Earnings call transcript: Wallbox Q3 2024 sees revenue growth, stock dips

Wallbox NV (NASDAQ: NYSE:WBX) reported its third-quarter 2024 earnings, highlighting a 7% year-over-year revenue growth to €34.7 million. Despite positive revenue growth, the company's stock fell by 4.72% in regular trading, closing at $0.609, with a slight recovery in aftermarket trading. The company remains optimistic about future profitability, projecting positive EBITDA in 2025.

Key Takeaways

• Wallbox's Q3 2024 revenue increased by 7% year-over-year.
• The company is restructuring to improve cost efficiency and plans to achieve positive EBITDA in 2025.
• The stock experienced a 4.72% decline in regular trading but showed a slight increase in aftermarket trading.

Company Performance

Wallbox demonstrated resilience in the third quarter of 2024, achieving a 7% increase in revenue compared to the previous year. The company's restructuring efforts, aimed at reducing costs and aligning with market conditions, are expected to support its goal of achieving profitability by 2025. Despite challenges in the European market, where EV sales declined by 13%, Wallbox managed to outperform the overall market, which saw only a 3% growth.

Financial Highlights

• Revenue: €34.7 million, up 7% year-over-year
• Gross Margin: 23%, affected by a €4 million inventory provision
• Adjusted EBITDA Loss: €21.8 million
• Cash & Equivalents: €71 million
• Long-term Debt: €84 million

Market Reaction

Wallbox's stock price closed at $0.609, down 4.72% from the previous session. In aftermarket trading, the stock saw a minor uptick of 0.33%, reaching $0.611. The stock remains within its 52-week range of $0.413 to $1.87, reflecting ongoing market volatility and investor caution.

Outlook & Guidance

Wallbox projects fourth-quarter 2024 revenue between €40 million and €45 million, representing a 23-38% year-over-year increase. The company aims for a gross margin of 38-40% and anticipates a negative adjusted EBITDA of €7-10 million. Wallbox is focusing on cost structure alignment and expects to achieve positive EBITDA in 2025.

Executive Commentary

CEO Henrique Associon emphasized the company's commitment to profitability, stating, "2025 as a year has to be a profitable year, and that's what we expect." CFO Luis Boala added, "Profitability and cash generation remain our top priorities," underscoring the strategic focus on financial health and efficiency.

Q&A

During the earnings call, analysts inquired about Wallbox's strategy in the North American market, where the company expects a 10-15% growth. Executives expressed confidence in leveraging new regulations to boost EV sales and highlighted the importance of maintaining manufacturing facilities in both the US and Europe.

Risks and Challenges

• Market Volatility: Fluctuations in the EV market, particularly in Europe, pose a risk to revenue growth.
• Supply Chain Issues: Potential disruptions could impact production and delivery timelines.
• Economic Conditions: Macroeconomic pressures, such as inflation and interest rate changes, could affect consumer spending on EVs.
• Competitive Landscape: Increased competition in the EV charging market may pressure margins and market share.
• Regulatory Changes: Evolving regulations could impact operational costs and market dynamics.

Wallbox remains focused on navigating these challenges through strategic partnerships and product innovations, positioning itself for long-term growth in the dynamic EV market.

Full transcript - Wallbox NV (WBX) Q3 2024:

Charlie, Call Coordinator: Hello, everyone, and welcome to Warbucks' Third Quarter 2024 Earnings Conference Call and Webcast. My name is Charlie, and I'll be the coordinator for today's call. At this time, all participants' lines have been placed in listen only mode to prevent any background noise. After the speakers' remarks, there will be a question and answer session. And now I'd like to turn the call over to Michael Wilhelm from Warbucks.

Michael, please go ahead.

Michael Wilhelm, Investor Relations, Wallbox: Thank you, Charlie, and good morning and good afternoon to everyone listening in. Thank you for joining today's webcast to discuss Wallbox's Q3 2024 results. This event is being broadcast over the web and can be accessed from the Investors section of our website at investors. Wallbox.com. I am joined today by Henrique Associon, wallbox's CEO and Luis Boala, wallbox's CFO.

Earlier today, we issued a press release announcing results from the Q3 ended September 30, 2024, which can also be found on our website. Before we begin, I would like to remind everyone that certain statements made on today's call are forward looking that may be subjected to risks and uncertainties relating to future events and or the future financial performance of the company. Actual results could differ materially from those anticipated. The risk factors that may affect results are detailed in the company's most recent public filings with the SEC, including the Annual Report on Form 20 F for the fiscal year ended December 31, 2023, filed on March 21, 2024. We will be presenting unaudited financial statement in IFRS format that reflects management's best assessment of actual results.

Also, please note that we use certain non IFRS financial measures on this call, and reconciliations of these measures are included in the presentation posted on the Investors section of our website. Also, a copy of these prepared remarks can be obtained from the Investor Relations website under the Quarterly Results section, so you can more easily follow along with us today. So with that out of the way, I will turn it over to Henrik.

Henrique Associon, CEO, Wallbox: Thank you, Michael, and thanks everyone for joining us today. Before we discuss the highlights of the Q3 2024, I would like to take the time to put in perspective where Volvo (OTC:VLVLY)'s is today in light of the current EV market sentiment, especially in Europe. Year to date, up until the end of Q3, we had revenue of €126,000,000 which reflects a 26% growth compared to the same time frame last year. If we look at the EV market in the main region we operate in, Europe, North America and rest of the world, which are all countries excluding China, we have outgrown the market significantly as the ABL market year to date only grew 3% year over year. In the same period, we have reduced labor cost and OpEx by 14% and CapEx spending by 48%, even after incorporating ABL, clearly reflecting how we are improving our efficiency while continuing to grow and develop our products.

We are a global leader in electric vehicle charging and energy management solutions. We have sold over 1,000,000 chargers in more than 100 countries. And we believe that we continue to play a key role in the transition towards electric mobility. It is clear that this transition is happening, but that it is going through a much slower cycle towards mass adoption and this is impacting the entire industry, including our competitors. We continue to work hard in adapting to the continuous changing factors ranging from regulations, subsidies, new technologies, the EU market, customer preference, product requirements, the macro environment and more.

This volatility on our way to become leaders of a more mature industry is a fact and it impacts our results. We already have been doing a lot in the last 2 years, but I would like to share with you key initiatives we are working on to remain agile against this market backdrop and how we plan to thrive. First, we have adjusted our organizational structure to be business unit driven. The core business units are common business and fast charging including software solutions and manufacturing. Each business unit has different types of customers, requires different kinds of support and has different sales cycles.

With this new structure, we create a more effective approach to each segment we operate in, allowing us to unlock the full potential of our solutions, shape a more focused customer experience, align resources more efficiently and solidify our path to profitability. 2nd, we continue to optimize organization according to the current market environment and as we look to 2025. This means creating visibility on the top line is key and we have been improving this by doing detailed analysis of our selling versus sell out data, speaking with our key customers and strengthening our pipeline. Based on this demand, we are matching the cost base of the organization to support our path to profitability and cash generation. The aforementioned business unit structure will play an important role here, where dedicated focus will help identify the best and most efficient way to serve a particular segment.

3rd, we have clear action plans to improve our gross margin across all our product groups. Due to our efforts to increase visibility, I just mentioned, we believe we are in a better position to optimize our procurement process and manage our inventory levels. There is a tail bill of materials analysis ongoing to further identify cost reduction opportunities and we are in the late stage of entering into strategic partnership agreements with industrial partners to improve our sourcing. Lastly, on top of the revenue we have visibility on, we have plans to further expand our sales with an improved commercial strategy and introduction of new products. As DB market is developing differently region by region, country by country and segment by segment, we are realigning our commercial strategy to ensure we optimize our sales channels and best capitalize on the opportunities in the market.

Besides, we aim to drive revenue by continuously innovating our existing product portfolio and with the commercialization of new products. Example of new products that are expected to come into commercialization soon include the Quasar 2 and the IRRIDE certified Supernova 220. Both segments bidirectional charging and public DC fast charging in Germany open up new markets in which we didn't operate previously or only limitedly. In Germany alone, promotion projects more than 150,000 public DC chargers to be installed between 2025 and 2,035. Now we will go into the highlights of the quarter and share our perspective on the market.

Afterwards, Luis will offer a closer look at our financial results and our key financial metrics. And finally, I will return to close the conversation and provide Q4 guidance. Q3 revenue was €34,700,000 up 7% year over year driven by strong AC sales in North America, but impacted by a softer market in Europe for all product categories and due to a one off revenue charge of €1,600,000,000 from a return related to historical bill and full agreement with a specific customer. We are excited with our growth in North America. The European market growth was too good to everyone's expectation and this impacted our results.

For European DC, we now see a similar trend as we previously saw in AC, where our CPO customers have been building up inventory as their focus has shifted from highly accelerated rollout towards profitability. In North America, the demand for the Supernova 180 in North America remains steady as we continue to ramp up sales efforts and add new partners. As we are starting from a smaller base in DC than many of our competitors, we see ample opportunity to grow as we mature our position in the market. In total, during the Q3, we delivered more than 38,000 AC units globally and 169 units of DC during the period. Gross margin was 23% in the 3rd quarter, heavily impacted by 1 off inventory provision.

As we continue to develop and improve our different product families, certain components become obsolete or much slower to sell. So we choose to provision them, setting the business on the right footing for future success. It is important to highlight that this is not a cash out. Excluding this impact, the gross margin was higher and closer to historical results. We keep pushing for unmatched product quality and operational excellence to keep gross margins in the range of 38% to 40%.

Luis will provide more detail on gross margins shortly. On a consolidated group level in Q3 2024, we saw a light year over year reduction in labor costs and OpEx 2% now, continuing the trend in cost reduction. Again, it is important to remember that we were able to achieve these cost reductions despite ABL's contribution to our cost base. We see additional opportunities to reduce our cost base as we continue to optimize operations across the group and leverage synergies. 3rd quarter adjusted EBITDA loss landed at €21,800,000 This quarter brought the improvement trends in the last quarters due to the inventory provision.

We see this as a one off quarter with a unique sales adjustment and inventory provision on our path in making the business profitable. For future quarters, we expect to resume top line and most importantly significant margin accretion. There continues to be progress with new products, new commercial efforts, cost reduction and gross margin improvements, which are not yet reflected in the numbers we report today, but which we expect to benefit from in the near term. For the Q3 of 2024, Europe contributed €22,900,000 of consolidated revenue or 66% of total revenue and grew modestly with 1% from the year ago period. Compared to the 13% decline of the AB market in Europe, this was significantly better.

North America continues to show strong progress with 45% year over year growth, while living market in the region grew with 4% and contributed €9,700,000 or 28% of total revenue. We are excited to see our progress in this region and how we are leveraging our portfolio in home, business and fast charging, which we now have in place. APAC contributed €1,200,000 or 4% and LATAM was approximately €800,000 or 2%. We see clearly an increase in relative exposure to the U. S.

Versus Europe as we further diversify our unique and in global geographical footprint. AC sales of €23,700,000 including ABL represented approximately 68% of our global consolidated revenue. The AC portfolio remains the most important revenue weight category for Woolworths containing both the home and business segment. We start at home and we continue to leverage our strong position in this segment as announced partnerships are starting to pay off. One exciting new partnership is with ENGIE as Volvo has been chosen as the only charger provider for their new EV charging offer via smart charge.

In France, there is a specific regulation where chargers require an integrated connector without a cable and this makes Wobox Pulsar Plus socket the perfect solution product partner. This is another example of how our broad product portfolio is allowing us to capture opportunities in different markets. In parallel, Volvo is making quick ground in the business segment with the AM4 and Pulsar Pro. We are syncing up new distributors and leveraging existing partners with the aim to optimize the cross selling opportunities in our sales network. DC sales were €4,400,000 representing 13% of the revenue in the 3rd quarter and was impacted by an expected order delay by a customer due to excess inventories.

In the DC segment, the sales cycles are longer and therefore can create volatility between strong quarters and slower quarters. As a trend, we do see the charge point operators are currently focused on profitability and network optimization much more than expanding the network by reach or by ports deployed. This means that charge point operators are working through existing charge inventories and ordering less frequently. However, we continue seeking out new customers and further expand our customer base in all regions. Software (ETR:SOWGn), services and others contributed €6,600,000 for the 3rd quarter, representing 19% of our total revenue.

These activities continue to be solid compared to last quarter with Electromaps, our public software activities showing 55% quarter over quarter growth. If we exclude the inventory provision impact mentioned before, the gross margin on a product level was solid. We also see opportunities to improve as we introduce new cost out versions

Luis Boala, CFO, Wallbox: of our

Henrique Associon, CEO, Wallbox: products. With the focus on quality, reducing our BOMs cost and leveraging our strategic partners to improve our procurement process, we see upside to the 38%, 40% gross margin target in the future. We believe this improvement will be accentuated further when the market demands larger volumes. Last earnings call, we mentioned that we remain positive our long term growth and the future potential of the EV market, which we continue to do so. However, it is clear that the transition TVs will take longer than everyone expected and that current growth is slow.

As reported by Raw Motion, in the Q3, there were 1,470,000 EVs sold in our core markets, which are North America, Europe and rest of the world. If we will compare the same period last year, this represents a 2% decrease in those markets combined. Our long term view on EBIT transition and the opportunity that comes with it remains solid and we are more optimistic as we enter into 2025. 100 of 1,000,000,000 have been invested by common factors, new more affordable EV models are being introduced, charging infrastructure continues to be installed and in the EU new regulations come into effect. We have a diversified position both geographically and commercially making us less vulnerable to local or region volatility.

At the same time, we see that competition without a similar diversified position and scale is struggling increasing our market share and creating more opportunities for us. We believe that we are only at the beginning of the adoption curve. And in the meantime, we will continue to focus on what we can control. There are clear headwinds in the industry, but we are focused on maximizing our growth and achieving long term profitability. Luis, I'll turn it over to you to comment further on our financial details.

Luis Boala, CFO, Wallbox: Thank you, Henrik. Good morning and good afternoon to everyone. Our 3rd quarter results are not as we expected, but have also been impacted by unique factors. The revenue for the quarter generated was €34,700,000 representing a 7% year over year growth. We continue to grow in North America and other selected markets, but we saw this growth offset by a softer market in Europe in both AC and DC.

Besides the aforementioned, we have recorded a one off revenue charge of 1,600,000 dollars due to a return with one specific customer. Absent this impact, we would have had double digit growth year over year. With 23%, the gross margin is lower than expected. This has to do with the provision and Rick talked about before, which we decided to introduce after a careful review of our inventory. We keep developing and improving our products to match new requirements and service new charging segments.

As a result, some components acquired at the peak of the supply chain shortage post COVID data are at risk of not being used in the new versions of our products. The additional inventory provision amount for the quarter is €4,000,000 This is not a cash out nor a write off yet. We see an opportunity to sell some of these components and recoup part of the initial investment. We do not expect material excess and obsolete provisions in quarters to come following the careful inventory review. As already highlighted by Andriyck, if we excluded this additional provision, the gross margin would have been closer to our target range.

Q3 labor cost and OpEx were down 2% year on year. Costs are decreasing despite the AB acquisition, which joined Warbucks perimeter in Q4 of 2023. Consolidated adjusted EBITDA loss for the quarter was $21,800,000 Absent of the aforementioned provision, we would have sustained the general sequential adjusted EBITDA improvement as the core gross margins remain intact and we continue to reduce cost. Profitability and cash generation remain our top priorities. We ended the quarter with approximately €71,000,000 of cash, cash equivalents and financial instruments.

Long term debt was approximately €84,000,000 at the end of the quarter. The last few years we have been investing in making ourselves future proof. We have a complete pro portfolio to cover markets globally and state of the art manufacturing facilities with plentiful capacity. Considering our existing capabilities to facilitate future growth, CapEx excluding capitalized R and D was again purposely very light with $1,700,000 spent in the 3rd quarter. This represents a 60% decrease compared to the same period last year.

In Q3, approximately €340,000 was spent on property, plant and equipment. We are expecting less than €10,000,000 of investment for the full year. We continue to reduce our inventory and our goal is to continue bringing inventory down in quarters to come. This quarter was significantly impacted by inventory provision discussed earlier. Inventory totaled €76,500,000 which is a 10% reduction sequentially.

With all the efforts we talked about today, we set Woolbox for success and in a strong position despite the market backdrop. The goal is to align the cost structure to the current demand and we can do that from a position of strength with sufficient cash balance. As part of the continuous optimization efforts, it is key we focus on our core activities and therefore we are also reviewing strategic alternatives of non core assets to conserve cash. As CFO, I'm 100% focused on getting the company to profitability and cash generation as soon as possible. And Rick, I'll turn it back to you to provide some closing commentary.

Henrique Associon, CEO, Wallbox: Thank you, Luis. Before I share with you my closing thoughts and our expectations for the Q4, every today we announce the resignation of Anders Petterson as Non Executive Chairman of the Board of Directors and the appointment of Beatriz Gonzalez as his replacement. We would like to thank Anders for all his contributions and congratulate Beatriz with her new role. Now I would like to leave you with the following. It is clear that the current EV market is volatile and that this is impacting our performance.

We understand that in these times visibility on the longevity of the company is key. For that reason, we share with you today the key initiative allowing us to continue building out our leadership position in a sustainable way. We have been executing key strategic initiatives in the past quarter, which include expanding into new countries and segments, securing new strategic partnerships, reducing costs and strengthening our balance sheet. As part of our initial efforts, we are now adjusting the organizational structure into a business unit driven model to better align resources with our product portfolio, improving visibility on the top line growth and identifying opportunities to expand gross margins and continue to drive sales. The main objective is to match the cost structure with the current demand to drive our path to profitability and cash generation.

We are in a multi decade transition and we are laying the foundation right now. We are executing well. We have a leading position and we are building a company that is being set up for success. From that perspective, we want to provide guidance on what we expect for the Q4. Revenue in the €40,000,000 to €45,000,000 range, representing an approximate year over year growth rate between 23% and 38%.

Gross margin back into the 38% to 40% range. Combined with continued improvement in cost, expecting negative adjusted EBITDA between €7,000,000 10,000,000 With that, we'll raise the question from our analysts.

Charlie, Call Coordinator: Thank you. Our first question comes from George Giancarikas of Canaccord Genuity. Your line is open. Please proceed with your question.

George Giancarikas, Analyst, Canaccord Genuity: Hi, everyone. Thank you for taking my questions. I'd just like to start from a I know visibility is fairly limited and you've articulated measures through which you plan to reorganize and cut costs. But I just like if you could help us understand a little bit of when you hope to get back to sort of or get to an EBITDA flat to positive situation? And if you could tie that in with your plans around strengthening the balance sheet to give the company runway to capture the future growth in electric vehicles?

Thank you.

Henrique Associon, CEO, Wallbox: Thank you for the question. This is Henrik. So I think the key and what we are trying to achieve and as I said before, it's obviously the profitability and

Henrique Associon, CEO, Wallbox: the cash

Henrique Associon, CEO, Wallbox: generation. And I think the good news is that we are growing in key markets like North America where we are growing 45% year over year. But other markets like Europe, we see a market that it's very volatile. And last quarter, we saw a 13% decrease on the EV market. Despite that, we were able to grow, which I think is very important.

And it shows that we are constantly increasing the market share, which at the end, it's what we want. In this moment, it's when we want to increase the market share. Our approach now is instead of thinking that we will catch up with revenue, which we believe, we believe that the revenue will grow and we will be able to continue capturing more market and more growth. At the end, any time that a company in our competition struggles, it's more market we get, it's more sales we get. So I think even if the market is not growing as expected, we still have opportunities to continue capturing more market share and grow sales.

But our approach right now is, okay, we have to adapt our structure to the revenue we are seeing now for the next quarter, which is this 40% to 45%. And with historical revenue, we've been having. And obviously, we see an upside, obviously, because we see that this opportunity is too low. But that's the key. And at the end, we will be profitable.

At the moment, we achieve this we adapt to these levels. So maybe as a data point, we provided already the Q4, which we are doing huge steps towards profitability. We're improving 50% versus Q2, the EBITDA in the best part of the range. But one thing is very important is 2025 as a year has to be a profitable year, and that's what we expect. We expect a positive EBITDA year.

And that's the data I can give you. It should not take us more than 2, 3 quarters to get the company into the cost structure given the current revenue. And as I said, we see upsides in revenue. But right now, we want to take an approach where seeing that the market is very volatile. And some we are able to capture the market that is growing, but we want to make sure we are committing to something given the volatility of the market that we can achieve.

George Giancarikas, Analyst, Canaccord Genuity: I think you mentioned that there may be some inventory on the DC side. But what about AC? I mean, that's been a pesky issue that you've had for several quarters. Is there still inventory, in your opinion in the European theater? And I think that in the U.

S. Market, you're growing inventory through your Generac channel. It's a bunch of questions, but am I accurate? Is there any inventory left in Europe?

Henrique Associon, CEO, Wallbox: No, I don't think so. I don't think in AC, there's an inventory issue right now. And the clear proof of that is that we're over performing in every country and segment the EV market growth. So not only we are not we see that data in the sell in, sell out data, but there's no inventory challenge. Obviously, we are in the North America increasing with new customers and new partners.

And as you say, Generac, it's a new partner. We're seeing very nice sell out from Generac, but they also have been selling to their dealers. And that creates some inventory in their dealers. But Generac is also making sure they don't have too much inventory. To give you an idea of the success of this deal, Generac has become in 2 quarters our top five customer in North America and one of the top in the world.

And I think this is a great data point on how this is working. Every quarter we are seeing orders and we are adding more products in our portfolio. And as I also say in the script, we see not only opportunities to increase sales with these partnerships we are doing, but also to reduce costs. We have some key strategic partners, not only Generac, other big OEM customers we have where we can leverage their purchasing power to improve our cost and improve our margins at the end. So as the industry is becoming more mature, our relationships with our partners are becoming more mature, are becoming we have bigger volumes obviously, but also more ways we can have synergies and support each other.

And a clear success of that is being able to expect to continue to improve our gross margin and the growth we are seeing in North America.

Henrique Associon, CEO, Wallbox: Thank you.

Charlie, Call Coordinator: Perfect. Thank you. Our next question comes from Ben Kallo of Baird. Ben, your line is open. Please go ahead.

Ben Kallo, Analyst, Baird: Hi. Thank you for taking my question. Good day, guys. Just maybe following up on George's question, could you guys just maybe taking a step back, just talk about expectations on EV sales across different regions you guys have internally for next year and then maybe 26? And anything that you see that could reignite demand for EVs?

And then I have a couple of follow ups.

Henrique Associon, CEO, Wallbox: Maybe Michael, you want to. No. So when we look at well, Ben, thank you for the question. So this is Henrik. We when we look at the different sources in the different markets, we expect a growth everywhere in North America and in Europe.

Europe is we expect it to be fueled by new regulations on emissions for the fleets. I know there's a lot of noise right now if these relations will come or not come or these fines will come and come. We believe it will come no matter what. Maybe the fines or the cost is going to be softer in our opinion. But no matter what, we are seeing carbon manufacturers in Europe preparing for that.

So we've seen a delay on the push for sales for EV at the end of this year and expecting a stronger first half of next year because at the end what matters is the EV sales you make during 2025 to achieve this regulation. So that's one of the reasons we also expect a strong second first half of the next year because some carbon factors, if they could choose, will prefer to sell EVs in January instead than in December to achieve these regulations. That's one thing that we see positive for the next year. And North America, there's a lot of new comment models coming, which we believe will impact. So our opinion, we can maybe share later, but we think we can be above the 10% to 15% growth for EV market.

But the way we are building our organization and our guidance and everything, we are considering a flat market. And we are making a company to make sure it's profitable in a flat EV market. Why we are doing that? Because we believe that's the way we can be quickly profitable. And if the market overperforms, we really think we'll overperform.

We will make more money. At the end, we will be more profitable. But we are adapting the company to a flat market just to be ready in case of some unexpected thing. But our forecast right now and what we see is a growth in the first half of next year in Europe and in North America due to new models and changing regulations.

Ben Kallo, Analyst, Baird: Thank you. Just on the point of your manufacturing footprint, because you talked about both from a geographic standpoint, if it still makes sense to have manufacturing in the U. S. As well as Europe? And then as well as any thoughts about moving to more of an outsourced manufacturing model?

Thank you, guys.

Henrique Associon, CEO, Wallbox: So this is an interesting topic. Now with the business units, it's I think we've recently started doing it. But it gives us more visibility on cost and cost allocation of the different parts of the business, and we have these kind of questions all the time. We believe that having our own supply chain still give us an advantage. And I think we seeing the North American market as a key growth vector for us, and we are proving that this quarter over quarter.

It's key that we have our own manufacturing capacity there. And there might be changes in regulations that also give us an advantage, the fact that we are a North American manufacturer. So we think that keeping this factory in North America and our one in Barcelona, but especially the one in North America, it's a key advantage for us. So we want to give that. The answer on if we will ensure 3rd party manufacturing or not, it will depend on cost and profitability.

Right now, we still see a key advantage. We have interesting gross margins. We also vertically integrate our electronics. We have this company called Ares that we acquired a couple of years ago that makes our PCBs and our electronics. The cost of our product is 50% to 60% electronics And we control that part and we get this gross margin.

With these strategic partnerships we are doing with different partners for purchasing at a better price components and we controlling our own manufacturing and supply chain, I think we can really exceed the 38% to 40% target in the future. So that's the focus. Apart from lowering sales and reducing costs is to increase margin. And controlling our own capacity and supply chain is key to achieve this margin improvement.

Luis Boala, CFO, Wallbox: Yes, maybe Luis? Yes. The only thing I add to that is that we've already incurred that capital expenditure, right? So when you look at our footprint, we're ready for the growth to come. It's not coming in the short term.

And as Andriyck mentioned, we're going to stay consistent with kind of a flattish EV market. But when that growth comes, we already have those facilities and those products. So we are in a very strong position to capture the growth when it comes.

: Okay. That was our last question. Thank you all for joining us today. We hope you found today's call a good use of your time. Let us know if we can help you in any way.

Charlie, Call Coordinator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.

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