Welcome to CTEK Q2 report 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to the speaker, CEO Henrik Fagrenius, and CFO Thom Mathisen. Please go ahead.
Thank you very much, and welcome everybody to today's call. Today's presenter is me, Henrik Fagrenius, and I also have Thom Mathisen, CFO at CTEK. Just a brief description of CTEK for the new participants. We were founded by inventor, Bengt Wahlqvist, 25 years ago in Vikmanshyttan in Dalarna. We are developing, designing and testing all our products in Sweden, and we have research centers in Vikmanshyttan, Sweden, Norrköping, Sweden, and Shenzhen, China. We have mainly two technologies, which one is EVSE, that is, chargers for electrical cars and hybrids, and Low Voltage , which is mainly 12 volts, up to 48 volts chargers to some different segments. Last year, we did a slight reorganization, and we have now two divisions.
One is called Professional, where we serve our big B2B customers, both Client Brand for Low Voltage and EVSE for big parking operators and others. And then we have our consumer segment, where we sell to consumers and to retailers. So let's talk about Q2 results. The revenue ended up in SEK 212 million, a gross margin of almost 53%, coming to an adjusted EBITDA of SEK 15 million. We had an operating cash flow of SEK 22 million, and the EVSE share of the net sales was 21%, and our net debt is 2x. I'm very happy to see that we are growing the company for the first time in one and a half year. We have an organic growth of 6%.
We increased the EBITDA margin by 5.7 % to 7.1%. And we see a very strong increase in the Consumer Division . We grow with 26%, and this is due to focus sales activities, and we also have launched the CS ONE in Australia with a very positive result. When we come to the EVSE, we see some slight positive trends for the EVSE in North America, though from very low levels. And we delivered our first CC3 to customers in the U.K. in July with a very positive outcome. If we talk a little bit more about the very important segment of Low Voltage, this is the fourth consecutive quarter that we have growth. And as I mentioned before, we are strengthening the sales organization in the Consumer Division. We will continue to do so.
We see a stable sales in the Client Brand, and as I mentioned, we are launching new products. With that, we are also shifting a bit of our focus now when we have finished the CC3 EVSE charger, so we will focus more on Low Voltage development going forward. With that, I leave a word to you, Thom.
Thank you, Henrik. So, some number crunching for quarter two. We had the overall key financials for quarter two. I just highlight here, as Henrik already mentioned, the net sales growth of 6%, adjusted for currency. We have an increase in gross margin, mainly coming from another mix, with higher share of the high-margin Low Voltage segment. Those two together means also an increased EBITDA, from SEK 3 million comparable quarter last year to SEK 50 million this quarter. Driven by volumes and mix, but also lower OpEx than the same quarter last year. I continue then to some words from the divisions.
The consumer division, that is our largest division, having around 65% of our volumes, where we did a high increase compared to last same quarter last year, 26% increase. With that follows, of course, higher EBITDA number-wise, but also slightly higher margin-wise, 38.4% versus 26.1% last year. So in the graph on the lower side of the slide, you can see that we have stable and good EBITDA levels, and also quarter on quarter, an increase over the last one and a half year. Going over the Professional Division , here the standing for around 40% of the volumes. We can see also that the share of EVSE is somewhat higher than last quarter. It's 56% and 44% from Low Voltage.
The lower volumes come from the EVSE part, and mainly actually from the big North American customer, where we had higher volumes comparable quarter last year. On the lower hand side, you can see that we have now stabilized the volumes in this division. We have a slight decrease in the margin, but going, we know now that the cost base is under control. We now need the volumes to grow the margins and turn them to the positive numbers. Cash flow and CapEx. I would say cash flow is, of course, a main topic for us to continue to work with. We continue now to create both positive operating cash flow, but also operate or positive net cash flow after investments. That is really important.
We have the higher continuous EBITDA levels and the reduced net debt, leading us to improved net debt ratio, now down to two compared to 3.4 x same quarter last year. As you see on the graph below, we are still on the same level of CapEx compared to net sales, 9%, as we had full year last year. We are working both with more efficient CapEx and we have also finalized some large CapEx projects. So, we've continued to work on that, reduce consultants, and going down somewhat in order to create more cash flow. And at the same time, also, of course, working with working capital, as we have done before, to create even more positive cash.
With that, I think I leave back to you, Henrik.
Thank you, Thom. Just as a summary then, I'm very happy to see that we are having organic growth in the quarter and with increased profitability. Also very important is that we are continuing to lower our net debt ratio, now reaching two, and of course, the strong increase in the consumer division with the increased focus on sales, and also launching products in Australia. Then we see some slight positive EVSE trends. We see a very good welcome of our now new CC3 products now when we are installing it at customer, and see a big interest on that. We are continuing to follow our strategy. As I mentioned last call, we have left phase one and are now coming into phase two, where we will focus on organic growth.
We are continuing to strengthen our sales organization, especially in the consumer side, and we are increasing the focus on development of new products in Low Voltage , and we look positive on the rollout of the new EVSE charger, CC3. So with that, I hand it back to the operator.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Sofia Sörling from Carnegie Investment Bank. Please go ahead.
Yes, thank you. Sofia here from Carnegie. Hello, Henrik and Thom. Can you hear me?
Yes.
Yes.
Hello.
Great.
Good morning.
Yes, a couple of questions from my side. So first, just to touch upon this, reduced spend on R&D, what implication on new product launches will this entail? And also, how do you see the, is it necessary for you to actually launch new products within Low Voltage and EVSE, ahead or into 2025? My first question.
Yep, I can take that one. We have now finalized some of the developments of CC3, where we have had external consultants involved. So the reduction is mainly that we do not need those external consultants any longer, and it is very important for us to still have efforts in the R&D, of course. We are an innovative company, and we live off premium products, so we need to be ahead, both in EVSE and in Low Voltage . But we have had very high concentration now to get the CC3 out, and now we free up some resources internally to refocus a little bit more on the Low Voltage side as well.
Okay.
Then we will focus then on building up the sales organization.
All right. Maybe you can also, you mentioned the increased focus on sales organization within the Consumer Division. Should we interpret that you will focus on the sales organization for Low Voltage, or is it both Low Voltage and EVSE? Fair or mainly EVSE?
Yeah. The consumer division is selling actually both Low Voltage and EVSE products, but mainly Low Voltage . And, we will concentrate to build up the consumer division sales organization because we have a lot of countries where we haven't got the penetration that we wish that we have. When it comes to the pure EVSE for parking operators, et cetera, I think we have the right sized organization to be able to grow there as well, because it's more of a B2B business with large key accounts. So we don't need that amount of feet on the streets to grow.
Okay. And just a question on the strong sales in Low Voltage, as you mentioned, the CS ONE in Australia, is this trend, if you can give some more details on the demand trend during the quarter, and if it's something that you expect will continue into Q3? And maybe in addition to that, if you see other positive trends within Low Voltage and also in other type of countries or anything that's distinguished from this sales in Australia.
Yeah. We have, of course, quite a soft comparing quarter when entering into Q2. But we see that the strong, this is the fourth consecutive quarter that we have growth in consumer.
Mm.
See a positive trend. We, we will not guide, because it is a very turbulent world, but of course, we are working to continue that trend. There are a lot of white spots for us, in Europe, but also in the rest of the world. With extra focus and extra seats on the street, I foresee that we can grow the Low Voltage further.
Okay. But would you say is the main drivers between this quite significant sales in Low Voltage then?
The underlying market is not growing as such, so much. So it's more that we are capturing market shares and, with the, of course, effort in launching new products and also entering into new countries, then that is, I would say, the... And more, it's hard work.
All right. Okay. Thank you. And, yeah, let's see. So let's go over to the EVSE sales instead. You mentioned actually that, compared to previous same period last year, and deliveries within North America was reduced, but you still also mentioned that you recognize some positive trends also in North America, and you see positive trends in the-
Yeah
Nordics. Could you give some more details on what you actually see, and-
Yeah
What drives this?
When it comes to North America, the comparing quarter last year was actually quite strong. But then after that, we have had very weak quarter. So, the positive trend I'm referring to is if you look from Q4 , Q1 , the three last quarters, we see a slightly uptake in North America, but it is, of course-
very low levels. When we come to the Nordic and Europe, it is a lot of activities. Still, it is uncertainties due to the, to the interest level, et cetera, for new building, building, projects, et cetera. But we see that there are more activity in the market than it was previously. And also. Now, when we have delivered our first CC3 units to, to customers in the UK, we get a very positive, positive, feedback on that, both on the product and also from the support levels that we can give to our customers.
All right. Okay, thank you very much. No more question from my side.
Thank you, Sofia.
The next question comes from Johan Eliason from Kepler Cheuvreux. Please go ahead.
Yeah. Hi, this is Johan at Kepler Cheuvreux. Just a curious question about the sales growth again, and following up on that. You say, focused sales activities. I mean, it sounds like the sales are not focused otherwise, but is it just that you have hired more sales guys, or have you initiated some sort of discounting program, or what's the focused sales activities actually?
Yeah, it is hard work, but it's also a more efficient way of working. We have a new Head of Consumer Division since beginning of this year, Fredrik Uhrbom, coming from the retail industry, with a vast experience in how to work. So we see a more focused work. We're working closer together with the marketing department, connecting those two departments, and we have also increased the sales force in especially Germany, and we will continue to do that in strategic countries.
Okay. So that sounds like some potential for it to continue. You have previously talked about your retailers restocking after the cold winter, starting in December, if I remember correctly, sort of. Well, how do you see the developments of the retailer inventories during this quarter and beginning versus the end, for example?
It is hard to have hard figures, facts, and figures on that one. But we see our online customers, and we see that it is increasing. We are actually gaining market share at companies like Amazon, et cetera.
Okay, good. And then on the cost items, good gross profit, et cetera, but at least that's my expectations. Your overhead costs were a little bit higher, and I noticed your staff costs have increased sequentially, and it's basically flat year-over-year. Is this what you're now planning for? I mean, you mentioned the higher sales in Germany, for example. Are you expecting these costs to be flat to up going forward, and that the volumes will help you to improve the EBITDA margin further? Or how should we understand these components going forward?
Good question, Johan. I'll take it first. So, first of all, I think we have very well followed our program that we launched end of 2022, with the reduction, as we said, in OpEx, and we are following that trend. Actually now on group level, we have lower OpEx in Q2 versus Q2 last year, where we had done the majority of the cost out activities. So, what we can say there is that we don't expect any large further cost reductions, but we work continuously with optimizing.
So what Henrik mentioned before, we need to have some more feet on the ground in consumer to grow that area, and then we take out cost in, in, primarily consultants in, in R&D, et cetera, to make sure that OpEx, CapEx levels stay on a stable level and, and not come into a cost problem, again, so to say. And then, of course, what you are saying is also true. We think we have done, as I said, most of the cost reduction activities, but we now need also to grow top line, and that will, of course, help us to have the right OpEx level compared to net sales.
That goes, LD, we can see that already now, and we can also see that we in EBFC, if we have the right sized organization, we think, but we have higher volumes, we will also, let's say, increase the EBITDA level by that.
Having a scaling effect, yeah.
Yeah, scaling effect. Yes, yes.
Yeah. Good, and just to be clear on this R&D, you mentioned you've developed now the CC3. That means your R&D costs should go down. Is that primarily on the CapEx side or OpEx side or both?
It's a little bit of both, I would say. Of course, quite, I will not give the exact percentage, but it's a lot of CapEx now that we can end having the CC3, the most of the things developed for that new product. So... But for us, we look not only on OpEx, CapEx, but it, the most important is to create positive cash flow. So having out, reducing the net cash out, is our primarily goal.
Okay, understood. Thank you very much.
Thank you.
Thank you.
The next question comes from Mattias Ehrenborg, from Redeye. Please go ahead.
Yes, hello, Henrik and Thom. Mattias Ehrenborg here from Redeye. I think most of my questions have been answered already, but I'm curious to hear just with regards to the very strong Low Voltage sales here, is there any customer, any account or anything like that, that stands out in the quarter with regards to this high level of sales? Or maybe any months in the quarter that stands out, or has it been in line with your own expectations, you think?
It has been in line with our own expectation. It's always varies a little bit between months. And I would say we have a very diversified customer base in Low Voltage, so it is growth overall. What I mentioned is that we, we see an uptake in Australia due to the launch of the CS1 there. I would say that is probably the, the one thing that is sticking out. Otherwise, it's growth all over.
Yeah, maybe we can say DACH also-
Yeah, yeah.
Where we have increased sales force.
Yeah. In Germany, especially where we have increased the sales force, we see a positive effect of that.
Mm. Okay. That sounds fair. Do you think there is any risk that the strong sales in Australia, for instance, could have, I don't know, maybe not a backlash effect, but that it could come on the behalf of the Q3 sales? Or is it still fair to think that consecutive-
I mean-
Another consecutive quarter with growth is fair?
Yeah. We, we are not guiding, and we are working hard to, of course, make the trend to continue. It's always hard to say in a specific countries, but we are working hard on having also the Q5 as growth.
Okay, that's good. You also mentioned in the report that you're seeing positive signals in the North American market, and possibly also the big North American customer. Could you just elaborate a bit on these signals or tendencies?
It is from very low levels, but we see that the model that we are still having. That we're still supplying to them, they start to have some demand for that. It is on low levels, but we see that it's at least moving in the right direction.
Understood. And, also final for me, regarding the timing of the launch of the CC3 in the UK market, you mentioned second half of this year, is it fair to say think that Q4 is more reasonable than Q3?
We, yeah, to see volumes, we have, as I mentioned, installed the first units as customers now in July, and we will continue, but the ramp up will be end Q3, Q4.
Mm. Okay. Excellent. That was all for me. Thanks. Thank you very much for taking my questions.
Thank you.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you all for attending this call, and looking forward to hear you again in a quarter. Thank you very much, and have a nice day.
Thank you.