Good morning, ladies and gentlemen, and welcome to the conference call of LION E-Mobility AG. At a customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press zero, followed by the operator assistance, followed by the hash key for operator assistance. I now hand you over to Jörg Peter Hahn.
Dear investors, good morning, everyone. Hope you can hear me. I will go through the agenda first. First, I will present the financial highlights, and then we have statement of our CEO, Joachim Damasky, and later on, we go through the Q&A session. We start with the highlights for Q2. I'm delighted to present you the Q2 and first half year results today. By the way, the presentation is now available on the homepage. To be clear, Q2 reserve sales and revenues were not as high as we expected. We could improve through our quarterly revenues to EUR 4.8 million from so low EUR 1.2 million in Q1, to a total of EUR 6 million in the first half year. As you know, environment in first half year was not been good.
You may have heard before, and read and heard in the last month, there is a high pressure from Chinese suppliers on battery cells, battery packs, and also from obsolete battery modules that are pressed into the markets by the German OEMs. This hurts the electric storage industry, and you also know that the electric vehicle industry got struck. So demand of electric vehicles slowed down. It had also an effect on us. As we are adapting our market approach and do not compete on low prices, we are still focused on further developing our high quality pack and developing our long-time developed LIGHT Battery pack in the connected BMS. You remember, we already said in the past, that we have test results since beginning of development of the LIGHT Battery.
So, with positive gross margins in Q2 sales, we could reduce the quarterly EBITDA to EUR -2.1 million, means totaling EUR -4.7 million. Negative operating cash flow in Q2 landed at EUR -2.1 million from Q1 at minus 2.6 million, totaling EUR -4.7 million in first half. I go over to shifting to half-year P&L. Our customers partially experienced slowdown in EV sales, I mentioned before, and competing oversupply of cells and modules in the market. This slowed down their orders significantly in the storage space. Not so much in mobility, where we see much more stable orders. We could reach now, again, a higher growth margin of almost 11% in first half-year, while not engaging in the price battle with our quality pack approach.
And if you look at our personnel costs, as I mentioned before, and you know, we are strongly investing in the further development of our new cell chemistry, and especially in the immersion, which also could be achieved by hiring new excellent experts into our battery and BMS development teams. If you go further down, operating expenses, it increased to EUR 2.8 million, mainly from increased additional costs on market development evaluation, search, insurances, fares and travel, due to our increased sales performance. Financial costs show our increased CapEx. Here, we paid roughly EUR 0.8 million in first half year. The EUR 1.3 million financial expenses include interest to RBI, an overdraft facility, and a substantial part of it is also accruals to our major investors, so not paid out.
However, we have done also our first repayment of 0.8 million. So at the end of the year, RBI will be, the RBI loan will be reduced to EUR 7.7 million. If we move over to the cash flow, just reflecting what I said before, the operating cash flow of -5.7 reflects the slow revenues. The investing activities, they triggered also a drawdown on our overdraft facility at Commerzbank. If you look at the balance sheet, non-current assets increased by EUR 2.2 million, whereas deferred tax assets of EUR 1.8 million took the largest part here. The decrease of our current assets of 28.7 show the decrease of our trade receivables by EUR 14.5 million.
The company tax receivables of EUR 4.2 million and inventory decreased by almost EUR 3 million, and show the usage of our overdraft facility. This all has been positively, positively offset by receiving now the requested subsidies of EUR 1.8 million from the State of Carinthia for our new production facility. We move over to the finance, to the passive side. There hasn't been any changes in the equity structure. And if you look at the non-current liabilities, again, they were reduced, and the current liabilities increased due to the firm upcoming repayments to RBI within the next 12 months. Again, end of the year, we will have only EUR 7.7 million left on the RBI loan.
On the other hand, payments towards suppliers also up, reduced of up to EUR 23 million on our current liabilities position. This all together shows that we have a slightly improved equity ratio of 20.1%, which is higher than last year's average of 19.5%. And, I would now pass over to the moderator to show the presentation, a recording of Joachim Damasky, please. Thanks.
Yes, thank you. One moment, please.
Good morning, ladies and gentlemen. I have to apologize myself. I have a medical treatment today, so that I cannot attend in person. This is now a recorded message that I recorded yesterday. I think we all see that especially the battery business is currently in a really tough environment. We see some of our competitors in very bad shape. We see also cell manufacturers like Varta under real bad situations, maybe right before a bankruptcy. You have also heard that Northvolt has reduced their investment plans in Europe also after not continuing the business with BMW, they will not build up a factory. So we see in overall a reduction in cell making plans in Europe. This has a certain effect.
That means, therefore, we see that our decision to buy the SVOLT cells direct from China in future, as you know, is the right decision. And on the other side, we see that the mobile battery business in total is really under pressure. We can see this also. You have also heard that Audi wants to stop the car production in Belgium. The sales in electric pure electric-powered battery electric vehicles is dropping, unfortunately, now, and therefore, the OEMs also have huge stock in batteries because they also have plans to sell more cars. So we have the situation that in both in the mobile but also in the stationary market the turnover is being reduced.
Our customers, especially in the mobile business, we have been in the United States last week. They are very positive that this will keep up, again, in the second half and also next year. So we see there also an increase of sales in the mobile business. With the storage business, there, we have the situation, unfortunately, that the Chinese battery makers, who have also built up a lot of, again, cell production capacities, they are selling now, in this field, also into the European markets, with relatively low prices. So this is what we see now. We are very bullish that this will ramp up again in the second half of this year.
Then we will also, we hope that the overstock sales from the car manufacturers will then end, what it seems like. So, we think, this is what is going much better in the second half, but also next year. But we are not only a company for battery manufacturing, we are also a design and development company. You know, these are our roots, and there we have really positive things to talk about. And we were able to hire four new engineers.
They are very specialized, they have a lot of experience in the OEM business, and with them, we are running now our NMC+ battery project, also LFP for the stationary market, so that we can also reduce the prices there, because we will use then cheaper LFP batteries, where the whole market in the stationary area is going to. And we are also now developing the so-called Narrow Pack US. That means this is a normal NMC+ battery for the U.S. market, especially for the truck market, where our battery fits in between the rails of the frame of a truck. This is also something that we have been discussing with our customers last week, where the customers are very keen to get the first samples as soon as possible.
The highlight that I would like to report is now the progress in our LIGHT Battery project. I have been talking last time that we have been able to submit our samples to a German car maker. We have passed with our samples all the test bench tests, and we are now built into test vehicles. The first test drives that we had are very promising. The car maker is very positive because he says, "This is the best battery electrical that is possible in the market to get." We see that our electric, but also mechanical, structure of the battery is quite good.
We have been able to supply more than 300 kW out of our battery, so that what we have been able to promise, and we also have been able to deliver this. And what we have also here with immersion cooling system, it runs quite well. The battery temperature is still lower than that what we expected. So also, this is something that is very promising also to our car makers. We will also offer this to other car makers as soon as we have passed all the driving tests. They are going on in the next future, and I hope we will be able to inform you also in our next meeting what we have achieved so far. So thank you very much.
Now I would like to hand over back to Jörg Peter Hahn. Thank you.
Yes, thank you very much. I heard everything went fine with Joachim already, so greetings from him. Now, I would like to start the Q&A session.
Jörg, it's Ian. I just wanted to make a few comments. I spoke-
Yes.
- at length with Joachim yesterday, and I wanna make sure that we're all on the same page. The environment, this year, has not been great for us. That's clear. Especially surprising in Q2, and I think that, if you read the press every day, it is very clear that there's a lot of, confusion, and stuff going on with regard to the pace of electric vehicle sales, which slowed significantly. And then also some confusion over hybrid versus full electric vehicle, where definitely I see that there is gonna be a bigger move to hybrid, versus full electric than previously expected. We can work with either full electric or hybrid, and in fact, our immersion test product with a German OEM is in bus. So we're, you know, happy with that.
I think the obvious questions will be, how do we see the market developing? We have debated internally with Michael Wright. We've listened to the feedback, and one of... You know, there are quite a few things going on, and it's not easy to figure out to put your finger on one thing. There's definitely been a slowdown in EV. There has definitely been a move by China to push more product into principally Europe, harder for them to do it in the US currently, but principally into Europe. This excess inventory has to be worked through the system. I think clearly Q2 was pretty brutal, because some of the other big OEMs in Europe did something that they hadn't done before, which is to push packs into some of our markets.
Some of our customers took it, and some didn't, and they said: No, we want longer term supply, and we know that these OEM packs will only be available during a period of excess inventory, and then they will stop supplying. The other issue we have our eye on is, of course, you know, tariffs, US, China, and Europe, you know, how all that pans out. I think it's too early to have a strong view on that, but we are going through an inventory liquidation in the first half of the year, driven by a slowdown in EV sales, and you've seen it even with, you know, the mighty Tesla. So what is our strategy through this? Well, to be frank, you know, we do have multiple options.
We have to upgrade our packs, and we wanna focus on the higher end of the market. We definitely have quality packs. I think you all know that, and you've heard Joachim talk about that. But we are more excited about our immersion progress than we were before. And that is driven by the fact that the track tests seem to have gone well, and I don't wanna run into Q&A, but I saw one question, which is, when Dr. Damasky says 30% better performance or better than anything else, what does it mean?
This, without going into, technicals, which I'm, I'm not sure we can, but it's basically C rate versus temperature, with the most important thing being, that when the car is challenged aggressively, the temperature is staying at exactly the right place, which is one of the key issues. If you take many electric vehicles on a test track, they will after, you know, a few minutes of pushing it, go into power management mode, and our pack is not doing that. It is maintaining a very stable temperature because of the active cooling system that we use, that I presume everybody knows about.
So the feedback we've had from our OEM customer has been very, very positive, and what we obviously hope is that at some point, and we're nervous about giving a timing, because we know once you give a timing, then, you know, people will say, "Do we have any information?" It's not in our control. It is in the control of the OEM. But once we get, you know, the final bit of feedback, we have two things. We have a, hopefully, new customer to negotiate supply with, because it is our pack, and so no one else can make this pack, 'cause we own the IP. But more importantly, once...
We will then have the final justification that we have something of value that we can go out to other people to say, "Here is our pack, would you be interested?" So the second half of our year is gonna be spent, obviously, big focus on this. But also, we will be, you know, pushing on the sales side to get the more generic pack business to a higher level of sales, but also, to continue to do that development. I'm gonna pause there, so we can go to Q&A, but I thought I would just clarify a few things. Thank you.
Oh, thank you. So if you would like to ask a question by phone, please dial nine and star on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial nine and star to cancel your question. And if you are using speaker equipment today, please lift the handset before making your selection. So far, we do not have any questions by phone.
Maybe I can go through some questions that we received as well. I can... Can you hear me? Yes.
Yeah, I can. Yeah, I think we should do.
Okay. Yes.
We can start with, if we go right to the bottom with Daniel König-
Exactly.
Maybe we can start with that. So do you wanna take that one?
I will take the first one. What, only in approximate words necessary, is the underlying volume and price assumption in your sales guidance for 2024? Well, this depends heavily on further market developments, and we cannot provide any further details here, right now, at the moment. There's another one from Daniel. Can you please say what your guidance adjustment for 2024 means for midterm guidance of EUR 150 million-EUR 200 million? Ian?
Yes, sure. I think it's we're not gonna comment right now, given the current market environment. I think we want to see what happens with our immersion product, and as Joachim, I think mentioned, he said, by the time of our next call, we should have more information, and I think it will depend on that. It also depends on, you know, we don't have control of the underlying pack market, so I think we're in a process of evaluation for the more medium and longer term guidance, but part of that is based on immersion success. If we do get into a situation where we know now or we know then that we have a great product, I think that changes an awful lot of things, because we then don't compete with, for example, China.
We would be making a highly advanced pack with a lot of IP around it in Germany, and so the we would have a run, hopefully for, you know, two to three years developing and putting more IP down to be able to grow this business. Now, is this a multi-billion? Could immersion be a multi-billion business? No. I think it will be for high-performance models, but it hopefully won't be for one. It could be for two, or three, or four. It could be. It's unlikely that we would have just one customer if it works, it would be more likely. So I think we need to go through this period of analysis before we can come out and give any further guidance changes.
Plus, we ourselves want to see how the market develops over the next six months, with regard to the U.S., with regard to China. Is the inventory starting to clear up? What are our, you know, what are the other, especially the big German OEMs doing? What are the cell manufacturing companies doing? What is definitely happening is there is potentially competition being cleared out of the industry. This is an industry purge that is taking place. You know, I don't need to tell all of you, I'm sure you're watching, that it's almost on a weekly basis, people are having difficulties or closing.
And whilst this can be painful to navigate through in the short term, it does present an opportunity on the other side, for us, especially if our long-developed technology is one that is at the top end of, you know, battery performance. Jörg, do you want to talk... Daniel asked another question.
Yeah, could you-
Guidance adjustment for free cash flow and net debt.
Net debt, yes. I mentioned already that, at the end of the year, we will have reduced our RBI loan to EUR 7.7 million. We will reduce it further. The repayments started already. Additionally, we also have a potential cash in, as you have read in the press release, as we have embarked on the sales process of our stake at TÜV SÜD Battery Testing. I think, with this function, also with our main shareholder in the back, we are able to go through this situation currently.
Jörg, if I... You know, I did see a question from Christian Sander-
Okay.
So, and I think it would be inappropriate to comment. I see some questions like, you know, what kind of price, what kind of timing, et cetera. You know, we are in discussions, and I think it would be inappropriate to discuss any of that for obvious reason.
Yeah. Yeah.
There's another question from Christian Sander, which is the replacement contract with sort of DHL. This is relatively recent. I would say the discussions are ongoing, but we will provide modules for them going forward. They want to, as you can imagine, they have to refresh a lot of their vans. We will provide modules for them. What we would like to do, of course, is to move to do full packs, but again, this is to be discussed. Modules are a good start, but that's all we really have at the moment, where we have an agreement for module supply to replace older modules or to upgrade packs. Christian Sander also asked a question on the LIGHT Battery driving test timeline.
We, we cannot really give that right now, but I think Joachim clearly said that by the next meeting, we should have much more information. I, I think the, the key information that we were waiting for is that the initial track tests went well. And to be specific, you know, there were, in the past, some mechanical leakage issues. The whole pack is, is immersed in cooling fluid. And in the past, there had been some leakage issues. And bench testing is one thing, but when you go onto the track and the car experiences G, not just side to side, but braking and acceleration, we, we have so far removed the problem of leakage with the sealing of the pack, which is pretty important.
That was one of the issues that had bugged us for a long time. You know, the thermal side, we thought we'd be okay on, but we needed to make sure that we could solve the pack leakage issue, because that wouldn't be good. It seems that we have done that, and we rely on the feedback from the OEM. So far, the feedback from all the track tests has been good, but they will continue, and they will continue throughout the next four weeks. They will also, you know, these cars will be subject to high temperature testing as well. People who know the auto industry will know this. As all that data comes in, if it's good, then we have a pretty important product.
And, it is our product, and, I, I think there would be more than one OEM that would likely to be interested in this product. And then, you know, the next question is: would it be a product that could be used more in, in not just supercars, but also other premium or slightly lower than that? Could it be used for people who want really, really good performance from their vehicles, in the same way that when I grew up, people wanted, you know, cheaper Ford cars with a V8 Cosworth engine in, because it was cool? Okay, hopefully that answers Christian's questions. Jörg, was there anything else?
Yeah, no, I, I don't see, I don't see the questions currently. Yeah, okay.
We have a question coming via the phone. So I would open the line from Stefan Burger, from Dieffenbacher.
Hi, good morning, everyone. Thank you for taking my question. Well, it's not really a question. I just want to take this opportunity to really express my frustration with how it is going at the moment. I mean, not so much regarding what is happening. I mean, as it has been said before, yes, everyone can see that it is a difficult and challenging environment. For me, it's more about the communication towards us as the investors. I mean, if you look at the price in the last 15 months, it's not just a recent thing. It's for the last 15 months, we have seen a steady decline from EUR 5 to now being a penny stock, and that is obviously really, really frustrating.
And the thing is about timing of how it's being communicated towards us. I mean, you can see really high sales of shares right before or a couple of months before, then the bad news is coming. We have seen that last year when it was regarding B-ON. We have seen it this year when we are now talking about reduced turnover. We did receive an information right before the general assembly, one close to one month in end of June, where you have reiterated that EUR 60 million-EUR 65 million is still achievable. One month later, we should believe that the situation has changed now into 42 million EUR at max.
That is what is so frustrating, that there's high sales volumes of shares, where you would think that insiders know, and then a couple of months later, we are being told, "Oh, there's bad news." That is the really, really frustrating part with LION E-Mobility, is how the communication with the shareholders is. And the next thing is, now it is being again, we are back at square one. Why should we now believe that at the end of the day, the LIGHT Battery is going to be the holy grail of, for, for, for LION E-Mobility? I mean, two years ago, in June, Mr. Meyer told us that this year, in 2024, the LIGHT Battery will be production ready. Now, we are still talking about prototypes being tested.
We are not giving guidance, timelines, nothing. Why should we now believe that this is going to happen? I mean, in April, we have been told that there will be requests for quotation in Q3. Now, this has been again withdrawn. We don't know anything about any timelines. Why should anyone stay invested in here, while we are only to be given carrots? Thank you very much.
Hi, Stefan, it's Ian, and I feel your frustration. I, like you, am a big shareholder, so when the share price goes down, I feel all that pain. So here's what I would say to you: I think you're right. It is frustrating. What we have tried to do... I'd remind you one thing, Stefan, our market value today, I think, is EUR 12 million. So we are a very, very, very small company. But we try our best with capital market, you know, with communication to the capital market. We can't afford to spend a huge amount of money on capital market communication, et cetera, because for a company of EUR 12 million, that would seem like a, you know, not the most effective use of money.
Where we want to use our money is to grow the business, to develop immersion. Stefan, you will know that we have tried along this journey to communicate better and better. We have appointed Kirchhoff, who are a very good IR company, who started at the beginning of this year. We do regular conference calls to keep investors up to speed. A lot of work goes into that. That's on a quarterly basis. We did a longer capital market day, several months ago, to profile as much as possible. And as a shareholder, I'm glad we're doing all this stuff, but I also want all the operating people to be focused very much on what they need to do, which is win business and develop products. You don't want them spending 25% of their time on market communication.
I want 99% of their time, actually 110, focused on product development, winning orders. I think your comments on the LIGHT Battery are spot on, Stefan. I invested in LION 5.5 years ago because I believed the LIGHT Battery would be a good product. That's why I invested. I looked at it and I thought, "Wow, you know, this is a product that could be revolutionary." 5 years later, you know, I still think the same thing, but I'm waiting for it. Here is the good news. We never let go. We never stopped. We kept investing. We kept developing. We do not control when someone gives us production or an order. Clearly, if a big OEM gives us an order, as they would say in America, that is pay dirt.
That is when we know that we achieved what we wanted to achieve all the time. We're a small company. We've always had big dreams, and I think that what is important is, the way I see it as a big shareholder, and I sit on the board, is we are now closer than ever. But I think the answer to your question is, we just have to wait and see what happens with this latest iteration with the OEM on immersion. The results are good. We are communicating to you. The feedback from the... But we, we don't control this OEM. There are things that could happen.
The OEM could say, for example, "You know, project is delayed," or, "Change of plan, we're gonna stop building electric vehicles or hybrids going forward." We don't control that, but we do feel that we are the closest that we have been today. I think all shareholders will make up their own mind as to what they want to do. What I can say is, I definitely am interested in this, and, you know, assuming that all information is put into the marketplace, if we go out and we win an RFQ with an OEM, I would wanna buy more shares, and I would be really glad that I hadn't sold. So I share your frustration. It's been a long journey for all of us. I would remind you, I'm a very large shareholder.
All I have done since my with Lion is increase to my position. That is all I've done over the last 5+ years is increase my position substantially. You can see it. It's declared, painful as the share price goes down, but I lose none of my enthusiasm, because I know that if we win this, it's a very, very big win for a very, very small company. And, you know, I wish it happened overnight. Sometimes I think, "Yeah, I wish we'd done this in a year or two," but I think the reality with the industry is it doesn't work like that. For everyone that does well, there are tons of people that don't, and you know exactly what I'm saying, Stefan, when you look around at all the companies that are suffering terribly right now.
In the U.S., some of our competitors don't exist, but we do. We still exist. We are still moving forward. We are still developing. We have some great people. We have hired some great people, and, I'm pretty excited. I think we're gonna get there, and I think that it's not just about winning this order. If we get an immersion order, I know there'll be more than one. I know that the automotive industry will suddenly say, "What is it that you can do?" And at the end of the day, what we don't... It is worth the fight, it is worth the time, and it is worth the frustration, if in the end, we get to where we wanna be. And, you know, we will continue to communicate. Communication could be better.
I'm sure Siemens or VW or Daimler do a much, much better job, but we're a tiny company, and we need to think about how we allocate our capital, what we spend our time on. We did a Capital Markets Day, which hopefully you listened to or saw. We're trying to communicate as much as possible, but we cannot communicate things that are not current or not happening. So, you know, that would... I hope, hope, please, you know, if you've got more questions, please ask, but that would be my general answer to your question.
I'm sorry. So Mr. Burger is still on mute? Should I open his line again? I didn't-
Sure.
Yes. Oh, sorry. I'm sorry. I'll do that now. Your line is open now.
Oh, no, I just said thank you through the online thing. Thank you, Mr. Mukherjee. No problem.
Okay. Thank you.
So we do not have any further questions by phone at the moment.
Yeah, we can maybe... Well, these are questions and very old project cooperations that we announced late 2018, 2020. Can you please give us an update on the following cooperations? 2018, Hermann announcement of a module concept. 2018, Analog Device in LN. In 2018, your BMS to implement LTC6813 with a significant time advantage. 2020, Sogefi, to develop modules and access to global sales and distribution. 2022, Evonik and Vestaro meant to develop the Pure Performance Battery. I think these co-cooperations have been stopped, as I understand right now. Another question: Are you still planning to shut down the plant to make modifications for the SVOLT upgrade? If so, what are the employees doing during this period?
So this is what we are currently talking and negotiating with the plant manufacturer. Actually, we won't make the shutdown, as I understand, this year. The first samples that we send out will be done manually and in a site production lines. So, the main modifications will be done in the current production line, beginning of next year, with lowest possible shutdown.
Okay, I think we've hit the end of the Q&A.
Yes.
Yes, thank you. So if there are no further remarks, I would close today's call. Thank you very much for your attendance, and have a good day. Thank you.
Thank you.
Thank you. Bye.
Yeah. Bye.