Hello, everyone, and welcome to Wallbox's Third Quarter 2023 Earnings Conference Call and Webcast. My name is Charlie and I'll be your operator for today's call. At this time, all participants’ lines have been placed in a listen-only mode to prevent background noise. After the speakers’ remarks there will be a question-and-answer session.

[Operator Instructions] I will now turn the call over to Matt Tractenberg, Wallbox's Vice President, Investor Relations, to begin. Matt, please go ahead..

Thank you, Charlie, and good morning and good afternoon to everyone listening in today. Thank you for joining today's webcast to discuss Wallbox's third quarter 2023 results. This event is being broadcasted over the web and can be accessed from the Investors section of our website at investors.wallbox.com.

I'm joined today by Enric Asuncion, Wallbox's CEO; and Jordi Lainz, our CFO. Earlier today, we issued our press release announcing results from the third quarter period ending September 30, 2023, 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.

Risk factors that may affect results are detailed in the Company's most recent public filings with the SEC, including in the annual report, Form 20-F for the fiscal year ended December 31, 2022, filed on March 31, 2023. 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 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 renewing highlights from the third quarter 2023, we will spend some time discussing how the current market environment is evolving and how our strategy fits within.

We will also dig into the ABL transaction and why it has the opportunities to transform our competitive position in the years to come. And then we will review some recent partnerships and commercial wins.

Jordi will then offer some color on our cost reduction efforts, provide additional detail on our quarterly performance and share some thoughts on our balance sheet as we close out the year. And finally, I will return to discuss our view of the market and what we are focused on for the remainder of the year and into the next.

We will end by taking questions from our covering research analysts. So let's get started.

While the third quarter revenue finished below our expected range at €32.5 million, down on a year-over-year basis, driven by continued channel destocking, we made great progress on a number of critical initiatives that were improving profitability, partnerships, balance sheet management and strategic M&A.

As we said this year, a large inventory build occurred within our distribution partners in both Q2 and Q3 last year in anticipation of stronger EV deliveries in 2022, which ultimately did not play out as planned. This created digital comps, both in revenue and unit volumes on a year-over-year basis for both Q2 and Q3 this year.

The trend that we discussed last quarter has continued and as a result, sell-through via our distributors exceeded the unit sold into those channels. That fell through unit growth on a global basis amounts to approximately 30% year-over-year, a reasonable growth rate in our opinion.

On a regional basis, a sell-through growth was 22% in Europe and APAC combined and 16% in North America. We continue to work with our distributors to put in place systems and processes to provide better visibility and more properly [aligned inventory] with end market demand.

We also continue to believe that we are approaching [indiscernible] adjustment and we'll provide more information as we have. It was another solid quarter for our DC business, driving 285% unit growth and 350% revenue growth, both on a year-over-year basis.

While we spoken at length about the balance and diversification, the DC offering brings to our portfolio, it's worth mentioning again. DC demand is less correlated to deliveries that [indiscernible] installations. It is a public infrastructure buildup and often driven by government and utilities.

The robustness of the network is expected to drive in the adoption, not the way around. For this reason, we continue to allocate resources to this opportunity globally and believe we are extremely well positioned. We expect there will be times that one portion of the portfolio outperforms the other.

The fact that we have a comprehensive solution across a global footprint to give the investors confidence we are working to cut the energy transition from a number of fronts. We believe this is within our control, and we expect to win in the marketplace.

The balance that we discussed with you in the past continues to evolve and, in some cases, accelerate. ABL provides access to applications and geographies that we were underrepresented in. What you see from us as we enter 2024, is a business that plays across regions, product categories, applications, customer segments and economic drivers.

The purchasing decisions across residential, commercial and public charge are as different as those who made them. It's equally so on a geographical level, based on government initiatives and consumer preferences. This reduction of correlation to European deliveries is intentional.

And so the shareholders will benefit from in the coming years in the form of consistency and stability. It will be overnight, but slowly through organic and inorganic means, and we are at a meaningful point in that transformation.

As ABL in Europe, this is globally by the external charges will create commercial forces, which we drive and many other new products hit the market and continue materially, you will see big changes from us. Continuing on with the performance.

Gross margins were 35% in the third quarter, a 530 basis points sequential improvement, driven largely by product mix. Our cost reduction program is front and center and allow us to reduce cash expenses by an additional €4.5 million sequentially. We expect to see the €50 million reduction target previously discussed.

Jordi will spend more time on that in a minute. Adjusted EBITDA loss was €16.6 million, a €4.6 million improvement over the second quarter loss of €21.2 million. This brings us to the facet of EV demand in general.

We have all seen comments made by large OEMs regarding challenges they're experiencing as they gain in the competitive environment and we've seen pricing actions taken. There will be quarters or even years where consumer behavior is [indiscernible] as would be expected.

But over the long term, replacing hundreds of millions of ICE vehicles and putting in place infrastructure to keep EVs charge and moving is one of the largest investment undertakings we may ever see. The current variability we've seen is not unexpected, nor that we change our thesis. In fact, EV demand relative to ICE appears to be relatively healthy.

And while they may not match the OEM initial forecast, we believe in the adoption continues to grow path forward. I can tell you this, the early transition from fossil fuels to alternative sorters is occurring and will continue for decades.

The management of [indiscernible] will take center stage, intelligent systems to optimize our generation, storage and use will be critical. We continue to build that offering and is resonating with customers. Through financial incentives, governments are expected to continue to encourage consumers to see from ICE to EV.

It will not be smooth and may continue to crawl in fits and starts. But we believe that this will accelerate as we make our way through the next three to five years. EV prices need to reach parity with ICE vehicles. EV prices will continue to decline as competition from Asian OEMs versus improvements from North America and European manufacturers.

Low-cost producers will disrupt incumbents, forcing productivity gets, lower prices will bring consumers to the market that will otherwise be left out. A market consolidation within maybe channel space will contribute. Scale our global footprint and a comprehensive portfolio will be critical to winning in this marketplace.

Given the size and scope of the reduction we see ahead, even with the small local companies with [indiscernible] offerings will be left out. And as all companies we complete software and hardware portfolios will prevent. For the third quarter 2023, Europe contributed to €22.7 million or 70% of the total revenue.

North America contributed €6.7 million or 21%. APAC was €2 million or 6%, and LatAm was €1 million or 3%. Variability in AC demand as a result of continued destocking was partially offset by strength in public DC charge. Supernova 150, our second-generation DC fast charger continues to see strong reception from those customers.

DC represented 25% of our revenue in the third quarter with AC 59% and softwared services and accessories, the remaining 16%. 2023 has brought with the large DC orders from big strategic customers, including Iberdrola, Atlante, Powy, Osprey, BeCharge and others. In some cases, these orders are in the tens of millions of euros over several years.

We see a lot of opportunity here and we'll ramp up production in a controlled fashion in quality and reliability in force. This is a critical time for both Wallbox and the market, one which requires the relentless proceed of [indiscernible]. We see retraction and customers have responded with repeat orders.

It's encouraging to see and we remain committed to staying true to those stats. Gross margins were 35%, an increase from last quarter, but lower than our long-term target. Margins were impacted by product needs, which we expect to ease as we make our way to 2024.

To provide color, approximately 60% of DC units sold in the quarter were Supernova 150, up from 40% in the prior quarter. And while there'll be a higher gross margin profile in Supernova 60, our first-generation product is still lower than AC.

So in time, as that mix shifts continues and the cost profile of the new product declines we anticipate that impact to lessen. We also made progress on our cost-saving initiatives.

Employee benefits and OpEx on a combined basis totaled €33.2 million, €4.5 million better than the last quarter and €16.8 million better than Q4 2022, our point of measurement. We have removed €38.8 million of expenses so far this year.

The rightsizing of our business, given the demand environment has put us in a position of strength and one that gives us line of sight to profitability in the coming year.

The processes and policies will now put in place will provide the structure for the next phase of growth, while allowing for the flexibility we'll need to navigate dynamic market conditions. The ABL transaction, which was closed on November 2, is one of the most important events in our company's history.

This has the opportunity to drastically change our financial profile and provide meaningful commercial, operational and financial synergies. They are the market share leader in German, one of the most important geographies in the world. The commercial market, we operate in is less correlated with EV deliveries and residential installations.

This is even more true of the demand drivers of DC public charging infrastructure. This transaction further diversifies our portfolio, provides balance and expand our product and service addressable markets. While the EV demand curve might see variability, this transactions offers further cushion against those near-term impacts.

The size of the German EV market is second only to China and North America. There are almost 2.7 million EVs on the roads there today. It's massive. And as I just discussed, since variability based on government incentives. Additionally, Germany requires a new certification called [indiscernible].

This ensures that the amount of electricity delivered to the vehicle is measured accordingly, so payments can occur. Any commercial and public application where energy is being sold requires it as well as many residential use cases where company cars are provided, a common occurrence in general.

ABL has a long history of offering innovative technologies. The management team has established itself as a trusted partner to brands, including [indiscernible], and they have sold more than 600,000 chargers today.

The product offering has been focused on these commercial applications and delivery chargers are [indiscernible] something Wallbox did not have. Because of this, the product overlap is minimal.

This transaction provides us immediate access to a market where we were underrepresented and provides opportunity to expand our offerings into established sales channels. Bringing Wallbox products like Supernova, Pulsar and Quasar in Germany and ABL products to the rest of the world is something that will drive exciting value for both companies.

As a reminder, Wallbox paid €10 million in cash already and we'll pay another €5 million in 2024 to acquire the operations and assets of ABL. This was structured as an asset deal, which narrates the need to pursue their liabilities.

Instead, we bring the intellectual property, inventory, facilities and equipment, employee contracts, customer relationships and talented management team to work, whether the Company will be the largest European EV charging name with the most comprehensive offering and broader ceratin footprint.

We anticipated [indiscernible] between €60 million and €75 million of revenue and positive adjusted EBITDA in 2024. This will be immediately accretive to Wallbox in the upcoming years. As [indiscernible], in 2022, ABL generated approximately €150 million in sales with positive EBITDA.

In 2021, the Company began investing in new facilities to bring its new products to market, the eM4. That investment occurred just before government subsidies were turned off late last year. The [indiscernible] timing in turn, created opportunities that brought Wallbox and ABL together.

Incentivizing and aligning objectives between ABL and Wallbox shareholders is extremely important. For this purpose, earn-outs are utilized. In summary, ABL management has a minority ownership stake in the business entity will create.

While the sales and margin targets are ambitious higher than those shared with you here, both ABL team and Wallbox shareholders will be rewarded if they are achieved. We are excited to see the team hit the ground running. Now I want to spend a few minutes on the benefits we expect to capture as a result of this transaction.

The commercial synergies are the first I'd like to discuss. [indiscernible] certified product portfolio is the most visible and tangible commercial benefit we see. The certification was something we were working on is [indiscernible].

The experience [indiscernible] is navigating the standards and requirements with accelerated process with Supernova ultimately providing faster access to the market in 2024. For the applications, in addition to lithium commercial, we now can bring the full Wallbox offering through establish [indiscernible] channel in German.

[indiscernible], our [indiscernible] charger, and the industry first will benefit from the strong relationship [indiscernible]. Given the size and focus of the general market or intelligent energy management solutions, we are optimistic about the opportunity.

And finally, there will be other markets within Europe where the ABL offering is better aligned with the market needs. For example, ABL [indiscernible] charger, the eM4 meet the needs of customers looking for a robust solution for fleets, apartments and office and workplace.

The market segment is growing faster than others and puts us immediately in a leadership position. The ability to quickly leverage that solution in countries that ABL cover we are not operating, offers a unique opportunity that we will quickly go after.

Pulling the eM4 in our [indiscernible] channels only accelerates our ability to participate in those projects. The operational synergies are equally compatible. ABL brings with its two manufacturing. The location in Germany is nearly 100% automated, and the location in Morocco is cost optimized.

The facilities also with capabilities that we don't have at Wallbox, including injection molding and socket manufacturing. By leveraging these from ABL and not Wallbox fleets like PCB [indiscernible], the combined entity can further increase the [indiscernible] and [indiscernible]. The savings could be millions a year.

The scale and scope of our combined offering and footprint also allows for both vendors and sourcing consolidation and leverage. Simply put, given our size, we are a major force in EV charging and expect to realize volume discounts that will immediately benefit gross margins. Optimizing R&D and CapEx is another operational benefits, we see effect.

Combining two product road maps into one will allow us to, in some cases, do more and others to spend less. A example of this is how it will impact our [indiscernible] at Wallbox, [upcoming] answer to commercial applications. ABL eM4 satisfied the European market immediately and can be sold throughout our channels today.

But this also allows us to see for R&D and CapEx, which is no longer needed in Europe to North America. Customers there have been eagerly awaiting a robust commercial solution and Orion will meet their needs perfectly.

This refocusing of investment and resources while expanding our service and product addressable market is a function of a complementary offering and footprint and there's more examples to share. And the financial synergies provide for enormous shareholder value creation.

As I mentioned, ABL generated substantial revenue and positive adjusted EBITDA in 2022. As the new products hit the stride, we anticipate them achieving their targets and generating positive adjusted EBITDA next year. It only increased our confidence in our ability to deliver positive adjusted EBITDA at the consolidated level in 2024.

To the [indiscernible] context, ABL and Wallbox on a combined basis delivered revenue of approximately €46 million in the third quarter. ABL gross margin are within rates the global [indiscernible] strips as well, approximately 40%, and we see more opportunities to improve them further.

And finally, regarding operating costs at ABL, prior to the transaction, the Company completed a cost improvement program to rightsize the business relative to market demand. This allows a more targeted approach to identifying potential savings that can arise from the buses combination.

We will always go on a case by case basis and ensure we're optimizing the combined operations in order to [indiscernible] volume for all stakeholders. In summary, this transaction has the ability to accelerate our strategic plan. It will provide a level of scale that does not exist today.

With that scale, we respectively profitable [indiscernible] moving forward. It will offer unique opportunities to follow the investments and bring new products to new markets. It's transformational for Wallbox, and I'm excited to see where it leads us. The third partnership we announced in the quarter was Kia.

Kia selected Wallbox as its partner in the launch of this beautiful new electric SUV, the EV9. Here, we'll offer U.S.

customers and solutions that include Quasar 2, our bidirectional charger, the next generation, 11.5 kilowatt bidirectional charger will enable EV owners to charge and discharge their electric vehicle to power their home or send energy back to the grid.

Kia EV9 can hold up to 100-kilowatt hours of energy over 5x the amount of energy of a standard 13.5 kilowatt hours home storage system and power a typical household energy consumption for up to four days, removing the need for expensive home energy storage systems.

In case of power outage, Quasar 2's power recovery mode automatically switches the users' power source from the grid to their vehicle to allow a homeowner to use their EV battery as an emergency generator.

This type of backup service is becoming not only increasingly important, but crucial given the sheer volume and duration of power outages in the U.S. Last year, Californian alone witnessed 39 power outages and more than 414 hours of total outage time. Across the U.S., unforeseen power outages cost the U.S. economy $150 billion annually.

We're excited to work with Kia America toward our shared vision for accelerating electrification and transforming how we harness and interact with energy. The next announcement we made was with Free2move eSolutions, which is a joint venture with Stellantis.

We alluded to this collaboration on the past calls, and we are proud to finally discuss who is with. The opportunity will involve both Pulsar AC charger for the customers and Supernova 180 for dealerships. We will be shipping Supernova in the current quarter and expect to accelerate as we make our way to 2024.

I'd like to point out how we come an opportunity dealerships bring there. Remember, in dealerships, we mean both AC and DC as well as bidirectional capabilities. You cannot service a fully charged [EV].

So capturing that energy through bidirectional charging, which today is wasted and moving into other vehicles or selling it back to the [indiscernible] is a compelling value proposition for dealerships, and there are more than 21,000 of them in North America alone.

One, we need to invest between $100,000 and $1 million to be ready, the massive market, and we are uniquely positioned. We look forward to bring a competency management factor to them. And finally, we've announced a strategic partnership with Osprey, one of the U.K.'s largest and leading rapid EV charger networks.

The collaboration will bring in by expanding the open network with 125 units of Wallbox Supernova DC charger, coupled with Wallbox’ care program, offering preventative and creative maintenance for the Supernova fleet. Charge point availability and reliability are both crucial for consumer confidence in making the switch to electric vehicles.

Wallbox’ Supernova uses a modular design with a simple user-centric experience and payment process. This ensures that EV drivers get ease of use and a high standard of reliability, whilst charge point operators can scale the units easily to improve availability. Jordi, I'll turn it over to you to comment further on our financial details..

Thank you, Enric Good morning and good afternoon to everyone. Our third quarter results came in lighter than expected, driven by additional channel inventory adjustments and some regional variability from residential applications.

I'll provide more detail on these results discuss some financing activities we've announced and shared some puts on the remainder of the year. For the third quarter of 2023, revenue was €32.5 million, flat from the previous quarter. On a year-over-year basis, revenue declined in both the U.S. and Europe driven largely by continued destocking.

On a sell-through basis, unit volumes increased by 30% driven by strength in the U.S. The inventory build that occurred last year continued in the quarter, and while it's difficult to say for sometime based on the pattern we saw last year, we expect less of impact going forward.

Gross margin for the quarter was 35% at a 130 basis point improvement over the last quarter. Mix shifts from new products continue to impact our margins, but progress is being made. DC margins are now above 30%, up from 10% last year.

As we continue to transition from Gen 1 to Gen 2, we believe we will see gradual improvement, enabling consolidated gross margins back in the mid- to high series in the fourth quarter. We were able to further reduce both employee-related cash expenses and OpEx, which amounted to €33.2 million in the period.

If you recall, our intention was to reduce 2023 expenses by €50 million using the fourth quarter 2022 as our [indiscernible]. Through the third quarter, we have removed €38.8 million from our 2023 costs. The most recent quarterly cash expenses are €16.8 million lower than Q4 2022.

This implies that we will exceed our planned reduction something we are proud to share with you today. We see additional opportunities to reduce costs further, and we will aggressively go after them. Adjusted EBITDA loss for the period was €16.6 million, a 22% sequential improvement and 20% improvement over the prior year period.

We remain extremely focused on cost and conserving cash and have seen tangible benefits of both efforts. We also improved our balance sheet in the quarter. We ended September with approximately €81 million of cash and equivalents.

In October, we secured an additional €35 million loan from several European banking partners at a rate of three-month [indiscernible] 3.25%. That will combine with the attractive purchase price of ABL, allows us to remain close to the €100 million mark where we are comfortable.

We ended the third quarter with €65 million of long-term debt, which excludes that Q4 funding event. We did not utilize the ATM during the third quarter. CapEx was again very in line with approximately €4.2 million in the period with €1.2 million spent on property, plant and equipment. Year-to-date, we've spent €11.6 million.

We expect an additional €4 million to €6 million of CapEx spent in the fourth quarter of 2023, resulting in a full year figure less than €20 million and significantly less than the €26 million previously planned for the year. Inventories were €94 million, down slightly from the second quarter.

Full-time headcount increased by almost 100 people on a quarter-over-quarter basis. We are at the headcount level of Q2 2022, and believe the absolute number will continue to trend down. To provide a bit more detail on our balance sheet, here you see the debt recovery.

As of September, we had approximately €65 million of interest bearing long-term loans with maturity greater than one year. We also have €19 million of short-term loans. The €65 million matures over the coming five years. Our fixed rate debt is at 4.1%, and our floating rate debt is at an average three months [indiscernible] close to 5.8%.

These balances exclude the new €35 million loan brought on in October. As you can see, we have careful finance business and do not have meaningful near-term interest rate risk. We believe we are adequately capitalized and are able to service our debt. Investors should be in comfort that we are in a solid position.

Enric I'll turn it back to you to provide some closing commentary..

Thanks, Jordi. As we exit 2023 and prepared for 2024 is an extremely important time for Wallbox. We have set up to achieve scale on the business that will allow us to live profitability very soon. The multiple new products we are bringing to market today provides access to applications and geographies that we have not seen before.

DC public charging in North America, DC and commercial charging in Germany, recharging in Europe or either in the U.S. for apartments and office lots, bidirectional around the world. These revenue opportunities are real. They will contribute meaningfully and ABL is an important part of that. We expect revenue growth to resume in the fourth quarter.

Managing our cost base is equally critical as we enter 2024. While we've taken huge steps to rightsize the business given the environment, we see more opportunity ahead. We will be leaner, more efficient and more flexible in the coming year.

Breaking even then generating positive adjusted EBITDA is now expected just a quarter later than originally planned. We believe that our operating leverage will be greater than previously sold given ABL's potential. It's an exciting time and one that we are very proud of.

We believe we are doing the right things and we measure our progress against our strategic plan by speaking with customers and staying close to the market transitions driving our business. Today, we are fully focused on what we can control. This includes taking market share, controlling costs and ensuring we [indiscernible] to profitability in 2024.

Each variable Wallbox is focused on this initiative, and we are willing to do whatever it takes to [indiscernible]. While we cannot control the markets, we can control how we compete within that. We are adding diversification across products, markets and geographies that rely less [indiscernible].

We will be largely profitable with a more efficient operational footprint and a more complete offer. We appreciate your trust, I look forward to turning the corner to profitability in the upcoming year. That, we believe, will set us apart from the competition and help [indiscernible] on where it should be.

the massive wave of [indiscernible] and channel infrastructure that we see coming over the next decade, and we are ready for it. With that, we are ready to take questions from our analysts..

[Operator Instructions] Charlie, I think you have some instructions for our analysts and how to get into the queue..

[Operator Instructions] Our first question comes from George Gianarikas of Canaccord Genuity..

So I'd like to ask about your expectations around reaching EBITDA positive for next year. You said in 2024.

I was wondering whether that means that you expect to reach profitability for the full year? And also your previous expectation about being EBITDA flat in the fourth quarter of '23?.

Thank you, George. This is Enric. We are seeing great traction on cost reduction, and we expect by 2024 as a full year to be a profitable year in adjusted EBITDA basis. And what we are doing right now, and as I said during the call, we are reducing cost and adapting to the environment.

Therefore, we expect that breakeven or actually profitability to be in Q1 2024. And we've been able to improve EBITDA 22% for this quarter. We believe we will make great progress in Q4 being in very small negative numbers, but actual positive numbers, we won't see them until Q1 2024..

And as a follow-up, I'd just like to switch gears a little bit and ask about the inventory destocking. I know last quarter, you mentioned that you thought it was -- you basically had a sort of an equilibrium, but you continue to see inventory in the channel.

Can you just talk about the measures that you've put in place to understand where inventory currently stands and when you now expect to be through that flush?.

Yes. So actually, if we look at the difference between sell-out and sell-in, so the chargers that were sold by our board partners, we see a €10 million difference. And that's something that we have not seen materialize this quarter.

When talking with partners and looking at the data, what we see is that they are carrying less inventory that they normally would. They used to have at least 1/4 of inventory and some of them are being more lean and having a couple of orders a quarter.

That's happening for some partners, big partners, especially that want to manage in a more smart way, they're working capital. And this is the gap that we've seen in Europe, mostly for AC charging, which was this €10 million. As we look forward, we are seeing that it's getting better, and we expect Q4 and Q1 to be clean in terms of inventory..

George, the only other thing I would add, it's Matt, by the way, is that this is now four quarters of channel destocking. So the inventory build at our channel partners ended in the third quarter of last year. So while we don't want to tell you that it's complete, the data that we're looking at suggests that we're nearing the end of that cycle.

And so that's what Jordi was talking about, the impact being less going forward. That's what we believe, and we're getting that both from the data and from conversations with customers. So hopefully, that's helpful..

Our next question comes from Abhi Sinha of Northland Capital..

So I just want to understand on the ABL acquisition. I understand Germany was an import area where you were underrepresented.

The first thing is, is that enough for you to make a breakthrough in Germany? Or would you require more similar acquisitions there? And second, is there any other import area in Europe where you are underrepresented and something more like this kind of acquisition might be a possibility?.

Thank you, Abhi, this is Enric. So ABL is the market share leader in Germany. So when it comes to AC charging, yes, it's more than enough. And the commercial network they have established after 100 years of a company, it's massive in Germany. They have presence in municipalities, in distribution channels, with installers.

They even have a training center for installers all across Germany. So we're bringing Supernova and Pulsar products through their commercial network is going to be obviously a huge synergy. So yes, it's an up for AC and for DC charging. The ABL team is super excited to start selling Supernovas actually. And they bring a product that for us was Orion.

Orion is our commercial charger focus to sell energy in commercial applications. The eM4 fulfills exactly what Orion should have fulfill. It's a product that is tested, that is being sold. So as we speak now, what we are doing, we are offering it to other geographies where ABL is underrepresented.

Obviously, they are strong in Germany, but not in the rest of Europe. And we also see a lot of synergies coming from there. When you ask about other countries that you think -- we think we're underrepresented, I think we -- after this acquisition, we are a powerhouse in Europe.

We are the number one manufacturer of EV charging in the European continent with offering in all segments from home commercial and fast charging and even bidirectional charging. So Immediately, I say no. I say we don't need any other acquisition like this in Europe. But we also recognize there's going to be more consolidation in the European space.

And we continue to look for opportunities. But by right now, our focus is making sure we can grow the ABL business together with the Wallbox business..

Our next question comes from Stephen Gengaro of Stifel..

I think two for me. Just ABL contributed, I don't know, about €13.5 million in the quarter. Is that -- and I know you gave some guidance on 2024 as well.

Is that a reasonable run rate? And is there any seasonality we should be thinking about in the ABL business? Did I lose you?.

Sorry about that..

I believe we've lost connection with the speaker team. There we go..

We're good. Okay. My apologies. So Stephen, just to clear that up, ABL did not contribute anything in the third quarter. The number that we gave you, which was approximately €46 million was a data point to give you a sense of the size or the scale of the combined business. But remember, we closed the transaction on November 2.

So we will include two months of Q4 in our Q4 numbers, but they didn't contribute today to the numbers that we reported here today. Your question was about linearity, seasonality or sort of the path forward. And I think what we want to leave you with is that we expect somewhere between €60 million and €75 million during the 2024 period.

We've set very aggressive targets for them and we'll continue to report on how their performance is. But how that shakes out over the next couple of quarters I think give us a quarter or two just to get our hands around the business and spend time with the team, and we'll share more with you on the next call.

Okay?.

And then just as a follow-up, you mentioned how strong that business was in 2022. I understand Germany is a more mature market. But I'm just sort of trying to understand the drop in revenue.

I mean if you cut half in 2022, what's behind that? Are they sold businesses? Is it just evolution of the German market? And is that €150 million the kind of potential they could get back to?.

Stephen, this is Enric. So that's something that happened to all German companies and companies that participate in the market. We also saw this drop on sales in the German market. That was driven by the KfW incentive.

There was -- the German bank was subsidizing commercial and home chargers in Germany, almost for free, basically, including installation. And when that stopped last year, at the end had an impact in the whole market. We are seeing -- as you can see, the €13 million, €15 million revenue quarterly right now.

And we obviously believe that they can go back there to these numbers as the German market becomes more normalized after this year. You have to think that it was a very subsidized time in 2022, 2023 after the subsidies were finished, obviously, the market dropped, because there has been a lot of people that have bought charges in that period.

But now in the Q3 and Q4, we are starting to see exciting opportunities. And we also saw new incentives coming from KfW in the German market. So it's not only that the market is improving, also the same entity is adding smarter and less [disruptive] rates incentive, but still that support the growth of the charging business..

So Stephen, yes, we -- I just want to be clear, we do believe it. Stephen, over time, we do believe that, that team can get back to those numbers. Okay..

Our next question comes from Ben Kallo of Baird..

All right. Just sticking to the acquisition there, can you give us any details about the process? Was it competitive? And then just because of that fluctuation in revenue from '22 to '23 and the thoughts about getting back to that.

Can you talk how you guys looked at valuation when you made the acquisition?.

Yes. Ben, it's Jordi Lainz. Well, it has been a very special process, because it was a private owned company by a family, it's a very old company. And they were doing significant efforts in 2022 in terms of investments to achieve higher growth on 2023, that finally, as Enric mentioned, did not come.

This financing of these big investments and increase in headcount were expected for a market growth that didn't happen. And since first quarter 2023, this company show how their sales were not growing them on 15%, their sales were decreasing by 50%.

It creates a distressed situation that became on a bankruptcy process in June 2023, where the business was managed by administrator and self-administration process. In that process, it's a third party, which is assisting to the existing owners to a selling process as quick as possible.

In that situation, we were in front of a process with at least two competitors to European competitors and a couple of private venture companies and selected company that was the most excited and complementary in terms of achievement common goals, in terms of market share and complementary in products was Wallbox.

And this is why Wallbox presented an offer in competition with other three offers that was best elected because it was considered as the best option for the future growth of the business. And this is why it has been, as you can -- and the market has seen a very competitive and attractive pricing for the business -- for the whole business..

Ben, to add to that, this is Enric. So the owners of ABL at the time the family owner, they had part of the decision on who was the best offer. And the fact that there was no overlap between Wallbox and ABL, and they are very complementary companies. And that obviously keeps forward the thesis that was an important part of the decision.

But yes, it was a very competitive process..

As we think about gross margin and any kind of seasonality into next year, can you talk about if there is any seasonality impacts gross margin? And any kind of -- there's a bunch of factors that you talked about in the prepared remarks impacting gross margin, but how we should think about levers increasing it and kind of timing for the increases in gross margin?.

Yes. So we don't expect any seasonality. We expect constant improvement as the Generation 2 Supernova is becoming a bigger part of the product mix of our CFC sales. You have to see that Supernova has very high -- Supernova Gen-2 has higher gross margin than Supernova 1, which was much lower, and that's the biggest driver in gross margin.

When next -- at the end of this year, this current quarter, we are also launching Supernova in the U.S., and it's coming with a very great gross margin closer to the 40%, which is the target of the Company. And therefore, also this will support building margin.

Additionally, as we keep producing our own inventory, the one we have in our warehouses, that give us opportunities to improve the design to cost of our products.

As we've been cleaning inventories from many products, we didn't have an opportunity to implement design to cost improvements that have not been seen, because we were eating through inventory. But already this quarter also, there's new initiatives that are coming and reduce cost and impact obviously gross margin.

So I think we should expect to see in general, an improvement on gross margin, getting close to the 40% target of the Company. There might be some quarters where we have an extra sale of Supernova and less AC or more AC and less Supernova, that's going to be what will create a little bit of noise.

But in general, we expect improvement and no seasonability..

[Operator Instructions] Our next question comes from Robert Jamieson of UBS..

Just one, just to go back to ABL real quick, just two-part question here. One, what's the level of EBITDA that they experienced in 2022? I know you said it was profitable and they generated €150 million in revenue. And then, I guess, second to that, related to gross margin. I mean, look, it looks like you have a lot of opportunities here.

You've got additional capacity for other components that you might have been buying from a third party, whether that's the socket manufacturing, injection molding.

Can you maybe talk about how to think about that next year in terms of gross margin and benefits there? And then as well as any kind of benefits to reduction in CapEx or OpEx that you'll also receive from ABL?.

Robert, it's Jordi Lainz. As we mentioned in the script, company reported positive adjusted EBITDA in 2022 with single digits, positive single digit on 2022. And last three years ago were constantly net profit.

And this lower positive EBITDA, which do just that begin to decrease sales in the last quarter, but for year-end, was a positive adjusted EBITDA. And another point that we believe is really interesting is significant gross margins at the Company has been reported historically in older portfolio that is around 40% and some months above..

Yes. Robert, going to the gross margin potential improvements, you're right. There's a lot of upside for gross margin. So we are not including in our target of 40% for next year these potential upsides, but there's many things.

So one thing that's very interesting is for our commercial products, for example, Pulsar socket or Copper SB, we use a device that a socket, that's important part of the cost of the charger actually is where all the power goes, so it's plastic with a lot of copper inside.

And normally, we buy this from suppliers, but now ABL being an expert on the subject, they manufacture them. They manufacture them for all the different markets, because every market has a special socket designs. So this immediately brings an improvement on gross margins for these kind of products.

Obviously, we don't expect to hit our P&L until the second half of the year as we are working on that right now. Or for example, ARES, we make our PCBs, we assemble our own PCBs. And in this case, ABL has to buy PCBs from third parties. So in that case, also that's something we will work with ABL to provide to them.

So there's a lot of opportunities here. Again, no overlap -- and that's why was so exciting to find out this about ABL and looking forward to this upside..

Excellent. Congrats on the settings exciting for next year. And then I guess just kind of more stepping back to a higher level question in U.S. and nevi deployments. Just curious with your conversations that you might be having and obviously, it's a very competitive landscape given everyone is trying to get their chargers in the ground.

But just curious, what are some of the most important attributes that customers are looking for in terms of the charging equipment itself? I mean, is there anything that you've seen through your conversations that's consistently a topic of conversation? Just curious any insight there?.

Yes, Robert, it's Matt. Thanks for the question. So I think that there's three things. One is the ability to effectively deploy OCPP. So what you're finding is that customers want to control the driver experience, we enable that. We're agnostic to it. And if that's something that they want, we're all for that.

And that's not something that you see across the competitive landscape. Sometimes it's spoken about, but it's not particularly embraced. So that's the first thing that they're asking for. The second thing is modularity or scalability, right? I think that they want to scale into the higher power chargers eventually.

There's not a lot of cars on the road today that can charge at 300 or more kilowatt speeds. And so what you're seeing is that they want to gradually layer themselves into that infrastructure and spend when it's needed. So that's 2. And then I think the third thing is reliability. It's really the most important factor that everybody is asking about.

And so high quality, making sure the uptime is impeccable Christine. That is something that we've been focused on since the beginning. We have a lot of good data and a lot of great experience here in Europe, delivering very, very high-quality DC fast chargers, and that's something that's top of mind for customers as well.

Does that answer your question?.

Yes, very helpful..

Charlie, I think that that's going to be our last question. So I want to thank everybody for joining us today. We hope you found today's call a good use of your time. Please watch our website for details if you're interested in meeting with us. Let us know if we can help you in any way. Have a great day, everyone..

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