Earnings call: Wallbox reported a 7% year-over-year increase in revenue

In the third quarter of 2024, Wallbox (NYSE:WBX) showcased resilience with a 7% year-over-year increase in revenue, reaching €34.7 million, despite a challenging European market and a one-off revenue charge. The company's year-to-date revenue stood at €126 million, marking a 26% increase from the previous year and significantly outperforming the overall EV market's 3% growth.

With a gross margin of 23%, affected by inventory provisions, Wallbox aims to achieve future margins between 38% and 40%. The company is optimistic about long-term growth and is focusing on strategic initiatives to reach profitability.

Key Takeaways

• Wallbox's Q3 2024 revenue increased by 7% year-over-year to €34.7 million.
• Year-to-date revenue rose by 26% to €126 million, surpassing the EV market growth.
• The company reported a gross margin of 23%, with a future target range of 38%-40%.
• Sales in Q3 were €4.4 million, with software and services contributing €6.6 million.
• Wallbox ended the quarter with €71 million in cash and €84 million in long-term debt.
• Q4 revenue is projected to be between €40 million and €45 million, with adjusted EBITDA losses estimated at €7 million to €10 million.

Company Outlook

• Wallbox anticipates Q4 revenue to range from €40 million to €45 million.
• The company targets a gross margin of 38%-40% and expects adjusted EBITDA losses between €7 million and €10 million.
• Long-term growth is expected in the EV market, with a focus on cost management and strategic partnerships for profitability.
• Beatriz Gonzalez has been appointed as the new Non-Executive Chairman of the Board.

Bearish Highlights

• The company faced a one-off €1.6 million revenue charge and a lower gross margin due to a €4 million inventory provision.
• Sales cycles in the DC segment are longer, leading to revenue volatility.
• Charge point operators are prioritizing profitability, resulting in reduced orders.

Bullish Highlights

• Wallbox continues to outperform the overall EV market with significant revenue growth.
• Software (ETR:SOWGn) and services, along with Electromaps, show strong quarter-over-quarter growth.
• The company remains optimistic about long-term EV market growth and profitability.

Misses

• Wallbox's third-quarter sales were impacted by a customer's order delay due to excess inventory.
• The gross margin for the quarter was below the company's future target range.

Q&A Highlights

• Wallbox expects a profitable year ahead with positive EBITDA and alignment of cost structure within two to three quarters.
• There are no significant inventory issues in the AC market in Europe.
• The company is preparing for a flat market but anticipates growth in EV sales across North America and Europe.
• Management stressed the importance of maintaining manufacturing capabilities in North America and Europe for regulatory advantages and cost management.

InvestingPro Insights

Wallbox's financial performance in Q3 2024 reflects a company navigating challenges while maintaining growth. InvestingPro data provides additional context to the company's current position and future prospects.

According to InvestingPro, Wallbox's market capitalization stands at $229.88 million, with a revenue of $179.58 million for the last twelve months as of Q2 2024. This represents a robust revenue growth of 16.1% over the same period, aligning with the company's reported year-to-date revenue increase of 26%.

However, the company's financial health presents some concerns. An InvestingPro Tip indicates that Wallbox "operates with a significant debt burden" and "may have trouble making interest payments on debt." This is particularly relevant given the company's reported €84 million in long-term debt at the end of Q3 2024.

Another InvestingPro Tip suggests that Wallbox is "quickly burning through cash," which correlates with the company's focus on cost management and strategic initiatives to reach profitability. This tip underscores the importance of Wallbox's efforts to improve its gross margin and achieve positive EBITDA in the coming quarters.

Despite these challenges, analysts anticipate sales growth in the current year, as noted by another InvestingPro Tip. This aligns with Wallbox's own projections for Q4 revenue and its optimistic outlook on long-term growth in the EV market.

For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Wallbox, providing a deeper understanding of the company's financial position and market performance.

Full transcript - Wallbox NV (WBX) Q3 2024:

Operator: Hello, everyone and welcome to Wallbox’s Third Quarter 2024 Earnings Conference Call and Webcast. My name is Charlie and I will be coordinating today’s call. [Operator Instructions] I’d now like to turn the call over to Michael Wilhelm from Wallbox. Michael, please go ahead.

Michael Wilhelm: Thank you, Charlie and good morning and good afternoon to everyone listening in. Thank you for joining today’s webcast to discuss Wallbox third quarter 2024 results. This event is being broadcast 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 Luis Boada, Wallbox’s CFO. Earlier today, we issued a press release announcing results from the third quarter ended September 30, 2024, which can also be found on our website. Before we begin, I would like to remind everyone that certain statements made on today’s call are forward-looking that may be subjected 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 SEC including the annual report on Form 20-F for the fiscal year ended December 31, 2023, filed on March 21, 2024. We will be presenting unaudited financial statements in IFRS format that reflects 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 will turn it over to Enric.

Enric Asuncion: Thank you, Michael, and thanks, everyone, for joining us today. Before we discuss the highlights of the third quarter 2024, I would like to take the time to put in perspective where Wallbox is today in light of the current EV market sentiment, especially in Europe. Year-to-date, up until the end of the third quarter, we had revenue of €126 million, which reflects a 26% growth compared to the same time frame last year. If we look at the EV market in the main regions we operate in, Europe, North America and rest of the world, which are all countries, excluding China, we have outgrown the market significantly as the EV market year-to-date only grew 3% year-over-year. In the same period, we have reduced labor cost and OpEx by 14% and CapEx spending by 48%, even after incorporating ABL, clearly reflecting how we are improving our efficiency while continuing to grow and develop our products. We are a global leader in electric vehicle charging and energy management solutions. We have sold over 1 million chargers in more than 100 countries and we believe that we continue to play a key role in the transition towards electric mobility. It is clear that this transition is happening, but it is going through a much lower cycle towards mass adoption, and this is impacting the entire industry, including our competitors. We continue to work hard in adapting to the continuous changing factors ranging from regulations, subsidies, new technologies, EV market, customer preference, product requirements, the macro environment and more. This volatility on our way to become leaders of a more mature industry is a fact and it impacts our results. We already have been doing a lot in the last 2 years, but I would like to share with you key initiatives we are working on to remain agile against this market backdrop and how we plan to thrive. First, we have adjusted our organizational structure to be business unit driven. The core business units are common business and fast charging, including software solutions and manufacturing. Each business unit has different types of customers, requires different kinds of support and has different sales cycles. With this new structure, we create a more effective approach to each segment we operate in allowing us to unlock the full potential of our solutions, shape a more focused customer experience, align resources more efficiently and solidify our path to profitability. Second, we continue to optimize the organization according to the current market environment and as we look to 2025. This means creating visibility on the top line is key and we have been improving this by doing detailed analysis of our sell-in versus sell-out data, speaking with our key customers and strengthening our pipeline. Based on this demand, we are matching the cost base of the organization to support our path to profitability and cash generation. The aforementioned business unit structure will play an important role here where dedicated focus will help identify the best and most efficient way to serve a particular segment. Third, we have clear action plans to improve our gross margin across all our product groups. Due to our efforts to increase visibility, I just mentioned, we believe we are in a better position to optimize our procurement process and manage our inventory levels. There is a detailed bill of materials analysis ongoing to further identify cost reduction opportunities, and we are in the late stage of entering into strategic partnership agreements with industrial partners to improve our sourcing. Lastly, on top of the revenue, we have visibility on with our plans to further expand our sales with an improved commercial strategy and introduction of new products. As EV market is developing differently region by region, country by country and segment by segment, we are realigning our commercial strategy to ensure we optimize our sales channels and best capitalize on the opportunities in the market. Besides, we aim to drive revenue by continuously innovating our existing product portfolio and with the commercialization of new products. Example of new products that are expected to come into commercialization soon include the Quasar 2 and the Eichrecht certified Supernova 220. Both segments, bidirectional charging and public DC fast charging in Germany, open up new markets in which we didn’t operate previously or only limitedly. In Germany alone, promotion projects more than 150,000 public DC chargers to be installed between 2025 and 2035. Now we will go into the highlights of the third quarter and share our perspective on the market. Afterwards, Luis will offer a closer look at our financial results and our key financial metrics. And finally, I will be going to close the conversation and provide Q4 guidance. Q3 revenue was €34.7 million, up 7% year-over-year driven by strong AC sales in North America, but impacted by a softer market in Europe for all product categories and due to a one-off revenue charge of €1.6 million from a return related to historical bill and hold agreement with a specific customer. We are excited with our growth in North America. The European market growth was subdued to everyone’s expectation, and this impacted our results. For European DC, we now see a similar trend as we previously saw in AC, where our CPO customers have been building up inventory as their focus has shifted from highly accelerated roll-out towards profitability. In North America, the demand for the Supernova 108 in North America remains steady as we continue to ramp up sales efforts and add new partners. As we are starting from a smaller base in DC, than many of our competitors, we see ample opportunity to grow as we mature our position in the market. In total, during the third quarter, we delivered more than 38,000 AC units globally and 169 units of DC during the period. Gross margin was 23% in the third quarter, heavily impacted by one-off inventory provision as we continue to develop and improve our different product families, certain components become obsolete or much slower to sell. So we choose to provision them, setting the business on the right footing for future success. It is important to highlight that this is not a cash out. Excluding this impact, the gross margin was higher and closer to historical results. We keep pushing for unmatched product quality and operational excellence to create gross margins in the range of 38% to 40%. Luis will provide more detail on gross margins shortly. On a consolidated group level in Q3 2024, we saw a light year-over-year reduction in labor costs and OpEx, 2% down continuing the trend in cost reduction. Again, it is important to remember that we were able to achieve these cost reductions despite ABL’s contribution to our cost base. We see additional opportunities to review our cost base as we continue to optimize the operations across the group and leverage synergies. Third quarter adjusted EBITDA loss landed at €21.8 million. This quarter broke the improvement trend seen in the last quarter due to the inventory provision. We see this as a one-off quarter with a unique sales adjustment and inventory provision on our path in making the business profitable. For future quarters, we expect to resume top line and most importantly, significant margin accretion. There continues to be progress with new products, new commercial efforts, cost reduction and gross margin improvements which are not yet reflected in the numbers we report today, but which we expect to benefit from in the near term. For the third quarter 2024, Europe contributed €22.9 million of consolidated revenue or 66% of total revenue and grew modestly with 1% from the year ago period. compared to a 13% decline of the EV market in Europe, this was significantly better. North America continues to show strong progress with 45% year-over-year growth. While the EV market in the region grew with 4% and contributed €9.7 million or 28% of total revenue. We are excited to see our progress in this region and how we are leveraging our complete portfolio in home, business and fast charging, which we now have in place. APAC contributed €1.2 million or 4% and LatAm was approximately €800,000 or 2%. We see clearly an increase in relative exposure to the U.S. versus euro, as we further diversify our unique and in global geographical footprint. AC sales of €23.7 million, including ABL, represented approximately 68% of our rural consolidated revenue. The AC portfolio remains the most important revenue weight category for Wallbox containing both the Home and Business segment. We start at home, and we continue to leverage our strong position in this segment as announced partnerships are starting to pay-off. One exciting new partnership is with Engie as Wallbox has been chosen as the only recharger provider for their new EV charging offer, My smart charge. In France, there is a specific regulation where chargers require an integrated connector without a cable, and this makes Wallbox Pulsar Plus socket, the perfect solution for our partners. This is another example of how our broad product portfolio is allowing us to capture opportunities in different markets. In parallel, Wallbox is making quick ground in the business segment with eM4 and Pulsar Pro. We are signing up new distributors and leveraging existing partners with the aim to optimize the cross-selling opportunities in our sales network. DC sales were €4.4 million representing 13% of the revenue in the third quarter and was impacted by an expected order delay by a customer due to excess inventories. In the DC segment, the sales cycles are longer and therefore can create volatility between strong quarters and slower quarters. As I trend, we do see the charge point operators are currently focused on profitability and network utilization much more than expanding the network by reach or by ports deployed. This means that charge from operators are working through existing charger inventories and ordering less frequently. However, we continue signing up new customers and further expand our customer base in operations. Software, services and others contributed €6.6 million for the third quarter, representing 19% of our total revenue. These activities continue to be solid compared to last quarter, with Electromaps, our public software activities, showing 55% quarter-over-quarter growth. If we exclude the inventory provision impact mentioned before, the gross margin on a product level was solid. We also see opportunities to improve as we introduce new cost-out versions of our products. With the focus on quality, reducing our BOM costs and leveraging our strategic partners to improve our procurement process, we see upside to the 38%, 40% gross margin target in the future. We believe this improvement will be accentuated further when the market demands larger volumes. Last earnings call, we mentioned that we remain positive on our long-term growth and the future potential of the EV market, which we continue to do so. However, it is clear that the transition to EVs will take longer than everyone expected and that current growth is slowing. As reported by Rho Motion in the third quarter, there were 1.47 million EVs sold in our core markets, which are North America, Europe and Rest of the World. If we will compare with the same period last year, this represents a 2% decrease in those markets combined. Our long-term view on EV transition and the opportunity that comes with it remains solid, and we are more optimistic as we enter into 2025. Hundreds of billions have been invested by car manufacturers. New more affordable EV models are being introduced. Charging infrastructure continues to installed and in the EU new regulations come into effect. We have a diversified position, both geographically and commercially, making us less vulnerable to local or regional volatility. At the same time, we see that competition without a similar diversified position and scale is struggling, increasing our market share and creating more opportunities for us. We believe that we are only at the beginning of the adoption curve. And in the meantime, we will continue to focus on what we can control. There are clear headwinds in the industry, but we are focused on maximizing our growth and achieving long-term profitability. Luis, I’ll turn it over to you to comment further on our financial details.

Luis Boada: Thank you, Enric. Good morning and good afternoon to everyone. Our third quarter results are not as we expected, but have also been impacted by unique factors. The revenue for the quarter generated was €34.7 million, representing a 7% year-over-year growth. We continue to grow in North America and other selected markets, but we saw this growth offset by a softer market in Europe in both AC and DC. Besides the aforementioned, we have recorded a one-off revenue charge of €1.6 million due to a return with one specific customer. Absent this impact, we would have had double-digit growth year-over-year. With 23%, the gross margin is lower than expected. This has to do with the provision Enric talked about before, which we decided to introduce after a careful review of our inventory. We keep developing and improving our products to match new requirements and service new charging segments. As a result, some components acquired at the peak of the supply chain shortage post COVID era, are at risk of not being used in the new versions of our products. The additional inventory provision amount for the quarter is €4 million. This is not a cash out nor a write-off yet. We see an opportunity to sell some of these components and recoup part of the initial investment. We do not expect material excess and obsolete provisions in quarters to come following the careful inventory review. As already highlighted by Enric, if we excluded this additional provision, the gross margin would have been closer to our target range. Q3 labor costs and OpEx were down 2% year-on-year. Costs are decreasing despite the ABL acquisition, which joined Wallbox perimeter in Q4 of 2023. Consolidated adjusted EBITDA loss for the quarter was €21.8 million. Absent of the aforementioned provision, we would have sustained the general sequential adjusted EBITDA improvement as the core gross margins remain intact, and we continue to reduce cost. Profitability and cash generation remain our top priorities. We ended the quarter with approximately €71 million of cash, cash equivalents and financial instruments. Long-term debt was approximately €84 million at the end of the quarter. The last few years, we have been investing in making ourselves future proof. We have a complete product portfolio to cover markets globally and state-of-the-art manufacturing facilities with plentiful capacity. Considering our existing capabilities to facilitate future growth, CapEx excluding capitalized R&D, once again purposely very light, with €1.7 million spent in the third quarter. This represents a 60% decrease compared to the same period last year. In Q3, approximately €340,000 was spent on Property, Plant and Equipment. We are expecting less than €10 million of investment for the full year. We continue to reduce our inventory and our goal is to continue bringing inventory down in quarters to come. This quarter was significantly impacted by inventory provision discussed earlier. Inventory totaled €76.5 million, which is a 10% reduction sequentially. With all the efforts we talked about today, we set Wallbox for success and in a strong position despite the market backdrop. The goal is to align the cost structure to the current demand, and we can do that from a position of strength with sufficient cash balance. As part of the continuous optimization efforts, it is key we focus on our core activities, and therefore, we are also reviewing strategic alternatives of non-core assets to conserve cash. As CFO, I’m 100% focused on getting the company to profitability and cash generation as soon as possible. Enric, I’ll turn it back to you to provide some closing commentary.

Enric Asuncion: Thank you, Luis. Before I share with you my closing thoughts and our expectations for the fourth quarter, early today, we announced the resignation of Anders Petterson as Non-Executive Chairman of the Board of Directors and the appointment of Beatriz Gonzalez as his replacement. We would like to thank Anders for all his contributions and congratulate Beatriz with her new role. Now, I would like to leave you with the following: it is clear that the current EV market is volatile and that this is impacting our performance. We understand that in these times, visibility on the longevity of the company is key. For that reason, we shared with you today the key initiatives allowing us to continue building out our leadership position in a sustainable way. We have been educating here strategic initiatives in the past quarter, which include expanding into new countries and segments, securing new strategic partnerships, reducing cost and strengthening our balance sheet. As part of our initial efforts, we are now adjusting the organizational structure into a business unit-driven model to better align resources with our product portfolio, improving visibility on the top line growth, identifying opportunities to expand gross margins and continue to drive sales. The main objective is to match the cost structure with the current demand to drive our path to profitability and cash generation. We are in a multi-decade transition and we are laying the foundation right now. We are executing well. We have a leading position, and we are building a company that is being set up for success. From that perspective, we want to provide guidance on what we expect for the fourth quarter. Revenue in the €40 million to €45 million range, representing an approximate year-over-year growth rate between 23% and 38%. Gross margin back into the 38% to 40% range. Combined with continued improvement in costs, expecting negative adjusted EBITDA between €7 million and €10 million. With that, we are ready to take questions from our analysts.

Operator: [Operator Instructions] Our first question comes from George Gianarikas of Canaccord Genuity. Your line is open. Please proceed with your question.

George Gianarikas: Hi, everyone. Thank you for taking my question. I would just like to start from a – I know visibility is fairly limited and you have articulated measures through what you plan to reorganize and cut costs. But I would just like – if you could help us understand a little bit of when you hope to get back to sort of – or get to an EBITDA flat to positive situation, and if you could tie that in with your plans around strengthening the balance sheet to give the company runway to capture the future growth in electric vehicles? Thank you.

Enric Asuncion: Thank you for the question. This is Enric. So, I think the key and what we are trying to achieve, and as I said before, now it’s obviously the profitability and the cash generation. And I think the good news is that we are growing in key markets like North America, where we are growing 45% year-over-year. But other markets like Europe, we see a market that is very volatile. And last quarter, we saw a 13% decrease on the EV market. Despite that, we were able to grow, which I think is very important. And it shows that we are constantly increasing the market share, which at the end, it’s what we want in this moment is where we want to increase the market share. Our approach now is instead of thinking that we will catch up with revenue, which we believe, we believe that the revenue will grow and we will be able to continue capturing more market and more growth, at the end any time that a company and our competition struggles, it’s more market we get, it’s more sales we get. So, I think even if the market is not growing as expected, we still have opportunities to continue capturing more market share and grow sales. But our approach right now is, okay, we have to adapt our structure to the revenue we are seeing now for the next quarter, which is 40% to 45%, and the historical revenue we have been having. And obviously, we see an upside, obviously, because we see there is opportunities to grow. But that’s the key. And at the end, we will be profitable. At the moment, we achieve this – we adapt to these levels. So, maybe as a data point, we provided already the Q4, which we are doing huge steps towards profitability, we are improving 50% versus Q2, the EBITDA in the best part of the range. But one thing is very important is 2025 as a year has to be a profitable year, and that’s what we expect. We expect a positive EBITDA year. And that’s the data I can give you. It should not take us more than two quarters or three quarters to get the company into the cost structure given the current revenue. And as I have said, we see upsides in revenue. But right now, we want to take an approach where seeing that the market is very volatile and some – we are able to capture the market that is growing, but we want to make sure we are committing to something given the volatility of the market that we can achieve.

George Gianarikas: I think you mentioned that there may be some inventory on the DC side. But what about AC, I mean that’s been a pesky issue that you have had for several quarters. Is there still inventory in your opinion in the European theater? And I think that in the U.S. market, you are growing inventory through your Generac channel. It’s a bunch of questions, but am I accurate? Is there any inventory left in Europe?

Enric Asuncion: Yes. No, I don’t think so. I don’t think in AC, there is an inventory issue right now. And the clear proof of that is that we are over-performing in every country and segment, the EV market growth. So, not only we are not – we see that data in the sell-in, sell-out data, but there is no inventory challenge. Obviously, we are in the North America increasing with new customers and new partners. And as you say Generac, it’s a new partner. We are seeing very nice sellout from Generac, but they also have been selling to their dealers, and that creates some inventory in their dealers. But Generac is also making sure they don’t have too much inventory. To give you an idea of the success of this deal, Generac has become in two quarters our top five customer in North America and one of the top in the world. And I think this is a great data point of how this is working. Every quarter, we are seeing orders, and we are adding more products in our portfolio. And as I also say, in the script, we see not only opportunities to increase sales with these partnerships we are doing, but also to reduce costs. We have some key strategic partners, not only Generac, other big OEM customers we have where we can leverage their purchasing power to improve our costs and improve our margins at the end. So, as the industry is becoming more mature, our relationship with our partners are becoming more mature, are becoming – we have bigger volumes, obviously, but also more ways we can have synergies and support each other and a clear success of that is being able to expect to continue improve our gross margin and the growth we are seeing in North America.

George Gianarikas: Thank you.

Operator: [Operator Instructions] Our next question comes from Ben Kallo of Baird. Ben, your line is open. Please go ahead.

Ben Kallo: Hi. Thank you for taking my question. Good day guys. Just maybe following-up on George’s question, could you guys just maybe taking a step back, just talk about expectations on EV sales across different regions you guys have internally for next year and then maybe ‘26 and anything that you see that could reignite demand for EVs? And then I have a couple of follow-ups.

Enric Asuncion: So, when we look at – well, then, thank you for the question. So, this is Enric. When we look at the different sources in the different markets, we expect a growth everywhere in North America and in Europe. Europe is, we expect it to be fueled by new regulations on emissions for the fleets. I know there is a lot of noise right now if these regulations will come or not come or these fines will come or not come. We believe it will come no matter what. Maybe the fines or the cost is going to be softer in our opinion. But no matter what, we are seeing car manufacturers in Europe preparing for that. So, we have seen a delay on the push for sales for EV at the end of this year and expecting a stronger first half of next year, because at the end what matters is the EV sales you make during 2025 to achieve this regulation. So, that is one of the reasons. We also expect a strong second – first half in the next year because some car manufacturers, if they could choose will prefer to sell EVs in January instead than in December to achieve these regulations. That’s one thing that we see positive for the next year. And North America, there is a lot of new comments – models coming, which we believe also will impact. So, our opinion, we can maybe share later, but we think we can be above the 10% to 15% growth for EV market. But the way we are building our organization and our guidance and everything, we are considering a flat market. And we are making our company to make sure it’s profitable in a flat EV market. Why we are doing that, because we believe that’s the way we can be quickly profitable. And if we offer – if the market over-performs, and we believe we will over-perform, we will make more money. At the end, we will be more profitable. But we are adapting the company to a flat market, just to be ready in case of some unexpected thing. But our forecast right now and what we see is a growth, especially in the first half of next year in Europe and in North America due to new models and changing regulations.

Ben Kallo: Thank you. Just on the point of your manufacturing footprint, could you talk about both from a geographic standpoint, if it still makes sense to have manufacturing in the U.S. as well as Europe? And then as well as any thoughts about moving to more of an outsourced manufacturing model? Thank you, guys.

Enric Asuncion: So, this is an interesting topic now with the business units. It’s – I think we have recently started doing now, but it gives us more visibility on cost and cost allocation of the different parts of the business, and we have this kind of questions all the time. We believe that having our own supply chain still give us an advantage. And I think we seeing the North American market as a key growth vector for us and we are proving this quarter-over-quarter. It’s key that we have our own manufacturing capacity there. And there might be changes in regulation that also give us an advantage, the fact that we are a North American manufacturer. So, we think that keeping this factory in North America and our one in Barcelona, but especially the one in [indiscernible] it’s a key advantage for us. So, we want to give that. The answer on, if we will outsource third-party manufacturing or not, it will depend on cost and profitability. Right now, we still see a keen advantage. We have interesting gross margins. We also vertically integrate our electronics. We have this company called Ares that we acquired a couple of years ago that makes our PCBs and our electronics. The cost of our product is 50% to 60% electronics, and we control that part, and we get this gross margin. So, with these strategic partnerships we are doing with different partners for purchasing at a better price components and we are controlling our own manufacturing and supply chain, I think we can really exceed the 38% to 40% target in the future. So, that’s the focus, apart from growing sales and reducing cost is to increase margin and controlling our own capacity and supply chain is key to achieve this margin improvement. Yes, maybe – Luis?

Luis Boada: Yes. The only thing I would like to add is that we have already incurred that capital expenditure, right. So, when you look at our footprint, we are ready for the growth to come. It’s not coming in the short-term. And as Enric mentioned, we are going to stay consistent with kind of a flattish EV market. When that growth comes, we already have those facilities and those products. So, we are in a very strong position to capture the growth when it comes.

Michael Wilhelm: Okay. That was our last question. Thank you all for joining us today. We hope you found today’s call a good use of your time. Let us know if we can help you in any way.

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

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