Hi everyone, and welcome to this webcast where we present Kempower financial results for the first quarter 2025. My name is Paula Savonen. I am the VP of Communications at Kempower and the host today. Today we have three presenters. We have our CEO, Tomi Ristimäki, our CFO, Jukka Kainulainen, and today we have also Monil Malhotra, our President for North America, straight from North Carolina, our Durham office. Nice to have you with us, Monil. You can ask questions anytime during the presentation by typing the question in the Q&A box on the screen, and we take all the questions in the end. I hope you enjoy the presentations, and now over to Tomi.
Welcome from my side as well for Kempower Q1 webcast. Strong sales execution. I think the best figure for Q1 is definitely the 32% growth in order intake. Reminding you also that it was the second continuous quarter that our order intake is bigger than revenue, which is really pointing in the growth. I think the book-to-bill ratio is the biggest indicator of growth and continuous good work. Revenue growth was modest, and the operative EBIT was in line with the expectations, like we mentioned already before the Q1. Revenue growth modest is, of course, affected by the low order backlog that was meant for the first quarter in the beginning of the year.
The record quarter for North America, I think we will hear more on that from Monil, but order intake in North America grew by 300%, and that was our record quarter ever, ever in order intake. Looking at the DC charging market, strong indicators, and I will mention them more in my upcoming slides, but strong growth in PEV registrations. Really the kind of the basic demand for the personal car charging market demand is still affected by customers' inventory levels. Like we have gone many times here and talking the story, we expect the market to recover during the second half of 2025. The DC charging market, significant growth in battery electric vehicle registrations in both of our main target continents. This is a positive indicator for industry growth in the near future.
Really, the January to February figure that we have now gotten the reports already from Europe is 31% growth, and North America the whole Q1 plus 11%. Even we look at the underlying market and the needs, and when the battery electric vehicle is growing, we see the weakness of market in the value chain position of DC charging manufacturers because we have the large amount of chargers sold in 2022-2023 that built up in customers' inventories. When there was slow installation due to grid connection availability and permitting, all the things affecting to that, that got quite big and customers are still installing the devices both in 2023.
DC charging points installations grew significantly in both Europe and North America, and this growth is pointing out that these inventories are going away, but it's also pointing out that the underlying market, the real demand comes really from the installations, which is now largely in the public charging segment serving the personal car segment is something that is coming from the inventories quite in a big significant way in big percentages. This is actually what we have been talking about, the inventory issue. Market for commercial vehicle charging, which is the growth segment and the new segment, this continues to grow, and it is already a significant market to us with big wins in there. Of course that's an early market that then you have more mature, still fast growth market.
In personal car charging, what you can see from the amount of DC charging installations growing is something that will continue us. Reminding you also that our vision in there and also the market studies on actually the market is that the commercial vehicle charging will become the biggest charging segment, especially for us in fast charging markets by 2030. In the short term, we expect the market to recover during the second half. Positive things from sales development. Onboarding 11 new customers during the first quarter of 2025. We also saw actually the impact of the new customer acquisition on 24 affecting already order intake. This is something that is a key. How many important customers, significant customers you have in your clientele is actually affecting your future figure. This number growing is also an indicator for the future growth.
New customer acquisition from 2024 starting to show in the order intake. Order intake grew, especially if we look at the growth market rest of the Europe market, so outside of the Nordics. Nordics grew more than 50%. I would highlight countries being Germany, France, Austria, and Italy. Order intake in North America grew more than 300%. The commercial vehicle segment continues to generate significant share of revenue. When we're looking even at 2024, which many people see as a decline marker for DC charging, the commercial vehicle segment grew already last year as well. Now I hand the presentation to Monil. Please go ahead, Monil.
Thank you, Tomi, and good afternoon to everybody. It's an absolute pleasure for me to be here today speaking to all of you and to give an update on Q1 for North America. Very happy to report, as Tomi said, Q1 was a record quarter in terms of order intake for us in North America. We came in at EUR 10.3 million in orders. If you remember, Q4 of last year was a record quarter as well, and Q1 was even better than Q4. Very solid momentum off to a great start in North America, and our growth from compared to the same time last year is just over 300%. This growth, it's not just limited to one sector or one region. We see this growth across the board in North America.
We're seeing it in Canada, we're seeing it in the US, and we see this growth in our two most important market segments, which is the private vehicle segment as well as the commercial vehicle segment. Very proud to team up with a customer with Revel, where we have our chargers in the ground in key strategic cities like San Francisco, New York City. We recently won a very strategic order with a public transit organization, and we had a key win with a school bus fleet. We're seeing this momentum across the board in various segments. What's very exciting is, yes, we have a solid Q1, but our sales pipeline or our sales funnel for the future also continues to grow significantly. In fact, we see significant growth in our pipeline from the same time last year.
As excited as we are about the current quarter, we're very energized and optimistic about the future as well. You go to the next one, please, Tomi. A quick update on the market. As Tomi said, we see double-digit growth in the battery electric vehicle registration, and that's obviously driving the electrification market. What we are now seeing is that this growth is not just because of incentives and funding, this growth is due to public sentiment moving very favorably moving towards electric vehicles. We see this especially with Gen X and the millennials, where it's not so much about the financials or the incentives, it's more about the values and the ability to green our planet.
In fact, if you look at the bottom right-hand side of our slide, there's a snippet of an article which states that last year, Florida was the state which had the second most sales of electric vehicles, second only after California. This growth in Florida was not because of incentives, it wasn't because of funding, but it was driven mainly by the millennials and the Gen X showing a very favorable trend towards electrification. Speaking of funding, yes, there is a temporary slowdown in the federal funding structure, but we still have plenty of state-level funding that's available. There are some examples on this slide about New York, just under one program, having almost just over EUR 28 million of state-level funding to expand the charging infrastructure. California has a similar structure where one program has over EUR 50 million in funding available to expand the charging infrastructure.
These are just a couple of programs. There are many such state-level programs across multiple states that still exist. Even with that, if you look at the demand, the ratio of electric vehicles in North America to the charger, that ratio today is still extremely high. That tells us there is still a very strong demand, a very strong appetite to expand the electrification infrastructure in North America, Canada, and the U.S. Very, very favorable tailwind for us. There is also the Environmental Protection Agency or the EPA requirements to reduce the greenhouse emissions from trucks and heavy vehicles. There is a mandate to reduce those emissions by 2028 and 2032, which will continue to drive this very important commercial and heavy vehicle segment towards electrification, which is again a major tailwind for us.
If you look at Canada, it is a market that's growing really, really fast, and we continue to outperform the market in Canada. Overall, if I look at what's happening in North America, you look at the East Coast with New York and the Eastern States, extremely fast-paced towards electrification. We have a similar story on the West Coast with California. In the South, we've got states like Texas and Florida that are very big for us for electrification. You have the big country of Canada, which is growing very, very rapidly with some very strong mandates towards electrification. Despite some temporary hiccups and slowdowns, overall, the tailwinds in this marketplace far outweigh some of the headwinds that we have, and it shows a very exciting future for our business and for electrification in general. You go to the next one, please.
I wanted to wrap up my update with just a quick section on tariffs and the potential impact on our business. As you're aware, we have full-scale, full-fledged operations in Europe and in North America, along with local supply chains. This gives us the flexibility to leverage our global brand, our global technology, but yet reap the benefits of a local supply chain. Since we have local supply chains set up in North America, at this point, the impact of tariffs on our business is relatively insignificant. Obviously, we continue to monitor the situation and we remain alert to any changes that we might have to make as we move forward. At this time, we feel we are very well positioned with our local supply chain, with our production facilities that are in North America to mitigate any potential headwinds that the tariffs might cause.
Overall, a very solid picture, a very solid Q1, and very excited about the future here in North America. Tomi, I turn it back to you.
Thank you, Monil. A view on technology and technological leadership. After a review period, we introduced Kempower's enhanced charging solutions with the slogan, "More power, more plugs, and more data." This ties also to our previous capital markets days where I said that the main point for us is more power and more plugs. This is really to go up in power. This is coming from the requirements from personal cars. The powers are going up. You have a larger amount of vehicles. You need larger systems, more flexibility. Part of the story is the trucks electrifying, which actually gets the charging powers up. Not alone the CCS charging, which is our standard, and then looking at the MCS, these power units are supporting both.
We can do also mixed systems, having MCS and CCS from the same system and having up to 12 charging points now in a single power. These updates are designed to meet the growing demands for efficient and scalable power solutions in various EV charging applications. Now off to Jukka.
Thank you, Tomi. Let's go to quarter one financials. Yeah, of course, it was great to see we had a really strong sales execution, which was visible in our order intake. Like Tomi mentioned, we were growing the orders more than 30% in the quarter. That's a really good start for the year. Of course, modest revenue growth was impacting our financials for the quarter. We're looking at our profitability. Operative EBIT was EUR 7.3 million negative for the quarter. Positive highlights, our fixed cost developments, EUR 26.2 million fixed cost for the quarter. It was EUR 4 million lower than quarter one 2024. Good progress there. Our savings program we started last year, H2, are now really visible in our numbers as well. Regarding operating cash flow, it was negative by EUR 7.5 million for the quarter.
At the same time, of course, the improved profitability impacted positively on the cash flow, even though it was negative. At the same time, our accounts receivable were increasing at the end of the quarter, which impacted negatively on the cash flow as well. Positive highlight also when looking at our inventory levels, second quarter in a row, we were able to reduce our inventory amounts on the balance sheet more than EUR 5 million. Now it is actually on lowest level since the fourth quarter 2023. Overall, good progress definitely on the sales side, slow start revenue-wise, EBIT-wise during the quarter one. Let's look a little bit more on the intake for the quarter. Like I mentioned, 32% growth during the quarter. Good start in that sense.
What was also positive regarding the orders, the new customers we acquired during the last year are now really visible also in our orders. Most of the orders in quarter one came from the new customers as the excess inventory still prevails on our market. Regarding the revenue, we started actually the year with quite a low order backlog for quarter one. That low order backlog for the quarter one impacted then on the revenue growth, which was quite modest. Revenue growth for the quarter was 2%. When we exclude the foreign exchange impact, the growth was 4%. Revenue grew in the Nordics and the rest of the world regions during the quarter one. One highlight, of course, good to mention, even though the modest revenue growth for the quarter, this was the first quarter, our revenue grew since the quarter four 2023.
About the profitability and cash flow development, like I mentioned, that impact, modest revenue growth impacted negatively on the operative EBIT and operating cash flow. When looking at operative EBIT, like I mentioned, it was EUR 7.3 million negative, but positive impact, of course, coming from the cost savings measures we implemented during 2023. Actually, we also had a positive impact on the reduction of expected credit loss allowances, meaning that we were able to collect effectively the overdue receivables from the customers. That had altogether around EUR 1.4 million positive impact for the quarter. Operating cash flow negative by EUR 7.5 million, even though improved year by year through the improved profitability, but at the same time impacted negatively by increased trade receivables. I already mentioned also about the good progress in inventories.
If we look at the amount of capital we have been able to release from the inventories, actually we have been reducing EUR 16 million amount of inventory on the balance sheet from the peak value in 2024. That is quite a good result overall. Also, when looking at our liquidity, which includes our cash balances around EUR 50 million and existing facilities, what we have, we are at the moment at the end of the quarter in the EUR 108 million. Actually our liquidity improved year on year, and it is definitely on the strong level at the moment. Regarding our outlook, like we guided in connection on the financial statements, we guide the revenue to grow between 10%-30% for the full year. We expect operative EBIT to improve significantly during the year 2024.
Regarding financial targets, unchanged, we target the revenue of EUR 750 million regarding years 2026 up to 2028. In the same time frame, operative EBIT margin between 10%-15%. Thank you.
Thanks, Jukka. Thanks, Jukka, thanks, Tomi, and thank you, Monil. We have received many questions, and you can still keep them coming. Monil, we start with North America. There is a question from Teemu Seppänen. Nice to finally meet you. What, in your view, are Kempower's strengths in the U.S. market, and what changes, if any, would you implement to Kempower's strategy concerning the U.S. market and market share?
First of all, very nice to meet you as well. Glad to be here. As far as Kempower's strengths, we are in a very unique position. This market is big. It is growing at a fast pace at double digit. We feel we have very clear competitive differentiators, whether it is our hardware, whether it is our software, our capabilities to be close to the customer and service them. We have tremendous strengths to be successful going forward. Obviously, it is a relatively new market, as you are aware. There is a lot of work still to be done, and we need to continuously evolve to meet the needs of our customers.
As far as immediate changes, I think it is just the way I would describe it is sharpening our focus on our two main segments, which is the private vehicle segment, the commercial segment, and making sure that we partner with the major players in these segments, and also make sure that our products are tailor-made for meeting the needs of the U.S. market. I think from a technology standpoint and a sales coverage standpoint, we want to make sure that we are absolutely close with our customers and that we are leaders in the marketplace. Those are the two main focus areas right now for us to continue to improve our market participation and bring value to our customers.
Thanks, Monil. I think we stay with you in North America. The next question goes also to you. Okay, you mentioned that there is a strong market growth appetite, but at the same time, there is currently slight hiccup in the market due to politics. What does that mean in your contexts? Postponed orders, less tenders. What are the biggest hurdles in winning new customers in North America? How do you see the competition? A big question.
That is a big question, and I can put up my entire 75-slide strategy deck to answer this, but I'll try to keep it concise. Absolutely right. There are some disruptions in the marketplace or some hiccups, as you said, but we have to keep things in perspective. This is a very big market in North America, U.S. and Canada. It is a market that is under-penetrated, and the demand far exceeds the supply today. If you look at the impact of some of the policies, and I'm assuming you're referring to the federal funding, the funding typically is low to mid-single digit of the total % of market spend. The impact, the way we see it today, is only to about 5% of the total addressable market. Is there a slight hiccup? Sure. Does that mean that the growth potential is reduced?
Absolutely not, because we still have the other 95% of the market to play with. Even with this 5%, it's still evolving. It's not like the 5% has completely gone. It's slowed down a little bit, but there's plenty out there for us to go help our customers with, number one. Number two, as far as what the competition is doing, it's good and bad. It's bad that you have a lot of competitors, but it's also very good because it shows that it's a healthy market. People want to get in. Everybody sees the potential of growth. It's an optimistic view. We see a lot of competitors in the marketplace, and we have to work very, very hard. The entire management team is constantly looking at our strategy, our technology, whether it's hardware, software, and a market penetration strategy as well.
Plenty of tactics in play there, but we are on the lookout for any changes to the policies, but we still feel we have a very big portion of the market to play in and to be successful in by bringing value to our customers.
Thank you, Monil. Let's take a third question concerning North America before we move to other topics. This is actually both about North America, especially about Canada. Maybe I give this to Monil, and maybe you want to comment after. Regarding the North American market, as you build your products in the U.S., when you export them to your customers in Canada, the Canadian tariffs will kick in. How big is that impact both in monetary terms and in terms of demand? Are your contracts made so that you can charge those extra tariffs to your Canadian customers? Monil, maybe you can comment first.
Yeah, yeah, I can start it off. Absolutely right. There is obviously the news about the tariff implication between Canada and the U.S., but we have multiple ways to tackle that at this point. Number one, we are a global company. While we manufacture in the U.S., we also manufacture, as you know, in Europe. We have the ability to take advantage of our two-continent manufacturing approach and see what best suits the needs of our customer from a pricing standpoint, as well as a technology standpoint, number one. Number two, even within the U.S., yes, while there is stock, it is still a fluid situation. It is not fully firmed out. It is still pretty fluid. We are monitoring those changes, but we feel very confident between the manufacturing in Europe and North America and between the products that are actually impacted.
We feel very good about our ability to mitigate those risks between Canada and the U.S.
Thank you, Monil.
Yeah, I could maybe comment on, yes, we have been serving some Canadian customers with the Europe factory, but that's not because of the tariffs. There is also the tendency that they don't want to buy at the moment something manufactured in the U.S., but we are in a position where we can serve the customers from both continents. This is definitely a positive in this, that you have the flexibility.
Yes. I take another question regarding tariffs to continue. This is about the tariffs between the U.S. and China. How do the high tariffs between the U.S. and China affect you and the DC charging market? Tomi, do you want to start?
I could first say that we are probably one of the lowest in the DC charging market when we look at our supply chain direct impact from China, which is lower than 4%. This is what any when you look at the indirect, of course, you have components which are based, but we do not see at the moment a big effect. We are analyzing this all the time, but it is not definitely a significant impact we see today.
Thank you, Tomi. The next question goes to you, Jukka. It's about the gross margin. Your gross margin remained roughly on last year's level. Do you think that the high market competition will impact your gross margins later in 2025, or was the impact already reflected in the first quarter's gross margin?
Really good question. This is, of course, we do not guide the gross margin. We guided the EBIT, which we expect to improve significantly for the year. It is right that there is some price pressure on the market at the moment. We will tackle it the best possible way when looking at our unit cost and productivity we can bring over there and pricing-wise as well. There is a pressure ongoing at the market at this moment.
Yeah, it's always when you have also even short-term happenings that create more competition in the market. This is definitely something that it is, but I would say not visible in Q1 figures.
Yes, thank you. We take a question on orders, company-level orders. Kempower's orders haven't grown basically at all in three years. While market has grown, an Italian competitor seems to get new deals every month. What is your solution to turning things around and start growing orders in an impactful way? Thank you.
I would want to see the Italian orders as well. I do not get this information, but this is true. The base market, if you look at DC charging installations, grew by 30%, but so did Kempower equipment installations last year. It is the same thing, but you do not see it in the sales because the goods are coming from the inventory. Definitely there are new deals and we have been publishing new customers. Definitely positive movement on the market. I think I concluded the CEO statement having that we have, let's say, a slightly positive view on the year. Yeah, it is actually something that affects all the DC charging manufacturers' sales. If you see a lot of installations happening, it is the same thing. The sales was happening in 2023 and previous year, and this is actually a market-affecting situation, not only Kempower.
Thank you, Tomi. There is a question about the permitting process and the grid connections. Are the permitting process and grid connections still a problem? Will they limit significant upticks in installations going forward?
I think it was never changing. There was no slowdown there except the component shortage times after COVID. Let's say the demand was higher than the utilities or the grid companies were able to provide. We see actually that getting better because you have growth in installations. That is actually a figure that you can see the effect. We have again a double-digit growth in the DC charging installations, which means you are getting the grid connections. It is continuous. All throughout last year, the growth was 30%. It is getting better. That is actually the fact that you can actually state from these figures.
Thank you, Tomi. Next one goes to Jukka. Did you book any quality costs in the first quarter like you did in the year 2024?
Yeah, of course we did. We booked every quarter, every month. It was EUR 4.4 million during quarter one. We booked it as a parity cost in the P&L.
Thank you, Jukka. Monil, back to you in North America. What percentage of total costs come from the United States? Maybe Jukka.
I can comment that we hadn't made public, but we have around 100 people in the U.S. at the moment. That is what I can comment.
Thank you. There is also a question about the maximum turnover per year, which could be achieved at the U.S. factory. Maybe Monil, you can talk about the scale-up and the possibilities there.
Oh, absolutely. We're gearing up to grow faster than the market. You've seen the market growth projections, which are expected to grow. You've seen the guidance. The market is growing 10% just in terms of beds. We want to far outpace this market and make sure that our production, as well as our coverage of the market, goes beyond what the market growth is. We have some plans in place to continue to expand, but do it in a disciplined manner so we are in lockstep with the market growth.
The question is also about the manufacturing. We do not see any problem with our current facilities to actually meet our mid-term financial targets.
Thank you, Tomi. There is a question about this OMAL deal. The OMAL deal was announced earlier. Have there been any similar discussions with other GCC countries, such as the Kingdom of Saudi Arabia? How does it look like?
I think the Middle East is a potential new market in the future. When our main focus in the strategy is Europe and North America, we are still doing, and like you mentioned also in capital markets there, we are doing business development within the Asian countries. Maybe the single distributor contract in OMAL is not the biggest news there, but we have significant rollouts in India. We have significant rollouts in Malaysia. These are the markets we are working. We have chargers installed in Saudi Arabia, in UAE, in Turkey, if you look at different areas there. It is for us a business development area, and we are really monitoring what we need to do and when. Mostly today, it is a business through our distributors, value-added resellers, and really to learn about the market.
Basically, if you look at the east side of the globe, only our own legal entity is actually in Australia.
Thank you, Tomi. Jukka, there is another question about the warranty costs. Warranty costs have been at the elevated level. What have you done to lower the costs? When can we expect to see positive results?
Yeah, we do quite a lot. Actually, it's not the quality cost, actually. We call it warranty cost, and it includes also we do quite a lot also the kind of preventive repairs for our customers. They get better performance to their systems, to their offerings. That's kind of outside the normal obligations. That's a, of course, we constantly work on that, including supply quality, how to improve that. We have lots of potential to improve it. This is a new industry. It's a new technology. In this kind of industry, you usually have relatively higher warranty cost than in other industries. It's definitely something we are working heavily on and will get the good results in the future.
Thank you, Jukka.
Comparability to warranty cost. It's funny that you compare the current sales to the warranty cost in %-wise. You should compare the like one year before or one year before that. That's actually affecting. Like Jukka said, there's also kind of things that we are operating that it's not something is broken. We are making, let's say, actions that prevent the things of getting broken if we find a problem or something like this. This is the total picture.
Thank you. We have a question about, and I'm just checking in. We have time for two more questions. This is about the ecosystem roadmap. The ecosystem roadmap mentions AI solutions for 2026. Can you provide more details at this stage about what this entails? Is it about integrating AI with the charge services or something else?
If you look at machine learning algorithms, we have had that in the chart side before people started talking about AI this wide. This is something on the analytics side that we are working on. Definitely, as we have something to publish, we will.
Yes. We take the last question, and Monil, this goes to you. How do you see the North American market developing in the near future, and how do you see Kempower's position in the market?
Absolutely. The market, as we talked about, continues to evolve, continues to grow on both the segments, private vehicle, where we see this positive sentiment. The big growth is also going to come from the commercial vehicle segment. As we move forward, we see both those segments continue to expand because once again, the demand far exceeds the supply in this field. The next five years are going to be, at least from my standpoint, very fast-paced. We need to just continue to be close to our customers, continue to make sure that as their needs evolve, our products and our services and our software continues to evolve as well so that we, again, continue to add value and increase our market presence in North America.
Thanks, Monil. Thank you, everyone, for joining Friday afternoon. Before you go and leave for any weekend activities you may have, we want to show you a video of the latest solution that actually Tomi talked about, more plugs, more power. I hope to see you soon and enjoy driving and charging. Bye.