Earnings call transcript: Envipco sees Q1 2025 revenue drop, focuses on growth

Envipco Holding NV (market cap: €418.59M) reported a 23% year-on-year decline in revenue for the first quarter of 2025, amounting to €21 million. Despite the decrease, the company highlighted improvements in gross margins and continued expansion efforts. The stock saw a modest increase of 0.35%, closing at 5.7, reflecting a cautious yet optimistic market sentiment. According to InvestingPro, the company shows several promising indicators, including strong liquidity and moderate debt levels. InvestingPro has identified 12 additional key investment factors for Envipco, available to subscribers.

Key Takeaways

• Revenue for Q1 2025 fell by 23% year-on-year.
• Gross margins improved by 220 basis points to 37.3%.
• The company is focusing on market expansion and innovation.
• Stock price increased slightly by 0.35% post-earnings.

Company Performance

Envipco’s performance in Q1 2025 was marked by a notable decline in revenue compared to the same period last year. The company’s EBITDA also fell significantly, from €2.7 million in Q1 2024 to €500,000. Despite these challenges, Envipco continues to invest in its future growth, particularly in the European market.

Financial Highlights

• Revenue: €21 million, down 23% year-on-year.
• Gross Margins: 37.3%, up 220 basis points.
• EBITDA: €500,000, down from €2.7 million in Q1 2024.
• Net Profit: -€2.4 million.
• Cash Balance: €20.7 million, down from €30.7 million.

Market Reaction

Following the earnings announcement, Envipco’s stock experienced a slight increase of 0.35%, closing at 5.7. The stock has shown strong momentum with a 16.8% gain over the past six months and trades near its 52-week high of 7.61. This indicates a neutral to slightly positive response from investors, who may be encouraged by the company’s strategic initiatives despite the revenue decline.

Outlook & Guidance

Envipco remains committed to its long-term growth targets, aiming for four to six times its 2021 revenue. The company anticipates a busy second half of 2025, with significant developments expected in Poland and Portugal.

Executive Commentary

CEO Simon Bolton expressed optimism about the company’s growth prospects, stating, "We are set for rapid growth with these market opportunities ahead of us." Additionally, Chief Strategy and IR Officer Michael Clement highlighted the company’s target of reaching 40% gross margins.

Risks and Challenges

• Revenue decline poses a challenge to meeting growth targets.
• Potential supply chain disruptions could impact operations.
• Macroeconomic pressures may affect market expansion efforts.

Q&A

During the earnings call, analysts inquired about the company’s revenue growth targets and potential market challenges. Executives confirmed that the 4-6x revenue growth target remains achievable and emphasized limited exposure to potential trade tariffs.

Full transcript - Envipco Holding NV (ENVI) Q1 2025:

Simon Bolton, CEO, Invipco: Okay. Good morning, everyone. It gives me great pleasure to welcome you to the Q1 twenty twenty five Results Presentation of My name is Simon Bolton, CEO of Invipco, and I’m joined by my colleague, Michael Clement, Chief Strategy and IR Officer, to run you through the highlights of the quarter this morning, followed by a Q and A. Highlights for Q1. Following a record end to 2024 and as anticipated and as mentioned last quarter, somewhat slower start to 2025.

Group revenues, 21,000,000, 20 3 percent down year on year. Gross margins continue to develop well. We’ve had, obviously, a target of 40% getting to 40% gross margins. And we continue on that journey with really good productivity and also cost efficiency in addition good work in on the commercial side. Overall, EBITDA with costs under control this quarter at 5,000,000 and then the cash balance, which Michael will go through in a little bit more detail later, ending the quarter at just over £20,000,000 We continue to strengthen our business.

I think for those who have followed the business for some time, you know that we’re positioned in this space really unprecedented market opportunity ahead of us, driven by EU regulation, which mandates introduction of a deposit return scheme, sort of a small fee on bottles or cans to return them to recycling point, which needs our technology, our services and our skills to make the whole system work. So, we continue to develop our organization, our technology and our capabilities, so that we can be ready to deliver all those opportunities when they come. We have announced continued excellent wins and progress in Romania. So, specific wins were announced this quarter. And in addition, in Romania, we had the pleasure of opening up our Engineering Center of Excellence inclusion at Pokka last month.

And I will talk a bit a little bit more about Romania later on. Again, we continue to invest in the team, the markets and products and also our operational and administrative processes, so that, that grows to really take these opportunities in addition to grow with efficiency. For those who maybe just joined for the first time, a reminder, we are a global recycling technology business. Again, we are set for rapid growth with these market opportunities ahead of us. We have, over the last few years, captured leading position in these European growth markets.

And as I said, we continue to invest in building our business, executed by a developing seasoned team. Over the last few years, we’ve seen significant growth and sustained profitability, and we expect that to continue in the future. A little bit more detail here. What we see is two key parts of our business. North America, really a forty year business, but which is set for decent growth over the next few years and then a higher growth European business with this year new markets principally being Poland and Portugal.

One of the things we do want to highlight is where our center of operations are. So, we actually have four centers of production where we make our reverse vending machine products. North America, so that’s in Connecticut, Nogatuk in Connecticut, and then in Europe, in Sebes in Romania, Athens, Greece and Ostendorf in Germany. This allows us to have a very decentralized production base with ample capacity. And if you look on the right hand side of the slide, that’s just a view of that’s just an assessment of our installed capacity at the moment versus what we’ve actually sold over the last couple of years.

So, we are ready and we are set to deliver on these growth opportunities. Also, of course, depending on what’s happening in the world, by having decentralized production centers with very localized supply chains means that we can respond effectively and produce in market, for market. Romania has become a real important part of our growth strategy. We’ve actually been in Romania over ten years, supplying components to the rest of InVIPCO group. And more recently, in 2021, we started to develop our growth strategy and growth plan for Romania as the country was heading towards a deposit return scheme.

That was launched in ’twenty three. And over time, we’ve built up a very solid commercial position, team and also loyal customer base within the country. Now, we’ve on a clear path to be 30 plus, which is our market share target. And we continue to see opportunities in the future. Examples, the follow on orders that we announced in Q1 and also potentially new market segments where recycling centers are put in municipal locations.

So, very exciting market, very important part of our growth story. Good. And now to go through a little bit more detailed numbers. Michael. Michael?

Michael Clement, Chief Strategy and IR Officer, Invipco: Thank you, Salman. Good morning, Let’s start out by moving into the profit and loss statements. Revenues in the first quarter of twenty twenty five were EUR 21,000,000. This is down 23 from the first quarter last year. Gross profit was €7,800,000 with gross margins at 37.3%, an increase of two twenty basis points from the first quarter last year, driven by operational improvements in our own assembly and production as well as in the supply chain.

Operating expenses, 9,800,000.0, driving EBITDA of SEK 500,000.0 in Q1, down from SEK 2,700,000.0 in Q1 last year. EBIT, negative €2,000,000 down from €1,100,000 last year, with net profit at minus €2,400,000 in Q1. Europe remains our largest region of revenues also in this quarter, but revenues were down on a year over year basis as well as down sequentially following a record Q4 twenty twenty four. Europe revenues were €12,300,000 down 38% from Q1 last year. Largely on shifts, quarterly shifts in revenues, specifically this quarter, Greece was soft, coming off a very strong Q4.

Our RVM sales in Europe were €11,000,000 down from €19,200,000 in Q1 last year. Romania was our largest market in Q1 this year, followed by Hungary. Romania sales were up strongly from Q1 last year. Programme services in Q1, euros ’1 point ’3 million, nearly double €700,000 in Q1 last year. Program services, comprised services, lease throughput revenues continue to make up a very small share of our European revenue base as our growth primarily will be driven by new installments of equipment.

North America, solid growth this quarter, 16% year over year growth to €8,700,000 Programme services were up 4% to €7,400,000 our largest share of business in The U. S, while RVM sales increased solidly to €1,300,000 on various installations across the country with various accounts. Operating costs this quarter were €9,800,000 This is down from reported OpEx of €11,300,000 in Q4 and adjusted OpEx of €10,700,000 in the quarter. The drop sequentially comes from lower personnel costs and professional fees. Year over year, our OpEx was up by €1,000,000 primarily driven by higher personnel costs on higher headcount.

Invepco will continue to invest in our business to ensure that we have the footprint and the organization ready to take on the anticipated growth in years to come. Then moving over to the balance sheets. This quarter, our total assets were down by roughly €10,000,000 to 119,900,000.0 driven primarily by, on the assets or excuse me, debt and equity side of lower borrowings and equity. On the asset side, non current assets were 38,700,000.0, down by about 1,000,000, primarily made up of PPE and intangible assets. Current assets totaled 81,200,000, down from 89,500,000.0 in Q4.

The drop is largely explained by a lower cash balance coming down from 30,700,000.0 to 20,700,000.0 at the end of Q1. Inventories up slightly, 31,300,000.0, with accounts receivables at 29,300,000.0. Equity ratio was 54% this quarter. Non current liabilities, 15,600,000.0, down a tad from SEK 16,400,000.0 at the end of Q4. Current liabilities were SEK 39,900,000.0, down from €45,400,000 at the end of Q4, with total borrowings short and long term at €15,000,000 down from €19,400,000 at the end of Q4.

Finally, the cash flow in the first quarter. We started out the quarter with €30,700,000 in cash. Our cash from operations were down by €4,000,000 primarily driven by a working capital build on higher inventories moving into higher activity in the second quarter. Interest and tax paid was in excess of €1,000,000 in the quarter. Cash from investing activities were 1,100,000 in Q1.

Capital expenditures were €700,000 with capitalized R and D at €500,000 Finally, cash flow from financing activities were negative €4,800,000 with a reduction of borrowings and lease liabilities this quarter, paying down on financing facilities for a total net change in cash of €10,000,000 and an ending cash balance of €20,700,000

Simon Bolton, CEO, Invipco: Then Simon, let’s move into the outlook. Right. Great, Michael. Thank you. So last couple of slides before Q and A.

So yes, So, as we see these countries coming through to introduce deposit return schemes, as I mentioned, that will drive the market and the demand for our products and services. So, this is just a quick snapshot going back a few years, our revenue development and what we expect to continue in the next few years. Also, how much of the population of European countries are covered by what’s happened and what’s coming ahead? So, over the last few years, deposit schemes have covered about have covered countries with about 42,000,000 of population. In the next few years, that will be two seventy eight million people and possibly another 150,000,000 on top of that for those countries that are covered by EU regulation, but maybe go later, ’twenty eight, ’twenty nine.

So, a very significant market opportunity in this deposit return scheme second wave to hit the continent. This is something we’ve showed before. But really here, these countries then are starting to firm up on their plans, on the preparation for introduction of a deposit return scheme. So, we were in the throes of final commercial discussions in Poland and Portugal. We had great news from The U.

K. A couple of weeks ago. The operator of the scheme, so called DMO in The U. K, that has been announced. That’s very positive.

And U. K. Remains on track to be a very significant market for us in the future. And then we have other countries that are also starting to develop and discuss schemes to put things in place before the deadline of 2029. What does this mean?

Well, this means, obviously, as we are positioning for this growth, both in Europe, but also continuing a strong business in North America, means top line growth of the business. Work that we are doing to continue to develop margins, we know that’s important. And obviously, as we grow and we will continue to invest in the business, But we expect operational leverage as we expand in the time ahead. So, that was update of Q1. Just a reminder, August 13 is our Q2 results.

And I think with that, Michael, we will open everything up for Q and A. Thank you.

Michael Clement, Chief Strategy and IR Officer, Invipco: Good. Okay. So let’s see here. Yes, we’re starting to get some questions. I guess we can just straight into this first question.

For is the four to six x 2021 revenue target still in place? What’s your degree of visibility on timing? Has this visibility improved during the last quarter?

Simon Bolton, CEO, Invipco: Yep. Yep. So, one of the things we set out when we developed kind of the first growth plan in twenty twenty, twenty twenty one was a revenue target, four to 6x. And we’ve set up the business to be able to deliver that. And we’re still in a position to execute on that.

Obviously, it’s dependent on new markets. And I think we’ve been very clear that the growth of the business is around these new markets being organized, opening up commercial processes with our customers, which is mainly retailers concluding. And then, obviously, installation of the products. So, we have certainly the capability. We have the organization to do that.

It’s really on timing of contracts. So, this year, it will be around, of course, Poland and Portugal. So, depending on the size of those, the timing of those will obviously dictate the final outcome.

Michael Clement, Chief Strategy and IR Officer, Invipco: Yeah. And to touch in on a different question here, also that visibility in that regard. I mean, that changed over the last months?

Simon Bolton, CEO, Invipco: Yeah. Look, I think we maintain the view, as we have done probably for the last couple of quarters, that we should expect news flow during the summer. And we should expect deliveries certainly in those two markets in the second half of the year, probably more back ended to Q4. And I so, those commercial processes, obviously, we’re engaged in. And so, we know what they are.

It’s, again, just the timing of when those customers will make the final decision and when they actually want the products. So, it’s that timing. And clearly, what doesn’t get delivered in ’twenty five will build a backlog for delivery in 2026, we expect to also be a very busy year.

Michael Clement, Chief Strategy and IR Officer, Invipco: Yes, exactly. So I mean, it’s reasonable to say that we’re more comfortable in terms of that assessment in regards to the news flow and the activity in the second half now than what we were a

Simon Bolton, CEO, Invipco: I would say so, Yes.

Michael Clement, Chief Strategy and IR Officer, Invipco: Good. Why was service revenues down in Europe from sequentially? Well, our service revenues as a program service revenues are driven by service, by lease and by throughput. We have a very few throughput deals, specifically in Romania. Q1, lower on volumes, drives a share of that reduction.

Expect our program services revenues in Europe to remain as a very small share of our revenue base but to grow sequentially also through the current year. When do you expect licensing of fine system operators in Poland?

Simon Bolton, CEO, Invipco: This is a good question. One of the things that obviously is required is a well structured system with operators in place. I think for those who follow the development of these systems, the Polish structure is that you can have multiple operators. And there’s still work and confirmation going on to define the final set of operators and also how they’re going to work together. I think what’s clear is that the system will go ahead.

And certainly, the point of view, our customers, they’re continuing to follow the commercial processes. And ultimately, they will then associate themselves with one of the operators that’s one of the several operators that’s finally chosen.

Michael Clement, Chief Strategy and IR Officer, Invipco: Yes. Why was your debt repayment so much higher this quarter than previous quarter? Well, it’s not a major uptick in debt repayments. It’s more a payment on overdraft facilities this quarter. It’s short term facilities that are being paid down.

So and that will move up and down in the quarters ahead. So no major shifts. With the current European market activity, should we expect Q2 revenues in line with Q1 revenues this year? Well, try to give some perspectives on that in the outlook statement, also in the reports. We do expect a sequential increase in revenues in the second quarter over the first quarter.

Romania, we’ve announced some major orders. They will increasingly come into effect. We do expect Greece to show increased activity in Q2 over Q1. We’re positive to the developments we’re seeing and the needs we’re seeing in the Hungary market. So, Q2 higher than Q1.

Simon Bolton, CEO, Invipco: And I think generally, just maybe to add to that, Michael, we’ve been quite clear that this year is also it’s we expect a very busy H2, right? So, we expect continued development and momentum building through the year as, again, some of these new markets go from finishing their commercial processes to orders then to deliver it.

Michael Clement, Chief Strategy and IR Officer, Invipco: Yes, exactly. Exactly. Why is your annual report delayed?

Simon Bolton, CEO, Invipco: Yes. Look, this is something we’re not happy with. Certainly, we also had a delay last year. And so, we’ve improvements in those processes, in that team. We’ve continued to make improvements.

So, you will have seen we announced a new CFO, has joined the business with an excellent skill set to develop a finance function, the organization, the processes to cope with our growth and to grow in line and develop in line with our growth. And also, we have we’ve started a new auditor also this year. So, there are some new things coming in. The process is still on track. So, as per our announcement, it’s something we’re not happy with.

It’s something that we don’t want to be repeated. And we’re certainly going to make good steps to make sure that doesn’t happen.

Michael Clement, Chief Strategy and IR Officer, Invipco: Let’s see here. Have you had any sales to Poland yet?

Simon Bolton, CEO, Invipco: Really, we haven’t announced any sales. So, no, we’re doing a lot of piloting. We’re very active. So, I think we’ve announced before that we have our largest business development group in Ivipko in Poland at the moment. They’re doing great work.

We’re excited about the opportunities, but certainly no sales yet. Coming soon. Coming soon.

Michael Clement, Chief Strategy and IR Officer, Invipco: Your revenues were down significantly in the first quarter. Are there any structural issues? Or are you losing market share?

Simon Bolton, CEO, Invipco: No. This is it’s really, you know, it’s part of the business. These when a market goes live, you know, these are kind of big projects. So, timing of markets, when that market open ups, open up and then gets delivered will mean there will always be quarter by quarter fluctuations, particularly us, which is we have a smaller sized business. So, these projects that we’re going for are very significant, which is exciting, but it creates some quarter over quarter kind of lumpiness.

However, overall, you would have seen from the history and we also predict going forward that overall that we will see a solid growth trajectory.

Michael Clement, Chief Strategy and IR Officer, Invipco: Yes. How is MVIPCO affected by proposed tariffs and potential trade war? Well, as Simon showed, I mean, we have an operational setup, a production setup regionally. So we have production assembly and supply chain in North America, largely serving the North American markets and the same then in Europe, largely serving European customers. There are few cross regional shipments of components and or finished products.

So in our assessment, we are very limited in terms of the exposure to any tariffs. And then I saw here, let’s let’s see here, is there anything new to report on the North American markets?

Simon Bolton, CEO, Invipco: Yeah. I mean, you would have seen this quarter good growth, good growth in North America, both program services and RVM sales. You know, we I think we continue to see and we expect steady growth in North America market, really great base of program services, well developed over time. It’s really a mature market. We reported, obviously, the Connecticut change and refresh of the deposit legislation a couple of years ago now.

That’s fed through last year. We’re still seeing the positive effects of that. And the neighbors, New York and Massachusetts, we hope to do the same soon. There’s other new markets such as California that we’ve mentioned before. Things are taking time.

I think that still is a medium term opportunity for us. And we also see opportunities to introduce new technology like the Quantum. So, we have our first few Quantums now operating in North America very successfully, really fantastic customer feedback. And so we would see potentially good growth using that technology platform in that in North America, U.

Michael Clement, Chief Strategy and IR Officer, Invipco: S. Good. Let’s see here. Consensus EBIT margin for 2627% is 17 to 18%. Are you confident that you can reach those margin levels?

Yes, sure. I mean we have not guided on EBIT margins, so we won’t comment on that directly. What we have said is that we target a plus 30% market share overall in markets new greenfield markets that we enter into. And we see, as Simon went through today, some significant growth opportunities in the years ahead, not only in the current year but also in the years ahead. And we have targets of reaching 40% gross margins.

We’re on a very strong trajectory towards that target, up two twenty basis points year over year this quarter. And of course, that eventually will trickle through. Having said that, we also comment that we will invest in our organization to be able to handle the anticipated So we will see an increase in OpEx but target an operating leverage and thereby widening margins as we move ahead.

Simon Bolton, CEO, Invipco: Yes, absolutely.

Michael Clement, Chief Strategy and IR Officer, Invipco: Let’s see here. One more here. Poland and Portugal, what’s your outlook in regards to news flow and commercial activity?

Simon Bolton, CEO, Invipco: Yes. Good. So as I said, we are heavily involved in those two countries. We remain very positive about both. Commercial processes take time.

We’ve been in those countries now some time, so we’ve done a lot of piloting. We’re coming to the end of those commercial processes. So, we would expect kind of we still expect news flow kind of over the summer. And because of the go live either back end of the year or right at the beginning of next year, then those to naturally flow through into deliveries in the second half of the year. Probably a little bit more Q4 than Q3, but nevertheless, we expect H2 to be a very busy half and busier than the first half of the year.

So positive about both countries and certainly expect news flow in the coming months.

Michael Clement, Chief Strategy and IR Officer, Invipco: Good. And that takes us to the end of Q and A.

Simon Bolton, CEO, Invipco: Well, fantastic. Michael, everyone, thanks very much. Thank you very much for your continued interest in the business. And once again, we look forward to welcoming you to go through the second quarter results in the August 13. So, with that, we’ll say thanks very much and have a great day.

Bye bye.

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