Welcome to the CTEK Q4 2021 report. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Today, I'm pleased to present the CEO, Jon Lind, and the CFO, Mathias Sandh. Speakers, please begin.
Good morning, everybody. My name is Jon Lind, and I'm the CEO since 2013 for CTEK. With me today, I have Mathias Sandh.
Good morning, everyone. My name is Mathias Sandh. I joined the company on the 17th of January this year. Previous positions I've had is within Apollo and Apoteksgruppen.
Let's go to slide three and make some reflections from market statistics and a little bit about our position and our journey within the segment called low voltage. Low voltage, we also say 12 and 24 volt chargers. A segment that sometimes comes in the shadow of the growth in the EVSE field, but it's an important part of our business going forward. We've seen the statistics here earlier in our prospects and so on that they estimate about 3% in the premium segment. We have now during 2021 growth of a little bit about 20% in this. I think it's very clear that we continue to see good trends that drive the business forward in this segment.
It is based on continue to see more advanced technologies in different automotive in the automotive sector and also in other sectors. I think we can relate to our private and professional life here. We see more and more batteries around us. That includes the 12 and 24 volt applications where we have a suitable technology. We see a good trend here going forward. We have positioned us as number one globally in the premium segment. If we then go over to the EVSE segment that we see a lot in people talking about chargers, we normally land in a discussion around EVSE. Just to make sure that we have synchronized now, this is slide four.
If you take a look at the statistics here, we believe that in the market, if you include all segments, there will be a CAGR of around 30% in Europe going forward. In our case, we grow the business by 90% in the EVSE segment. We have been focusing on the segment, and still focusing on the destination charging. In the bottom of this page, we also show some of the different segments. On top you have the home charging, and then the destination charging, and then on the bottom, others, I mean, others we include our solution called NJORD Go , which is a portable solution that we launched last year in the Nordics. Now it's going to roll that out in other countries.
Just a quick one on our position and how we look at ourselves in the EVSE segment. As I said, focus has been in the destination segment where you find more complex, you could say, and bigger charging infrastructures that also require clear backends and software solutions that we highlight in the bottom of this page. Of course our journey here from 1997 has taken us to a worldwide presence in more than 70 countries. That helps us, of course, when we're now also going to accelerate and incorporate the EVSE products globally. We have the track record both in profitability and innovation. The sales channels are something that is important for us and the way we have structured the company.
I'm coming back to that and give you a presentation of that. Those are the two technical legs that we build our business on. If we then switch over to slide five, then you see the structure of CTEK today. If we start from right and go to left, we're coming back to again the worldwide presence and what comes with that regarding distribution capability, knowledge around the compliance side and also sales channels. That takes us to the divisions that you see there. The three divisions, Energy and Facilities, Aftermarket, and OE. If you start with OE, that is the division that's targeting the customer base connected to original equipment manufacturers in different fields. The main part of this is related to the automotive sector for us.
We started with the low voltage, the 12 and 24, and that continued to grow in that part. But now we're also tapping into and going with the EVSE products into that division and with those customers. We have the aftermarket division. Aftermarket division is a distribution setup of different type of sales channels, everything from pure retailers to omni-channel to online platforms that takes us out into 70 countries today. Interesting here is that it even started with the low voltage side, and it continued to grow. Now we're also adding relevant products in the EVSE field that is suitable for distributing through those channels. On top we have Energy and Facilities.
In energy and facility, you find the customer base connected to customers that either install, owns, or operate different charging infrastructures for chargeable vehicles. We have the main footprint is of course in Sweden, but we have now, according to our strategy and expansion going on into other countries. The main focus has been destination charging. Coming back to the split between those two technologies that we're talking about, EVSE and the low voltage, we have 82% related to low voltage and 18% in the EVSE side. Organization-wise, this is a product development company, and that means also that we have a big portion of the workforce are related to R&D, in this case, around 40%.
We have a number of central functions, of course. Sourcing, a hot topic of course, what is going on in the world and how you manage or not manage the situation out there. We have a team established close to the supply chain, and the main part of the supply chain is based in mainland China. We have been there for more than 20 years now with our team that consists of four quality product engineers, production technology managers. We have been able to manage it quite well. We have had some disturbance, of course, and we see also going forward that it will be in the picture in one way or another based on shortage of components and everything that is going on, based on the COVID situation where everything started.
We are happy with that setup right now, and how we've shown that is scalable. We're going over to slide 6. Now I already mentioned some numbers earlier here about the split between the technologies, but then we also can take a look at the different divisions and the split from a revenue standpoint. Aftermarket continued to be the biggest one with 72%. We have a fast-growing Energy and Facilities division that now is up to 17% of the revenue stream. If you look from a geographic point of view, we see a quite fair split between rest of Europe, the DACH, and the Nordics. You can see the rest there in that picture.
Another area, let us go over to slide seven. That is the ESG and the sustainability program that we have in place. We started 2017 with some KPIs and started off in a more structured way of working. Now, last year, a year and a half, we have also shaped a more clear plan connected to the headlines you see to the left there, internal footprint, logistics, sustainable products, employee spending, supply chain, risk governance, and reporting and communication. Now we have a quite detailed plan how we go forward, and we have already started a number of activities related to that and also pointed out how we look at the timeline here to the right.
I'm really proud today that we get a higher rating from EcoVadis, a company that give companies these different ratings related to the ESG position. We increased from 43 to 58 during 2021, and that took us at least to a silver medal, but we continue this journey now in a focused way going forward. If we then switch over and go to slide nine , and we give you some highlights. Already mentioned that we see a continued strong demand in all divisions, and the organic growth during Q4 was 16%, with a very strong performance on Energy & Facilities and with an increase of almost 60% compared to last year's Q4.
I said it before, but worth mentioning now we are up to about 18% of the total revenue stream is related to EVSE. The aftermarket division grew with 11%. Also important to point out that we had a disturbance in the supply chain end of September, and we could not take one part of the revenue into the books, and we shipped out the products in the beginning of October. That is in the Q4 figures. We also have announced the GM collaboration with General Motors in October jointly with GM also sent out their press release. This is jointly defined three new type of chargers that goes under the name Ultium Charging Stations.
Then we have also very proud now because we launched the CS ONE during Q3, the new charger for the 12-volt segment that takes adaptive charging to a complete new level. We got an award from Auto Express in the U.K. here and was named as best battery charger and best buy. That is of course we become very proud when we launch a new product and can get that award direct. That is some highlights, and we'll come back to more details of course. With that said, I hand over to you, Mathias.
Thank you very much. If we turn the page to slide 10 and start to look at the numbers, we can see the strongest quarter in the company history so far. As we heard from Jon Lind, we had an organic growth of 16% driven by a strong performance in Energy and Facilities division. Gross margin decreased by four percentage points to 49.2%. Due to higher logistics component cost, product mix, goods for resale cost increased by 25% during the quarter. When we come to adjusted EBITDA, the amount decreased corresponding to a margin of 8.1% versus 16.2%. The decrease was due to lower gross margin, larger share of sales from the division E&F, as well as continuing investments in the organization. This investment led to the personnel cost increase by almost 50% in the quarter.
If we go further down in the P&L, financial net amounted to SEK -0.9 million. The interest expenses offset by realized and unrealized currency derivatives. Annual interest expenses are expected to be between SEK 10 million and SEK 12 million after refinancing. Looking into the full year, we see the same trend as we see in the fourth quarter. The main variances are one-off item that was impacted by SEK 40 million. Last year, we had a positive impact of SEK 46 million. That gives us a total variance of SEK 86 million between the years. Furthermore, the financial net has been impacted by SEK 24 million due to refinancing costs related to the settlement of the previous financing. If we turn the page to 11, and we start looking into the division and start with the aftermarket.
Here we can see an increase by 11% to SEK 176 million, corresponding to 72% of the group sales for the quarter. The increase was mainly driven by online channels such as Amazon, increased market penetration, and our newly launched products. Adjusted EBITDA amounted to SEK 59 million, corresponding to a margin of 33.5%, impacted by higher price of certain components, freight costs remaining at significantly higher level than last year. We're going on to page 12. That's the original equipment division. The sales was in line with last year. We have seen a generally higher demand from a number of leading automotive manufacturers after a weaker 2020. Adjusted EBITDA increased to SEK 2 million, corresponding to a margin of 10.1%. We're going into page 13.
Finally, the Energy & Facilities division accounted for 18% of the total group sales. The organic growth was 59%, mainly driven by higher domestic sales, combined with a general higher demand for EV charger systems. Adjusted EBITDA decreased to -SEK 11 million due to increased costs for activities in new markets and product launches, as well as still relatively high share of fixed costs. We're going into page 14.
No. The cash flow.
Cash flow.
14, yeah.
14, cash flow. The cash flow from operating activities amounted during the year to SEK -32 million, mainly due to reported items affecting comparability, cost of refinancing, as well as higher inventory level to secure future deliveries. CapEx during 2021 totaled to SEK 67 million, whereof intangible CapEx amounted to SEK 52 million, corresponding to 7% of net sales and in line with recent years. Cash and cash equivalents at the end of the period amounted to SEK 50 million. Net debt ratio for the period was 2.6. With that said, I hand over to you again, Jon.
Thank you, Mathias. Let's go to page, slide 16 then and talk a little bit about the current trading. You see that we have advanced our market positions, and especially then, I would like to highlight the online channels. We see how the retailers, classic retailers also move towards more online and a omni-channel setup. We have other pure online players that also accelerate in a clear way. We have strengthened our relationships both towards end customers and a number of leading automotive manufacturers, and together with the major charge point operators. We're coming back again then to the strong demand that we see across all divisions. The global electrification, I think no one had missed that one.
We see how the investments continue in that field in a strong way. I've been referring again before to our position both in the destination charging together with the portable solutions that are both related relevant for a number of different type of use cases and are distributed into both OE and aftermarket mainly. Again, I would like to highlight the importance of understanding the low voltage movements and the trend that we see here. We saw growth during 2021 with more than 20% due to the fact that there are strong needs out there, and we have also launched new products like the CS3 and CS1 during 2021.
Also coming back to another part that is important to understand our journey here in on the investment side. For us, it's important to invest into the organization now, mainly in the R&D sector, customer support and sales. In Q4, we increased staff close to 20% to get ready for the next steps going forward midterm. We have already talked about General Motors, but some more details around that one. We have a rollout of those products now together with GM during 2022, and we will see the first reported financial numbers into the OE division during the second quarter of 2022. Another area is of course the disturbances we see in logistics and the components in the world.
This is an area that will continue to have an impact on our business the coming quarters. We may need to continue to swap out certain components to components that are available, and then increase the share of purchases made outside of our normal framework contracts with suppliers. We also see a potential need to increase the stock level to be able to supply according to the demands. Based on these cost increases, we continue with further price increases and roll them out in all divisions. We will see impact of that during Q2 2022. I go direct to slide 18 and give you an update on the strategy of CTEK midterm.
We say midterm is not two years, and it's not six years, somewhere between that. We have the three divisions in this picture, and if we start from left, we have the aftermarket strategy that is based on existing distribution setup. Of course, we look over it every year and so on and work through if we can improve and so on. For us, strategy is of course to come closer and closer to the end customers in relevant markets. What we do here is that we now go in with relevant EVSE products and distribute them through this distribution setup. On the low voltage side, we have already talked about the next generation consumer offering that we launched. The first products were launched during 2021.
We also see another segment that is growing, and that is the professional segment. A little bit about that is that doesn't matter if you have an electric car, hybrid car or a combustion-driven car today, when it goes in for service, they have a need of charging and power, set power on the 12-volt battery that you find in all these kind of cars. Of course, in the workshops, you also have a need of the EVSE chargers in one way or another. The last part of the aftermarket strategy that is to look further into other markets that we maybe have not been so focused on, and that we see that we have a growing demand in the low voltage segment.
OEM, with those relationships we have and established over the years and also developed, we continue the journey with them in low voltage segment and see also their demands going forward. On top of that, continue to move forward with the EVSE offering from CTEK towards the OEMs in different fields. E&F strategy, said before, we have established a quite good footprint in the destination charging in Sweden and growing that now. On top of that, we have started a journey for expansion into new markets like Netherlands, U.K., Germany, France and some others. That goes hand in hand also with the product development that we are doing, both for the home markets but also adapting the systems for the new markets.
For us, we have pointed that out several times. We will continue to invest in advance now in this field with the people, product development, sales, and so on, and we'll achieve the profitability from operational scale effects later on. Worth mentioning also is the fourth block here that is the M&A side. We have based our strategy and the targets mid-term on organic growth. We are not depending on M&As, but we have it quite clear on the agenda now looking for opportunities that can help us to speed up the journey or secure key in one market or a technology. When we look at the M&A strategy for CTEK, it must be a match towards the existing strategy we have from technical perspective and also marketing, et cetera.
That is on the agenda, but it's not the demand to reach our midterm targets. That was all from our side today.
Thank you.
Okay.
If you have a question for the speakers, please press zero one on your telephone keypads. Our first question comes from the line of Johan Eliason of Kepler Cheuvreux. Please go ahead.
Yeah. Hi, Johan. Hi, Mathias. I hope you can hear me well.
Yep. Good morning.
Good morning.
Good. Congratulations to good numbers after the sort of delays in Q3. I guess there's a bit of a catch-up in Q4, but would you say there are still volumes that you weren't able to supply in Q4 that have slipped now into Q1 or Q2?
No, actually not to a level worth mentioning, if I put it like that and word it like that. You have always some sort of slip between days and weeks and so on, but not on a level that we need to mention here.
Okay, good.
Yeah.
I thought it was interesting you said you would now launch the portable charger and you would go into other countries. I have been noticing that it has been difficult already to order it from, for example, Clas Ohlson here, saying sold out all the time in Sweden. Do you have the supply to take it into other countries right now?
With some products, for sure, we have various. We have different situation with different products. In some areas like new products, that has been hard to ramp up to that demand that we're seeing out there. In some product areas, we have backlogs and ramping up now the production and Njord Go is one of them.
You do expect to be able to supply bigger volumes going forward, both locally as well as into new geographies?
Yes.
Good. On the E&F front, we saw a good development here, and you mentioned local contracts as the main driver for that. I mean, here in Stockholm, we have all obviously seen ambitions by the City of Stockholm and the parking solutions they have put forward. Is Stockholm the main driver for your E&F business right now, or are there also others to mention there?
No, I would like to balance that. Of course, depending on how you are measuring it, and this is always we're coming back to that, I think especially now in the EVFC landscape that we are trying to understand all of us, you, like investors, and we as suppliers and so on. Some angles on this one. We have probably the number of chargers from CTEK. They are probably the biggest in that area. From an importance point of view going forward, we are expanding now into new cities, new segments within the destination side and also from a geographical standpoint. Our expansion footprint-wise is important for us.
Then of course, we are happy, and Stockholms Parkering, like you say in Swedish, they announced more investments and we have continued to supply to them during Q4 as well.
Good. On this OEM contract, GM, you mentioned it sort of destination chargers for the 4,000 dealers out there. You say you're working on three different products. Could you sort of mention, is it also products to the end customers of GM as well, part of that development program?
Yeah. I will try to give you a high-level description, so we sort out maybe some questions, more question marks there. There are three different levels and we talk about one base unit that has one spec and then two premium ones that has different power levels and also other features than the base unit. That of course bring a product portfolio for GM to target different customer groups like private persons, residential, commercial use, and so on. It's a spread of different potential customers for through these products then, so going forward.
Coming to the gross margin, we obviously saw it coming down below 50% here, due to cost inflation, et cetera. Do you think with the price hikes you're implementing you will be able to get it back to the 50% level? Or is the mix change with the most likely faster-growing EVSE chargers still detrimental to this margin development going forward?
You know by now probably our product portfolio, and it consists of a number of different products that also goes into different segments. Our price increases, they are different in different segments, and then you will get, of course, different effects from that. But of course, we are trying to push it in the right direction, and that is of course up. I think also we see others going the same way when it comes to price increases. So that will help us. But I'm also very humble about the world, what kind of different impacts there can be going forward. We have said that we continue our price increases, and this is the third one in 12 months.
We continue to try to compensate in the best way and in a fair and reasonable way.
I listened to ABB's EV charging Capital Markets Day the other week, and they talk about the target gross margin of 30%. Is that a reasonable assumption for your EV chargers as well? Is there any significant reason why you should have a different gross margin than that business?
I would like to go back to how we are reporting the company from a divisional point of view, because that reflects also different segments, and it's not one to one when you compare to ABB and us, then you have to look at the divisions and what kind of customer groups we are targeting. For us, it's more relevant to measure on the bottom line. That is how we answer that question when it comes to a more detailed analysis around the margin.
Okay, excellent. That's all I had for now. Thank you.
Mm-hmm. Thank you.
Our next question comes from the line of Kenneth Toll of Carnegie. Please go ahead.
Thank you. A couple of questions, please. First, on the low voltage side, you have grown sales there very nicely in the last two years. You have also launched some new products there, the CS1 and CS3. I was wondering, had there been a positive COVID effect, you think, that have really supported your sales? Are you seeing demand for your low voltage products slowing down now than when hopefully the COVID relaxes in the Western world, at least?
I'd like to see, and I will avoid speculating of course. If you look at the data we have on the low voltage side, we made a estimation based on data points from the industry when the COVID took off and so on in the electronic segments connected to these kind of products. I think we could carve out about 10% potential impact based on new behaviors and so on in the online buying pattern. That is one side.
The other side is actually that we have seen over the years that the need of higher power and more smartness into this based on new battery technologies that are applied in different vehicles like lithium-ion batteries and other things drives both the price point of chargers up in need of higher power and more sort of expansive units. We also, with CS, especially move into new segments like the outdoor, let's say, outdoor people that can carry the power with them. It's not necessary a unit for a starting battery. In that case, you can use it for other things. It's a mix of both new use cases, higher demands on existing segments, and then yes, there can be an impact from the COVID situation.
Okay. Great. Great answer. Also, you're writing in the CEO comments that you are working together with the other OEMs, not just GM, about new potential products and so on. With those customers, are you working on the low voltage products, or is it also on electric vehicle chargers, with those please?
Let us look at the history of CTEK. We started in the beginning of 2000 with targeting the OEMs with our low voltage products, and they continue to grow. Like we said before, for us, OEM, the old business and division is important to collect data from the car industry where it's going. We see a growing business there and also the need for higher power and more smartness within the low voltage segment. That continue to be a focus area for us together with the OEMs.
Then on top of that, we are parallel to that. We discuss now the EVSE side. I think you start to know us by now that we are trying to take a little bit of the approach step by step and not run everywhere. That must be a good fit also towards our profile and style, so we get a good match. First out that we could announce about that was, first of all, GM collaboration, and then we had a small volume customer, the Battista vehicle from Pininfarina. We have ongoing discussions with our existing relations and potential new relations in the EVSE segment that is, of course, a part of, as I said, the strategy we have.
Okay, I saw in the numbers that you're adding inventories now to prepare for growth. The GM deal is very large, and you will start shipping sometime during the second quarter. Do you know that you will have components enough to increase production quite significantly in the second and third quarter for GM?
Yeah. I think it's dangerous today saying that we know for sure because there are so many things out there that can have an impact. We have a clear collaboration with GM.
Mm-hmm
in those fields towards the component suppliers, actually. We are trying together to secure the volumes jointly. That of course is a strong thing when you can go hand in hand and look at the potential volumes that needs to be supplied, and then we work together looking into the supply chain.
Also, you discussed the price increases, and that you did the third one in a year recently. Do you have some problems with long order books? I'm thinking especially on the electric vehicle chargers, that maybe you take orders that are for delivery in six months or even longer. Price increases there, will it take a long time before it affects, yeah, the full product range, so to speak?
Yeah, of course, first of all, that question is highly relevant, and we have a mix of different type of contracts and how long they are valid.
Mm-hmm
I'm happy again that we have a great mix in this company between fast-moving and short, how to say, contracts with retailers and other online channels and so on, and then parallel to the more long-term contracts that takes a little bit more time to how to say, achieve a change in pricing.
Sure.
We don't report the ratio between these, but I see it as a good mix for us. We are not just have one part of it.
When you have introduced those price increases, have there been, how should I say, complaints or customers leaving, or do you believe that your competitors are doing the same thing?
I would like to go back to the two technologies that we are serving the market with, where we see the low voltage is more mature and understand and can get that to them. While we have the EVSE that everybody understands that the costs are increasing in that field for all of us that are try to source in the right way and manufacture now. At the same time, you have a lot of different players also there. They need other and want to see competitive pricing, of course. It's a little bit different from the two technologies.
Which one is hardest to get the acceptance for price increases?
Yeah. I would say that depending again on the segments, and I'm coming back to that.
Okay. Mm-hmm.
If you start with the segments, in the EVSE side, we have our Njord Go, for example, that goes into the retail chain that you can say it's equal to the low voltage that is in that segment and so on. You have one profile and can get it through. You have these bigger contracts, where you have other type of players. It's a mix of that.
Mm-hmm.
Of course, coming back to our pole position in low voltage as the market leader, it's slightly easier to come through with price increases.
Okay, great. Those were my questions. Thank you.
Our next question comes from the line of Johan Eliason of Kepler Cheuvreux. Please go ahead.
Yeah. Hi again. Just to follow up a little bit with if you have some more data for us. I think, 2020, you talked about having sold or installed some 50,000 charging stations on the EVSE side. What sort of numbers are we at today then? Obviously including portable chargers like Njord Go as well in that number.
No, I don't have the updated figures to give today. We have to come back to that if we go, if we should do so. That would be my answer today then.
That was my follow-up. Thank you.
Mm-hmm.
May I remind everyone that if you wish to ask a question, please press zero one on your telephone keypads. And there are no further questions at this time. Please go ahead, speakers.
Thank you so much. Take care.
Yeah. Thank you.