding the American market. How is the American market evolving? It's been almost half a year now, and we haven't seen any recruitments. Can you tell us more information or provide us more information about new deals?
Well, I'm glad you asked this question. We just appointed Alma Miller as CEO of Soltec Trackers in North America. Alma was born in Puerto Rico, and she studied in Syracuse University. She was CMO of BBVA. So she accounts for a lot of experience and happy to have her with us in our Florida headquarters in the U.S. So at the same time, we are closing new projects in the U.S. Just a few days ago, we announced that we signed a contract with Blue Ridge Power. 164 MW was in Virginia, USA. So we are reinforcing our team there and also our activities. And we expect this year to account almost 40% of our new sales coming from the American market, from the U.S.
Is the year 2024 going to be very backloaded again? If this is the case, are the numbers expected to be better than last year's?
Well, originally, this year was going to be backloaded too, but everything changed with I mean, in terms of revenue recognition, so everything changed with this Bill and Hold arrangement. So we will have a more I mean, more similar quarters increasing in Q1 and Q2 so that we will be more stability because of this effect.
At this moment, we have no more questions on the platform. All the companies at your disposal for any additional question you might have. Thank you very much.