Earnings Transcript for ABHBY - Q4 Fiscal Year 2024

Operator: Hello. And welcome to the Alfen 2024 Full Year Results. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions] Today we have Marco Roeleveld, CEO; Onno Krap, CFO; and Michelle Lesh, CCO as our presenters. I will now hand you over to your host, Marco Roeleveld to begin today's conference. Thank you.

Marco Roeleveld: Thank you Laura. Good morning and welcome to this Alfen webcast. We appreciate the fact that you have taken the effort to participate. This webcast and the questions that may come forward are handled by the management board of Alfen, as indicated by the moderator being Michelle Lesh, CCO; Onno Krap, CFO and myself, Marco Roeleveld, CEO. In this webcast we will start with the highlights of 2024 followed by a short review of the business line. Next we will go in more detail regarding our financials of 2024 and lastly a significant part of this presentation will handle the strategy update, our outlook for 2025 in the context of our medium-term ambition. We can continue with Slide 4 with the highlights of 2024. In line with the updated guidance during the Q3 results, the revenue for the full year of 2024 ended up at the lower end of our revenue bandwidth and amounted to €487.6 million. The adjusted EBITDA of 5.8% was in line with the updated guidance. Our results in 2024 were impacted by headwinds across all three of our business lines. Lower EV subsidies resulted in a low demand for charging stations and a significant price decline of batteries resulted in a wrong decision cycle and low revenues, and a moisture issue as market solutions caused a big financial impact. The free cash flow in 2024 was €21.4 million positive, compared to a negative cash flow in 2023 of €27.2 million. This positive cash flow exceeded our updated guidance, primarily driven by a reduction in inventory and time of Energy Storage projects. We have updated our strategy in the second half of 2024 and have decided to enhance our focus on our core markets and to further optimize our product market approach. With the restructuring in the fourth quarter, we adjusted our cost base, adapting it to the new market conditions, and for 2025, a €13.1 million net cost base improvement was realized compared to 2024. Driven by strategic repositioning in which we sharpen our market focus and the current limited market feasibility, we concluded for the year 2025 a revenue outlook of €445 million to €505 million at a single-digit adjusted EBITDA margin and combined with a CapEx below 4% of revenue. Due to the current market volatility and macroeconomic uncertainty, our updated medium-term ambition for 2026 to 2027 is a revenue growth of 5% to 10%, a year-on-year improvement of adjusted EBITDA margin towards low double digits and a CapEx below 4% of revenue. On the next slide, we will continue with our progress on our sustainability program. With regard to our sustainability program, we would like to highlight three aspects. First, that 99.5% of our revenue in 2024 has been aligned with the EU Taxonomy. Secondly, that the SBTi has validated our science-based greenhouse gas emission reduction targets. With these targets, we comply with the SBTi Corporate Net Zero Standard. Thirdly, in the Sustainability section of our 2024 Annual Report, we have closed more than 30 pages of qualitative and quantitative information on our ESG activities. In our sustainability approach, we have defined 15 material topics we have reported on. It has been a tough job to bring all data points together and create a comprehensive storyline. We are convinced that the overall result is well balanced. Please look at our Annual Report on our website for further information. Michelle will now continue this webcast with a segmental review.

Michelle Lesh: Thanks, Marco. Now we'll talk through each of our business lines, starting with Smart Grid Solutions. In Smart Grid Solutions, we achieved €210.6 million of revenue for full year 2024, which is a year-on-year increase of 11.8%. This is primarily driven by our grid operator segment, which contributed to 66% of our revenue. And while grid congestion drives our grid operator demand, we do see it hamper our private domain segment. Gross margin was 15.5%, driven by a €15.4 million warranty provision for the moisture issue, but our adjusted gross margin was 22.8%. Commercially, we continued to win projects in our greenhouse segment and provided a new innovative approach to the transport distribution stations for our customer Enexis. Alfen's innovative approach to the station and as the end-to-end contractor significantly reduces their time to install, connecting more capacity in a shorter amount of time, which further eases grid congestion in the Netherlands. On the next slide, we'll talk through EV Charging. In full year 2024, we saw revenues of €153.3 million, which is flat to 2023, and slightly above our guidance from the Q3 trading update, which was up to a negative 5% growth year-on-year. Due to a one-off inventory adjustment, gross margin was 31.5% versus 38.3% in 2023, driven by a general warranty provision of €4 million and on an adjusted basis was €36.1 million. We continue to win and innovate this space with multiple wins in the public segment, for example, in the City of Groningen and launching the first AFIR-compliant Twin 5 Plus station with dynamic QR codes. On the next slide, we provide some additional context on Alfen's revenue relative to other players in the marketplace. Here, we can see Alfen's revenue development is in line with our peers, based on the information currently available. And while we all have slightly different end segments that we serve, overall, we see that 2024 was a challenging year. Even with these challenges, we still see Alfen well-positioned. Overall, we had stable revenue, and as we looked at our market share position in each country, across our key markets, Netherlands, Belgium, Germany and France, in aggregate, we gained share. And if we look across all of those other countries outside of our top four markets, we slightly lost share. This reinforces our direction of increased strategic focus on our core markets, as we will discuss later in the webcast. Overall and across Europe, in aggregate, our market share has remained flat. We do expect EV registrations to come back in 2025, as previously shared. However, we still don't expect that uptick in Q1 and expect any market growth that might materialize to contribute in the second half of 2025. Now, as we move to Energy Storage, on the next slide, we see revenue of €123.7 million, down 24% year-on-year. As previously communicated, we had longer deal cycles, which impacted our 2024 revenue. Our gross margin was 27.6%, compared to 22.4% in 2023, driven by an impairment of older batteries. Our adjusted gross margin was 29.1%. In Q4, we were able to finalize key deals and are excited about FlevoBESS, a 126-megawatt-hour system, the largest for Alfen and one of the largest for the Netherlands. This project is expected to contribute to our 2025 revenue. We also continue to deliver innovation to the market, utilizing the latest containerized solution for our customers, which ensures our competitiveness in this space. As we move to the next page, we can see our backlog development, which includes other key deals from Q4. We've seen steady backlog growth from €72 million in June of 2024 to €100 million in December of 2024, with €86.5 million of that currently contributing to our 2025 revenue outlook. As you compare our backlog to our outlook, we have approximately 78% coverage of our midpoint and expect our current first half pipeline of deals and total year mobile system opportunities to support the remainder of the gap and contribute to backlog in 2025. And now I'll hand it to Onno to walk through the financials.

Onno Krap: Thank you, Michelle. Let me start by commenting on revenue. Full year 2024 revenue ended up at €487.6 million, which is at the lower end of our updated guidance of €485 million to €520 million. As you already indicated, during our Q3 earnings release, the reason that we ended up at the lower end of the guidance was due to the weaker-than-anticipated fraction that we experienced in our EV Charging business during Q3 and Q4. On a positive note, we were able to ramp up our substation production numbers significantly and we reached an output of 100 stations per week in November and December. We now move on to gross margin and adjusted gross margin. Our gross margin this year was 23.7%, which is significantly lower than the gross margin of last year of 29.9%. We have made several adjustments to the gross margin, resulting in an adjusted gross margin of €28.6 million. I will first explain what impacted the 2024 gross margin and then I will provide more detail to the adjustments we made to arrive at the adjusted gross margin. Our gross margin percentage was impacted by four factors. First, for Smart Grid Solutions, we experienced a number of inefficiencies due to the resolution of the moisture issue and some startup inefficiencies as a result of the move to our new state-of-the-art production facilities. Within Smart Grid Solutions, we have seen a revenue share shift from our higher-margin private domain segment towards grid operators at lower margins. This trend is expected to impact our margins also for the longer run. The gross margins are further affected to catch up in the recognition of a warranty provision for our EV Charging business. Under IFRS, we have to recognize this provision as soon as sufficient data is available and a reliable estimate can be made. We therefore booked this catch-up provision for an amount of €4 million. The fourth factor is the gross margin for our battery business was positively impacted due to the timing effect of the realization of certain larger projects. Towards the end of 2023, we realized a number of ownership transfers for batteries without shipping these batteries to the customer sites. Under IFRS, we can recognize the revenue at the moment of ownership transfer, but at zero margin. The margin can then be realized at the moment of shipment or installation. Especially Q3 and Q4 margins in 2024 were positively influenced by this effect. If we then move from gross margin to adjusted gross margins, we have made a total of four significant adjustments. First, we booked a €15.4 million provision for the substation moisture issue, which is somewhat higher than the €12.5 million we booked in the first half year in November of 2024. This is due to a larger on stock population of substations that needed to be repaired. In total, we used €2.6 million of this provision to cover the actual repair cost and we have not started any repairs of units that are installed out in the field. Second adjustment, we also booked a total of €6.5 million of obsolete inventory provision for EV Charging inventory. As noted before, we are overstocked on certain EV Charging components as a result of component stock build-up during 2022 and 2023, which we are in the process of consuming in the coming years. We carefully monitor the consumption of these components based on the anticipated demand for charging poles. Fluctuations in the anticipated demand influence the valuation of this inventory and might also impact the valuation in the future. We estimate that based on normal stock turnover, we have around €27 million of too high EV Charging inventory and stock down payments on a total EV Charging inventory of about €48 million. Third adjustment, we also took a €1.6 million charge for all the batteries that we did have on stock but cannot be sold anymore within a margin. And fourth, we charged €0.5 million inventory write-down on the remaining component stock that we still had for our DC chargers. And then moving on to personnel cost. Personnel cost increased by 27.1% in 2024. Alfen has gone through a period of significant growth over the past few years and we expected continued growth as we moved into 2024. In anticipation of this growth, the organization was strengthened with additional resources. As soon as we realized that these market conditions became less favorable, we stopped hiring and started a restructuring program on which we have informed you. A restructuring provision has been taken of €5 million. Of this €5 million, €3.7 million related to the write-sizing and €1.3 million related to other personnel related events during the year. The full effect of the write-sizing savings will be visible as of Q1 2025. In operating expenses, other operating expenses increased by 22.8% and include €3 million of one-time charges. Among others, the cost of our strategic write-sizing project have been recorded in this line. Lastly, adjusted EBITDA. Adjusted EBITDA amounted to €28.5 million, which is €28.6 million lower than the 2023 adjusted EBITDA of €57.1 million. €11.7 million of this difference is due to the lower adjusted gross margin and the remaining decrease due to the increased adjusted personnel costs and adjusted operating expenses as the organization has been built for growth in the beginning of 2024. For 2025, we have taken significant measures as part of a restructuring program to reduce costs. Next slide, balance sheet. For a deeper understanding of the movements in the balance sheet, I also would like to refer to our financial statements in the annual report. The summarized overview in the webcast does not always do justice to some of the complexities and movements. First, on the non-current assets. Non-current assets increased by almost €30 million due to the commissioning of our new facilities here in Almere in 2024. PPA [ph] increased by about €31 million due to this reason. Current assets. Current assets increased by €63 million, which was driven for a large part by a reduction of inventory of €49.3 million and an inventory-related reduction of trade and other receivables. I will come back on that on the page on working capital. In addition, the current assets also decreased by €25.7 million as a loan that we provided to the construction company for our new facilities was repaid during 2024. Finally, current assets increased to a €4 million -- due to a €4 million current tax receivable and €70 million cash that we had on bank by the end of 2024. The €4 million tax receivable is mainly related to a carryback compensation for our realized loss in full year 2024. And then to continue with the non-current assets. Non-current, sorry, non-current liabilities. Non-current liabilities increased by €34.8 million caused by an increase of lease liabilities as we are financing a significant part of our facilities through a financial lease. An increase in provisions of €50 million is a result of the moisture provision and the new warranty provision for EV Charging and is also recorded in this line. Finally, the deferred tax liability decreased by €6.3 million partly as a result of the write-down of the capitalized R&D due to the strategic review. And lastly, current liabilities. Current liabilities decreased by €40.1 million mainly due to a reduction in bank overdrafts of €6.4 million and the repayment of a loan facility that we had on our books and that offsets the loan that we provided to the constructor of our facilities that I just mentioned to explain the movements in the current assets. Our net deposition improved, reducing from €55.1 million at the end of 2023 to €32.7 million at the end of 2024 and that includes the lease liabilities. Free cash flow. Our free cash flow has improved. In 2024, our free cash flow was €21.4 million positive, compared to a negative cash flow of €27.2 million in 2023. This is more than in line with our 2024 guidance provided in 2023 in which we indicated to improve our cash flow position compared to 2023. We indicated that we would improve our cash flow position versus 2023. Next slide please. Networking capital reduced by €42.6 million primarily driven by movements in inventory. Inventory on the face of the balance sheet came down by €49.3 million but actually came down by €60.4 million and let me explain. Reduction of -- first, a reduction of €21.9 -- €29.1 million in inventory for batteries of which €19.6 million was due to the effect of battery inventory that we could not ship at the end of 2023 and went out in 2024. Second, we were able to realize a €20.2 million reduction of inventory and stock down payments for charging pole components as part of our effort to consume the excess components we bought in 2022 and 2023. A part of this €22.2 million reduction in EV Charging components is represented in the reduction of trade and other receivables. That has to do with the fact that we have done so-called strategic stock down payments to some of our suppliers to guarantee the supply of components in the period 2022-2023. These strategic stock down payments are now being reduced but are recorded as prepayments under trade and other receivables but actually they are a kind of inventory. In addition, I would like to draw attention to the inventory levels for substations that were elevated during the year of 2024 but are now back at a level of €24.3 which is less -- slightly lower than by the end of 2023. €10.8 million of inventory write-down is due to various reasons but mainly driven by the inventory obsolescence reserve for EV Charging and a net realizable value write-down for batteries and an inventory write-down of components for DC chargers. I move to trade and other receivables. Trade and other receivables came down by €7 million of which €5.8 million was due to a reduction of contracts that were in a net receivable position. Contracts in a net receivable position are contracts for which we have performed work more than we have been able to bill to our customer. We have also a tax receivable of €4 million as we have realized a loss over 2024 for which we are unable to claim a tax refund. Lastly, the trade and other payables. Trade and other payables were reduced by €6.3 million that amount to customers increased -- but due to customers increased by €3.6 million. This €3.6 million working capital improvement was due to an increase in contracts that were in a net payable position. Contracts in a net payable position are contracts for which we have received more prepayments from customers than the work we have performed. Next slide please. As announced in our Q3 update, we have been working on a cost savings program. This cost program consists of organizational restructuring, as well as an organization-wide spend reduction program. The total net savings as a result of our restructuring efforts is €13.1 million. The €13.1 million is a net effect. Gross savings are estimated to be up to €20.3 million as we would face a €7.2 million cost increase if we hadn't taken any measures. This increase would come from salary increases as stipulated by the collective labor agreement and roll-over effects from employees having started throughout 2024. Of this €13.1 million, €7.5 million is related to external labor costs and will improve the gross margin. The remaining €5.6 million is related to OpEx and will reduce OpEx by this amount for 2025. This includes the 2024 financials. I will now hand over to Marco for the strategy update.

Marco Roeleveld: Thank you, Onno. I will continue with the strategy update in 2025 outlook and our medium-term ambition. On Sheet 18, we have summarized the most relevant aspects regarding the changing market conditions at the end of the first half year of 2024 and our reaction in the second half of 2024 by conducting a strategy review and execution on the organizational right-sizing project. First, I will highlight the changing market circumstances we observed in the first half of 2024. Rapidly decreasing battery prices made Energy Storage customers postpone closing of deals and the lowering prices of battery was – the lowering of battery prices was indicated by an overcapacity of battery production due to the lower production of battery-equipped vehicles. Lowering EV subsidies resulted in a tempered growth of battery-equipped vehicles in Europe and as a consequence also a lower demand for charging stations. Within SGS, we faced a moisture issue in our Pacto substations with Liander and Enexis. The combination of these three elements forced us to issue a revenue and profit warning in June 2024 and we took immediate action as indicated by initiating a strategy review followed by an organizational right-sizing project. In the strategy review, we reassessed our competitive position and based on that we reassessed our product-market combination approach based upon first the market attractiveness, then our competitive position combined with our activity and margin levels, and lastly, the fit with our capabilities. The outcome of these steps have resulted in a strong focus in our ambitious market segments. In the organizational right-sizing project, we realigned our organization to the new level of market growth targeting a high single-digit adjusted EBITDA margin for 2025 and making the organization more effective. As explained above, the right-sizing program resulted in a net cost down of €13.1 million in 2025. On the next slide, we will present our updated strategy and the 2025 outlook and medium-term average. With regard to our strategic update, I want to share with you the main points in this update before we walk you through in more detail. Supported by an external consultant, we started the strategy review process by reviewing each of our markets and our positions in these markets. The findings supported the uniqueness of our business model, the three business lines that complement each other commercially and operationally. Although each business line has its own specific characteristics, we see in our business lines that the reason why our customers buy from Alfen is linked to our deep grid expertise, our ability to deliver turnkey solutions including consultative selling, project execution and service, and because we are close to our customers. In my more than 25 years with Alfen, we have step-by-step built up to these capabilities and I'm proud of where we stand today. After the strategic validation process, we also reconfirmed the long-term growth trend to the fundamental growth drivers in each of our markets in which we operate. Sometimes emphasis is too much on an annual growth or temporary headwinds and therefore it's good to look at the trends on a longer-term perspective. If the longer-term growth is positive, you could question why did we need to change our strategy and our organizational size. But we've seen that in our markets there is a rapid technology, as well as regulatory developments. This requires focus on a select couple of product markets to be able to truly deliver on these technology -- technological and regulatory changes. We also see that the market growth has been tempered, which requires a smaller organization to maintain ambition profitability level. The outcome of our strategy review is that we will focus on the markets where we are best positioned in the long run, which are all in Northwestern Europe. We will keep our geographical focus within SGS as it is. For EV Charging, we fully focus on AC charging and discontinue our DC charging project. In DC charging, we see too limited market demand yet and we don't have the development resources to develop a broader DC charging portfolio that's needed to win in these market segments. In terms of organizational right-sizing, we are much more than simply reducing the number of FTEs in our company. We have leveraged the synergies of some departments with similar capabilities, for instance between Smart Grids and Energy Storage on the service elements. And furthermore, we have simplified our research and development organization and interfaced with the rest of the organization. Bringing it all together into an outlook for 2025, we expect the revenue to be in the range of €445 million to €505 million, with a high single-digit adjusted EBITDA margin and CapEx below 4% of revenue. Onno will give you more details later on in this presentation. For 2026 and 2027, we see that -- we are setting our objectives amidst market volatility and macroeconomic uncertainty. Therefore, we see a revenue growth in the range of 5% to 10% for those two years, while improving our adjusted EBITDA margin further towards low double digits and we expect the CapEx to remain below the 4% of revenue in 2026 and 2027. If markets would grow faster than expected now, we can quickly scale the corporate production capacity available. In the first quarter of 2025, we are focused on truly activating the updated strategy in all the teams of Alfen, after which we will focus on execution from Q2 onwards. We will of course monitor market developments and our positioning in the markets. Due to the positive long-term underlying growth trend, we are convinced that from 2027 onwards, market expansion becomes possible again. On Sheet 20, we have tried to make a comprehensive overview of our unique business model. As you can see in our mission and vision, we are truly positioned in the heart of the energy transition. We are dedicated to deliver innovative solution -- energy solutions across our business line. And these, as a core differentiating capability, we are able to translate our knowledge of how the grid works into solutions that are valuable for our customers. A nice example of our capability is demonstrated with Enexis. In the coming years, we will be executing a fair amount of contracting work with Enexis, delivering our project execution capabilities. We are able to help one of the Dutch grid operators to speed up the expansion of the grid and to cope with the energy transition. Within our Smart Grid Solutions and Battery projects, we are not delivering part of a solution, but really from start to finish, meaning that we help our customers with setting the right requirements, we design and develop the solution for them, assemble it, and also service and maintain it once it is operational. And lastly, our sales force is well connected to our research and development department, which is how we can tailor our solutions to the customer needs. A nice example is how you can see or show with a wide range of solutions we offer to support large PV powers. And I'll continue on Sheet 21 with the interaction of our three business lines. We have conducted, sorry, we have concluded we have a strong right to play in each of the markets and that the business lines reinforce each other. Of course, each business line has its own merits. Smart Grid Solutions is the source of our grid experience and the knowledge based on how we differentiate in the market. It's also the fundament of long-term growth and revenue. EV Charging has the highest growth margin and creates a basis for digital expertise. And Energy Storage brings the highest market growth potential, as well as big synergies with Smart Grid Solutions, for example, in our project and service organization. The synergies between the different production lines go far beyond these examples. On the right-hand side of the slide, you can see an extensive list of how we benefit from having three interconnected business lines. I will hand over to Michelle who will elaborate on the growing market and -- markets in more detail.

Michelle Lesh: Thanks, Marco. Now let's look at the market context and dynamics of each of our business lines. And before we look at the individual business lines, it's important to note that you will see deviations from the overall publicly available information. We see the data, we've read the reports, but we also have customer data points and on-the-ground experiences that show a more nuanced view. And in a positive light, we are very well positioned to take advantage of the market growth that may still materialize in all segments. As Marco mentioned, we have strong customer relationships and the manufacturing capacity to support a rapid ramp-up. And we've shown that previously, last year with the ramp-up of SGS and previous ramp-ups in Energy Storage and EV Charging. We can and have executed in a fast-moving environment. The next pages will share the market view balanced with the Alfen view and provide nuance and hopefully insight to ensure we are all clear on the risks and opportunities we see in each of our business lines. As we move to the next slide, we'll focus on SGS to start. We've got two key areas, the grid operators and the private networks business. First, let's look at some of the underlying market trends where we see increasing electricity demand, ongoing renewables to be grid-connected, capacity-constrained and congested grid, and the support of the government for the Dutch DSOs. If we look specifically at the grid operators, which represent 66% of our volume, we see they've announced investment plans. They have an expected CAGR of 21% from 2024 to 2026. And we, of course, expect to capture some of that volume. However, we anticipate a positive yet constrained growth rate of 8%. Why is this? Why are we cautious and expect that slower pace than the investment plans? Because we see constraints in the overall value change. There are permitting and site readiness issues. There are transmission capacity challenges, component challenges and installation capacity, which are all limiting factors to the realization of the investment plans. We will support the grid operators and will ramp when needed, but right now we see tempered growth. In the private domain area, we see a couple of key drivers, the combination of which leads us to expect almost no growth in the private domain segment. We see the installations hampered by grid congestion and an overall reduction of renewables deployment in the Netherlands. Now, on the next slide, let's look at what's happening in the EV Charging market. First, the overall trends are similar to what we have shared previously. The disparity between ICE and EV vehicle prices, ongoing incentive challenges, changing regulatory environment complexity, and divergence in some markets, and a continued desire for advanced capabilities such as ISO 15118. Overall, we do expect a profit from the mid- to long-term market growth while being less optimistic in the short term. Current market predictions for charging point installations expect a CAGR of 18% from 2024 to 2027, but when we look at our core markets and sub-segments of those markets, we expect a 10% CAGR from 2024 to 2027. For 2025, this is based on not yet seeing the order intake to reflect the growth projections and conversations and projections from our customers. And while January looks to be a good month for EVs, we do expect a lag, especially in the business and public segments where we focus. We also see continuously changing regulatory environments that can impact the adoption speed positively and negatively. So, on the next page, what does this mean for Alfen? In 2024, we saw markets develop differently across Europe in regard to electric vehicle registrations, which is another indicator we watch. Here, we can see that Belgium and the Netherlands were up last year, but France and Germany were down. Bloomberg is currently projecting 30% growth in EV registrations for Europe, but as with all growth projections, we have to carefully monitor ambition versus execution. And right now, we see uncertainty in the adoption of the EU CO2 regulations. We saw adjustments in the market information over 2024 and we've seen a delay between EV registrations and charge point sales. But in the mid- to long-term view, we still see positive signs and are particularly optimistic as the EV price parity with ICE is coming closer, which is currently expected in 2026 and 2027 for all car sizes. Next on Slide 26, let's review Energy Storage. Here again, the market trends remain similar, with storage continuing to play a key role in the energy transition, providing grid stability as renewables continue to be added, and storage is reaching cost parity with fossil dispatchable sources and can play a very strong role in easing grid congestion. Now, let's look at the installed capacity trends. Remember, this is on a gigawatt-hour basis and large megaprojects can influence these growth rates significantly. In aggregate, we do see strong double-digit volume growth for Energy Storage until the end of this decade. However, Alfen foresees 15% annual volume growth due to our focus area on mid-scale best systems. And the complexity of the cycles that come with these smaller- to mid-sized projects with customers that are new to the Energy Storage space or slightly different than some of the larger players in the mega-storage space. On Slide 27, let's really look specifically at some of the price trends that we anticipate. In 2024, we saw a sharp decline of 40%, which did impact our deal values. For 2025, we don't expect that same rate of downward pressure. And while the lower energy system prices impact overall deal values, they do incentivize and improve the project economics. Here, we're also sharing some high-level overviews of some historical benchmark system prices from multiple sources, where we see for project sizes over 10 megawatt-hours, 180K per megawatt-hour to 260K per megawatt-hour. But please know, these system prices are generic and can be affected by many factors, such as the size of the system, one-hour, two-hour, four-hour, the installed versus usable capacity that's required, the specific technology, project scope, grid integration requirements and overall risk of the project, and location. This should give you a range, though, to understand how to project into the future. Now that we've looked at the market context in which we operate, let's discuss the case for change as we move to the next slide. Overall, we feel a more focused strategy in our core markets with the right products and organizational structure will allow us to excel. What we still see is attractive market growth in each of these segments, but we do feel that with all these growth opportunities, we need to be very focused on the right product-market combinations to win. We also see rapidly changing technological and regulatory developments, so we have to stay agile and ready to adapt, which again means focus on the right combination of markets and products to improve our positioning and increase profitability and ultimately deliver for our customers. And we see consolidation of markets as they mature, and we need to ensure we have the right value proposition as those markets change and have the right balance between product leadership, customer intimacy and operational excellence, which means we need to lean into our strengths of grid expertise and customer centricity. We have to focus. We can't be in every market with all products and expect to be in the top three, which is our ambition. And we need an agile organization to execute and to ensure the right development capacity to meet the market needs. Now let's recap what this means for each business line. You'll see that the focus for Smart Grids remains relatively unchanged. We will continue to focus on the grid operators and private network clients in our core markets of Netherlands, Belgium, Finland and Sweden. And we'll look to expand with opportunities such as the transport stations with our end-to-end turnkey capabilities that we're doing with the Enexis. In EV Charging, we will be fully focused on AC charging and have stopped our DC charging efforts. Stopping DC is primarily due to the limited market demand and we also see that winning in this market requires a broader DC portfolio, and we need to focus and further develop our AC product portfolio. Our segments remain the same, public, business and mid-to-premium home, but with more emphasis and focus on our core countries, both with our country presence and our internal R&D development activities. For Energy Storage, the focus will truly be in the mid-scale segment where we can add value in providing customer-specific grid-integrated storage solutions. As the overall storage market and project sizes get larger, the definition of mid-scale does increase as well. So, FlevoBESS does fall within that core focus. Now let's walk through each business line in a little bit more detail just to recap what we offer. In Smart Grids, we have a wide range of products to serve our customers, multiple substation types, both walk-in and compact stations, as well as other offerings that allow that end-to-end, such as the switchgear, the project execution, the grid automation, service and maintenance. What really sets us apart here is our ability to design and develop in-house solutions that meet specific needs of our customers, such as our greenhouse customers, where we're able to balance their existing requirements and successfully deliver a fully engineered solution or another customer that was looking to optimize their grid capacity relative to the industrial load of their plant, contracted with Alfen to improve their medium voltage connection, install multiple new compact stations and install a small stationary battery system, ensuring seamless integration across all the elements. And our large-scale manufacturing production capabilities and deep domain expertise make us a cost-effective trusted partner. In AC charging, we have a wide range of AC products that cover the mid-premium home, business and public segment needs. As mentioned before, we have decided to discontinue the DC charger. Here you'll see our Eve Single S, which is primarily used in the home segment, our Single Pro, which is used in home and business, our Double Pro, which is primarily used in business, and our public offerings, the PG and the Twin 5 Plus. We differentiate in this market with the quality of our charger and the feedback we get from customers. We have very high quality reliability, which speaks to the robust and industrialized nature of our products. They are meant to last and support our customers' evolving business needs. And we ensure interoperability that allows our customers to realize their business cases, with features such as smart charging, broad OCCP [ph] capabilities, and additional solutions tailored for business needs, including seamless payment integration. Now let's move to Energy Storage. In Energy Storage, we differentiate in how we advise and support our customers throughout the deal cycle to get to the right project solution for them. Our customers see us as a trusted advisor and value our grid expertise that comes from years of experience in our Smart Grid Solutions business. We work with the latest technologies and offer a modular design to make our solutions customizable for our customers. Next to the storage solution itself, we offer the long-term performance guarantee, service and maintenance, which is really the end-to-end offering our customers expect. And in mobile, this is truly an all-in-one integrated package. You see other small stationary systems on the market, but our mobile solution is robust enough for construction site festivals and regular transport and movement from place to place to ensure high utilization. Now I'll hand over to Onno, who will discuss the organizational change in more detail.

Onno Krap: Thanks, Michelle. We have made our organization future-proof for growing profitability in coming years. Alfen has grown significantly over the past five years. When you grow at a speed that Alfen has grown, you do not always have time to pause, think and revisit. In 2024, we were faced with a slowdown in the markets in which we operate and we decided to use the opportunity to rethink the way we are doing things. We realized we had become overly complex and especially when you want to take out costs, it is important to make changes that make the organization more effective instead of just adding additional workload on less people. With the help of our external consultants, we prioritized the markets in which we are operating and made choices that allowed to concentrate our resources in the markets where we are winning, so doing less by creating more focus. We redesigned the organization to allow for fewer duplications. We integrated our supply chain organization with the rest of the operational organization and we merged together for substations and battery systems as they have quite some overlapping activities. Just a few examples from a large list of operational improvements. In certain areas, we rethought the way we are working. I am personally quite enthusiastic about the steps that we are taking in the R&D organization and the way we are streamlining the R&D organization with sales, product management and operations. We are reorganizing the former functional R&D organization into multi-disciplinary agile teams per product which are working autonomously on making the most successful product for the market in which they operate. We have also taken steps to optimize the span of control in various parts of the organization and at the same time making sure that we are making our direct workforce more flexible and aligned with production volumes. Here we also see the advantage of operating in three different business lines which allows us to move people throughout the organization. In particularly we see price and common capability requirements within our substations business and better resistance, Next slide, please. We would like to talk about our ambition for 2025 and beyond. Overall 2000 – overall ambition for 2025 is a revenue target between €445 million and €505 million. We are aiming for a high single-digit adjusted EBITDA margin and CapEx less than 4%. For the mid-term, after 2025, we do foresee a growth between 5% and 10% on an annual basis improving adjusted EBITDA margin to low double digits and CapEx remains less than 4%. Next slide, please. For 2034, I would like to take one step deeper. We foresee a revenue outlook between €445 million and €505 million. For substations, we expect a modest growth percentage of mid-single digits as the project business is expected to be approximately flat compensating part of growth that we foresee with grid operators. For EV Charging, we currently foresee a slight decline as current run rate numbers are not showing any signs for accelerated growth. For battery systems, we rely on the backlog numbers that we have in our books. At this moment, we still have some bookings to call in the next four months and there is, of course, always some project execution on projects that we do have in backlog. In addition, we foresee gross margin decline versus 2024 as 2024 included some one-time gross margin windfalls I explained. As a result of our restructuring efforts and continued cost control, we believe that we can realize a high single-digit adjusted EBITDA margin for 2025 and CapEx will remain under 4% of revenues. We foresee a further reduction of inventory and believe that we will be cash flow positive for 2025. Next slide, please, on the years after 2025. For the years after 2025, we are confident in the longer-term perspective of the energy transition. We have a strong demand for our substations and we will continue to increase our added value for our customers by offering additional services and state-of-the-art market-leading products. We also believe that we can increase our RSV [ph] as the size of our substations tend to increase. As the market growth is very dependent upon many different electricity grid bottlenecks, we foresee a mid-single-digit growth. However, if market growth exceeds our expectations, we are able to quickly expand capacity as we are proving through our 2024 Q4 production ramp-up. We believe that EV car sales will increase as soon as lower-priced vehicles will be introduced in the market. At this moment, the initial cash outlay for electrical cars is still an important criterion for the consumer purchasing decision. However, various studies already indicate that the total lifetime cost of electrical vehicles is lower or at par with gasoline vehicles. Our leading position is market continues to be strong and we believe that we are well-positioned as soon as overall demand will bounce back as we have established customer relationship and short production lead times in our factory in Almere. For the battery market, most analysts report we see a continued growth for this market. However, this is highly dependent on the various -- upon the various segments in the battery market. We are optimistic on our position and we see many different use cases for our products, but of course is too firmly predict a longer term trends in this market. Overall, we believe that a 50% growth rate is quickly attainable. We will continue to work on a scalable organization that will grow at a lower rate than revenue and therefore will continue to improve our adjusted EBITDA margin towards low double-digit numbers. CapEx will remain under the 4% of revenue and will therefore be cash positive. I will now hand over to Marco who will continue with the phases of growth.

Marco Roeleveld: Thank you, Onno. We are now at the last slide of this webcast and in this slide we have tried to summarize part of the phases of growth that we already elaborated on earlier in this presentation. In the first half of 2025, we will focus on implementing the new way of working and making sure that all our teams contribute to a more effective organization. For the remainder of 2025-2026, it is fundamentally a matter of executing the planned changes which sound simple but as we all know requires a lot of commitment from everyone. At the right moment, we will switch the -- our focus towards profitable market expansion again. For now, we expect it to be around 2027 or shortly after that. If momentum in the market would pick up earlier, we have proven in the past years that we are well equipped to capture such an opportunity. We have now come to the end of the presentation and although we have tried to bring things forward in a balanced way, we are happy to provide further clarification in the Q&A part of this webcast. Moderator, can you please take over and open the line for questions?

Operator: Thank you. [Operator Instructions] And we will take our first question from Nikita Lal of Deutsche Bank. Your line is open. Please go ahead.

Nikita Lal: Yeah. Good morning. Thank you for taking my questions and the details provided. I would have a couple of questions for you if I may. The first one is on Q1 2025. So, in your press release, you stated that the revenues in Q1 should be lower than in Q2. But how should we think about this in terms of margins? Should we expect week stat and the cost reduction may be realized in H2 or is it equally distributed over the course of the year?

Onno Krap: Nikita, this is Onno. We put a lot of effort in the restructuring program to be completed before the year ends and also to be able to book the financial effects of the restructuring program in 2024. All people that are affected by the restructuring program have been notified end of November, beginning of December and are not employed anymore. I mean, still -- some of them are still on the payroll, but they're not part of our cost base anymore as of January 1, 2025. So it's very evenly distributed over the year.

Nikita Lal: Okay. Yeah.

Onno Krap: Does that answer your question?

Nikita Lal: Yeah. Sure. And then my second question is on free cash flow. You did not give any guidance for 2025. I understood that you will have cash outflow from restructuring costs from Q4 and now in Q1, but could you give us more flavor here?

Onno Krap: If you carefully listen, I mentioned that we are going to be cash flow positive in 2025. But I realized it was not specifically stated in one of the written statements, but I mentioned it in my wording.

Nikita Lal: Yeah. Yeah. But more around the magnitude. So, I mean, you had…

Onno Krap: Yeah.

Nikita Lal: … more than €20 million in 2024.

Onno Krap: Yeah.

Nikita Lal: Should it improve or…

Onno Krap: Be a little bit careful. Yeah. I think we -- I want to stay at positive. As you know, cash flow in itself can be somewhat lumpy, partly because of the fact that we get quite some prepayments from customers on battery projects. So I want to be careful to be too bullish. At the same time, I can give you some idea. If you take a look at the projected EBITDA for 2025, that in itself is enough to be cash flow positive. And on top of that, we do expect some inventory reduction over the year that will also add to the cash flow. So if you have some kind of idea of what we're thinking about.

Nikita Lal: Yeah. Okay. Perfect. And my last question is regarding the improvement of the margin over the next year. Could you elaborate what are the key levers here? Is it just cost reduction and then cost discipline or do you expect to see higher operational leverage, for example, in the next year?

Onno Krap: Yeah. It's a little bit depends on what you compare the margin to have. 2024 has been a strange and difficult year with a lot of adjustments. So it's difficult to basically make 100% comparison with 2024. But if -- for example, if you go back to 2023, then you see that what we that our margins are more or less staying at a similar level as 2023 with one exception and that's in substations and Smart Grid Solutions. There we do see a trend towards grid operators and grid operator margin is somewhat lower than what we see in the private domain. So that's somewhat of a more structural trend. I mean, we're talking about a few percentage points. But overall in the other areas, I don't see a major reduction in margins if you compare to 2023.

Nikita Lal: Okay. Thank you very much.

Operator: Thank you. And we will now move on to our next question from Thijs Berkelder of ABN AMRO ODDO BHF. Please go ahead.

Thijs Berkelder: Yeah. Good morning.

Marco Roeleveld: Good morning.

Thijs Berkelder: First question on your cautious outlook for 2025. So you more or less give a very cautious outlook for Q1. So that reach a still mid-single-digit margin for Q1 and you guide high single digits for the full year. So should we then expect roughly you to be back at the 10% level in the remainder of 2025?

Onno Krap: No. I don't want to give too much guidance on EBITDA margins per quarter. To be honest, I think for the whole year we feel comfortable that we are in the high single digits. How that exactly works out per quarter, we haven't given too much guidance on that one. So I would like to leave it at that.

Marco Roeleveld: That we will -- we have also seen in the past years especially with project realization and able to record revenue or margin on the project, it's difficult to balance it out over each individual quarter. That's why, like, Onno, stretching the average gross is the one we are steering on and there are -- due to the lumpiness of some of our business elements, it can differ per quarter. But the fundamental trend is that we will start this year with a high single-digit and that we are able to -- when we grow our revenue we will also be able to translate it to a higher EBITDA level in years after that.

Thijs Berkelder: Yeah. Then follow on question on your gross margin outlook for Smart Grid Solutions. At the high end of the range, I can understand but what needs to happen for you to end up the whole year at the low end of the range, only 20% gross margin there. What is the reason to have the low end so low?

Marco Roeleveld: I think, it's always -- we have the supplying a gross margin range is always complicated to split and to say do we aim for the low end? Of course not. What we have seen is that due to the effect that with the grid operators we have a little bit lower margin that brings the gross margin a little bit down. So it is not that we think we will drive down to the low end of the range but it is more or less to give an indication that all the different orders will be in the price range – in the range of the gross margin we have supplied. We don't expect to run into the low end of the gross margin range.

Thijs Berkelder: Okay. Yeah. Then my final question for now is on your restructuring exercise. It to me seems to have primarily impacted your EV Charging business and a question there, are you now no longer selling in the U.K. and/or are your reseller clients also no longer allowed to sell in the U.K.? How should I interpret that?

Michelle Lesh: Yes. So we did affect our geographical footprint for resources which did impact the U.K. and what we're focusing on internally is the R&D focus for our core markets. We've always had charging that can end up in multiple countries. So as long as we meet the market need, it's compliant. But in terms of where we put our resources and R&D investment, it will be focused on our core markets.

Thijs Berkelder: But the clients such as Blink had selling your chargers in the U.K., are they still allowed to do that or how does that work?

Michelle Lesh: Yeah. We're working with each individual customer to determine the right path forward for that customer.

Thijs Berkelder: Okay. Clear. Thanks.

Operator: Thank you. And we will now take our next question from James Carmichael of Berenberg. Please go ahead.

James Carmichael: Hi. Good morning, guys.

Marco Roeleveld: Good morning.

James Carmichael: Just two from me really. Just I guess on the second half guidance in terms of revenue specifically. You talk in there about it being second half weighted and a little bit contingent on the run rate on orders in EV Charging. I suppose there are sort of familiar themes from last year when guidance was coming down ultimately. So I guess just wondering on your level of confidence going into 2025. I appreciate it's always difficult this early in the year? And then I guess just a second on the DC charging piece. That was a focus in that segment for quite a while getting that up and running. It seems like your mind has changed significantly and you've killed it. What's changed from really focusing on getting that rolled out to killing it completely?

Michelle Lesh: Yes. I think let's start with the DC charging question. So that was a product asked for by customers to expand their portfolio to serve the business. It was focused on business applications, parking garages. The ratio of DC to AC was one DC for every 10 AC. The price point of a DC significantly higher and what we started to see is, one, the demand wasn't there fast enough, and two, we had to continue to invest in the portfolio with options and capabilities and we had to make a tradeoff between serving our install base in AC customers and their needs and continuing to pursue DC. And so we made the hard choice to stop DC. And in terms of the EV guidance for the year, right now we're leaning into the reality of what we see with our customers. The conversations we are having, I think everyone is ambitious and optimistic about the EV market for this year, but when we look at the reality of the run rates and the forecast from our customers, it's not materializing yet. And so if it comes, we're ready to ramp. We have the manufacturing capability. We have the supply chain ready to go. So if things move in the right direction, we're ready to support it. But based on what we see today, the reality of the situation is slightly tempered growth.

James Carmichael: Okay. Thank you. That’s clear.

Operator: Thank you. And we will now move on to our next question from Paul de Froment of Bryan Garnier & Co. Your line is open. Please go ahead.

Paul de Froment: Yeah. Thank you. Good morning. I have two topics. The first regarding EV Charging. How do you see your gross margin evolve over the next quarter? And more precisely, what's your pricing strategy regarding commoditization? So that's the first topic. And the second one is regarding storage. You mentioned forthcoming utility scale projects. Do we have to expect a negative impact on gross margin? Thank you.

Michelle Lesh: Yeah. So I think for EV Charging, from a gross margin perspective, for 2025 to 2027, we're still projecting the 35% to 45%, which is in line with what we communicated at our Capital Market Day. From a pricing perspective, as one of the reasons we focus on the business and public segment is where we see more commoditization and price pressure is in the home segment, low, mid-range home, where you don't necessarily have the same back office interoperability requirements, you don't have the same connected requirements, whether it's utilizing solar charging. So in that segment, we've made a choice not to necessarily follow that pricing trend down, and if you see, I think, our ASP has improved, which then represents the higher mix of the public and business in the overall mix. And then in Energy Storage, we do see that the gross margin from 2025 to 2027, we're expecting the range to be 15% to 25%. As the project sizes get larger, there's a higher percentage of batteries, which does impact the overall gross margin percentage.

Paul de Froment: Thank you very much.

Operator: Thank you. [Operator Instructions] Thank you. And we will now move on to our next question from Jeremy Kincaid of Van Lanschot Kempen. Please go ahead.

Jeremy Kincaid: Good morning all. Three questions from me. The first two are just on EV Charging. Firstly, would you mind sharing how much investment you made into developing the DC product? The second question is just on the U.K. market. I maybe -- I thought that was a top three or four market, but I might have misunderstood. I was just wondering if that is the top three or four market or if maybe that was just the case during the inventory stocking period. And then on Smart Grid…

Michelle Lesh: Yes.

Jeremy Kincaid: … Solutions, you obviously talk about issues across the supply chain, which limiting growth of and you expect 8% per annum between 2024 to 2027. Does that imply that after 2027 you expect a lot of these supply chain issues to be resolved? And if so, could you help provide some context around that, please?

Michelle Lesh: Maybe to start on the U.K. market. For us it was not in our top three. And I think what we're seeing in the U.K., especially in the regulatory environment, is divergence relative to what the EU is doing. And so you see each and every country and market has their own requirements, and if the EU is moving in a different direction with smart charging requirements and other elements, and it's not necessarily a market where we feel we can be the top three, then that's why we have deprioritized it.

Onno Krap: Yeah. And the investments, we have about €4 million of capitalized R&D on the balance sheets which we wrote-off as part of this effort.

Marco Roeleveld: And maybe to add the last element of the limited growth with the grid operators, we have seen of course in the past two years that the grid operators published quite extensive investment plans and also indicated number of substations they want to be installing in the coming years. But on the practical side we have seen also that in the whole value chain it is not only one element but the value chain including the contractors that need to be able to connect all the cabling to have all the permitting done for new cable runways and also for substations. We have seen that although the ambition is there to have a quicker ramp up than what we now see happening that we are more or less a little bit careful in just taking over the growth numbers that are published by some of our grid operators and we more link it to the practical realization in growth that we see happening at the moment. Whether there is in three years’ time to be -- still a ramp up to be expected is too early for us now to state. I think if we look at the overall investment plan in the coming 10 years, the grid operators need to expand year-on-year their investments to be able to cope with the energy transition. Now that line of percentage, of course, will be evolving. I think already -- the 8% is average cost per grid now is already quite an extensive average ramp up for the grid operators. We think this is more closely to be expected for the average growth rates in the coming years with, say, with – in this market environment.

Jeremy Kincaid: Okay. Thank you.

Operator: Thank you. And we will now move on to our next question from Thibault Leneeuw of KBC Securities. Your line is open. Please go ahead.

Thibault Leneeuw: Good morning. My question is basically on the adjusted EBITDA margin for 2025 and how confident you are to achieve the single-digit target, because if I basically look at it and I use the midpoint of the revenue guidance, midpoint of the gross profit margins and if you look at the cost savings starting from the adjusted OpEx levels and include the external cost in the gross profit margins which are included in the guidance, then it seems that you will have to be at the higher end of either revenues or gross profit margins in order to achieve the high single-digit margin. Do I read that correctly or am I missing something?

Onno Krap: You're adding a lot of variables together and we did, of course, add the same variables together, and we are quite confident that we are able to get into the high single-digit EBITDA margins. Yeah, and…

Thibault Leneeuw: At the midpoint of all the guidances is if you take the midpoint of the revenue and the midpoint of the gross profit margin combined with the communication on the OpEx?

Onno Krap: It did, but – yeah, but you cannot only – yeah, you really have to take a look at the mix also. I mean, our EV Charging business has higher margins than the battery business, so we did a number of analysis and a number of stress test analysis to see where we would end up and we feel rather confident that we should be able to end up there.

Thibault Leneeuw: Okay. Thank you. That's all for me.

Operator: Thank you. And we will now take a follow-up question from Thijs Berkelder of ABN AMRO. Your line is open. Please go ahead.

Thijs Berkelder: Okay. Thank you. A follow-up question on your balance sheet. You're reporting net debt of €32 billion but excluding leases. I think you're back to net cash so that looks solid and sound again. In that sense, can you again confirm that you do not see any reason for a capital raise and maybe give a bit more explanation on your balance sheet strategy towards 2027 when you seem to be open for M&A again?

Onno Krap: So the first question is, do we see a reason for a capital raise? All right. No. We don't see a reason for a capital raise but we continue to be careful with our cash consumption. We continue to be careful making sure that we stay within the governance so that is one area that we're continuously monitoring. But in line with kind of what we said, being cash positive, making sure that we have the right EBITDA, we have to realize that EBITDA is being calculated on the last 12 months so we are still carrying some quarters with us out of 2024 that are less than brilliant. But I think the governance -- we're positive that we are not going to run into a governance issue and that therefore we're positive that we're not going to do a capital raise. Yeah, going forward, I mean, if this continue – if the trend continues we will continue to be cash positive so we will be building up cash. Is that something that we can use for M&A? Yes, at a certain moment that potentially could be. That's not our focus at this moment in time. I think our focus at this moment in time is to kind of stabilize, build and make sure that we realize what we're promising. But I don't exclude the possibility that we will have an eye on potential extensions of kind of the business that we're in.

Thijs Berkelder: Okay. Thank you.

Operator: Thank you. And we will now take another follow-up from Nikita Lal of Deutsche Bank. Please go ahead.

Nikita Lal: Yeah. Hi. Maybe two questions on Smart Grids for me. The first question, you mentioned that you had a production run rate of 100 substations per week end of 2024. How should we think about this in 2025 and going forward and also your utilization rate with your new production plant? And the second question, maybe on the timeline to repair the substations out there? Do you have any new indications for this?

Marco Roeleveld: If you look at, say, our run rate in, say, two months in the 2024, we have shown that we can quickly build up our production volume into Smart Grids solution and we ended up, say, over 100 substations a week. Due to the demand at this moment, we will be somewhere between 60 and 70 substations a week. And we just give that indication, because between September and October, we'll be able to ramp from 35 substations a week up to the 100 and the 100 is not a limit of this facility. So that means that we have quite a lot of leeway. If the market demand is really stepping up in the coming time, whether it is next year, the year after, or the year after, that we will be able to execute on that opportunity within the given facility and whether the limit is 100 or 150 substations a week at this moment is not that. We don't see there any problem in our facility. Your question on the repair, I understand that you would like to know when are those costs going to happen. That's something where we are not, can decide for ourselves, because that -- we now have open more or less these substations on site. We've had a preliminary inspection in June last year that led to the provision that we have now in our books. And we are starting -- we're now in the process of having a discussion with, say, the two main grid operators that are being affected, that has been Liander and Enexis, how to process this step-by-step. And you have to bear in mind that, say, the fundamental impact of a substation is not such that there is any safety issue. That's also that at this moment priority one for the grid operators is to get their installation program of new substations first up and running, and then in parallel try to do step-by-step. But it's not that they are in an urgent need to do that step-by-step improvement of the installations on site. That's also why we can take some years for us to step-by-step remedy this and also use the provision we now have to accommodate for those costs.

Nikita Lal: Thank you very much.

Operator: Thank you. That was our last question. I will now hand it back to Marco Roeleveld for closing remarks. Thank you.

Marco Roeleveld: Okay. Thank you, Laura. And I would like to thank everybody for participating in this webcast and also say I think there are some relevant questions on revenue development and growth margin. And maybe I was thinking a little bit on the question of Thibault in relation to where are we ending up in our mid-single digits and why it is. I can remind also Thibault that on Sheet 35 we were giving a little bit of explanation why we think the gross margin development is, as we are trying to incorporate it in our outlook and if you have further questions that you can also do -- bring them forward in the later moment. And would now more less to ask the moderator to close down this call and that we can go back to business again. Thank you all.

Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.