Morning, everyone, to the Q3 investor call of LION E-Mobility. It has been a while that we talked, but so I'm glad that you are here and that you are dialed in on this Friday morning. My name is Frank Schönrock. Most of you should know me. I'm supporting LION in its investor relations, and I'm glad that you are here to listen to our Q3 results and also our outlook to the year's end results. On the call are Alessio Basteri, the chairman of the supervisory board, Ian Mukherjee, as board member and investor, Jörg Peter Hahn, who is the CFO of LION Group, and also I'm glad to have Dr. Eichhorn on this call—who is the chairman of the newly founded GTAC.
We will start with you, Ian, give some preliminary remarks and open the call. Please, Ian.
Thanks, Frank. Can you hear me okay?
Yes, absolutely. We hear you loud and clear.
Good. Good. Hopefully, the first thing everyone notices is this is LION E-Mobility reporting. This has taken a while coming and evolved over the last year, and from here on, we will report at the top co-level, which is what we should do, not at the subsidiary level. We've had a lot of feedback on that, and pleased to say from here on, we will be reporting quarterly group results. We... It's been a busy year for us. We're very pleased to deliver a sales result in line with our guidance. As you know, we lost a client this year, unfortunately, otherwise, our sales result would have been higher. Michael Reich and our growing sales team have done a great job, and our client base continues to grow.
Our hope is that by the end of next year, we will have between 13 and 15 clients, up from 8-10 this year. Also, in 2022, much of our business, as many of you may know, was dependent more on one particular client, and one of the things that we're pleased with and relieved is we are diversifying, which is really important. Frank, could we go to the first slide, if that's okay? I'm sure many of you are familiar with our progress this year. Our factory in Hildburghausen did not start official production till late in the first half after it reached qualification. We were delighted with this. It's a great achievement, and we have delivered on our sales guidance this year with so much going on.
Next year, all sales are going to be our own production. There are no further SE09 inventories around, or certainly none that we know of. As usual, there's always a lot to do. As announced a few months ago, we are working with SVOLT, a cell manufacturer, to produce two different types of cells for our SE09 packs. We will be buying from them an LFP cell for the storage business and a high-energy NMC+ cell for the mobility business, which means we'll be energy and cost competitive, i.e., we will have completed a pack upgrade program. That doesn't mean to say people won't want our current pack, but we can offer better packs. Specifically, in particular, the LFP product opens up a whole new market for us in storage.
Again, the way we have structured this with SVOLT, we've been very lucky to work with them because they have made cells which are identical to the Samsung cells, so we refer to it as a drop-in replacement, which means there is minimal CapEx required on the module or pack line. At some point, going into 2025, one of the things we would like to be able to do is to offer different kinds of packs. In the stationary business, it's not always a requirement to have a flatbed-like pack. Sometimes they want something that is more box-like, and we want to be ready so we can provide to that industry in all different varieties. On immersion, I won't go into details on what our immersion is, 'cause we've talked about it many times over the last few years.
We have had good feedback from the OEM we were prototyping with. They have bench-tested our packs, and we are confident that we'll move to the next stage of prototyping, incorporating design changes, and delivering more prototype packs next year. So very happy to get that feedback. On the financial results, we are pleased that the start-up has been well-funded, and Jörg will talk more about this, and despite all the start-up costs in the first year of opening the factory, we ended EBITDA positive. In the battery EV space in the world, as I'm sure you've seen, it's been a tough year for many, with quite a few casualties that I'm sure you may have seen.... So we're pleased to say we have run the business as prudently as possible on the road to greater profitability.
If you look at our results, and again, Jörg will explain further, we are well set up for operating leverage to kick in, and our cash flow situation is good. We now have a relatively fixed cost base of approximately EUR 10 million a year. So incremental sales growth starts flowing to the bottom line, given the large amount of unused capacity that we have available. You can see on the slide here that we want to increase our IR focus and activity. We've had various comments on this, not just this year, but also last year. And the first thing that I'd point out is we are a small company with limited resources, and our focus naturally has been on operating, getting the factory and sales up and running.
But we do want to upgrade, and this year, we, you can see we've started to report at the AG level. That is a big plus, I think, for a lot of investors to save on the confusion. We have two research reports that have come out on the company to help people independently understand what may be happening. We have attended a few conferences, and of course, we distribute relevant information when we can or need to. This is still not enough, so in Q1, we will launch an upgraded IR website. This is something that we've been working on since early October and should be ready for release early in Q1. And in the next few days, we should see an upgraded IR deck sent out to all investors and added to our website.
By the way, we will also be upgrading our commercial website at LION Smart and LION Smart Production, so we can show our clients our full product range, including Gen 2 LFP, high energy, and immersion, and much more. We also want to do a capital market day. I would have liked to have done this towards the end of this year, but we're going to move it to Q1. We want to do a fuller capital markets day, with presentations by sales, also engineering, but we moved it to Q1, and we want this to be hosted, hopefully by our new CEO. Just in case anyone missed it, we've been fortunate to recruit Dr. Ulrich Eichhorn as an advisor to our board and to help us navigate the technology roadmap in front of us.
He will speak after Jörg Peter Hahn. Dr. Eichhorn has a unique perspective for us, having been former Chief Technology Officer and Head of Research and Development at VW. I'm sure I don't need to explain who VW are. Dr. Eichhorn has enormous industry experience and connectivity, both of which we are keen to take advantage of. He can work closely with our engineers here to motivate them and to help guide them as we look at what is happening and the roadmap going forward, and hopefully, he'll give us some more color when he speaks. If we go to slide nine briefly, please, Frank. Just very quickly, we put a bridge slide out so people can. Sorry, I meant, slide four, I think, Frank. The bridge slide. That's it.
So if we look at our what we've achieved this year, this is a great slide to help people understand. You can see where we were at the nine-month mark. You can see what we have booked so far in Q4, so you can see where we are year to date, but we still have just over EUR 5 million of packs to ship before year-end. So Hildburghausen is extremely busy right now, with lorries coming in and out every day. So we will be slightly north of EUR 55 million on the year-to-date sales level. We have not released any guidance yet for 2024. We want to be prudent here and wait till January to release updated guidance for the next year.
We're steadily working through putting together a multi-year business plan, which we hope we can also share details of on our capital market day. With that, Frank, I think I'd like to hand over to Jörg.
That is great, Jörg.
Hello. Hello,
You can start.
Hello.
I can hear you.
Okay.
Brilliant.
Thanks, Ian and Frank. Good morning to everyone, also from my side. Here's a brief on the financials. First, from now, as Ian stated, we will report only figures on a consolidated group basis from now on. Looking at the revenues, of the first nine months, the sales was at the beginning mainly from BMW-produced packs from stock, and then from May on, increasingly, logically from our starting production. As you may know, last year, BMW stopped its pack production in Q3 2022, but therefore, our customers accumulated BMW packs, as they were facing this production stop, and so did we. But until the end of this year, the revenue will be north of EUR 55 million, as Ian stated already. We generated also a positive EBITDA. Ian mentioned that before.
Although we had to manage the production ramp up, where we needed more employees and ensure additional operational expenses, which we could not activate, such as, for example, additional work, external workforce, necessary contractual and legal costs and so forth. Looking at the operating cash flow, nevertheless, we were cautious with our working capital, and this led to a positive operating cash flow until now. Next slide, please. Going through the P&L, restating again, so EUR 10 million revenues in Q3, but we have invoiced until now, until today, already EUR 50 million. And additional shipments in the next two weeks are coming of above EUR 5 million, which will bring us to EUR 55 million-plus at year-end. Looking at the operating income, this was mainly caused by accrued public subsidies, which were derived from former fiscal years.
Looking at the cost of material ratio went down from 87% in 2022 to 82% year to date, mainly due to our own produced packs. So therefore, we have now a higher gross profit margin with our own produced packs. With almost flat opening expenses year-over-year, we reached positive EBITDA, so you can see just above zero, so EUR 100,000. In July, we were able to start depreciation of the production investments in our production site in Hildburghausen. Starting a new loan mid of the year, our finance expenses picked up to EUR 1 million until year, until Q3 end. Next slide, please. Thank you.
Looking at the cash flow, end of last year, we had EUR 3 million cash at hand, as you can see. In the last nine months, we generated 1.1 million from operations. Our new loan was therefore solely used to finance our EUR 10 million investments in our production facilities. So it's just an offset, as you can see, and at year to date, Q3, we have reached an even higher cash level as beginning of the reporting year. So we were cash flow positive in the last nine months. Next slide, please. Thank you. This all is reflected then in the balance sheet. With our new production facility in Hildburghausen, our non-current assets increased by almost EUR 10 million. Our current liabilities increased due to the preparation and start of the production.
As we have increased our cash level, we still have an undrawn credit facility of approximately EUR 5 million, and we are prepared for what comes next. With that, I would like to pass again to, back to Frank and Ian.
Yes, thank you very much, Jörg, for your explanation and describing the numbers for Q3. I will ask you, Ian, to touch on the IR aspect. You have already mentioned in your introduction, and I think you would also like to point out some more details about this. So please.
Yeah, I think I covered a lot of it, but you're right, we should talk through this slide so people can see it. As we mentioned, the new website will be launched in Q1. We should have a new IR deck in the next couple of days. To summarize, we have—we will host a capital markets day in Q1, where we can talk through in more detail sales, clients, with client confidentiality, of course, e-engineering, roadmap, business plans, et cetera, hopefully with a new CEO. And for improved financial reporting, you can see today, this is IFRS AG reporting level. We have research coverage, which got rolled out last year, and hopefully, that will pick up. Family office roadshows, which are planned.
We hope in the new year to be busy visiting in Switzerland, possibly in Madrid. We have some requests to go down to Madrid, and also in London, and then, of course, at the next big capital markets event we can get to in Germany. So again, we, we've listened, and we are going to ramp up our, our sort of IR professionalism. Thanks, Frank.
Thank you very much, Ian, for outlining the activities on the IR side for beginning of next year, and particular in Q1, of course. And now it's my honor to open the mic in a second for Dr. Ulrich Eichhorn, who is also on this call the first time, and Dr. Eichhorn will give his perspective about the innovation strengths of LION E-Mobility AG, and also where the company stands in terms of, you know, the technical aspects of its business. We have also a slide prepared. I will bring that up, and now I'm open the microphone for Dr. Eichhorn. So you can now start, Dr. Eichhorn, your-
Yeah.
Welcome.
Thank you.
Yeah.
Thank you very much, Frank. I hope you can all hear me.
Yep.
And Ian, thank you very much for your kind introduction. Indeed, I've been in the automotive world for about, well, more than 35 years, doing research at several points. Was fulfilling a global leadership role in Ford Motor Company before Ferdinand Piëch made me an offer to come to Volkswagen and run research there, which was too good to turn down. And I've done several jobs since within the Volkswagen Group. I'd like just like to outline two of them. One is, I was for nine years the main board member and chief engineer of Bentley Motors, and later, the chief technology officer for the Volkswagen Group, which encompassed also research and all the things looking into the future.
The current platform of battery electric vehicles, which Volkswagen call MEB, the modular electricity Baukasten, or platform, or modular kit, that was created in that time. I was also responsible for Volkswagen's battery strategy, and I can bring some of that knowledge, but of course, no conflict of interest and no insider knowledge in here. As such, I was very impressed with LION E-Mobility for a number of reasons, which I will outline.
One is the flexible product based on the BMW i3 battery, obviously, which was for a long time the industry benchmark, and which was purpose-built, the first large series purpose-built one for automotive application, and which still defines the way that is done, but I will come back to that in a moment. Of course, BMW at the time also built a top-notch absolute German automotive industry standard production facility, which LION was smart enough to take over and transfer to Hildburghausen. It is very rare to see a company of this size and in this role, having such a world-class facility.
I mean, this could be standing in any automotive factory in the world, and it did. So, that is clearly one plus, fully connected, fully interlinked production system, in process quality control, and everything to the highest standard, also built with the best suppliers. A little side note, I had discussions at that time with BMW because I was, besides the Volkswagen role, also the technical director of the Association of the German Auto Industry. And as they were quite nervous with the reception of their first purpose-built all-electric vehicle, they were cutting absolutely no corners, but built an absolute top-of-the art facility there.
Of course, there still is the product that comes from this. If you ever get to Hildburghausen, it is very impressive how that works. So, that is the established product of the i3. And as Ian has already pointed out, with the new cooperation with SVOLT, there are upgrades on this in two ways. One is the NMC+ or the more traditional lithium-ion cells. But I should say here, NMC is not always NMC, nickel, manganese, cobalt. At one point, and that was when the i3 was new, we started with one third of each of those metals.
Nowadays, we are up to 95% nickel and about 3% each on the manganese and the cobalt, which especially in the case of the cobalt is a huge improvement, as cobalt is expensive on the one side and and has a reputation for being made by child labor, which is not really true, but has been reported widely. No one in the auto industry is using cobalt or lithium that comes from child labor. If you just look at the amounts that we need for that, for that stuff, it's impossible for little children to dig these out with wooden tools like somebody like sometimes shown, but that's the power of the pictures.
So, that gives LION the opportunity to have the authentic i3 pack, so to speak, then within the NMC, have the upgrade to more battery capacity, translating into more range for the car, or to replace them with the LFP, the lithium ferro-phosphate. That has made a comeback from a few years ago, because of the low energy density that these had. We had more or less written off the LFP technology, but through really high-class research, mainly happening in China, I must say, the LFP cells have made a comeback, so that the cost advantage now in most applications outweighs the loss in capacity range in a car.
There are two other important developments that I've seen since I joined Lion as a senior advisor. One is the sodium battery. Very similar story there. It's a technology that is decades old, always suffered from a lack of cycle life, how often you can charge and recharge, and from even lower energy density than LFP. But once more, that has been largely fixed so that we are in the realm now of the cost benefit, which is very significant and versus the reduced battery capacity. That comes together with something that Lion has been starting to design lately, which is the so-called Cell to Pack technology.
You've seen that in some other cars already, but here, the Cell to Pack together with the LFP and/or with the sodium allows to compensate much of the loss of capacity, because you get a much simpler internal working of the pack. And it is a big advantage to have a pack, a standard pack, which can accommodate all these various internals and cell chemistries. I'll come back to cell chemistry in a moment.
But let me deviate for a moment to the other product line, which is what you see on the bottom left of the chart, what LION calls the super cell, where round cells are packed together, and then out of those super cells, a module is built or a whole system is built. The big thing here, however, is not using of round cells. Many people do that, but it's the immersion cooling. As you all know, especially the lithium-ion batteries of the NMC type, have to be kept at a certain temperature. Every transfer of energy in and out of the cells creates some waste heat.
Not a lot, but, but significant enough, which may be enough, when you run very high power, not energy, in this case, high power, in and out of the battery. This is typically what you get if you have a performance car that does a lot of acceleration and also does a lot of deceleration, because you always want to do regenerative braking or recuperation, putting some of the kinetic energy that the car has back into the battery, rather than heating the brake discs. And, these require some sort of active cooling that goes beyond just putting a cooling plate, or, or bottom cooling. So, that's why it's called immersion cooling.
Those of you with a British background know immersion heaters, or the word, the rest of the world doesn't. So, it means the cells are fully or almost fully immersed in the coolant. And, LION has developed a pack for a large OEM manufacturer for what is, for them, a niche product, but as an electric car, wouldn't be a niche product, with very positive test results already. And, I've had several discussions with the engineering team, and they have some innovations on the coolant itself, some innovations on the coolant flow, and some innovations on how the whole thing is packed.
So, that this looks very promising, and the target application for this can be, on the one hand, battery electric vehicles that want to take a lot of power out of a comparatively small battery. On the other hand, for plug-in hybrids or hybrids, where you use the electric energy to recover the brake energy, and then use it to boost once you're out of the corner to boost the engine and help the performance. So, this is a very exciting application, so to speak, on the other end of the spectrum, of what the new cells in the i3 pack will deliver.
But back from the immersion to some more general points. So first of all, LION has obviously the facility that I talked about, the BMW i3 based battery, then in three or possibly four levels of cost and energy density or energy content. And this is not only something that can be used for the automotive field, but also for stationary power storage, even for residential. We've had some very good discussions about using the lower ends of that spectrum for even single households or for larger apartment complexes, or for, as I said before, for supporting power grids.
The stationary has, of course, the advantage that weight is not such a key issue as it is in any car application, nor is crash. You probably know that much of the battery pack or the casing in which the battery pack is built as sturdy as it is to make sure that there is no intrusion in case of a crash, which on some cells could lead to a thermal event, as they say, or even a thermal runaway. In stationary applications, obviously, that is not the case. Similar is true for trucks and buses and other special vehicles which are not run at high speeds on the open highways where crash is not such an issue.
Weight may or may not be, depending, but LION can, with the extension now of the i3-based battery, can make a clear segmentation of the individual parts of the markets and the different markets. One aspect of that is that, typically, what the truck and bus manufacturers, especially those that don't happen to be Mercedes or MAN, have volumes that are relatively small in automotive terms, meaning that it's normally not economically or sometimes not even possible to build battery packs specifically for these. When...
To say it the other way around, when we did the pack for the Volkswagen MEB, we knew we were going to be millions of cars based on that, and every car would have something like 12 packs, like 12 modules in it. So we could define whatever we wanted, and that would become the industry standards. Most other companies, especially truck and bus companies, do not have that luxury. They need to take something that is available, and you don't even get application engineering done on that if you're talking about several hundred or several thousand vehicles per year only. LION can do that. Another advantage that LION has in this context is that they have their own BMS design and engineering capacity. And I was...
When I came on board, I very, very strongly advocated keeping this, because with face to the customer, that makes it very much easier to do exactly this plot, may do an application of the i3 based system or of the immersion system to the specific demands of that customer. Let me close with a few more words on where the automotive field in general, not just the car field, is going in terms of of its power. Now, I've been engineering cars for, let's just say three decades, that doesn't make me sound so old.
There is, of course, now, the effective mandate for battery electric vehicles, with the ban of the sale of new internal combustion engines in many jurisdictions, coming in Europe in 2030 or 2035. It can then only be battery electric vehicle. There are, of course, the other contenders. There is the fuel cell car, sometimes referred to as the hydrogen car. We should not get misguided by that name. That still is an electric vehicle, but it draws its power, or I should say, part of its power, from a fuel cell, which turns hydrogen into electricity.
It still needs batteries to cover the brake energy recuperation, and it still needs batteries to cover the dynamic peaks, which a fuel cell normally cannot. Also, there is no real rush to fuel cells. You may have heard that Toyota has just more or less announced that they are getting out of this technology, although they've been backing it for a long time. So last man standing in Europe is BMW, and worldwide, only helped by Hyundai. As Hyundai usually do whatever Volkswagen and Toyota, and/or Toyota do, and Volkswagen is not doing fuel cells, at least not in serious application. We are doing research on it to be ready just in case, but no production plans.
So, fuel cells, let's say, is still in a research phase, which it has been for 50 years now. When I became head of Volkswagen Research in 2000, I had three different, fuel cell, projects. I was the first person to ever drive a fuel cell car over an alpine pass in winter, which was not entirely without, its incidents. Meaning, we, it, it failed on the way up, and we had to reheat it, because, well, bleed so far. Hybrid, of course, is a technology that, is more or less seen as a bridging technology, although there are some excellent, hybrids, these days.
Hybrids also to qualify for tax breaks or whatever else need a significant electric range in terms of when you're looking at plug-in hybrids, or they need high power in case of the of normal hybrids, let's say, of the Toyota type, for which exactly the immersion cells can deliver the high power out of a comparatively small battery, say, 15 kWh, but delivering 100 kW peak power going in and out. The other dark horse is the E-fuels or synthetic fuels. Our term used to be sun fuel for these. There is no legislative backing for that, unfortunately.
You may know that Porsche has a facility for these in Chile, and some others are looking at that, but that will never be anything but a niche, and the lawmakers through various means are more or less dictating battery electric vehicles. If we look into the batteries that are in effect needed for all those that I just mentioned, obviously in the battery electric, but also in the hybrid, in the fuel cells, and even if we did if we run internal combustion engines with e-fuels, they would still be hybridized to a lesser level, but they would still be hybridized, so batteries are needed for all of these. If we look at the batteries themselves, there is a continuous development of various sorts.
I've mentioned already the improvements in NMC, the significant improvements in LFP and in sodium. And of course, the thing that is on the horizon, but still on the horizon and not in production, is solid state. There is a host of research going on in solid state, in various sorts, even in fluoride ion or in chloride ion or in sulfur, et cetera. But these are all also still somewhere in the research phase. There is no current production worth speaking of. But we see very encouraging improvements in the performance of batteries over time, and that will really help us.
For somebody like LION, especially for LION itself, of course, all that is good news, because both the immersion cell pack and the BMW i3-derived pack will take any sort of chemistry, as long as the cells themselves are of the correct size, which can easily be done. And looking at possible future all-solid-state batteries, possibly with fluoride ion, which looks to be the leading technology there, that can easily be integrated into both sorts of packs, and will give another boost in capacity and another boost in performance, and maybe even in longevity.
The cells themselves, as I said before, the cells themselves, inside that pack, do not change the pack. However, LION can change the pack, so we can adjust the dimensions to make smaller, bigger, or otherwise adjust to the application in case. So that's my roundup of LION E-Mobility. I think it's in the right business. It has top-notch quality facility. It has a range of products that are already there, and it has other products that are going to market. I know the sales and marketing department or sales force are out with several people in several not only countries, but continents.
So it looks quite good to me, which is also why I agreed to come to LION as a senior advisor, and not to some others that I could have done. So thank you very much, and if you have any questions, and I'll hand back to Frank or to Ian.
... Thank you very much, Dr. Eichhorn, for this impressive speech. I think everyone understands and can also perceive your explanations still as an external perspective based on your vast experience in the automotive industry. So thank you very much. I think that our participants in the call will much appreciate what you have outlined. So we are done with the call, I would say, but before we start our Q&A session, I would like to hand over to Alessio for some closing remarks. Alessio, please.
Many thanks, Frank. Can you hear me?
Yes, we hear you loud, loud and clear.
Thank you so much. So I would really like to thank everybody, especially Dr. Eichhorn, for explaining and officially to join us in this journey at LION. I suggest that I will just summarize a few points to address because Ian also gave, and you all gave, all the details on our strategy and what we achieved so far. Because, I mean, what a year. You saw how much we achieved this year with the ramping up and the construction of the plant, but not only. So, let that nobody will have any doubt that this company has been completely transformed over the last 18 months. That is a fact. We are now a pack design and manufacturing company, no more only an engineering and project company.
We are really in the map of the European manufacturers of batteries, and this is something where I think all of us has to be really proud. I want to really to address one topic today. I want to make sure that the next CEO will be someone who can take the business to the next level, push both the technology forward, develop our sales further, and win OEM business, lead our people with the one strong vision. Considering the moment and the challenges we have had, this is a critical appointment, and I hope to announce something shortly. In the meantime, I really wish you and your family all the best wishes for Christmas and the beginning of a new year, and we will catch up soon and do the best of calling you one. Thank you.
Thank you very much, Alessio, for your closing remarks, and now we can also start with the Q&A session. We received a couple of questions in the questionnaire here, so I will cover those, and then I will hand over to the ones in the call so that you can speak up live. So the first one is, how have the sales numbers developed in North America in 2023? Maybe, Ian, you would like to answer that question.
Yeah, I think, broadly speaking, most of our sales came out of Europe in 2023, so North America has been lower. And I think, you may have caught the reason I gave is, in 2022, we had a particularly large customer, which was great, but at the same time, you know, it's. You don't want to have too lumpy a business. So that has diversified and gone down, and much of our sales in 2023 have come out of Europe. Again, part of the reason is, we had storage kick in. We are currently not doing any storage business in North America. Our storage business is European. There's a lot of storage business to do, and most importantly, we need to bring out the key storage product, which is LFP.
Storage companies do want NMC, but the demand for LFP is much greater 'cause of the longer cycle life, a better thermal stability, and also it's cheaper. So that, that's the weapon to penetrate storage. We are looking at storage in the US. We very much are trying to develop what we'd call a lead customer. I think once you've got one lead customer there, it makes it easier. And for storage in the US, LFP is really going to be key. So I hope that answers the question on sort of North American sales. I think it will come back, but it won't be as dominant as it was before, 'cause we had that very big North American client, and the North American client, we believe, will continue to be a client of ours.
They have built their own production facility, but one of the things we can offer many people, our second source of supply. There is, as I'm sure you know, huge nervousness about supply, cell supply, pack supply from people, because if they can't get the packs, their end product, they can't make the end product. So, the former, the big North American customer from 2022 is still here in smaller size in 2023, and we believe will be back in 2024, maybe depending on their sales, of course, back with us ordering packs as a second source of supply, which we think is a great niche for us as well, for people who are already buying packs from maybe even one of the big Chinese manufacturers.
We can say, "Do you want a second source of supply in Europe?" Hope that answers that, Frank.
Yeah, I believe so. Thank you very much, Ian. If there are any additional questions regarding this, happy to answer those. There's another question, and Alessio already touched on this, is about the continuation in terms of the general management for 2024. So is there anything you would like to add regarding the search of a new CEO?
No, I think addressed [CEO]. Sorry, I think Alessio addressed it. But what I would say, and it is very obvious to myself, Jörg, Dr. Eichhorn, and Alessio, is we have a great team. You know, there are people we know very well in both Hildburghausen and in Munich, who are really, really key individuals that make sure our business continues day after day. So over time, we've built up, you know, key members of the team, some of which you, if you've been an investor for a while, you'll know, like Michael Geppert, who is our CTO, and the go-to person for technology at LION on almost everything, and somebody Dr. Eichhorn will interact with probably, you know, very frequently going forward.
Michael Reich, who's head of sales, Jörg, who's looking after our financials, Felix, who is very key in Hildburghausen, along with Andreas Vogt. These people are, you know, a great part of the team. So we have, you know, business goes on, and, but we do need a good leader in the business, and we need somebody who can help take us forward to the next level. We're now a EUR 50 million-60 million a year pack manufacturer at the end of this year, and we want to be much, much bigger than that. And to be bigger than that, we need the right plan, and we need to be winning more and more client business, and I think it's not just, you know, i3 pack business.
I think it's other business we can win, and we want to win it from an OEM. We're here in Germany. We're gonna have, we have, and will have, great connectivity to some of the biggest car companies in the world, and our ambition would be to win, in due course, win something from one of these companies.
Thank you, Ian, for this. We have now a couple of questions regarding the financials, so I would address these to Jörg, potentially. The first one is, could you outline, Jörg, why the tax is positive? So the tax is positive. Why is this?
Can you hear me?
Yeah.
Yeah, the tax positive, this comes from IFRS adjustments that you regularly do if you have development. So it's mainly deferred taxes.
Okay, clear enough. Can you please split the revenue for the nine months in volume and price? I don't think that we can-
No
... that we can, due to competitive reasons-
We cannot.
... but maybe you can,
We not
Well, support this.
Well, the last nine months, well, Q3, Q4, Q1, Q3, Q4, no, Q1, Q2, Q3, we have roughly EUR 10 million, but I cannot give a more detailed information on that. And-
Frank, maybe, Frank, maybe I can answer this. We have, from our sales point of view, we've been told not to broadcast average pack prices for the obvious reason that we talk to a variety of different clients, and, depending on a number of things, some may pay higher than what the average is, some may pay lower than what the average is, but it is not something that you want necessarily to be transparent from a commercial point of view.
Thank you for the additional explanation, Ian. Then we have another question: Could you please explain how sales will be, can be affected by destocking and production ramp-up when you told us last quarter that production is currently in stock because customers were cautious to buy batteries?
Yeah, I'm not sure I fully understand... I'm not sure I fully understand the question. So, if we look at the last sort of year, the noise around it is, it's not too complicated. The noise around it is production of i3 packs stopped in August last year, so there was clearly nervousness among clients that they could get supply for their vehicles, so there was a lot of stocking, if you like, of packs that took place. That would have been from BMW. Some of it was through us, to people from BMW, but all these packs obviously came from BMW.
So there was, people wanted to make sure they had a buffer of supply, so they could keep making their vehicles or whatever it is that they were making, and people knew that there would be no new production until perhaps the second half of this year. So again, just to be clear, we only started selling our own packs, really in the second half of this year. And all sales from September of last year up to
May
the middle of this year, we're coming from inventory, and clients would have had to stock up their own inventory, or they had to buy what was available through us, or we of course don't have the money to have huge, huge amounts of inventory, or whatever might be left over at BMW. Pretty much all of that is clear. We don't know of anybody now with any pack inventory left. So if people want demand going forward, they really will have to come to us and buy i3 packs, should they need more i3 packs. And so I think that's what we talk about when there was, you know, a destocking this year, where with client active— There were two problems.
One is, if client demand had been much higher at the beginning of the year, we wouldn't have been able to sell any more packs because we really, we didn't have access, 'cause we didn't start manufacturing till the second half of the year. So I hope that answers the question, Frank. I'm not 100% sure, but hopefully that's in the right direction.
I think so, yes. So if the person feels that there are some questions left, the person can still ask a question. I have two more questions we received now in written form, but then I would like to ask, you know, the participants. There are two participants already raised their hands, so I will then jump to this one. So, can you please... No, sorry, I'm mixing up. Is it right to assume that the operating income in 2024 is unlikely to be as high as in 2023? I don't think that we give already guidance for 2024, but this was a question. Jörg, do you want to answer that question or confirm what I've just said?
Right now, I cannot give you more information on that. I mean, we are, we have not restated and informed about 2024. So, we don't—we cannot do this right now-
Yep.
At the moment.
Perfect. I guess so.
Yeah.
So let's open the Q&A session also for the people in the call who want to speak up. There was one from Mr. Franco Ferrari. So I will open your microphone, and then you can ask your question, if that is okay. So, Mr. Ferrari, you are now unmuted. Maybe the question is already answered by by what we have already said. There was another question from Mr. Jacobi. Oh, no.
Hello? Hello.
Mr. Ferrari.
Can you hear me?
Please.
Yeah, sorry. Sorry, I was on mute. So good morning, gentlemen, and congratulations for the good numbers, increasing transparency, and obviously, investor relations activity. I'm Franco Ferrari from Mirabaud Securities, and thank you for taking my questions. I have three, if I may, and I will ask them one by one. The first one is on quarterly progression of the top line, and you gave us pretty much a lot of granularity about the Q4. Can you perhaps give us a little bit more granularity on comparison on the Q4 of last year, please?
Maybe, maybe I jump in. So, last year, as, as, you have seen, we had, in, in Q3, revenues of around EUR 46 million, so we were much higher than, than this year. That means, in Q4 last year, we had less revenue that we will foresee this year.
Okay. Perhaps if I may continue with a question on growth margin. Q3 has been the first consolidated quarter for this year, and my calculation give a growth margin around 16%, 16.5%, which compares to the last consolidated numbers in 2022, around 14%. So there is an incremental trend on the growth margin. Can you elaborate a little bit more? You mentioned, Jörg, the own manufacturing take-up, which impacted positively on the costs.
Yes.
Perhaps you can add something more on this Volt contract for next year.
Well, as Volt contract, I cannot explain more on that. I mean, it's... As we, as Ian already said, we have, when we- when Volt will kick in, and even before that, when we can sell less expensive products, we assume that the revenues will increase. But on the other side, I mean, that will- but I mean, this is a wash, so you get more products, more material at a lower price, but you also have, doesn't change the gross margin, but a lot.
Comparing last year to this year, as I said before, I mean, there is a trend that we definitely see, and as we are selling less and less of the BMW-produced packs, and can kick in our supply chain efforts, we can reduce our cost of material further in this year, and it shows already.
Can I, you know, maybe I can just have a go at that as well, Frank, for-
Sure.
Mr. Ferrari. It's to compare margins in 2022 and 2023, it's a bit disingenuous because in 2022 we sold packs that BMW made. As we move into 2023, we did some of the packs that BMW made, and then more packs that we made. We anticipate, I think we, Jörg stated it, a gross margin of around 18%. And so to be clear, if you do the math on it, if we have about an 18% gross margin, as our sales revenues go up and our costs are relatively fixed, I think, I gave them earlier on, you can see them in Jörg's numbers. We have, say, EUR 10 million that we have to pay out a year.
So as sales pick up, certainly over the next 100 million of sales, there's very little—a 100 million additional in sales, whenever that comes, there is very little additional money that needs to be spent. We may need a few more people at the plant. So you could then back out a net margin from that, and you can see that the net margin should increase as sales pick up from here. Another way of putting it is we are operating at approximately breakeven at the moment. On the gross margin level, I wouldn't want to predict how that develops, but certainly if we get better pricing from suppliers like SVOLT, that is very useful. But then on the other hand, we may pass some of that on directly to clients in lower pack prices, so we can increase our volumes.
I don't know if that works for you, Mr. Ferrari, but hopefully it's a good explanation.
Yes, thank you very much.
There was a third question, Mr. Ferrari.
Exactly.
Very quickly, yeah.
Exactly. Here I'm stepping in for my analyst, Sonia. And two part of the questions, the first one on the other operating income. Jörg, you mentioned that these public subsidies, so these are EUR 1.8 million for the first nine months, are they sustainable going forward?
No, they are not. Actually, it's from former fiscal years.
Okay. And-
Okay, thank you very much. If that is okay, Mr. Ferrari, I will unmute you now and move to another question from-
Thank you.
Mr. Jacobi, then. Thank you, Mr. Ferrari. In one second, Mr. Jacobi's microphones should be unmuted. Please, Mr. Jacobi.
Yes, can you hear me?
Yes, we can hear you.
Oh, that's great. Good morning, everybody, and thank you for having my questions. Congratulations from mine for the good numbers as well, especially the positive EBITDA in this very special year. That's a really good sign. You mentioned in your report, there is extraordinary costs included in the EBITDA, and I'd like to know how big they are, as my first question.
Okay, I will take over. So, as I mentioned, the operating costs come mainly from additional, for example, additional workforce, as I said, and necessary contractual and legal costs for setting up the business. And, as we were trying to be very fast in establishing the production, we needed to get a team very fast together, and this normally leads to higher costs. From extraordinary costs, from a total cost side, I cannot give you more information than that, as we don't release this information.
If you're comparing last year with this year, even the operating costs were very similar. I assume there will be progress in the next years.
... Okay. And then I get a couple of questions regarding the revenues, which nicely went up in fourth quarter. Can we expect the fourth quarter to be something like the new normal revenue, or has there been a special demand in the fourth quarter? And how did you manage to deliver the demand, because well, has the production went up? Is there a second shift in the facility maybe, or have you had so big stocks in the storage so that you could deliver them now? How did it work?
So maybe I'll take that, Frank. So in terms of how did we deliver it, well, we have a pretty big facility, and the facility can produce, you know, in euro value, something like EUR 400 million of packs a year. So to deliver 25 in a quarter is really not particularly demanding. We don't need more shifts for that. We believe that, with our current employee setup, we probably comfortably could deliver around EUR 100 million of packs a year. We would not look to add a second shift, until you know, volumes were reliably higher than that. But it is something we will do if volumes are reliably higher than that. In the other question was on materials. We have a pretty automated plant, by the way.
So, you know, the shift number is not particularly high. It's well automated, BMW standard, plant. So, you know, no problem in delivering. In terms of materials, the key one are the cells, and I think, I don't know if we've stated it before, but we have a relationship with BMW to get hold of cells, as you would. So when we need cells, we buy the cells direct from BMW. So the materials are easy to get hold of, certainly on the cell side, certainly this year. And producing the packs, it was not particularly difficult. I think in turn, you asked the question, we cannot comment on future guidance at this stage.
Being a listed company, we have to be a little bit careful, and we would ad hoc our guidance at the right time through the right legal channels. So we don't, we have not submitted what our sales would be for next year. I would say, I would hope that they will be higher than the sales for this year without stating too much. But in terms of how that will pan out, don't know. You know, how did we set what happened in Q4? I think that there are a couple of things, actually. One is, you know, certainly we had clients that were interested, which is great, both one in North America and others in Europe and in, can I say, Northeastern Europe. So that was good.
Then the last point I was gonna make is that which is interesting is cell prices are coming lower. You probably have seen the progress of commodities, lithium, et cetera. Cell prices are trending lower, which means that pack prices have come down. Pack prices this year have come down, I would say, at least 10%. And our revenues reflect that. So our revenues, had pack prices been the same, and we'd sold the same number of packs, et cetera, then our revenues would be a bit higher. But we welcome lower cell and lower pack prices because we believe that stimulates the end market. And I think one of our hopes is that as these raw material prices come down, and we get lower cell prices coming into 2024, that will stimulate demand further.
Okay, thank you. And just my last question is, has there been something like a typical production monthly, which was roughly the same every month, or did you raise production for the fourth quarter while there was the big demand?
We will produce according... Well, I think if I understand your question, we'll produce according to demand. However, as we have really only been producing six months, I would hate to use anything as normal. I think it'll take at least another six months or longer to say what we think is normal. However, I'd overlay that our technology is not static. Next year, my hope is that in as we go through Q1, certainly in Q2, we will start delivering Gen 2 prototypes to a number of our customers. This is either LFP or high-energy NMC, and as we deliver those, we hope we will build up our forward order book. But at the moment, there is nothing normal, you know, given where we are.
Great. Thank you, and good luck for 2024.
Thank you very much.
Thank you. We have another question or another questions from Christian Sandherr. I will unmute your mic. Please, Mr. Sandherr, continue.
... Hi, good morning, guys. Most of my questions have actually been answered, but maybe a follow-up, just to clarify. With Q4, you're gonna book some EUR 25 million in sales. I don't know, gross margin, gross profit is gonna be around EUR 4 million, which should put you as a, on a quarterly basis in the profitable range. Would you agree with the assumptions that on a full year basis, that should put you at a net income positive range?
I would not comment on that, Christian Sandherr. I think we will, we don't have this information yet. I could calculate, but these are assumptions, and I don't want to do that right now.
Okay. Then a second one, for 2024, would you say that LFP, you would expect LFP to be a stronger sales driver compared to mobility?
I think, I think that's a good assumption. I think that, you know, we have nothing in LFP, and we know that a huge chunk of the storage market is LFP. So, you know, I don't want to say the high energy is not as big a priority, but LFP is a very big focus for us because we are feeling the demand from customers when we have the LFP products. So our plan is, as I said, to have prototypes for LFP, and we'll update at the time in Q2. And then, hope to go into series for the LFP in, in either late Q3, Q4 of next year. That's our, our plan.
Okay, great. Thanks. That would already be it.
Thank you very much, Mr. Sandherr, for your question. I will unmute your, your mic again. In terms of LFP, there's a question here in the chat, so maybe I can add this now, Ian. So LFP could reach NMC miles range, question mark. So LFP could be competitive with NMC on big cars, question mark. Is that a fair assumption?
No, no, it's not. Our LFP product will be aimed at storage. The high-energy NMC will be aimed at mobility, and that will have a longer range than the current i3 pack. That's the point of it. We offer an upgraded, high-energy NMC, i3 pack. The LFP product will be squarely aimed at the storage market.
Thank you for this. So we have also covered that question. I think also given that we are running out of time, so by almost 20 minutes now, I think we can close the call for today, and also close the calls for this year. Thank you very much. If there are still questions open, I have to check, then we will answer those questions in writing to every stakeholder, of course, because we cannot disclose any information to a single stakeholder. You understand that, and this leads me also to a final comment in terms of if you send us questions, you can always do so. We are happy to answer. However, we cannot do this on a one-on-one basis with a single investor. We will collect all the questions for these calls we have on a quarterly basis.
I'm more than happy to forward all your questions we received via email to the board, and then we will collect all questions, and we'll then answer those in these investor calls we have created just for only also for answering questions. So I hope you understand that. So that's it for today and for this year. Thank you very much all for your trust in to LION, and that you are still, and that you're maintaining an investor to us. We much appreciate that. I wish you a wonderful Christmas and a wonderful Christmas break. Hope you stay healthy. Hopefully, it will be a peaceful Christmas, and we will see or hear us for the next investor call. So thank you very much for your intention, and goodbye.