Welcome to the Energy Save Q2 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, CEO Fredrik Sävenstrand and CFO Helena Wachtmeister. Please go ahead.
Thank you very much. Welcome to this web presentation of our second quarterly report, a report that has seen a significant temporary setback in the quarter. As we have guided in the two previous reports, and also as we communicated the 23rd of July in a press release, net sales in this quarter have taken quite a hit, decreasing by 85% to SEK 15.4 million from the previous year's second quarter, which was an exemplary high- turnover quarter with SEK 103 million in turnover. We will show you that even though we are seeing this temporary setback, the cost discipline that we have added to our cost savings program and also with our new product offer, it still puts us in a very good position moving into the forthcoming peak season, which is up ahead. This decrease that we have seen derives from a decline mainly in OEM sales.
This has also been explained before, but of course should be again. The decline in OEM sales is 95% in the quarter to SEK 4.2 million from SEK 93 million in the comparison quarter. This is due to a temporary delay of deliveries and of orders, which originates from our OEM customers balancing the stock in this particular quarter, second quarter.
If I may add something, we need to remember that the quarter we compared to, where we had this exceptional high turnover in 2024, was during the introduction phase of a new OEM client. Of course, now we're into cooperation gradually deeper and deeper, and now they're balancing their stock. It's a tough quarter to be compared to.
Tough comparison, yes, correct.
They built up volumes to go to market in the comparison quarter.
Yep, exactly. They dropped this even further, but still there is a significant drop also compared to the quarter directly preceding this one with about 71% from the first quarter of this year. On the plus side, we have seen an increase in ES brand sales in the quarter by 10% to SEK 11.2 million from low levels, of course. Compared to the closest preceding quarter of the first quarter of 2025, we have seen an increase of 40%. This is positive because it's mainly sales of existing stock and of R32 units, not so much of the now being launched propane units. This increase is a very positive indication going into the peak season.
Yes, because we haven't yet launched the propane units into the market. We're building up stock gradually. We'll come back to this.
I will, yes.
Not yet launched them, all of the volumes are from, so to say, all stock volumes of R32.
Exactly.
Which is good for cash flow.
Great.
Okay. You want to mention something about the...
Yeah, the operating expenses decreased in this quarter by 26% compared to the comparison quarter. This is due to the cost savings program that we initiated by the end of 2024, and we have seen a couple of positive results from it for a couple of quarters now. Also, to secure financing during this period, we have taken out a short-term loan of SEK 25 million. This was taken out after the end of this quarter. You won't see it in the figures now. You will see it in the figures from the next report. This loan has been guaranteed to 80% by the Swedish Export Credit Agency under their Green Credit Guarantee package, which is a tool to facilitate export and financing for companies that are investing in green transition.
Yes, and going out of the quarter, we have signed a new, quite significant distributor adding Spain and Portugal to our markets where we haven't been present before with the ES brand. The new customer, Sedical, is a quite big client, has 12 regional offices across Spain and Portugal. Spain has become one of the fastest growing markets in the EU in 2024 with a growth of 13% while the market dropped by 20% approximately in general. Sedical is a good fit for us because they're really strong on the commercial side, but also working with the residential side, and they have a very strong track record in their markets. Going forward, we expect the turnover to bounce back. This is due to OEM orders coming in in the coming quarters.
We will launch the ES propane platform that we have been working on since basically we finished it firstly for ERA. We have also increased our stock sales activity level. As we can see, this result of growth starting to come from low levels on the stock volume of R32. Going forward, we will, to a larger extent, focus on customer-driven development rather than generic product development, which has been a phase for us now finishing the propane platform. This will make our development more cost-efficient and more customer-driven going forward.
Looking a bit more into the revenue and net sales for the quarter, comparing it to the previous, the seven quarters preceding it, you do see that this quarter absolutely stands out almost in the same way that the second quarter of last year stood out, like Fredrik said before, from going from a starting quarter with a large customer into a balancing OEM customer quarter. We also do expect this quarter to be an exception, and we do expect to return to our previous levels during the second half of the year here.
Which we have also guided for in previous reports, I would like to mention.
Correct. The drop in total revenue and net sales was 85% respectively and reached SEK 16.7 million on total revenue and SEK 15.4 million in net sales in the quarter. For the EBIT margin, the quarter reaches an unforgivably low minus 96%. This is also important to show that this is a temporary situation for us and a temporary quarter. We do expect to return to our previous trends after this quarter, which is an improving profitability during the 12 months preceding it. We expect to see renewed EBIT trends here in the coming quarter.
Gradually returning to the pattern that we've had before.
Exactly, yeah. Also, I would like to mention the gross margin on net sales in the quarter, which was 29.1% in this quarter compared to 25.8% in the comparison quarter of last year. As I said before, operating expenses have decreased by 26%. This is actually split into other external costs, which decreased by 46%, and personnel costs, which actually increased by 15%. The reason for the reduced level, I should start with on the other external costs, is reduced levels of consultant fees mainly in this post. This is a result of the savings package that I mentioned before. The increase of 15% is also a result of the savings package where we have for efficiency transferred some consultants into staff because that has been a more cost-effective solution. All in all, the effect has been 26% better, lower cost here.
We expect to see some improvements on the cost side of personnel costs going forward. We have done some adjustments there that we yet haven't seen the result of. This transiting the consultants, some of them into employments instead, is a shift due to the fact that we're moving from a broad generic development phase where we needed lots of specialists into the projects and moving more into customer-driven product development in the next phase. Yes.
Correct. On the operating cash flow, we see a negative operating cash flow in the quarter of -SEK 8.6 million compared to -SEK 7 million in the comparison quarter. The largest impact in the second quarter was, of course, the negative EBIT and the operating activities in the quarter. EBIT was, as you know, -SEK 16 million, as you saw in the prior slides. Looking into the split by business area, we see the drop both in our largest residential property segment, but also in the commercial property segment, which dropped by 46% to a level of SEK 1.7 million in the quarter. Residential property dropped by 87% to SEK 13.3 million. This is due to the OEM customers that are balancing their stocks in this quarter and are mainly active in the residential property segment.
We need to remember that the commercial property side is even more dependent on the R32 unit or the propane platform introduction. This introduction of commercial propane units will come in the coming steps, which is why it's also slowed down a bit harder at the moment.
That's right. That explains a bit more.
I will come back to that later.
By brand, we see the drop, like I said before, 95% in the OEM brand sales to SEK 4.2 million in this quarter, and an increase on the ES brand sales in the quarter of 10%, mainly due to sales of R32 units from stock. The development since the first quarter of this year, the immediately preceding quarter, was a 40% increase.
From low levels.
From low levels.
I would say it's a positive trend that we are happy to see that our increased activity level on stock is giving a result.
Yes.
Okey dokey.
Yeah. On the geographical split, we see that Scandinavia has decreased by 71% to SEK 1.6 million in net sales, while Europe outside of Scandinavia decreased by 86% in the quarter to SEK 13.9 million in the quarter. Number of heat pumps sold also declined to 247 sold heat pumps during the quarter compared to 2,661 in the comparison quarter and 1,566 sold heat pumps in the first quarter of this year. This is also an area where we expect to return to our previous trends in the coming quarters and in the coming quarter.
Here we see the difference in the different phases if we compare April to June 2024, when some of our large OEM customers were building up stock, getting ready to launch into the market compared to what happens when they balance out within the agreement structure and temporarily, and it doesn't affect the volume commitments, etc. It gives this dramatic effect in this specific quarter.
Yeah, sure does. Looking into the balance sheet a bit, I would mostly like to comment on the value of our inventories in current assets. As you can see, inventories during this last year have only declined by 2%, which may seem like a very low number. It is a very low number, but it may seem like there is no movement on stock. I would like to offer some flavor to that, which is that we have seen movement during the year on R32 units over stock. For instance, in this last quarter where we saw an increase in sales, which was mainly due to that type of sales, the reason for the stock level remaining high is that since we are now launching propane units into the market into the European peak season, we have also needed to stock up on propane units.
To be ready to launch into the market.
Yeah, exactly.
While finishing all of the certificates and getting onto all of the subsidy lists in the different countries with our ES brand.
Correct, yeah, just being ready for this.
R32, so to say, old stock is reduced, and we're filling up to getting ready to launch the propane units.
Absolutely. This, in combination with the fact that we see a positive, we look more positively now on the R32 market than we have before, where we are now seeing signs that R32 will remain in the market for several years coming as a slightly cheaper alternative to the premium offer that is the propane units. Those two factors combined make us very positive and very secure in the stock value.
I would say increasingly positive because we see that this market shift from R32 to propane may not go that fast that we expected. It will rather be the high-end, the home energy management providers that are providing complex solutions. They're moving faster towards high-end propane units, while the volume market may stay with R32 longer to be cost-competitive in the traditional distribution chain of installers, which is the majority of the market still, while the market trend is moving toward more complex solutions. We can have one leg in each segment. We can join the high-end segment, but we can also benefit from having cost-efficient R32 units to provide in volume to the market.
Absolutely.
Okay. What do we expect going forward and what are our priorities? Of course, priorities are to focus on OEM sales, increase the volumes there. We expect it to come. We expect to focus on getting results of the introduction of ES propane units in the new focus markets where propane is specifically important to succeed in countries such as Germany, Benelux, Italy, for example. We will have a strong focus on customer-driven development, as I said before, moving out of this generic, quite costly development phase. In the coming steps later, we will also launch the propane units for the commercial platform. This will strengthen our unique product concepts within the commercial segment. This is an exciting development to take part of that we look forward to.
It will increase our competitiveness in this segment quite significantly because when it comes to the commercial market, the focus is the shift will go faster into propane units. This is quite clear, while the residential market may have a balance towards R32 for a longer period. We will remain with a high attention to the cost reduction program and maintain cost discipline going forward. I don't know, Helena, if you want to mention our general outlook on the market and our position remains the same.
It does. We have repeated this for a couple of quarters now. As a general, the outlook of the market after we leave this period of low turnover, this temporary low turnover quarter, setback. We are still seeing these same factors going into the peak season of this year. We're seeing the lower interest rates, the lower inflation, the improved balance between the pricing of electricity and natural gas, the spark gap. We are continuing to see signs of political initiatives on different markets. These investments that we have made now for the last year have improved our offer strongly towards the OEM segment mainly. Our ongoing efforts in the focus markets here will generate the results. That is our strong belief. Just summing up a bit about what we have told you today, we are now in a good position moving forward.
We have come out of this period with high uncertainty, and we are leaving this quarter with temporary low sales, which is due to stock balancing with our OEM customers. The cost savings program that we initiated in the end of 2024 keeps giving effect and will continue to give effect as we move into higher turnover levels. Our strategic investments, our product development has put us in a very strong and competitive position moving forward into this period. We are now very excited to move into this dynamic and very much more growth-oriented phase. Thank you very much.
Thank you.
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 Lara Mohtadi. Please go ahead.
Hi, Lara here from ABG. A couple of questions from my end. Firstly, you highlighted that you expect OEM demand to pick up in the second quarter of the year and especially in Q4. Could you please elaborate on what you're seeing from customers and what gives you confidence in this recovery? Are there any particular market segments or geographies where you expect OEMs to grow or for the growth to come back first?
In a way, we have OEM clients that are now moving into propane units that have previously worked with the R32 units from us, but also our largest customer, of course, which is ERA. We have quite good visibility. That's why we were able to guide in the previous quarter quite clearly that we expected a significantly lower turnover in this quarter. With the same confidence, we expect to develop in a clearly positive way in Q3 and Q4, getting back to normal. We are working closely together and we have quite good visibility, basically. Did I miss out on any part of the question?
No, that's great. Thank you. Very clear. Thank you. As you mentioned, your ES brand sales grew in the quarter. You also mentioned there was from lower levels, but it was still promising to see. How sustainable would you say this trend is? Going forward, how should we think about the mix between OEM sales and ES branded sales?
We should expect the ES part to become a more significant portion out of the total, not the most significant. In near time, the OEMs will still be the largest part, but we see a sustainable growth pattern because this increased volume from stock on the R32 units doesn't come automatically. It comes from the sum of quite many activities. We're quite confident in that development, even though it's from low levels. If we can shift SEK 12 million from stock into cash flow in a quarter, it's an important development if we can move this maybe to SEK 20 million going forward. The second thing, that why ES brand will become a more important part of the mix is because we have worked quite intensely in the last two years to get new distributors in markets that have before been unknown to us. We haven't entered them.
We are entering them with the propane units because you need propane units in order to succeed in these markets, which is Germany, Benelux, Italy, for example, where we have signed new customers and we are now launching. We're in the launching process. This is an additional upside to the pattern that you or the development that you can see in this quarter. Even if we're looking at very, very small figures in this quarter, you can still build on that going forward.
Absolutely. As you mentioned in the beginning, we will also, apart from that sales activity, now put a large focus into the OEM offer that has been developed and is very strong currently.
Sure.
That will also be a large part of sales activity.
We can enter the market with the propane units in growth markets in Europe under the ES brand, but we can also bring on new clients in the OEM segment. We have the capability. We have built the project capability to manage the sales.
Absolutely.
Good comment. Also, not to forget that the commercial offer has been, I don't know the word in English, but spar-loga, a little bit on spar-loga, due to the fact that we haven't been able to in parallel do the product development of the propane platforms for both residential side and commercial side.
Been risky.
We have been trying to do it, but the improvements in the commercial offer will come slightly later. This will also be an exciting possibility to wind up the commercial sales with a really attractive offer for the growing markets in Europe, specifically Germany, I would like to mention. Okay.
Great. Thank you very much. It was very clear. On your new agreement in Spain and Portugal, when do you expect this partnership to translate into sales? You touched a little on this, but what market potential do you see in these regions going forward?
As I mentioned, Spain is an important country in the European Union. It has grown 13% in 2024. Basically, it was just Spain and the U.K. that grew in 2024. They're putting quite a bit of efforts into the energy transition. We expect this cooperation. It's well-prepared, if I can put it that way. We are launching in the beginning here of Q3. We're launching the propane units into the markets, and we expect this cooperation to pick up speed from pretty much day one. We have done the preparation work. We have done the training, etc. Positive outlook in general.
Great. With the launch of your new propane platform and being close to the market, what early feedback have you been receiving from customers? How do you foresee this contributing to growth going forward?
That's an important contributor going forward. It will be the ES brand positioning one offer in high end, but where we still deliver maximum saving for every spent euro in the premium segment of propane units. We expect it to be an important growth driver. The feedback from the market has been very positive. Let's keep in mind that we have already delivered basically thousands of units, but under a different brand, based on the same platform, based on our platform through the OEM customer. We are very confident in the quality of this product offer. Mainly, the differences that are made between the OEM offer and our offer is, of course, the design. We need specific ES certification. We may add some specific features, but the platform has been in the market at scale for the last almost one and a half years.
If we look a little bit on our OEM customers working with the ES propane platform, they receive quite good feedback or very good feedback from the market.
Okay, thank you very much. That was all from my end.
All right. Thank you very much for joining. Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. 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 have received a couple of written questions. First off, we have a question about the ERA partnership, asking, please tell us about the partnership. Are they still selling our products?
Yes, they are still working within the agreement structure that we have communicated, which is a license agreement. This license agreement lasts over four years, starting from the beginning of 2024. Yes, they are. What else to comment on? As you know, we've communicated that this frame agreement, license agreement, we also have delivery commitments within this or supply parts in this agreement where we expect the volume in the agreement to reach between SEK 200 million and SEK 400 million, starting basically from the second half of 2024 and 24 months going forward. In the last Q&A that I participated in, not the previous one, the one before, I mentioned that we expect this volume or this figure to come in in the higher tier of the interval of SEK 200 million to SEK 400 million. We're quite confident in that cooperation. It's developing very well.
Of course, they also supply other brands, not their own brand, other brands. I can't comment on the balance. This you can read about in, I think, their communication maybe. They're working with like Daikin and some other bilingual brand or so. On the OEM side and the ERA brand, we are the technology partner to ERA, which they also communicate.
Yes.
Okay.
Thank you. Next question that we have written in here. Do we have the Energy Save? Do we have the right capacity when it comes to the sales side?
Sure.
Expanding?
Oh, sure. We always try to challenge ourselves and find more efficient ways of selling, etc. We are very confident. We have a key account team that is doing a really good job. They added several important customers into growth markets, preparing for the entrance of the propane segment. We can also see the result of that work in general with the ES distributors in the small trend where we're increasing the volumes out of stock. This key account team is highly motivated. While handling ERA and other OEM clients that we've had from before, building up OEM or design development capability, we have a team that can now, through customer-driven projects, handle other major OEM accounts that are looking to, as we call this, the decarb venture segment that are looking to challenge the market.
We can bring on more customers like that and make really attractive offers at attractive cost, industrialized offers, do the design, design the software because we now have our own IP to a larger extent, design this to be meeting their requirements in their business model where they might work with home energy management systems, as I mentioned before, optimization things. We really know what they're looking for and we can bring on that type of customer. We have a team set up to do that. I think we're well off. We're well off, but this quarter that we have passed through has been a kind of balancing or outlier quarter in that way compared to how I view our sales capacity and ability going forward.
Absolutely. I would like to take another question that is kind of connected to that one, that speaks a bit about the company's uniqueness. Is this more our current uniqueness than, say, individual products?
You know, before we have, for example, the plug-in module concept, which is really unique. We have a patent for that. It will sooner or later, you know, it will be. We were very early on with that product concept. Specifically, we focused on construction site heating, but we also see potential to move with that product into the more permanent market to compete when there is a lack of advanced installers in fast-growing markets such as Germany, for example. We haven't spent so much time in the last years to focus on adding specific unique features, rather building a unique position in the value chain, building more own IP, more uniqueness in design, ability to rather have a unique position in the value chain and in the offer that is extremely hard to copy. That kind of uniqueness in ability is what we are focused on.
We can come back to the unique product offers. The unique product offers aren't worth anything unless you can scale them and the market is ready and you can scale it with profitability. You need to have this unique position. We've been in the value creation ability-building mine for the last couple of years.
This uniqueness is not really limited to one business segment, to residential, to.
You can add this uniqueness to the different product offers. Of course, the stronger technology platforms that we develop, the better capability in digital offer, because the digital offer is make it or break it going forward. In the end game, it will be those total installers challenging the market at the moment that will win the volumes going forward, where you need to integrate different assets, energy-saving assets. It will be fruitful going forward. It will pay off going forward.
Yeah.
Okay.
Can we say something more about when our 290 products will be launched for residential and for commercial segments?
We're in the launching period now, if you say, on the residential side. On the commercial side, it will come later. I don't dare to say exactly, but we're on track quite good. To come back to the previous question a little bit, we can add the propane attractiveness to the different unique product concepts. We can start to work more intensely setting up the sales models, etc., on the commercial side, adding added value to the unique concepts that we already have. These unique concepts aren't worth anything unless you can scale them and scale with profitability.
Good. Thank you. We have a question that I think is regarding the stock level and the inventory. Given that demand seems sluggish, can you not build to order and keep your inventory lower? I think what the question is aiming at.
I understand it, yeah.
Yeah. Can we not.
Yeah, we can build to order. We do build to order as much as we can, but we also need a little bit of own stock in the launching period because not everyone can in a launching period absorb large volumes directly from factory. They need some smaller volume that we hold on stock. Of course, we get paid for that. They pay more when they buy over our stock. They will be motivated in the second phase to buy build to order if we're talking about the propane. If we're talking about the R32, it's no point to build to order because we have the stock. We just want to lower the stock level.
Absolutely. Given that many of our distributors that are applicable for this propane assortment are new distributors.
They may have, in the end, the capability of selling thousands of units annually. In a starting phase, you need to build up confidence. You need to start maybe with 20 pieces, 30 pieces, 40 pieces. They're willing to pay a little bit more, or we need to have the ability to supply over stock. Of course, scaling that propane business, we should go back to as before with the R32 units. We should scale with direct deliveries and look at the warehouse more as a service, an additional supply possibility to start up customers or add volumes when they sell more than they expect, basically. We can deliver quickly to meet the increased demand. At a certain volume, we should have a stock to have this flexibility, helping them to start and helping them to grow.
Right.
are clear incentives for our customers to move to volume, or how was it phrased? On demand.
Yeah, build to order.
Build to order. Yes, that is our business model. Let's keep that in mind because in 2022, 2023, when we grew by 300% and had SEK 300 million in turnover, the stock level was low and main volumes was built to order.
Absolutely, that is absolutely our intent to return to.
One of our success factors as well is why we can grow fast.
Absolutely.
When market is there.
We also have a question that is regarding cash flow and cash flow planning here. You have taken out, we have taken out a short-term loan of SEK 25 million to ensure the liquidity to be paid back over 12 months. How do you view your cash flow developing in the coming year? I would like to point out here that the loan that we have taken out here, the main reason for the loan is not to pay for our operating activities or to finance our operating activities, but to make sure that we can make these investments in propane stock that we need to be ready for the upcoming season. We do not, we are not worried about cash flow in the coming year. We do expect this loan only to bridge this period of lower turnover combined with our need to have stock.
To build up a bit of stock due to the factors that I just mentioned.
Exactly, exactly. Yes.
Yes, yes, yes.
Yeah, we have a question about visibility.
I think I already commented on that.
You did, maybe.
I asked the question about how we can be confident in gaining volumes in the coming quarters. I think I commented on that.
Okay, good.
If you don't mind.
I absolutely know. Very good. In that case, I don't think we have any more written questions.
Maybe I see here one comment on that ERA raised SEK 1.7 billion. Now, does it affect our cooperation? Of course, the more financially strong our currently biggest customer is, the better for us, the better confidence we have in agreements, etc. It has in that way indirectly a very positive effect for us.
Yeah, true.
I comment on that.
Okay, yeah, true. That is, of course, commenting on that capital raise that was made. That was announced a couple of days ago.
Yeah, that was announced a couple of days ago.
Okay, so no more questions.
That applies in general. The more robust financing our customers have in general, the better for us.
Of course.
Okay.
Good. With that being said, we would like to thank you so much for listening in to this web presentation and joining in on our Q&A. We will see you again in a couple of months for the third quarter report. Thank you very much.
Thank you very much.