Wallbox NV (WBX) 2022 Q4 法說會逐字稿

Hello, everyone, and welcome to Wallbox's Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. My name is Charlie and I'll be operator for today's call. (Operator Instructions).

I'd now like to turn the call over to Matt Tractenberg, Wallbox Vice President of Investor Relations. Matt, please go ahead.

Thank you for joining today's webcast to discuss Wallbox's Fourth quarter and Full Year 2022 Results.

This event is being broadcasted over the web and can be accessed from the Investors section of our website at investor.wallbox.com. I'm joined today by Enric Asuncion, Wallbox CEO; and Jordi Lainz, our CFO.

Earlier today, we issued our press release announcing results from the fourth quarter period ended December 31, 2022, which can also be found on our website. Before we begin, I'd like to remind everyone that certain statements made on today's call are forward looking. That may be subject 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 U.S. Securities and Exchange Commission, including in the post-effective amendment, number three, to our registration statement on Form F-3 filed on December 14, 2022, which can be found on our website at investor.wallbox.com and on the SEC website at www.sec.gov. We will be presenting unaudited financial statements in IFRS format that reflect 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'll turn it over to Enric.

Thank you, Matt, and thanks, everyone, for joining us today. In addition to reviewing highlights from the Fourth Quarter and Full Year 2022, I will also discuss the rationale and intended impact of the recently announced cost reduction program and offer some recent commercial wins.

Jordi will then step in and offer additional detail on our quarterly performance and some recent fundraising transactions as well as some guidance on expenses and CapEx. And finally, I will return to the current market outlook and how it impacts our guidance for the first quarter and full year 2023. We will end by taking questions from our covering research analysts. We have a lot to get through today, so let's get started.

Looking at the full year 2022, I thought it may be helpful to revisit a few of the wins we saw last year. Because while it's important to focus on what's ahead, it's equally important to celebrate and recognize your wins. And there were a lot of wins in 2022.

We expanded into an additional 21 countries. We announced strategic partnerships with leading global brands like Nissan, Fisker, Leaf and Polaris and expanded existing partnerships with Uber. We launched new distribution channels like City Electric, Svea Solar and IKEA and NAPA Auto supply.

We strengthened relationships with utilities like any EDF, Bechard, Atlante and Iberdrola. We opened a state-of-the-art manufacturing facility in Barcelona, which allow us to immediately begin shipping our new dissipate charger, Supernova.

While bringing on new factory airline is a difficult task, we also opened a second factory, this one in the U.S. to provide products for the North American market.

That facility opened in the fall and continues to ramp up production, putting us in an NBL position to qualify for meaningful government investment.

We acquired 2 attractive companies, Ares Electronics, a leading PCB supplier and COIL, a North American installer, both of which provide competitive strength. And we navigated a challenging supply chain without ever being in out of stock position.

In summary, 2022 saw with highlights and its challenges, but we believe the market outperformance illustrates we are executing well, and we are well positioned.

Revenue for the full year of 2022 was approximately EUR 147 million, representing growth of more than 100% over 2021. Crossing EUR 100 million of revenue at our age is something we are very proud of. There are not many businesses of our size who can point to that type of growth, but we can and we did.

And while we are proud of what we have achieved, we are even more excited about what's ahead. 2022 market share gains in both North America and Europe were solid, as illustrated by our ability to grow consolidated revenue 4x faster than the overall market.

As you can see from our regional competitors, this is not easily achieved. Execution versus the competition has been strong and will remain so. Of that, we are confident, but performance versus your expectations is important as well. So we are working to better understand how our customers behave in volatile economic environments.

Attractive gross margins are something we've been able to deliver, and we delivered 40.5% on a full year basis. Introducing several new products with drastically different financial profiles, customers and market drivers adds a new level of complexity, but we are confident that in the long run, we can move margins back into the range you've come to expect from us. That operational leverage is a critical element in our path to profitability, and you will hear more about today as well.

The fourth quarter finished slightly below our expected range, impacted by 3 main drivers: first, channel inventory. Our partners had sufficient inventory to service others without replenishing as they normally will and their desire to remain conservative for the foreseeable future that can inventory was a result of second half 2020 expectations within the industry that did not materialize.

Remember, they often buy for more than 1 quarter forward and forecast in Q3 were still at 3.3 million European IM deliveries. Second, geographic mix. While EBIT Deliveries in Europe had a strong finish to the year, some of that strength occur in markets that we have lower share. While we are working hard to change this, it takes time.

And third, seasonality. Q1 is always down sequentially from Q4, but the ordering pattern was unusual closing the year. As we made our way through the fourth quarter, it became clear that customers were more cautious on Q1 EV deliveries than we expected.

And in December, the Bloomberg Energy Finance full year 2023 European EBIT delivery forecast decreased by 23% from 4 million to 3.1 million units. The indeeper, the Q1 European delivery forecast now expects half the volumes seen in Q4 2022 and no volume growth over this time last year.

That low growth in Europe is not expected to persist, but clearly impacted customer behavior in December and January. Q4 revenue of EUR 37.3 million grew by 44% on a year-over-year basis, a reasonable result when compared to 37% year-over-year growth we saw in the quarter from North America and Europe combined.

Gross margin of 35.7% was below the expected range and impacted by both unfavorable product and channel mix. We sold more DC relative to AC, driven by what I just described in Europe.

Our DC portfolio brings a lower margin today, and we sold more to OEMs who traditionally receive better pricing. Supernova continues to ramp up, but brings with a lower margin profile. However, Gen 2 of Supernova already has a better margin profile.

And as that is delivered in the first half 2023, some of that will be alleviated. Our fourth quarter results were fueled by exceptional strength in North America, growing revenue by 425% and key markets, including 700% growth in UL, 185% in Spain, 133% in Belgium, 117% in France and 76% in Italy, all on a year-over-year basis.

We continue to make great progress in Asia Pac and LatAm growing at 14% and 360%, respectively, both of which are early in the RIMI transition. We continue to cultivate the relationships we established in these markets and look forward to them contributing materially in future years as EV adoption ramps up.

North America now contributes 25% of total revenue, an increase of 18 percentage points over the prior year period. This exceptional growth drove in part the geographic mix shift from Europe, which now represents 66% of revenue.

Asia Pacific provided 6% of consolidated revenues in Q4 and Latin America was 3%. This meaningful shift is both deliberate and helpful as we continue to diversify both our geographic and product mix.

Our AC charging portfolio represents 72% of our total revenue, with cash charging at 13% and the remaining 15% provided by software and services, a growing portion of which is recurring.

And finally, we sold more than 48,000 charges in the quarter with our revenues doubled from the third quarter and public DC volumes almost tripled sequentially. As we said in the past, as our poly charging portfolio ramps up, you will see the impact of higher prices and lower volume on consolidated results.

In addition to the financial performance achieved in the quarter, I wanted to highlight a few other items worth noting.

First, the White House recently released the national electric vehicle infrastructure standards and requirements. I mentioned, Wallbox as one of the few who has made the necessary investments to help drive this initiative.

While there were a number of important elements included in this document, the one that we are most pleased with and impacted by is that of Buy America requirement which stipulates that final assembly must occur within the U.S. immediately with no transition period.

This is something we were deeply involved with, and we believe they made the right decision. The purpose of these public investments are to both electrify the roads and encourage U.S. business activity, i.e., CA jobs.

Wallbox is extremely well positioned to participate in these subsidies today given our Texas facility, and we look forward to bringing Hypernova to market later this year. This is not a common position among our competitors and many are scrambling to build factories.

This takes time, time and money that we invested in beginning on 2021. So we believe we have an attractive head start. And already, we are beginning to see real interest from customers for Hypernova.

Today, we have more than 300 units on LOI, representing nearly $30 million. As we continue to build that order book, we will provide more color. Second, remaining on the topic of pallet charging, we continue to ramp up production well.

To give you some context, we anticipate shipping several thousand units of Supernova this year. But ultimately, on a global basis, we believe we have the capacity to produce 20,000 units of both Supernova and Hypernova combined. That production capacity with all appropriate caveats put us in a position to meet the massive weight of the demand we see in the U.S. and globally.

The capacity is there and the demand will take how quickly we ramp up production. Supernova, which we are in the process of rolling our generation to already, is seeing encouraging uptake. Gen 2 includes a speed charge 150-kilowatt CCS configuration, something that has been in high demand from customers. Pipeline for units continues to grow and totals several thousand units.

Third, Douglas Alfaro, who many of you met on our Q2 2020 earnings call has accepted the role of Chief Business Officer. Douglas has been with us since 2018 and has served as General Manager of our North American business. Having grown that market from nothing into what it is today, our largest geography, we are ready to give him his next challenge. Douglas will bring the same rigor and process that he deployed in North America to our global business, and I'm looking forward to seeing what he can do.

He will join us on the next earnings call to give you a better understanding of our global sales strategy. And fourth, -- there continue to be commercial wins and partnerships that you shall know about. One worth noting is Sam club. This massive retailer, a part of Walmart will soon carry Pulsars in 50 stores across the U.S.

This exposure is very valuable and is another proof point that measures names are trusting Wallbox to provide innovative EV charging and energy management solutions to their customers. Of course, there are always commercial wins that you don't hear about. This occurs for one reason or another, but respecting our customers' needs is our first priority.

One that we are especially excited about is a new partnership with a very large European OEM. They have agreed to allow Quasar I to discharge their vehicles. This is important for 2 reasons: one, by direction of CCS charging requires acceptance and approval from the OEMs. Their protocols must be obtained for a discharge to occur. So this illustrates the trust we've built with major brands for our innovative technology.

And second, acceptance by one-off then leased to others, so we hope to build momentum following this agreement. These new customers also include a large transportation and logistics provider who has requested a comprehensive offering, including chargers, Sirius, our commercial energy management application and services in Europe or a major OEM that has selected Wallbox as their preferred provider of hardware as they expand the (inaudible) offerings. You will get more specifics about both of these soon. But know that while you may not read about them in the news, we are doing exceptionally well in winning competitive opportunities.

In summary, the conversations we're having and opportunities with one, give us confidence in our strategy and on you to sharing that as well. I also want to share more detail on the cost reduction program we announced in January. We did not make this decision lightly, but recognize that actions were necessary to ensure the long-term health of the business.

The factors that drove this decision are largely related to lower market growth within Europe, which was impacted by lower EBIT deliveries than expected at the start of 2022. As you will expect from a responsible company when a downward revision to revenue occurs, it must be accompanied by an adjustment of cost as well.

That cost adjustment will result in the model of approximately EUR 50 million of OpEx and employee benefits, essentially payroll this year from the previously expected levels.

To that end, we've been very deliberate in where these cost reductions will occur. Preservation of growth, innovation and market position is critical to the future success of Wallbox. So we evaluated the investment profile project by project function by function.

The areas impacted by these cost reductions predominantly have longer-term horizon. And while that is important, given the market variability we experienced over the last year, they will be paused for the foreseeable future. You should not expect these actions to impact revenue.

As a result of these actions, we expect to drive profitability through the business almost a year earlier than originally planned. Therefore, we anticipate breakeven adjusted EBITDA in the fourth quarter of this year and positive adjusted EBITDA on a full year basis next year.

Over time, we believe that consistent gross margins of approximately 40%, combined with this new cost structure can drive adjusted EBITDA margins of 10% in the midterm and 20% over the long term.

You likely heard us talk about 3 pillars: cash conservation, achieving profitability and growing in excess of the market. This construction, which was completed yesterday is directly aligned with 2 of the 3. What you see today is a company that is establishing processes and spending capital in a responsible manner.

And I'm excited to see Wallbox enter this new phase. What you have come to expect will continue capturing market share by offering innovative hardware and software in a young and fast-growing space. It's a process and change that our companies must go through, and we are looking forward to showing you how successful we know we can be.

Jordi, I will turn it over to you to comment further on financial details.

Thank you, Enric. Good morning and good afternoon to everyone. Given the continued challenges the EV market is experiencing and the supply chain disruptions that we work through, I'm satisfied with our quarterly results and know that 2023 will be an even better year.

For the fourth quarter 2022, revenue was EUR 37.3 million, a 44% increase from the year ago period, driven by volume, new products and M&A slightly offset by end of year pricing discounts.

The seasonal pattern we saw as we moved from the third quarter to the fourth was disrupted by the channel inventory dynamic and Rick discussed earlier. But we anticipate that being solved in the first half of the year. Deliveries improved quarter-over-quarter, but still full sort of earlier estimates.

However, our goal is to grow in excess of the Europe and North American markets combined, and we achieved that once again in the recent quarter. Now let me share with you some key highlights that drove our results.

First, our regional mix now with more than 113 countries continues to improve and open the benefit of geographic diversification.

North America accounts for 25%, up from 7% in the prior year period, and Europe now represents 66% of our revenue mix, down from 88% last year. Asia Pacific is currently 6%, 2 points higher than last year and Latin America is 3%, up 2 points as well. We expect this shift to North America to continue as EV adoption accelerates and U.S. subsidies takes hold.

Second, gross margins on a full year basis of 40.5% were resilient in the face of continued component shortage, but in the quarter were impacted by product mix shift from AC to DC.

As we have said all year, as Supernova ramps up, we will see door margin pressure and this did occur, but it did occur more than anticipated, largely due to the lower mix of AC sales in Europe.

We continue to aggressively cost engineer Supernova, now in Gen 2 and believe we can make meaningful improvement this year. However, just Supernova is going through its post-launch engineering process, Hypernova will lender. We will provide as much color as we can to ensure you understand the drivers of our margin performance.

Adjusted EBITDA loss for the quarter was EUR 29.1 million, up on a sequential basis driven by lower revenue and gross margins and higher headcount costs.

Adjusted EBITDA loss for the year was EUR 88.3 million. As we review our growth trajectory and our revised cost basis following the actions Enric discussed, we believe we can reduce this materially by more than half in 2023 and into positive territory next year.

We have sharpened our focus on profitability here. Philosophically, profitable growth is one of the key pillars that drive our strategy, equally important to operational excellence and innovation.

To our shareholders, we are committing to you this renewed focus and look forward to proving this out. We were also very busy improving our balance sheet in the fourth quarter. As you may have seen, Wallbox raised approximately $43 million through a sale of ordinary shares to a group of investors, including Enric, Board members and nearly private holders who believe in the long-term value we are creating here.

In addition, we completed a loan of EUR 16 million and expanded working capital by $15 million. Our balance sheet remains solid with almost EUR 90 million of cash and equivalents available at quarter end. In the first 2 months of 2023, we've also brought on an additional EUR 25 million of cash through loans and other financing instruments.

Opening 2 new factories, accelerating hypernova to market and building a robust supply chain for Supernova in Europe to support the demand we see ahead requires capital, but we do not intend on spending at this rate. CapEx is relatively light going forward as well.

Additionally, we continue to evaluate opportunities to bring additional capital onto our balance sheet, and we believe we have access to the cash we need to run the business until we generate positive free cash flow in 2025.

And finally, as we discussed last quarter, we hold more finished goods, work in progress and raw materials that we would in a normally functioning supply chain. Our intention is to continue to work through those components as we progress through the year.

We ended the quarter with EUR 44 million of long-term debt, which now incorporates assumed debt from recent acquisitions and other additional facilities. As of December 31, there were more than 1,250 full-time Wallbox employees around the world. Any headcount additions we do this year will be done in key areas of growth.

CapEx for the quarter was EUR 17 million, of which EUR 6.5 million was PP&E. For the full year, we have spent $36 million of PP&E. We would expect approximately $26 million of PP&E in 2023 as our factories are up and running and do not require significant additional investment until 2024.

With that, I will now turn it back to Enric to provide you with some commentary around the fourth quarter.

022 was a volatile year. Of that, we can only, and that gives us a greater sense of caution as we look at 2023. Market volatility occur for many various reasons, including the war in Ukraine, persistently high inflation, supply chain disruptions, OEM capacity constraints, fuels of recession, et cetera.

We do not believe that most of these are long-term systemic issues. We do believe that we will begin to turn the corner late in the second half of the year. As we look into 2023, we focus on 2 data points. One is the new European EBIT delivery forecast of 3.1 million units, a 23% reduction from when we last spoke.

And the second is our January and February sales data. For this, we believe a conservative outlook is the responsible thing to do. But the year by many measures, will still be widely successful and productive. Growth rates between 60% and 100% are not often seen from a company of our size, but we believe we can achieve them.

And those rates are well in excess of the overall market, again, not a common occurrence and an uncertain economic climate presents us with some opportunities that we have not yet discussed today. It allows us to get ourselves in better shape for the tighter way we see in the coming years.

The wave is driven by customer preferences, more accessible public charge infrastructure, more affordable vehicles, government subsidies, sun setting ICE vehicles and new EV capacity coming online. For us, it's driven by this, but also by the exciting partnerships we've spoken to you about all year, Uber, Venison Fisker, Best Buy, BYD, Leaf and many others.

By new product introductions, new customer verticals, new geographies and that getting in shape is about optimizing our business, some of which was announced in January, but it's also about our focus on cash conservation and profitability.

All of these things will set us up very well to come out of 2023 in a much stronger position than when we entered it. That position of strength must be built today because the amount of infrastructure needed is difficult to comprehend. We intend on winning in the marketplace. And to do that, these actions are needed now. That's our plan.

Therefore, for the first quarter of 2023, we anticipate revenue within the range of EUR 35 million to EUR 40 million. This represents year-over-year growth of 33% at the mean point.

We also expect full year 2020 revenue to be between EUR 240 million and EUR 290 million, representing growth between 60% and 100% as we make our way through the year, this range will tighten up. And we expect Q1 gross margins to be flat sequentially and approximately 38% for the full year.

With that, we raised the question from...

Welcome back, everyone, to our analysts, (Operator Instructions). So Charlie, I think you have some additional instructions.

(Operator Instructions). Our first question comes from George Gianarikas of Canaccord Genuity.

Good morning, -- so first, let me just focus on what you've seen in the marketplace over the last, call it, 90 days. Just -- I want to make sure I understood it. You saw a weakening of demand past your -- the last time we spoke in November. And do you think that's a function of 2 things of lower-than-expected EV demand and also inventory in the channel. Is that an accurate portray?

George, thank you for ring and thank you for the question. This is Enric. So in Q4, basically, we were able for the full year and by the year to grow more than the market. So that's important to note because our markets grew 37% in Q4, and we were able to grow 44%. So we kept our path to acquire more market share and more press in the market.

However, it didn't grew as expected Q4 because we had some channel inventory in our partners. But given the reduction in the last 60 days from industry forecast in EV deliveries, they were more cautious on stocking for the next quarter. You have to think that they buy the products that are going to be delivered the following quarter many times. So they have stock, they have to replenish many centers, many retail stores.

So well, basically, we over performed the market. That's very important. We grow more than 400% in the U.S. But in Europe, we are seeing and we saw that industry forecast for 2023 were dropping 23% for EV deliveries. And that made our partners to be more cautious.

Do you have a follow-up, George?

So just -- so on the inventory, how confident are you that you've cleared it? I mean you mentioned that your partners felt like they needed to destock relative to the industry forecasts. I mean, what sort of -- what levels of channel inventory do you think we have a...

So we are monitoring this with our partners, and we expect to see still some reduction in inventory during this first quarter.

Yes, George, we think we will be through that inventory through the first half of the year within our then...

First quarter…

Yes, first quarter. Sorry. And -- but we're having good discussions with our channel partners in terms of what that right level is. And certainly, industry forecasts impact that, right?

You have to think that, for example, 2023 is in terms of wide liveries in Europe is half of the medals in Q4. So that obviously impacts the consumption of inventory. That said, that's why we have given the guidance for Q1.

Our second question comes from Marianne Bula of Bank of America...

Yes, I had a question on the growth in North America. It was a bit lower than we might have expected. Was it due to this inventory channel you mentioned? Or have you seen some slower investment in the network level, perhaps with a delay in investment patterns around the people waiting for the IRS funding?

Yes. So actually, in terms of Wallbox, thank you, Mariana, by the way, in terms of Wallbox's performance in Q4 in North America was exceptionally good. We were able to grow 440% -- 425%. So we over performed clearly the market that grew on double digits. And we even go out as we explained, orders and agreements with OEMs in North America. So that really fuels sales in the market. So the market may have not performed well or not, but as Wallbox -- we over performed well the market growing more than 400% in North America...

Okay. So yes, I'm just trying to see if you look into maybe a bit longer term 2024, 2025, what type of growth you're expecting in the U.S. given there is this IRS funding that might increase the investment of your customers?

Sorry, I want to make sure we understand your question. Are you asking for a better view into 2024 and 2025 in terms of North America?

Yes. Basically, a better view on your growth in North America and what you're expecting?

Yes. We are seeing a big uptake -- project, actually, the growth in fast-charging preorders in North America coming from the Navy program. The fact that we have a factory in Texas already up and running and has been commented and approved by the White House as one of the few ones that are ready for the Buy America requirements.

It's obviously impacting very well in our future sales for the next year in terms of fast charging in North America.

So in that regard, we already have collected more than $30 million on LOIs and preorders for Hypermobile fast charging product we are launching in the U.S. later this year. So -- we are seeing a lot of potential growth in the U.S. given the fact that we are ready in terms of manufacturing, and we have the right products that fulfill the government requirements.

And Marianne, the impact of both NAVI and the inflation Reduction Act is really exceptional. And so while it's hard to give you a number for 2024 and 2025 on a regional basis, we feel like we're ready and we feel like we have the right products to sell. So we're excited about next year... Charlie?

Our next question comes from Maheep Mandloi of Credit Suisse Mandeep.

Maheep Mandloi here from Crédit Suisse. On the margin versus your target, I think, for Q4 and Q1. Could you talk about like is that mix shift? Or is it just some pricing discounts? I'm just like wondering if it's possible to kind of like see some pressure on pricing to enable a faster destocking in the market.

Yes. Thank you, Maheep, for joining us for joining us the call today. Basically, the gross margin in Q4 was just impacted because of the mix of sales.

Basically, you know that we are in a ramp-up of Supernova sales, which is our public challenging new product. And as in the last quarter, Supernova sales has represent higher percentage versus the total sales than expected through the EV market in Europe was not as expected. It makes that how we are on the ramp-up of production, it has been impacted on gross margin.

However, we are expecting, as we have announced today that we will maintain this excellent gross margins for the total 2023.

And to add to that, -- thank you, Maheep, for the question. So this is something that you have to expect from us as we are launching new products. We are focusing on time to market.

We launched a new product like Supernova. And the first 6 months, few months, gross margin is a little bit lower. After that, which we are now in that phase, we do engineering improvements and operational improvements to radically improve gross margin.

So right now, we are launching Generation 2 Supernova, which is higher power, but also higher gross margin and lower cost product. All the things we've learned, all the operational things we could do, we redesigned some parts like we always do every time we launch a new product to improve gross margin.

So during this month of March, we will start delivering the first unit of Supernova Generation 2. And next quarter, we will start seeing even more positive impact of gross margin in fast charging sales.

And all this transition to Gen 2 is going to be almost over at the end of the year. But the volume to obviously is growing, and it has much better gross margin. But this is normal in our case, the new products that have just been launched, half lower margin. But after 6 to 8 months, we are back on our expected gross margin.

Got it. And just a follow-up on the target EBITDA margin, which you kind of talked about on the prepared remarks on the slide deck. Just curious like what's the timing on that? I mean in 2024, you expect positive EBITDA margin, but how should we think about that ramp from the breakeven in Q4 to achieving the target for year...

Yes. I don't -- so we're not providing guidance for 2024. I think that midterm is sort of a 1- to 3-year range. And obviously, it will ramp up as we make our way through that period. But we do think that we'll break even as we exit this year and next year, it will probably be at the lower end of that range and continue to move up from there.

And that -- there are a lot of variables that will determine how quickly we move up, including the market forecast. And as you know, market forecasts have been changing fairly drastically over the last couple of quarters. And so I think we want to take quarter-by-quarter and year-by-year, and we'll give you a better idea as we come out of 2023. If that's okay, Maheep.

Our next question comes from Brian Dobson of Chardan Capital.

It's Greg Pendy in for Brian Dobson. Just wondering, can you kind of help us understand on the gross margins on where they came in? Can you maybe give us a little bit of color or some numbers? How much of this was mix to the OEMs? How much of it is from Supernova and then also just big pick where we are in Supernova and where you think -- how long do you think it will take to get to kind of their peak margins.

Greg, thanks for the question. And I'm just looking through the data now, Jordi, and Enric, just looking through our bridges. And so I would say the biggest impact to gross margin sequentially was from volume and then we're looking at mix.

And so that lower volume of AC relative to what we expected. And then the volume of DC was not more than we expected. But obviously, when you compare the 2, that product mix shift did drive that gross margin lower than we had thought.

I wouldn't say there's a material -- I wouldn't say it's a material impact from channel or from end of year pricing, but they did come into play.

And in Q2 -- well, thanks, actin Q2, Gen 2 is going to be already available in the market. As I said, this month of March, we are delivering the first unit of Gen 2 to selected customers, and it starts with a margin closer to the 40%. So we expect that to ease already in Q2.

And Enric, Gen 1 is different from Gen 2, how...

Well, it allows higher power charging. So Gen 1 Supernova can charge up to 60 kilowatts. Gen 2 up to 150 kilowatts. So it can be used for commercial centers, but also for highways. And it has all the improvements in terms of uptime, quality, service and cost to -- that we learn from Supernova 1.

And maybe one important difference is that it doesn't have charter charging. So Gen 2, it's a split CCS product that doesn't have chat them. But at the end, it's an improvement in power and technology from what we have been selling in the last year for Supernova.

Our next question comes from Alex Schiblhafer of Stifel.

So if you can hear me. Just to kick us off here. So I just was wondering if you could provide a little bit more color on your production capacity. So I think you said during the call that there's 20,000 units in aggregate for Supernova and Hypernova.

I was just wondering from a breakdown perspective, how much of that is more so on the Supernovagen 1 side versus hyper. And also if that's primarily U.S. production capacity or is that more global, including Barcelona?

Sure. Yes. So I think that -- let's put that number into context because that's a long-term aspirational number. I think we've been getting a lot of questions internally of -- sorry, from analysts and investors in terms of what are our long-term capabilities, manufacturing capabilities, when we think about the public charging portfolio.

And so it's going to be a mix. And I think that, that mix is going to evolve based on customer preferences based on projects, especially when we look at NAVI and IRA in North America.

But by the time we get further out into the curve, you're going to be in future generations of Supernova. And remember, we're making some assumptions with that 20,000. We're making some assumptions in terms of continued capacity build-out, so expanding our factories, right, to their full footprint, adding production lines, doing full ships. That is designed to give you sort of an extreme boundary. And if the demand is there, we will continue to ramp that production up to meet that demand.

Yes. Thank you, Alex, for the question. But with this 20,000 number, which obviously has been deeply tied by our operations team, we wanted to show the capacity that the current facilities and warehouse we have today, how much they can produce. Obviously, as Mark said, we will need to invest slightly additionally in assembly lines.

But in terms of facilities and the factories, the footprint we have today and the CapEx we invested last year in Texas and in Barcelona, they allow us to have this capacity of 20,000, and we are talking about a 3- to 5-year target for these productions. But the investment is already done, except for a few assembly lines.

Got it. Got it. for the clarification. Just as a follow-up as well. Just I know, Matt, I think you touched on the NAVI funding. When do you think we're going to start to see some allocation of that? Is that going to be 2 more of a 24 story? And for those 300 units, I believe, of Hypernova they have in the pipeline, is that tied to the NAVI, you just starting to see some incremental demand for that product tick up?

Yes, that's a great question. So those units are a mix between both U.S. and Canada. So it's nice to see that they're not all tied to NAVI funding. And they Sorry, your question about... About the Devi program. So in terms of the -- when those projects are going to hit the calendar, we believe that there are some infrastructure upgrades that need to take place.

I think Douglas has talked about this publicly. And we expect this year to have discussions publicly with regards to project wins and where we're going to participate. But installation and having it hit hardware vendors P&Ls, it's probably either late this year or first half of next year. That's when you're probably going to see disbursement of funds to where we are in the marketplace.

And thank you for the question, Alex. The key here is that we have coil as part of our portfolio, the company work hired last year, they installed in the U.S. And they are experts on upgrading the power, building the switch units, the transformers, making all the installations for fast charging.

So what we are working very hard now is to make sure we can provide a turnkey solution that can be quickly adopted by our customers because their main challenge is not only the hardware that is by American, and we can provide that. Also everything what Matt was explaining, making the upgrades and everything. And we think we coil be able to provide a faster track for our customers. So we will help us to get more business

Our next question comes from Abhishek Sinha of Northland Financial.

Just wondering on the hyper mean from all your learnings that you have had so far moving from Supernova to Hypernova. I'm just wondering like maybe you can talk a little bit more on like how the learning has been and where the industry is heading.

I mean, do you see, at some point, we go to like (inaudible) system? Or do you think that's even if technically feasible, is not economically viable? Or I'm just trying to understand like where the industry is moving and what you're learning has been and how difficult would it be to get to the 1,000 coat? Are we reaching a point of emission returns already?

Yes. I think, NAVI, what you're asking is, what does the road map look like in terms of electrification in terms of needs in terms of certainly our public chargers. And remember, Hypenova is a generation ahead of most other products coming to market this year. It goes up to 400 kilowatts.

And so we think that we've built in quite a bit of future proofing for our customers. We want to make sure that we preserve that long-term investment value for them. Some of this is dictated by the OEMs, right?

What they're building into the cars, some of it is dictated by battery technology. A lot of it is dictated by some of these subsidies that are going to be coming to market this year and next year.

And so I think for the next couple of years, I think that, that 400 kilowatts for the next year or 2 as the very least, that next that 400-kilowatt configuration is probably enough given what we -- what vehicles we see coming to market.

Yes, exactly. So there's Harvey. There's today actually a few vehicles that can charge up to 350 kilowatts, not even 400. However, we are seeing, especially in the U.S., that cars are getting bigger and bigger battery. We are seeing the dorm coming with 200 kilowatt hours per battery, which means that it will take you half an hour to charge this battery with 400 kilowatts charge.

Obviously, it has a long range, but it's maybe too much time for this kind of cars. So in a few years, as I say, maybe in the longer term, power will be graded. But for this program and for the next 2 to 3 years, 400 kilowatts with the current road map of carbon factors and technology is more than anaphase which is proof...

Can I have a follow-up?

Yes, please do go ahead.

Just one quick one on your -- on yes, on the use of silicon carbide on your modules, that is one of your differentiating factor. I'm just trying to find out like where do you think the industry is right now in terms of catching up?

And how long you think that technical mode, if you will, will be there or you have some technological differentiation that will keep them more wide?

Yes. Thank you, Eric, for the question. So it's not all -- the silicon carbide MOSFET allow us to work in higher frequency when doing the switches. So this allow us to better -- more efficiency and better form factor and lower cost.

So we think we are a couple of years advanced from competition, and that gives us obviously a very good hear. But I think it's going to have, especially a huge impact in bidirectional charging because we -- bidirectional chargers for the home, which we are now working with OEMs in this direction with Caser 2.

You need a product that's compact, that's in the wall that has a small form factor because it's a home charger, but work with bus. So obviously, for factoring, it's good in terms of cost and form factor, but it's even more important for bidirectional charging in the home.

And that's where we believe we have the biggest advantage even more than 2 years in this area because we have the capacity to discharge CCS cars. We have a product available, which is (inaudible) -comment, and it's going to be again the first home CCS mediation charges, Peter one was a separation charge for the home, which are desirable the first one for CCS. So we are excited. And the key of this advantage, I mean the first is our technology that uses silicon (inaudible)...

Charlie, we have one more?

We have a follow-up from George Gianarikas of Canaccord Genuity

I just wanted to make sure I understood the (inaudible) of 300 units. Is that expected to hit your P&L in 2023? Or is that a 2024 event?

So thank you, George, for the follow-up question. So it basically depends on our capacity to deliver the product in this year. We are trying to accelerate the launch of the product to make sure as much as possible from these LOIs can be delivered, but we don't expect huge numbers for this year.

So not all the 30 million are going to be delivered during 2023. And -- it obviously depends on also on U.S. certification, which is something we cannot control 100%. So there's also opportunities to be more, and that's baked into our guidance. But I can see that not everything is not ever, but we will take to deliver as much as possible...

Anything else? Charlie, anybody else in the queue?

We currently have no further questions registered by the telephone lines. So I'll hand that over to Matt Tractenberg for any closing remarks.

Great. Well, I guess that's our last question then. So thank you all for joining us today. We hope you found today's call, a good use of your time.

Also, please note that we have several upcoming investor events in March. So watch for our website for details. If you're interested in in meeting with us. Let us know if we can help you in any way.

Have a great day, everyone.

Thank you.

Thank you.

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