Fastned B.V. (FAST.AS) Earnings Call Transcript

Hello and welcome to the Fastned Quarter 3 Trading Update. My name is Caroline, and I'll be your coordinator for today's event. Please note this call is being recorded. [Operator Instructions] I will now hand over the call to your host, Michiel Langezaal, the CEO, to begin today's conference.

Thank you, Caroline. And I'd like to extend a warm welcome to everyone on this call as well as to those joining via webcast. The presentation used during this call is available on our Investor Relations website. You can find that at ir.fastnedcharging.com. Slide 2, please. With reference to the information provided in these slides and discussed during this call, please take note of the disclaimer. Which brings me to Slide 3. My name is Michiel Langezaal. I'm the CEO and one of the founders of Fastned. Victor Van Dijk, our CFO, is also present on this call. Together, we will present this webcast. Today, I will elaborate on the highlights of the third quarter of 2024. We will discuss the current market situation and sentiment and we will look ahead to how we foresee this developing in the coming period. As always, we will talk about the progress made in acquiring new locations and the construction of stations. After that, Victor will take over and talk you through the top line results for the third quarter and as always, we will update you on our station metrics. After our presentation, we will be happy to answer your questions. If possible, please limit them to 2 questions per analyst so we can give everybody the opportunity. We've scheduled this call to last for an hour. That brings me to Slide 4 presenting the highlights of the quarter. Fastned's revenues continues to grow strongly. Last quarter revenues amounted to EUR 21.9 million, which is an increase of 44% compared to third quarter of 2023. Total revenue for the first 9 months of 2024 now stands at EUR 59.7 million compared to the EUR 60.5 million for the full year 2023 with the best quarter still to come. This is driven by the continued strong growth of electric vehicle fleets in Europe. The electric vehicle fleet in Europe's markets grew by 34% compared to the same quarter last year. Also note that we again outgrew the market as sales grew by 44% in the same period. So Fastned is doing great. About profitability, we continue to outgrow the market while delivering margins that are at or above target levels. This underpins the strong market position we have with our award-winning concept and our focus on A+ locations. Expanding the network. Last quarter we continued to work on the pace at which we secure new locations and we won several high profile tenders, which I'll talk about more later in the presentation. In total, we secured 13 additional locations this quarter bringing the total number of secured locations to 523. On the construction side, we opened 8 new stations in Q3 and we have in total 326 stations operational today. This means that we are well on track to reach our goal of 335 to 350 stations for this year's end. Energy delivered per station was 438 megawatt-hour annualized in Q3 2024. This is up 19% from the previous year and a little lower than BEV fleet penetration growth of 27%. Regarding cash flow and cash position, we've just commenced our third bond round for the year and our cash position at the end of Q3 amounted to EUR 126.7 million. Now let's now look at the electric vehicle market moving on to Slide 5. In summary, many European countries are showing a growing share of electric vehicles as part of new car sales. The Netherlands, Belgium and the U.K. are especially strong. That said, some market analysts have even higher expectations. At the opposite end of the spectrum is Germany, which has seen declining sales shares all year dragging down the overall figures. Let's zoom in and move on to Slide 6. For the last month, we have seen a positive change in practically all markets. So you might very well ask what is happening. I will provide you with a high level overview of how we see the various market drivers interact. First of all, legacy carmakers are optimizing their sales to comply with the EU's CO2 emission targets, targets which have become stricter year after year. In the first half of the year, OEMs seem to have focused on selling classic cars with internal combustion engines or hybrids that deliver good margins. At the end of the year, they turned their focus to selling just enough EVs, cars that are not yet delivering the level of profitability they would like to see. So they do this just to scrape past the EU's CO2 threshold. This year the introduction of a new generation of EVs has skewed this even more. I'm talking about cars with more range, faster charging at more attractive prices and models opening up new segments such as the Renault 4 and Renault 5. And this brings me to the Osborne effect, which we know from consumer electronics, the phenomenon where the announcement of new and more advanced products can significantly reduce the sales of the current offerings as consumers wait for the newer and better versions to become available. Applying this to our market situation with so many new, better and more attractively priced models coming on to the market in the coming months, the Osborne effect would suggest customers to prefer to wait and thereby significantly reducing EV sales. Finally, many governments across the EU have been reducing subsidies over the past year, which is logical given that EVs are approaching price parity. In some markets, governments have been too abrupt in closing the tap with Germany being a prime example. But it is also good to see that Minister Habeck is once again keen on introducing EV incentives for Germany. Closing the tap in the Netherlands seems to have had a lot less impact. As we will see on the next slide, it is norms that are starting to take over here. On the global scale, it is important to mention that well-priced Chinese EVs are requiring the EU to take action in supporting its domestic car industry. This is touched upon in the report regarding the competitiveness of Europe that was recently published by Mario Draghi. Chinese companies and the government there have heavily invested in building a well-to-wheel electric vehicle value chain and ecosystem, including solar panels. They started with this almost 2 decades ago. If Europe wants to have a competitive car industry a decade from now, it will need to take unprecedented measures to support this industry in achieving scale faster and this outcry from the car industry drives current sentiment in the media. But it is the race for cheaper and better EVs that will accelerate our market in the coming years regardless of whether these cars will end up coming from China or Germany. And that brings me to Slide 7. Some weeks ago I saw this article in the Dutch Automotive Magazine, Auto Week, reporting on the results of the National Business Mobility Survey. The number of company fleets that require drivers to choose electric had increased from 14% in 2023 to 30% this year whereby the number of fleets of large corporates with more than 1,000 FTEs is even a whopping 60%. This development is largely driven by Europe's Corporate Sustainability Reporting Directive or CSRD for short. This EU legislation requires large companies as well as listed SMEs to report on their sustainability activities. The directive entered into force on the 5th of January 2023 and the first set of companies subject to the new rules must start reporting in 2025 for the financial year 2024. Emissions from company fleets are also part of the scope companies have to report on as part of the CSRD. And with EVs now more or less having reached price parity, electrifying company fleets becomes an easy win to comply. Moving on to tender successes on Slide 8. If there were 3 tenders to win in the last 6 months, it is definitely these 3. On the right, Storebaelt, a tender for 1 big charging station on the west side of the huge bridge across the Great Belt in Denmark. While most tenders in Denmark do not allow charging companies to brand their locations, Storebaelt does. On one of Denmark's prime locations with 38,000 cars passing by each day on a key long distance route. Even more so, we are talking about building one of Denmark's biggest charging stations with more than 20 charging bays. In the middle, it's ASTRA. This is the Federal Roads Office of Switzerland. Last spring it put out to tender 5 lots, each with 11 locations spread across Switzerland. Party selection and lot preference will be based on the quality of the applications. Once again, our concept showed its value and we walked away with the most preferred lot. These sites are prime locations at motorway exits that cater to 35,000 cars passing by each day and include the ability to realize the regular amenities such as coffee and toilets. And important to mention the contracts have tenors of 30 years. We often get the question about increasing competition with the scaling of our market. This tender is a nice benchmark. As in 2019, Fastned won a prime lot of 20 sites in the first motorway tender from ASTRA. This year, Fastned comes out on top again in its second tender. To the left the tender organized by Places for London. Many of us will be more familiar with the name of its parent company, Transport for London, the company that also operates London's underground. Moving on to Slide 9 for more details. Places for London, the property company of Transport for London, has selected Fastned as its preferred partner for its new joint venture. The plan to build up to 65 new large charging stations all across London using its vast real estate portfolio in the city. The joint venture will support the Mayor of London's commitment to achieving net zero carbon by 2030 by building the charging infrastructure to allow people to switch to electric cars. The plan foresees the build of 5 seed sites in 2026 and an additional 20 sites that have already been identified are planned to follow in the period 2027, 2030 with the potential to scale to 65 sites in the longer term. To give an indication of the potential of the locations. The first 5 seed locations have more than 100,000 cars passing by each day on average, which are traffic levels that only the busiest highways of Europe have. London as one of Europe's biggest cities has a very high traffic density and is one of Europe's front runners in the electrification of it. Land to build basically anything is scarce and the very few charging stations realized to date are therefore already showing very high utilization. Fastned already operates one of London's busiest charging stations in Greenwich. Here we welcome more than 100 customers each day while our capacity is limited to 6 charging bays. From our station economics, we know that at such utilization levels, returns become very significant and payback occurs within several years. On the right side of the slide, you can see our performance in relation to competitors in London. Fastned sells roughly double the volume of any of its competitors, performance that in the construct of a JV drives returns for Fastned and Places for London. I'm very proud that Places for London decided on Fastned as its preferred bidder for this tender. Together, the companies plan to invest many millions in the development of its charging network. And note that in the case of Places for London, this is public money that will generate returns in the form of dividends by the JV. To put the importance of this tender into perspective, Places for London is probably one of the very few parties, if not the only party, that has such a vast real estate portfolio across London. Gaining exclusive access to this portfolio to build charging infrastructure with 20- to 30-year tenors in London is special. Put it simply, Fastned will build and operate London's charging network, full stop. And to the question of who competed for this tender, I think we can be certain that all the major players took part. This was one of these once-in-a-decade opportunities I have often mentioned, an opportunity we could seize upon because we developed the best charging concept in the market. Moving on to Slide 10. The third quarter continued the trend of growing acquisition pace of high traffic locations securing 13 new locations. This leads to 523 locations signed at the end of this quarter. In the last 12 months, the acquisition speed of new locations has been above 100 and that means we're fully on track to reach our goal of 1,000 stations by 2030. And this brings me to Slide 11 and handing over to Victor Van Dijk, our CFO. Go ahead, Victor.

Thanks, Michiel, and welcome all. In summary, Q3 sales and revenue development have been in line with our expectations and let me put the quarterly sales growth in perspective on this slide. As discussed last time, fast charging is a seasonal market, but with a strong bays growth. Fast charging demand in the winter is structurally 20% to 30% higher than in the summer due to cold weather and rain. At the same time, the bays demand is growing due to electric vehicle fleet growth. The combination of this leads to the annual growth concentrating in the fourth quarter and the other quarters to be relatively flat or have slightly negative growth in Q2. This year we see the same effects as you can see in the graph. Overall, we see 38% year-on-year volume growth supported by BEV fleet growth of 34%. Continued European fleet growth will continue to support our sales growth. Going to the next slide, station economics. Station economics continued to track in line with our expectations with annualized revenues of EUR 270,000, just ahead of the Q4 growth quarter. Good to note here there was a small impact related to France adopting an eCredit scheme like we have seen in the Netherlands and Germany already. They adopted the system only this year and we were able to sell several products in Q3. The net positive one-off effect of that was some EUR 400,000 on revenues and absolute gross margin level. On a gross margin per kilowatt hour level, this had a one-off impact of EUR 0.01 per kilowatt hour. Year-on-year sales growth was 19% at the average stations and 24.5% at existing stations so stations we had operational already a year ago, which is tracking close to BEV fleet penetration growth. We underperformed that BEV fleet growth a bit because the public slow charging normalization effect in the Netherlands is still in these year-on-year numbers. As a reminder on that, what we saw there is that in Q3 last year the public slow charging market in the Netherlands had negative sales growth so it significantly underperformed the fast charging market. This was caused by the energy crisis in the winter before leading to relatively high slow charging prices till then and people shifting demand partially to fast charging. After that, the slow charging pricing normalized. And in Q4, Q1 and Q2 of this year; slow charging outgrew fast charging, which was the normalization effect I mentioned. That normalization led to us having slightly lower growth than the fleet growth in these year-on-year numbers. Now from Q2 to Q3 this year, we see fast charging outgrowing slow charging again. So likely the normalization is behind us and we can expect outgrowing fleet growth again. Then as said last time, it is important to realize that these are our station economics. The average fast charging competitor makes -- well, the average fast charging competitor makes fewer sales per station so they are less profitable. To provide you with a picture of this; in the Netherlands, the average fast charging competitor does only 12% of our sales per station. That means the revenue per station starts at around EUR 30,000 versus our EUR 270,000 assuming similar pricing. Again this provides us with financial flexibility by being in the driver's seat when it comes to any price changes and tender and rent bidding and maintaining our 40% operational EBITDA margin target where others still have to deal with negative to low station profitability. With EV penetration expected to double by 2026 and fivefold by 2030, we continue to track our target of EUR 1 million revenues per station in 2030 and our more than 40% operational EBITDA margins.

Thanks for talking us through the financials, Victor. Moving on to Slide 13 -- and providing us with all of your insights on this, Victor. This concludes our presentation for today. And on this slide, we have summarized our guidance for 2024 and 2025 as we presented last quarter as well. We haven't spent much time on the pace of construction today, but just to recap. We opened 8 new stations this quarter and have now 326 stations operational putting us well on track for our guided 335 up to 350 stations year-end 2024. And on that note, I would like to thank you all for listening and handing the word back to the operator for questions.

[Operator Instructions] We will take the first question from line James Carmichael from Berenberg.

Just a couple. Just thinking about 2025 guidance really so I guess 2 points there. Just on the station rollout, just wondering how confident you still are in sort of 420 to 450 stations operational by the end of next year. How much of that is underpinned by sort of contracts in place and how much you still need to permit, et cetera, et cetera? And then similarly just on the sort of revenue per station there. I guess if we look at the Q3 numbers, it's up 24% year-on-year, which is really strong. You're going to need nearly 50% growth by the end of next year to get to that sort of EUR 400,000 per station. I appreciate that still leaves Q4, which is obviously a strong period. But just interested in sort of where you see that growth per station coming from over the next 12 months or so.

Maybe on the rollout guidance for next year. I think when we look at the acquisition pace of new locations, then I think we see that we're building a very serious buffer of sites that we can build, which is really good. Those sites are all being worked on in terms of permits, grid connections and the pace at which these sites are coming in basically gives us a lot of confidence next year that the construction pace can go up significantly. And building at significantly higher paces is something that we already tested last year where one of the quarters we delivered a build pace of far over 100. So we know that supply chains can do it and the team is well on its way basically to make sure everything is in the works to start construction on that pipeline next year.

And then on revenues per station, that is something we monitor of course and what we -- and we will update if we need to. And what we are doing there is that of course we're running our budgeting process for 2025 and also what we will do is take into account the Q4 growth. And once we have that picture, then we can see whether we need to do any update on that revenue per station target. But that is something that is probably too early to say now, but it's something we will assess over the coming quarters.

Does that give you a bit of color on that topic, James? I think in the end, it's difficult to say basically what the coming quarter will give. We know that all the growth is basically in those last quarters.

We will take the next question from line Nikita Lal from Deutsche Bank.

I have actually also 2 questions. Sorry if I did not get it, but my line was not clear at this. So the first question is on your gross margin in Q3 this year. Could you explain what's the key driver, why this is much higher than last year Q3? And the second question is on your pilot shops, could you give us any update on this?

Do you want to start, Victor, with...

On the gross margin, there's a couple of effects and some of them structural, some of them one-off. But one thing we see overall is that France and Belgium are adopting eCredit schemes this year, which is positive and that gives a structural increase in eCredit sales and that is to the tune of around EUR 0.01. So overall, it is limited, but it's a structural effect. What we also see there is with the French scheme because it was starting up, we were able to sell -- only able to sell the first quotas of this year in Q3. So that created a one-off effect that I mentioned and that one-off effect was basically EUR 400,000 and that is also EUR 0.01. So you can say that EUR 0.01 out of the current gross margin is not structural, but is one-off. And then thirdly, there is the energy prices where what we generally see that in the summer, our input prices are lower because there's more solar production and that creates lower prices and that effect is also about EUR 0.01.

And then on pilot shops, Niki, I think the way we look at it is basically like we want to provide our customers a really, really great charging experience. And that is why we want to make sure that on all the sites, there are the proper amenities in terms of like coffee, sandwiches, toilets. And that is why we're building these shops where we basically have charging stations, but we don't see the right amenities being present or we see an opportunity to add amenities. The pilot in Brecht. Let's say the first shop that we built in Brecht is running really, really well. It's running far above expectations. That is something we worked on with a partner. We also will roll out unmanned shops and we're still basically in the phase of seeing like what the mix will be, how many of the larger shops and how many of the more unmanned versions we'll use. But I think the core for this call I think is to see it really as making sure that our charging experience is the best experience. So it's not in any sense of like something that would become a core revenue driver for us or so. Does that give you some color on that topic, Niki?

Yes, sure.

We will take the next question from Jeremy Kincaid from Van Lanschot Kempen.

My first question is just on this eCredit scheme. Are you aware of any other countries that are potentially looking to implement the scheme or something similar? Second question is just on the third retail bond released this year. Can you provide comments on how demand is looking for that so far? And then finally, can you just provide a little update on whether or not there are other large tenders which you're looking at for the remainder of this year that we should keep an eye out for?

Jeremy, I think you were very difficult to hear. If I got it correct, I think the questions that you're asking are about the eCredit scheme so which countries is it already applicable and which countries would we expect it to come into force? Then about the retail bonds, any color on that topic? And large tenders, whether there's any large tenders upcoming that we know of? I think that was the 3 questions. Maybe, Victor, do you want to start with eCredits?

Yes, sure. So eCredits was already in place for a couple of years in the Netherlands and Germany so that's continuing and now we see that Belgium and France have adopted that scheme. It's all under the umbrella of European biofuel regulation and this is a derivative of that biofuel regulation. And of course that also means that countries like Switzerland and the U.K. won't adopt it because they're not part of the EU and we haven't seen it in our other countries yet, but that could come. But these are the core countries where it has a meaningful impact for Fastned. Then on the retail bonds, it's going as expected. We're closing the retail bonds in more than 2 weeks from now and generally what we see is that in the last 1 or 2 weeks, we see most demand coming in. So as it sits now, we're tracking nicely. But any answer we will know the final results in 2.5 weeks.

And I think then on large tenders, I think you've just seen sort of the message on what we currently -- we're very happy with. So I think for this year, I think basically early of the year was the Deutschlandnetz tenders and today the tenders in Denmark and the Transport for London tender, ASTRA. That basically I think that would say I think the U.K., I wouldn't expect anything big upcoming. ASTRA, I think that really is it probably for the foreseeable future in Switzerland. I think when you look at like where we would expect significant rollout to happen and need to take place and we're talking about countries like Spain, area of Belgium, the public network of France. And I think basically Germany, Switzerland, that is more or less covered for the moment for the tenders that we see with of course the potential being related to the German laws, but that's [Audio Gap] very high level, but there's little bit less to say.

We'll take the next call from line Paul de Froment from Bryan Garnier & Co.

You mentioned the new locations in the U.K. notably in London. From what I understand, these locations will be in a city site, which is not usual for Fastned. And on top of that, the U.K. market is well known for its high electricity cost. So my question is do we have to expect a dilutive effect on gross margins following an increasing footprint in the U.K.?