ADS-TEC Energy PLC Q4 FY2021 earnings call

Transformation and Vision

• ADS-TEC Energy is focused on the transformation to an intelligent and decentralized energy supply, developing and producing decentralized, smart storage-based platforms. It is not just a components supplier but offers complete systems, software, and services.

Product Highlights

• Developed battery-buffered ultrafast charging platforms like ChargeBox, ChargeTrailer, and soon ChargePost, enabling charging in minutes even on low-powered grids.
• Identified vertical market segments including ChargePoint operators, retail, condominiums, apartments, hotels, offices, industrial sites, OEMs, auto dealerships, etc.

Expansion Plans

• Executing expansion plans in the US faster than originally planned, with a search on-going for a manufacturing plant location in the US to handle services, warehousing, assembly, and testing, expected to open this year.
• Hired highly experienced managers from longstanding collaboration with Porsche in areas like product marketing, quality assurance, development, and C-level positions.

Supply Chain and Services

• Managed supply chain well despite challenges, with weekly task forces and efforts to find second sources for critical components like silicon carbide semiconductors. Service contracts expected in 2022 with recurring revenues over years, and customization of platforms to support partners and customers over decades.

In 2021, ADS-TEC Energy's revenue was €33 million, down from €47 million in 2020. The commercial industrial business had about €6 million in revenue, representing a 16% year-over-year increase. The service segment contributed about €2 million, a 82% year-over-year increase, and upper sources accounted for €700 thousand. Geographically, 28% of the 2021 revenue came from outside Germany, including new business from Spain, Ireland, and other European economic area countries.

Revenue and Unit Sales

• Expect 2022 revenue to be in the range of €80 million to €100 million, backloaded to the second half of the year based on confirmed order backlog.
• Anticipate charging unit sales for 2022 to be in the range of 400 to 500 units, with non-Porsche charge units expected to grow from 61 units in 2021 to at least 400 units in 2022.
• Expect positive adjusted gross margin in 2022 to improve from 2021.
• Cash on hand at the end of 2021 was about €102 million with no debt, supported by business combination with EUSG in December 2021.

• Supply chain issues, including delays in deliveries from usual suppliers.
• COVID-19 pandemic, lockdowns in China, and interruptions of supply chains.
• Geopolitical challenges, including the war in Europe and cost inflation.
• Unpredictable procurement market with unstable delivery and committed prices.

Q: Deliveries from usual suppliers continue to be pushed out further and further into next year. You mentioned having a U.S. factory this year, can we meet our deliveries in 2022 under the current circumstances?

A: We would be able to produce units in Germany. Our customers also face supply chain problems, such as delays in material, sub-suppliers, or government approvals, which might postpone projects. But we are confident in our production capabilities from Germany.

Q: How do you avoid draining the storage to meet the needs of the electric vehicle in your ultrafast chargers?

A: The operation of the units is mainly driven by our partners and customers. They decide how to use the battery capacity, whether for charging cars, peak cutting, or other purposes based on local operation and business models. We prepare the platform to enable these operations.

Q: Of the 400,000 to 500,000 unit sales guidance, what portion is already secured in the backlog?

A: In our backlog, we have secured over 200 units.

Q: What differentiates ADS from the systems that are offered by Tritium?

A: Tritium offers standard AC-DC converters without batteries or flexibility. ADS-TEC's platforms have battery buffers, flexibility, and additional features like advertisement screening, providing more business opportunities beyond just charging cars.

Q: What impacts are supply chain and inflation difficulties having on the business in 2022, including your supply of battery cells?

A: Inflation is hard to predict. We have supply contracts for battery cells with well-known suppliers and expect to receive ordered batteries. Commodity prices are up, but the market is accepting it, and the business model remains attractive as it offers multiple revenue streams beyond just selling electrons