Hi everyone, welcome back to ABG's Investor Days. My name is Karl Bokvist. I'm the Responsible Analyst for Energy Save. With us now, we have both the CEO and CFO, Fredrik Sävenstrand, and Helena Wachtmeister. As we have done before, we will start off with a presentation by the company, and then towards the end, we'll be able to ask some questions. So thank you both of you for being here, and please go ahead. Thank you very much. Thank you, Karl, and welcome everyone. Like Karl said, presenting is Fredrik Sävenstrand, which is the founder and CEO of the company, and myself, Helena Wachtmeister. We will tell you a bit about us, a bit about our business model, a bit about our offer, a bit about our OEM product case study with customer Aira, some financials, and the market potential for heat pumps. So Energy Save is a Swedish energy technology company. We contribute to the sustainable energy transition in Europe through cost-effective and smart air-to-water heat pumps, and we are listed on Nasdaq First North Growth Market. We are present on three locations in Europe, where the main office is in Alingsås in Sweden, and we are approximately 40 employees. We have employed a partnership strategy that really makes our reach and scale-up potential much larger than our own operations. The two major parts in this are that we have a production partner in China with great volume potential, soon also a joint venture together with the same partner in Turkey, and we have a representation in 29 European countries that sell our ES brand units in their respective markets. We focus mainly on air-to-water technology, which is the technology that is expected to grow the most on the European market and really in all heat pump markets where it's expected to grow. We offer residential heat pumps, which is villa, small units for households, and we offer in our other larger business segment commercial systems and commercial heat pumps for larger buildings and commercial buildings. In the commercial segment, we're modulating with larger heat pumps up to 16 pieces of 90 kilowatt units into the largest system. We sell heat pumps both in our own brand, in our own ES brand, but also as an OEM offer where we offer efficient production and design and development capabilities to other brands that want to reach the same market. These days, we own our own IP platform. In that way, we are independent of our suppliers and of our partners, and through this IP platform, we have developed a new tech stack where we have our own software and based on propane heat pumps. Propane is a refrigerant, a natural refrigerant that is more effective than other refrigerants on both environment and on performance on heat pumps. Also a key technology to get into the large gas boiler markets such as Central Europe and Germany. Yeah. Since the start in 2009, we have sold close to 30,000 units on the European markets. And the European market, the European heat pump market, has really high potential since at least 50% of all the energy that is consumed within the EU comes from heating and cooling, and at least 70% of this comes from fossil fuels. The major part here, gas boilers in Europe. And heat pumps are three to five times more energy effective than gas boilers. So heat pumps simply are the most effective way to provide heating and cooling while reducing carbon dioxide emissions. So in the past 18 months, we have seen a decrease in the heat pump market for the first time in many years. That market has increased for a long time before. But for the EU to be able to reach the net zero targets to 2050 and the intermediate targets until 2030, it is crucial that these approximately 90 million installed gas boilers and oil boilers in Europe are replaced, and they need to be replaced by heat pumps. Yeah, for sure, we have had a setback in the market, no doubt, but we can see some positive trends at the moment, slight positive. We have inflation coming down. We have the interest rates that are coming down as well. The price on gas is gradually increasing. Very important the ratio between electricity and gas pricing, and some important markets have their subsidy schemes in place, such as the U.K. market and the German market, so we have a clear focus. We focus on launching the new propane platform into key markets where we have not been present before. Historically, we've been strong on Eastern Europe, South Europe, North Europe, but not in Central Europe. Now we're focusing on Italy, Germany, and the Benelux countries. We are also looking at the U.S. market. However, in the U.S. market, the propane will not be the dominant refrigerant. It will be R32, and that's also the type of units we have in stock at the moment. So it's a good opportunity for us. And of course, it's the Inflation Reduction Act that is pushing heat pump into the U.S. market. So very interesting. What makes us unique besides the scalable production partnerships we have is that we go to market in two different shapes. We enter the market with ES brand, traditional distribution such as NIBE, for example. Distributor is pushing to the installer network, and the installers are working with the end market. But however, we also use on the same tech stack. We provide other brands with ambition to have heat pump in their offer, in their own design, and in their own brand to go to market on the same platform. This makes it possible for us to scale the market in several layers, ES brand and OEM brands in the same market. As long as we differentiate the designs, we can coexist in the markets. Okay, and here you see our propane model program for residential buildings. We have invested quite heavily in this tech stack. It has been accelerated through the Aira project. We also have unique product concepts within commercial heating. Here we're looking at a plug-in module concept for the construction site heating market, a segment that we find interesting, but we also do traditional multi-heat pump systems as well. We have, in parallel with developing the hardware, spent lots of time in the last years to develop digital tools that can really speed up the consultant process, the dimensioning process, and the quotation process. Additionally, we've been investing in a control platform that is built in layers, allowing partners to integrate at whatever layer they want. And this is a kind of unique offer that we have that is fairly difficult to find. If you want to build your own brand, you have a decarb venture, ambitious plan, you want heat pumps in the offer, you need a partner that understands what your market needs and has the ability to transfer that into the product platform. Difficult to get from the large famous brands because they want to promote their own brand only, but equally very difficult to set up through partnership in China, which is the other option. Here we play a vital role. And one very successful example of this is the Aira project, where we based on our tech stack brought Aira to market in less than 14 months with a premium product in a unique design with a unique digital interface. Of course, we're looking and expecting more such customers to follow. And what we have done, what we have achieved through the last years is really to transfer our company from a hardware company, purely hardware company, to a hardware and software company. This is important for the OEM business, but it's also important for the ES business. Because in the ES platform, everything is branded ES, then we create the ability to develop new services and recurring revenues going forward. That's the plan. So we mentioned before there has been a temporary market setback for the past 18 months or so, and it has continued on the same path so far. Heat pumps fell by 47% in the first half of 2024, and this was due to changes in national policy, changes in subsidy schemes for consumers. Also, gas prices have been low, and electricity prices have come down, but not in the same way as gas prices have been making the ratio higher for electricity. However, we are seeing some recovery signs. For us and for Europe, important market Germany is starting to recover. There has been an increase last year. There was an increase in the German market by almost 60%, and the German heat pump organization is forecasting that the increase for the second half of the year will be almost 90% compared to the first half of the year. Also, you can see this in the applications for heat pump subsidies. Even if they are improving now during the fall from low levels, they are still improving by over 100% for August, September, and October compared to the period before. Yes, the reason behind this also with the big decline was the delay of the implementation of the new programs. Yes, yes, absolutely. The subsidy time. So a bit about our financial history then. Here you see the net sales and the EBIT for Energy Save for the past five years. As you can see, we have also been affected by the last year, year and a half market setback with a declining turnover as a result. We do still carry a growth rate that exceeds the one of the market during these five years, our five-year CAGR on 35% compared to the market's 27% approximately. And we do expect that we will be able to grow again when the market turns. So we have already proven that we can do this in the year of 2022, 2023 when the market was in an accelerating mode. We increased our turnover by 200%, and we believe that we have the capabilities to do that once again when the market is accelerating. I would say even further actually because we have a broader platform. We can go faster on the OEM side than what we could in 2022. Absolutely, and the latest development has been that last year we saw an improvement in sales quarter to quarter. Now, our last quarter, we actually saw a decline in sales mainly due to market conditions. We do actually expect to remain on this level for a few couple of quarters, but we also expect that the European heat pump market will recover during 2025, so when that happens, these investments that we have made during this year and prior to that will make it possible for us to take this growth journey in another step. Yes. And all of the, to summarize the most important investments that we've made in the last years has been to invest in setting up a factory, production plant in Turkey, get closer to supply chain, closer to Europe. This we're doing together with our production partner in China. Of course, this is to create a safe harbor also for future toll barriers that are expected. And since you could see that we have an ambition to go to the U.S. as well, this also makes it more safe to supply from Turkey to the U.S. rather than from China. So it's a very strategic investment. We have, of course, through the Aira project, been scaling up our project and product development capability, and we have significantly strengthened our IP platform. All of this creates a base where we're not only dependent on that market recovers in Eastern Europe, in South Europe, but we can also create new businesses in key markets. Yeah. So, starting to summarize now, I would just like to point out that we have a really competent and experienced board with us on this journey and the continued growth journey. We also have a very stable ownership structure with the two founders still remaining as the largest owners and active parts in the operations and on the board. And to summarize, I would just like to point out a few key takeaways that we would like you to take with you from this presentation. Energy Save is acting in a market with major market potential that is created by the green transition. We have a really robust business, and we have a competitive position on this market. We have our own IP. We have a strong product offer that is adapting to the changing market demands. We have a scalable business model through this partnership strategy that we told you a bit about that has been proven to work and proven to deliver before. Also, we have a rapid delivery capability both with the dynamic OEM offer to OEM clients, but also with ES units on stock. Thank you. Great. Thank you. So the first question that I have is regarding the Aira partnership. For a couple of quarters now, we've seen really encouraging deliveries to Aira. And could you just remind us and the audience about the contracted revenue potential, how you think this partnership can develop over time? And also a little bit about the visibility, the kind of contracted volumes or like you see that, okay, here we have something that we know we will deliver in the next quarter or in a year or so. You mean the visibility in forecasting? Yes. Okay. Okay. Many questions in one question. Let's start with the contract maybe. Yeah, the contract we communicated in the first two years. The cooperation agreement, the license agreement spans over four years, but the supply agreement in the first two years, SEK 200 million-SEK 400 million. And I think from what we have seen in the recent reports, it's quite clear that we are on track, and I expect this to come in in the higher tier of what has been communicated. So that's one part. And then if we go beyond these 200- 400, how can this contract develop in the future? You know, this we cannot say specifically, but of course we have plans on how to continue cooperation over time, especially since the license agreement is over four years. So there is a fairly good possibility of added volumes, I would say, over time. It's also possible to develop that kind of, what should you say, not so common partnership, you know, where we're helping them in a way to go to market really quickly, helping them to set up their own factory. But I see more potential upsides than downsides over time, for sure. You know, we're working with, for example, a much wider range of products. So this may open possibilities for the future. And then the third one on that was the visibility that you have on these delivered volumes. Yeah, we have fairly good visibility, I would say. Of course, being so working so closely in development, setting up supply chain, we have a forecast method that I think provides us with good visibility going forward. Of course, that type of forecast method is always more open in the longer perspective, but working well, I would say. Yeah. And then I was thinking about product and marketing strategy. So the first one being whether or not there are differences between your ES branded ones and the Aira branded ones. But what would you say are the kind of key unique selling points for your products regarding either just actual performance or if there's anything? It's a price-performance ratio that is extremely high, I would say, best in class, and that's always what we focus on. We have a unique hardware design, IP, that simplifies the installation process and simplifies to change from gas boiler to heat pump. Marketing-wise, of course, with the ES brand, we cannot build brand awareness to end consumers all across Europe. It's rather of providing solid support, digital tools, product material, web page to help the distributors to push the installers with the right profile in the local market where the business is made. Of course, Aira has a different strategy, building brand awareness in a totally different way. Good. And then, yeah, and so then, you know, the strategy you say, then it's more about, as you have done, establishing relationships with more and more distributors. So going back a little bit to what you said about the market, as you say, and what we see, things are seemingly improving from low levels, but is that also what your customers, i.e., the distributors are saying? Yes, this is what we see. I think this is across all of Europe. The challenge for us is that where we historically had the largest sales are the markets that have had the toughest. So recovery is going quite slow. Recovery is going faster in some markets, such as the Central European markets, but we haven't had presence in those markets other than through OEM. Now we are successfully through the propane platform offer, gaining new distributors both on the residential side and on the commercial side in these key markets, but they have a kind of ramp-up or preparation phase before we can expect sales to pick up, so that's kind of a challenge for us now that on the broad base of Europe, it's still recovering a little bit slow, but we're working hard with what we can do. Understood, and then this might be a question either just to Helena or to you both, but if we then look a little bit about the financial side, right now you have a net cash balance sheet, so even if current profitability is negative and you make these investments, you have a balance sheet that can support this. So if we then look further ahead, your financial targets, I believe, are to grow by 20% per year and reach an operating margin of 15%. So what would you say that you can do internally and what needs to happen externally in order for you to reach those levels? Internally, the answer is really what we have been doing. We need to, like Fredrik said, we need to develop our offers to our distributors, find new distributors in these markets where the market is expected to grow the most. This we are doing. And also to evolve our product offer both on the ES brand, but on the OEM brand and on the OEM offer as well to be able to take market share. So this we can control ourselves. And then on the other side, on the external parts, that is the market, that's the market recovery. That's dependent on subsidies. That's dependent on EU politicians delivering on the targets that have been set and the goals that have been set. And also on primary energy prices, of course. Did I forget something? No, no, I think you covered it well. We need this, you know, more of a drive back to green transition from EU. But meanwhile, we have a fantastic platform to bring on new clients in these key markets and a fantastic offer to scale OEMs in Europe. So that's what we're focusing on. And also meanwhile, we need to, of course, now we've been in an investment phase. We've been product developing at high pace. Now, of course, we need to focus hard on market activities and sales, and have a close eye on our balance sheet until the market more broadly recovers at a higher pace again. That's when we get the full turnout on returning to our goals, financial goals. Understood. With that, our time is up. So thank you, Fredrik and Helena. Thank you, everyone who has been listening and watching. Thank you very much. Thank you very much.