Welcome to the Energy Save Q1 2025 presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers 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 speakers: CFO Helena Wachtmeister and Deputy CEO Yibo Zhao. Please go ahead.
Thank you very much, and welcome to this first interim report for the year 2025 for Energy Save. We have, for this quarter, seen a strong recovery, and seeing that cost discipline, among other investments, puts us in a very good position going into the peak season. Deputy CEO Yibo will now summarize the quarter for us.
Thank you very much, Helena. As Helena said, we had a strong quarter, but also we had cost discipline to put us in the good position for when the high season starts. This quarter, we had net sales, which increased by 39% to SEK 53.9 million. Meanwhile, we had a strong cost discipline to decrease our cost by 32% compared to the previous quarter due to the efficient cost-saving program that we had. This resulted that we were able to increase our EBIT margin from -20.2% to -7.0%. What we have ahead of us is a low season. The next coming season, we have a low season, and this quarter, we will have significantly lower turnover due to temporary stock build-up on the markets. We have done investments that are expected to generate increased growth once the high season starts in the second half year.
We implemented interim reports in English, but also...
Also new KPIs. This, of course, both the English reports and the new KPIs are to increase transparency both to our Swedish and to non-Swedish-speaking investors. New KPIs in this interim report will cover a number of solar heat pumps, which we have seen an interest in before, but also the sales split between OEM sales, that is, sales outside of the ES brand, other brands, so OEM sales, and sales on the ES brand only. The reason for this being an important KPI is that we have OEM sales as a growing important part of our business strategy, even though we have had it in our business strategy and in our business since the start of the company, really.
Some of the key milestones we were able to achieve in the first quarter, we probably received the ISO 9001 and 14001 certification that will enable the possibilities for us, or open up more opportunities for us to focus on getting more businesses in our OEM business. We signed a new distributor in the Swiss market with Philippe Michel, and we introduced the first ES propane unit for the commercial system during ISH in Frankfurt. We sold, we passed 30,000 heat pumps in the quarter.
Yes, thank you very much, Yibo. I will go a bit more into depth on the figures here, starting with the turnover, revenue, and net sales, where we see an increase in the quarter. Total revenue increased by 31% to SEK 57.1 million, and net sales increased, just like Yibo said, by 39% to SEK 53.9 million. You can also see in the graph that there is actually a long-term growth trend. This is something that we have accomplished, even though we have had a very challenging market climate in these past two years. We are very positive that this trend will allow us to continue on the growth path after this coming quarter. Like Yibo said, we expect a lower turnover in the second quarter of the year, but then we expect a recovery to pick up again in the high season of 2025.
I also want to add that the reason for the net sales increase here is mainly an increase in direct deliveries and an increase in net sales. A bit more history then on the EBIT margin. We saw improved margins both on gross margin in the quarter, increasing from 26.3% to 28.4%. Also, just like Yibo said, on the EBIT margin, increasing from -20% to -7%. Here, we also see a 12, approximately 12 months' positive trend during this time. This is, of course, the savings program kicking in and our profitability slowly returning. Even here, we will expect the growth path and the positive trend that we see here to improve, particularly during the second half of this year and into the peak season, which is typically fall. A bit about OpEx and cash flow.
The savings program has, just like Yibo said, it has increased by 32% from the closest quarter, the one previous to this one, Q4 in 2024, but it has decreased by 21% from the comparison quarter, from SEK 13.9 million to just short of SEK 11 million in this quarter. We also saw an increase, actually, in personnel costs from SEK 8.3 million to SEK 9.7 million. This is mainly due to two things. We were still, in the beginning of the last year, adding to our organizational structure, but also, in some cases, we have converted consultants into staff when they could not be, we could not save that competence. We instead lifted it into the company, and that's also improving cost. Cash flow for this quarter was SEK -23.5 million operative cash flow.
This is compared to the previous quarter last year of SEK 56.6 million. This is a hard comparison number, and I will start by explaining that number that was very largely affected by sales, sales of financial assets in the quarter. I think it was about SEK 75 million-SEK 76 million in sales of financial assets being the main driver for that figure. In this quarter, we are affected mainly by inventory increase. This might seem strange since we have a large inventory already, but we need to stock up some of the propane machines that have been developed during the year, especially moving into the peak season sales. That has been done during the quarter, main effect on operative cash flow. Also, we have seen an increase in receivables in this quarter affecting cash flow.
During last year, we introduced a new propane sales series for a new propane platform. Due to that, we need to stock up before the high season starts. That is very important for us to get onto our focus market. Those units are the enabler to get on this market. That is why we have a negative operating cash flow.
Exactly. Thank you. Thank you for the clarification there. A bit on sales split here on net sales, starting by business area. We saw an increase here in residential property that is really driving sales. You will see in the coming slides that driving sales for this quarter and for the past couple of quarters is residential property, is OEM sales, and it is sales in Europe outside of Scandinavia. In residential property, we have seen an increase by 40% in this quarter, from SEK 35.4 million to SEK 49.5 million in this quarter. Commercial property, on the other hand, has decreased by 40%, even if the decrease is on a low level to start with, decreased from SEK 3.2 million to approximately SEK 2 million.
This is really a part of an effect also of product development focus that has been largely on the residential property side. Now, when we are also seeing a bit increased in commercial property demand and, yeah, in general interest, we also have a large focus on that area in product development. Just like Yibo mentioned previously, we did introduce on a fair during the quarter the R290, that is propane machines for commercial property in some effect.
We do see a technology shift when it comes to commercial units. The commercial units are getting from an older technology to a new technology, which is why we want to risk balance our company to keep good control over cost and/or cash flow. That is the reason we still offer the old technology to the customer. Meanwhile, we need to invest in the new technology to be ready for when the market flips to the new technology.
Right. This is also a market split where new focus markets, not new markets, but for us, new focus markets will be interested in the propane technology mainly. Other markets will still have an interest in the older coolants, the other coolants. That is, yeah, exactly. Here we see the new KPIs then that we start to report on in this quarter. We can see in the split between ES sales and sales into OEM brands, we can see that we have strong sales in OEM, and this is why we are shifting market focus a bit. OEM sales in the quarter increased by 45% to SEK 45.9 million compared to SEK 31.6 million in the previous, in the comparison quarter. We saw an increase also on the ES brand sales by 12% to SEK 8 million from SEK 7.2 million.
Now, this shift that we have been making during the last year, year and a half, maybe two years even, if you start with the planning stage, has included a lot of important, a lot of important steps that are aimed towards increasing sales on ES brand once again. We have developed propane heat pumps, which will be the focus market preferred technology. We have also found distributors on these focus markets and began collaboration with them. A couple of added markets during the past year was, for instance, Germany, Italy, Switzerland, and Belgium. All of these are countries where you want to see propane mainly. We also have been applying for and been receiving certifications for these machines, allowing customers on the respective national markets to be granted subsidies.
All of these combined, we believe will be driving ES sales in the next step, which is fall, mainly peak season of this year.
Yeah. This was being able to be enabled due to the investment we've done in the digital platform, the new product propane platform. This, we can carry this both opportunity on the ES side, but also on the strong OEM side.
Exactly. Lastly, on the net sales split, geographical split between Scandinavia and Europe outside of Scandinavia, there is very little sales really in Scandinavia this year, 93% drop from SEK 40 million to only SEK 1 million in turnover. This is because Scandinavia and the Scandinavian sales have for a long time mainly been driven by Denmark. Denmark is one of these historically strong markets for us that has really backed down on demand. We do expect eventually this market to return, but now and in the short term, especially on the European market, focus is on some markets that are expected to grow quicker than the rest. Some of these focus markets I mentioned before, and that is also the reason why we see an increase in sales in Europe outside of Scandinavia by 114% to SEK 52.9 million, making out 98% of net sales in this quarter.
During this quarter, we have sold 1,566 heat pumps. Also, here you can see an improving trend, and you can also see the difference in amount of number of heat pumps sold when focus is on villa mainly. Of course, the larger machines are more value-dense and more expensive. You will see lower numbers, and a high villa count will show larger numbers of heat pumps. Just like Yibo said, in this quarter, we did pass 30,000 sold units since the start of the company in 2009.
Okay. Moving forward, we do see a surge in uncertainties in the short term, but we see also market recovery. We see trends of market recovery on the second half year. The next upcoming quarter, we will have lower sales due to low season. There are some political uncertainties, such as subsidy programs in Europe. Some of the different markets have reached different far when it comes to the subsidy programs. We do also see that geopolitical concerns, the trade relations in the world at the moment, that gives some concerns. We do not see anything affect our supply chain due to the trade situation. The stock build-up, as Helena mentioned before, when it comes to the Danish market, is a very good example. The Danish market has been overstocked in our distribution chain.
We see that in many of our markets, that's started to get lightened up. Still, the market comes out from a situation where the market was completely emptied by heat pumps. They stocked up and they rushed to stock up, and then the demand stopped. Right now, we're coming out from an overstock situation, but our customers are getting more cautious. This is actually a very good opportunity because this is for the market. Meanwhile, ES, we have quite good stock, mixing of traditional units, but also the new propane units. If we look forward here, what is going to upcome when it comes to when we enter our high season, we see that there are many positives, such as lower interest and inflation that will make it easier for the end customer to take a decision to invest or install a heat pump.
We do also see that there are trends of improved balance between the pricing of electricity and also natural gas. It's a good positive sign. There are many positive signs when it comes to political initiatives, the subsidy that is being paid out in some of our focus markets. What we have made the investments now with all the new platforms, with the new digital investments, that improves our offer. Also, our ISO certification, we have been able to build a slim, efficient scale-up company that can also improve our offer, can improve our ability to deliver to the OEM segment. Our effort, this will generate effect later.
Very good, very good summary. I would also like to add here that this is really the same expectations that we have mentioned before. We are repeating our short perspective, high season perspective expectations. Given that this coming quarter, the second one of the year, will be one with lower turnover, we still do expect the same development to kick in at the end of the year.
A summary, we have a good position moving forward. We delivered the growth despite we're in a very challenging market. We're very cost-aware. It has been strong for us to keep high cost awareness, high cost discipline in order to, meanwhile, build a slim organization to scale up when the market turns. That is already giving effect. We improved our EBIT margin during this challenging situation. We're making strategic investment in both the product portfolio, our offer portfolio, that puts us in a very good position as soon as the market turns.
Yes. Thank you very much, Yibo. That concludes our presentation of the interim report, and we are now ready to take questions.
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.
Hi, Laura here from ABG.
Hi, Laura.
You wrote that you're expecting.
Hi. You wrote in your report that you're expecting a weaker Q2. Just to clarify, do you mean a weaker quarter- over- quarter or year- over- year as you had quite tough comps last year?
Yeah. I wish that I meant year- over- year, but I don't. I mean, compared to this quarter, the one that we have been reporting now.
Okay. Thank you for the clarification. You initiated a cost savings program, which you said decreased costs. Can you give some examples of these initiatives, and do you expect costs to continue to decrease in the coming quarters, or have you reached some sort of steady state now?
Yes, absolutely. No, we do expect them to continue to increase a bit. The cost, the savings program is mainly, it's several parts. The largest one being a cut on consultant cost, which is both in a natural way, going out of the Aira project where we have reduced consultant intensity, but also in the overall general business. This is a large part. Another large part is our review or over we have been looking over cost for facilities, both in warehouse and in office space. This, we are seeing effects from now, but we believe we will see even more effects in the coming year. We expect that the facility savings will be on an annual basis, approximately SEK 2 million.
Okay. Thank you. Very clear. When you refer to the high season in the second part of the year, are you expecting your sales to resolve that first quarter now, i.e., higher sales through OEM partnerships rather than through your ES brand, or do you expect your new offering to balance this split, or is it too early to see the effects of this?
There was a bit of noise in the middle there, but I think you asked if sales will increase in OEM sales or in ES sales or in both. That's the question, right?
Exactly.
Yeah. So, we really do expect that you will please jump in if I miss something, but I think that the sales are likely to increase both on the ES side going into the high season with this new offer, with the new distributors on focus markets that we have built up relation with, but also on the OEM side.
Yes. We have gone through a quarter where we did some intense market activities to train our distributors about our new heat pump introduction. Meanwhile, of course, in talking to them on the existing traditional portfolio. In the upcoming quarter, we have indications from our distributor that they want to have a stock balance. They want to keep their stock low due to cautiousness. Here, we can deliver from our warehouse quite quickly as soon as we see the opportunities chance.
Yeah. Yeah, exactly. We are seeing this pattern of delayed orders, really. The waiting, the heat pump pieces.
Yes. Okay. Very clear. Thank you. If we just talk a little about the Aira agreement, as you know, you gave the range of SEK 200 million-SEK 400 million during the first two years. Firstly, how many quarters do you have left in which you expect to receive further revenues from this agreement? Will you communicate the expected revenues beyond these two years, and what do you expect?
I think you fell off a little bit there, but I think you will see if we're in line with the expectations that we have discussed before to SEK 200 million. We are in line with that, what we are expected. Aira are having ordered to us. Aira is doing quite successful on their markets. We can also quite see quite many good positive reviews on the Aira's installation on different internet forums. We're helping Aira, actually helping working closely with Aira to progress.
I can also add to that that the commercial phase of the Aira agreement was started in the beginning of 2024. The estimation that we have given is for the full year 2024, the full year 2025, approximately. That is the first two years of the four-year contract. Of course, we will communicate our expectations for the following period of that once we have a grasp of it.
Okay. Do you know what to expect for the remaining two years?
As of now, we don't specifically know what to expect, but as soon as we do, we will communicate those numbers also.
Okay. Thank you. You talked a little bit about this during the end of your presentation, but sales in Scandinavia are continually subdued. What's your long-term view of sales in Scandinavia? You mentioned Denmark, but what about Sweden?
Yeah. Sweden and Norway are still strategic. It's still strategic to us to roll out new products in. I can't find the word right now that we usually use for this, but we usually make Sweden and Norway proof-of-concept markets where we start because these are so heat pump technology dense markets already. If we succeed with the concept here, we can easily roll it out in Europe and in other markets also as well. This is still the strategy for these markets, but we don't have a specific strategy to have a high growth in these markets mainly. There we see more focus markets that we have mentioned that are expected to drive sales and to drive a heat pump increase in the European market.
Exactly. We're building our technology. We're building the proof of concept in the Swedish market. Our core market is the other part of Europe.
Okay. Great. My last one is just on your factory in Turkey. What's the status? How is that developing?
The factory is developing according to a plan, from what I understand. Start of production at some point during 2026, roughly. Yeah, on schedule is my understanding.
Okay. Great. That was all from me.
Thank you very much, Laura.
There are no more phone questions at this time. I hand the conference back to the speakers for any written questions and closing comments.
Thank you very much. We will continue with the written questions that we have received. I will start off with a question regarding, let's see, Aira once again here. Perhaps this question has been answered, not sure. The question is anyway, how much did you sell to Aira in the first quarter, and how do you look upon the rest of the year? I think that maybe most of you know this, but we do not really report on specific sales to specific customers. We never have, and we will not going forward either. However, Aira is one of our large OEM customers and is a large part of sales there. Upon the rest of the year, we do expect the estimation of total sales reaching the range of SEK 200 million-SEK 400 million to be fulfilled. I hope that is answer enough to that question.
Second question here is, Aira is an important customer to Energy Save. How much did you sell to Aira in the first quarter, and how do you look upon—I'm sorry, now I'm reading the same one again.
Anything twice, same question.
It was the same question twice. Okay. Sorry, sorry. Sorry about that. Okay. I'm going to go to the next one then. How does the EUR 150 million fit within the- This is Aira sales, I'm guessing. How does the EUR 150 million fit in with ES turnover and sales to Aira? Where do the products that create the high turnover come from?
I think the question is, how does Aira sales number EUR 100 million?
Yes. Right, right.
How much is the proportion of ES turnover of that?
You're right. That's the question.
Where do the products come from that generate the high turnover at Aira, EUR 100 million? We do have a different scope of supply. We are a technology partner to Aira, but Aira is a complete heat pump and also solar panel installer to the end customer. There is a difference here in the scope. We are part of the technology. It is not really comparable, but we are still working with Aira very closely, and we are supplying them with our technology.
Good. Next question here regarding the digital product area. Has this development within this area led to any unique product thus far?
Yes. The digital platform is one of the key core IP of ES. This has enabled, combined with the new hardware, with the new propane setup, we have been able to build unique product that has been really attractive to the market. We have been able to secure our OEM businesses. We have been able to secure OEM businesses with the combination. We have the digital controller that is unique. We have the fleet manager. We have the ES app. The combination of this is that we are able to further expand our OEM collaboration with the possibility to brand to the customer's brand.
Right. Right. Next question. How comfortable are you with your current cash position? Do you have lending facilities that you can use if the market continues to be poor for a longer period of time, or do you see any risk of potential equity raises? We did have a negative cash flow in this quarter. We do expect cash flow to be negative also in the coming quarter due to the low turnover that we see up ahead. However, after that point, we do expect cash flow to improve as well as other KPIs and measurements in the company. If we land in a situation where we need to look over the financing of the operations, we do have concrete plans for this that can be set in place.
What that will be, I don't want to be too specific about it, but it leans more into lending facilities at this point. Yes. Second question. I forget that I asked the question, but I do. We have a second question. We have a question also here about uniquity. What unique features does ES have today? Sorry, you answered this question already in the previous.
I think that is partly already answered. It's about our digital investment, our propane unit, but also the ability that we can offer this both in ES brand, but also through the traditional distribution chain, but also toward OEM brands.
Very good. Next question. Are you worried about the balance sheet if you need to continue to build stock with the new propane heat pumps if we are worried about that? The buildup on propane stock in this quarter is something that we do not expect to continue with in the second quarter. For this quarter, we have built up some stock. Now, we do not expect to do the same in this quarter. We think that we have a starting volume that we can kick off sales with, and we will continue to fill stock here if and when we see the demand and orders increase from this. That part, we are not worried about, but we also have a stock level that contains R32 units, R410A units. These are coolants. We want these units to move from stock, obviously. This is a challenge.
It would be untrue to say anything else, but we are not too stressed about it since these products are current and will continue to be current. Eventually, on the European market, these coolants will probably be phased out eventually. Even then, there will be other markets for these products to be current in. Yes. Okay. Next question. Let's see here. NIBE and others are talking about good order intake acceleration through Q1. Seems odd that OEMs generally would have delayed orders given that. Can you give more flavor on those delays, please?
I think our business model is a bit different from NIBE's. We're not a factory. We're not producing, which means that there's a shift when things come to our order book compared to when things go to NIBE's order book. We are more of a selling from the stock or direct deliveries from the factory when needed. Yeah, I think that maybe you can clarify that question.
Yeah. Very good. Thank you. One more question here. Can you describe your high season? You say that the third quarter and fourth quarter is the high season, but looking at your graphs, it does not seem to support that. This is really due to we are coming out of a strange period in market development for heat pumps that have seen an increase for many years. It is really these two past years that have deviated, especially for the year 2023. Here, we saw that the market as a whole went down and really due to several factors in the end of the year. This is opposite of the trend, opposite of the peak season, low season expectation of the market.
For 2024, the market had a more normal split of sales in the first half, second half, but our sales were more focused to the first half of the year. This was really due to our starting commercial phase with Aira, for instance, and other sales agreements kicking in in that part. For two years, we have had a bit of a deviation from that, but these are still the high seasons. For this year, we do expect to see the normal trend both on market and on Energy Save sales, really. Yes. One more question here. Does your organization have the competence, the capability, and the efficiency for further expansion?
I think this question summarizes quite well the investment we've done to our organization. We've certified the company according to ISO 9001 and ISO 14001. That is the proof that we have developed the company into a well-positioned scale-up with the right competence, with the right capability, with the right product portfolio that is ready to scale up immediately when the market turns.
Very good. From what I can see, we have no more further questions. If nothing else comes in here, if you do not want to add anything, Yibo, I think we can conclude this Q&A for today. Thank you very much for listening.
Thank you all for listening.