Nuvve Holding Corp. (NASDAQ:NVVE) Q1 2023 Earnings Call Transcript May 11, 2023

Nuvve Holding Corp. beats earnings expectations. Reported EPS is $-0.32, expectations were $-0.41.

Operator: Good afternoon and welcome to Nuvve Holding Corp.’s First Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Eduardo Royes. Thank you. You may begin the call.

Eduardo Royes: Thank you. On today’s call are Gregory Poilasne, Chief Executive Officer and David Robson, Chief Financial Officer of Nuvve. Earlier today, Nuvve issued a press release announcing its first quarter 2023 results. Following prepared remarks, we will open the call up for questions. Before we begin, I would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Nuvve’s best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking projections. These risk factors are discussed in Nuvve’s filings with the SEC and in the earnings release issued today, which are available on our website.

Nuvve undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances. With that, I would like to turn the call over to Gregory Poilasne, Chief Executive Officer of Nuvve. Gregory?

Gregory Poilasne: Thanks, Eduardo and good day to all listening in. We thank you for attending our first quarter 2023 results call. We are extremely encouraged by the improvement in the fundamentals of our business in Q1. 2023 is so far bearing the green shoots we have always felt were inevitable. It has just been a question of when, not if. This was evidenced by both record orders and deliveries for our DC chargers during the period. At the same time, we progressed on additional lumpy orders which is helping sustain momentum in order flow and sales of our DC chargers in the near-term and evolve our plans to boost megawatts under management and reach service revenue streams more quickly via avenues that are not dependent on large scale hardware rollouts.

To briefly summarize our key accomplishments in the quarter, while we do not get into specifics on orders and deliveries, we will note the following. On the order front, we saw a fourfold increase in orders for DC chargers versus the fourth quarter 2022 and orders increased by more than 3.5x on a year-over-year basis. In terms of deliveries, we more than doubled our fourth quarter DC charger shipments sequentially and more than tripled shipments related to Q1 2022. One big driver of the increase in both orders and shipments in the first quarter was the previously discussed record size order of 24 units from the Los Angeles Unified School district. Only a small portion of orders between now and Q1 were affiliated with rebates to customers that we directly supported in the 2022 integral funding round of the 5-year EPA Clean School Bus program.

We are also thrilled to report that our strategic initiative aimed at quickly growing and scaling up our megawatts under management by integrating into established third-party hardware networks led to the partnership we announced with Circle K in February. In summary, our agreements with Circle K initially expected to yield an additional 40 megawatts under management from EV fast chargers at 50 Circle K service stations and 3 to 5 stationary storage sites in Norway and Denmark. Importantly, Circle K has more than 560 locations combined across these two countries. We believe that a strong demonstration in this initial program should bode well for expansion in the region. For prospective, if all 560 locations were hooked up, this would represent nearly 500 megawatts under management in the Nordics alone.

And if you look even further out, we know that Circle K has an estimated 17,000 locations worldwide. We have been working closely with our colleagues of Circle K on integration. As of today, we are integrated and ready to demonstrate our grid service capabilities on the stationary battery and we are progressing on integration activities with the charging stations. We expect to be generating grid services revenue from this partnership in the back half of the year. Turning to recent developments since our last call that underpin our optimism about 2023 showing a marked improvement in results for Nuvve over 2022. We are pleased to disclose today that in April we secured a new record order from a large fleet operator with 25 DC chargers. We understand this award to be for our school district that has been awarded funds via the EPA Clean School Bus program.

Importantly, it is not one of which we were involved with in leading all supporting roles during the application process, so it is incremental. Looking ahead, we expect to receive the majority of the purchase orders for hardware associated with the EPA rebates during the second quarter. As we discussed in our March call, we have been working closely with our school district partners to help them strategically evaluate the optimal use of the government dollars, which include their hardware selection. At a high level, awards should translate to approximately $1.1 million in Nuvve hardware sales affiliated with 10 school districts customers that we formally represented in the grant writing and submission process. In addition, we are receiving orders for other customers we have facilitated in the process.

Further, we are pleased to see that in late April, the EPA of the second round are funding for the Clean School Bus program. At least initially, they will be awarding $400 million as part of the 2023 round. Applications are due this August with awards expected between November 2023 and January 2024. This is an elongated timeline for approval and reflects a change in the structure of the program ready to 2022 round. Round one last year was nearly $1 billion in rebates through a lottery system. With awards spreading out over nearly 400 school districts, the average number of buses per recipient was in the order of a single-digit. Round two however will be a competitive grant based program and awards will be for larger scale programs. Grants will allow a minimum of 15 above and up to 50 buses for applicant school districts.

And unlike last year, third-party applicants such as transportation companies will be allowed to participate as well. They will be allowed a minimum of 50 and up to 100 school buses serving at least 4 school districts. The EPA ultimately plans to make only 25 to 50 awards in total in this phase. We believe this new format should play to our strength. Nuvve differentiates itself not only through its tech, but also its ability to offer a turnkey solution and act as a trusted advisor for fleets as they electrify. We believe that applicants who have not only the desire, but we can demonstrate a plan for how to implement and scale up the electrification program efficiently will be the best position to win EPA dollars in this next round. With Nuvve’s assistance, we can lead not only the grant writing initiative, but also advice on design, implementation strategy, financing and project management as we interface with the variety of stakeholders involved in the process.

We look forward to partnering with our applicants in the month ahead to build a pipeline for this award win late this year and going into next year. Further, we believe our holistic solution will continue to position us to win new business outside EPA and we are optimistic that we will have more to say on this in the month ahead. Putting together a solid improvement in Q1 with the continued momentum, we are seeing so far in Q2 support by confidence that 2023 can be an inflection year for our business, both in terms of a ramp in hardware sales and via non-hardware related partnerships, such as the one with Circle K. We continue to pursue large-scale program where we can lean into our differentiated ability to offer a holistic solution, while simultaneously pursuing other agreements with ChargePoint operators that are reliant only on our ability to integrate and manage third-party hardware.

All the while, we will continue to be a leading voice for V2G and its benefits. On the March call, I discussed California Senate Bill 233, which aims to make bidirectional charging for electric vehicles and not and which in fact could facilitate widespread V2G adoption in the years ahead. In April, I testified before the California Senate Energy Utility and Communication Committee in support of this proposed legislation. The cost of a bidirectional capability is close to zero as their hardware capability exists today in line with our expectation. As this bill goes for appropriation and through the Senate, we hope the politician that will recognize the transformative impact that V2G can have on-grid resilience and EV total cost of ownership.

And with that, I will now turn the call over to David to discuss our financial results.

David Robson: Thanks, Gregory. I will start with a recap of first quarter 2023 results. In the first quarter, we generated total revenues of $1.9 million compared to $2.4 million in the first quarter of 2022. Recall the last year’s Q1 results were impacted by unique strategic decision to directly sell 5 electric school buses that has not been repeated since. On a more apples-to-apples basis that excludes the bus sales, our product and service revenues increased by approximately 240% year-over-year given the record high number of charger shipments that Gregory alluded to. Margins on product and service revenues were 18% for the first quarter 2023 compared to 5% for the first quarter 2022. Margins in the year ago period were depressed due to the just mentioned bus sale.

As a reminder, margins can be lumpy from quarter-to-quarter depending on mix. DC charger gross margins at standard pricing generally range from 15% to 25%, while AC charger gross margins are approximately 50%, but in dollar terms are a small fraction of the revenue of a DC charger. Grid service revenue margins are generally 30%. Operating costs, excluding cost of sales, was $8.3 million for the first quarter of 2023 compared to $9.8 million in the first quarter of 2022. This decrease was primarily attributable to lower public company fees, payroll and consulting costs. Cash operating expense, excluding cost of sales, stock compensation and depreciation and amortization was $7.2 million in the first quarter of 2023, declining from $8.2 million in the first quarter of 2022.

The reduction in costs evidences our previously discussed initiatives to optimize our cost structure. And we believe we can continue to run expenses at approximately $7 million or lower per quarter in the near-term. Other income was $0.2 million in the first quarter of 2023 versus income of $4.8 million in the year ago quarter. The decline primarily reflects a $4.8 million non-cash gain from the change in the fair value of warrants in the year ago quarter. Net loss attributable to Nuvve common stockholders increased in the first quarter of 2023 to $7.9 million from a net loss of $4.9 million in Q1 of 2022. The increase in net loss was also primarily a result of the just mentioned non-cash gain in the year ago quarter offset by a 70% improvement in operating losses of $1.7 million.

Now, turning to our balance sheet, we had approximately $11.8 million in cash as of March 31, 2023 excluding $0.5 of million in restricted cash. On our last call, we provided an update on our capital raising initiatives. But I will briefly summarize, in February, we raised $637,000 through a combination of proceeds from our ATM and a registered direct offering of common stock. Further, during Q1, we were presented with an attractive opportunity to monetize our investment in Switch, a leader in charging infrastructure operation and maintenance software. This resulted in $1.3 million in new cash proceeds received near the end of the first quarter. We generated a 30% return on this investment in less than 12-month span. Yet we are able to retain the same important commercial and technology benefits of the partnership that we had prior to our divestment.

Subsequent to the quarter end and as previously disclosed, we raised an additional $1 million through a registered direct offering of common stock in April. We continue to remain focused on securing capital in the optimal ways amidst turbulent market conditions. This includes using our ATM facility and other potential equity offerings. Total cash decreased by $3.9 million during the first quarter, primarily attributed to net cash used in operating activities ex-working capital of $6.5 million offset by the sale of our investment in Switch of $1.3 million, $0.6 million raised through the sale of equity and the balance from positive working capital. As we have previously discussed, we expect to continue to generate positive working capital in future quarters as we bring down our net investment in inventory.

Inventory decreased by $1.5 million during this quarter to $10 million compared to $11.6 million at the end of 2022. This is consistent with expectations and our prior commentary regarding anticipated declines in inventory as charger shipments pick up. Accounts receivables increased by $1.4 million during the quarter to $2.6 million compared to $1.1 million at the end of 2022. The increase is attributable to higher sales activities late in the first quarter of 2023 compared to last quarter. Now, turning to our megawatts under management and estimated future grid service revenues. As a reminder, megawatts under management is metric we use to quantify the aggregated amount of electrical capacity from the deployment of our V1G and V2G chargers, which are primarily deployed in the electric school bus market in the U.S. and in light-duty fleet deployments in Europe in addition to stationary batteries.

Currently, these chargers and batteries are located throughout the United States, Europe and Japan. Megawatts under management increased by 5.7% over the fourth quarter 2022, up 0.9% to 18.3% at the end of the first quarter 2023 from 17.4% in terms of its composition 8.2 megawatts or from stationary batteries and 10.1 megawatts were from EV chargers. On a year-over-year basis megawatt under managements increased by 24.8%, while the sequential increase in megawatts under management from Q4, 2022 levels may seem low relative to the aforementioned improvement in charter deployments. This simply reflects a timing issue, as many charges ship late in the first quarter have yet to be commissioned. As such, we would expect to report acceleration and growth and megawatts under management with our second quarter 2022 results in the back of half of the year, driven by the Circle K ramp.

As we noted in March, we expect grid service revenue growth to outpace our strong hardware revenue growth in 2023, resulting in grid service revenues making up a larger share of total 2023 revenues relative to a share of 2022 revenues. Depending on the geographic regions of our deployments or grid service revenue opportunities will vary. We are currently seeing grid service revenue opportunities for vehicle to grid services ranging between $85 per kilowatt year, up to $300 per kilowatt year and certain key markets we are focusing on. And with our planned expansion of V1G charging management services in Europe, we’re seeing further grid service revenue opportunities. These revenues include a combination of contracted services, and merchant expose services.

Given the long-term nature of our customer deployments, these revenues are generally recurring up to periods as long as 10 to 12 years. Now turning the backlog on March 31. Our hardware and services backlog was $4.2 million, up from $4.1 million. The modest growth reflects the fact that while orders were high, we also shipped a record number of units. Subsequent to Q1, we saw a strong increase in our backlog increasing to $5.7 million by the end of April. Before turning the call back to Gregory, I would like to reiterate that we believe Nuvve is on track to deliver strong growth and his key operating metrics in 2023 compared to 2022, including an acceleration of megawatts under management, increased charging station revenues, and higher grid service revenues, while lowering our operating expense structure.

We saw this play out in Q1 and while it is still early days in Q2, our key operating metrics are improving, as evidenced by the win of our largest single order and Nuvve’s history recognized in April, and 27% increase in hardware and services backlog through April compared to the end of Q1. All our charging station deployments and megawatts under management continued to increase. At the same time, our operating costs have come down as we materially scale up the business and demonstrate our ability to generate valuable grid service revenues through opportunities with ChargePoint operators such as Circle K. And with that, Gregory backing you to conclude our prepared remarks.

Gregory Poilasne: Thanks David. To wrap up, better record orders and deliveries for our DC chargers in Q1 and Q2 is poised to be another strong quarter given the larger award we have already won, others we are working on and the EPA fund in 2022 awards coming in. We are making good progress getting our Circle K partnership up and running and look forward to revenue generation later this year. And to momentarily showcase the benefits of this partnership to Circle K that customers and ultimately others we think stand to benefit from such agreements over the balance of the year. At the same time because you do work on other similar opportunities with ChargePoint operators that we hope to announce in the coming quarters. We thank you for your participation and look forward for speaking with you in August. With that said, I would like to now turn the call back to the operator to begin our Q&A. Operator.

Q&A Session

Operator: [Operator Instructions] And the first question will be from Eric Stine from Craig-Hallum. Please go ahead.

Operator: [Operator Instructions] The next question is from Brian Dobson from Chardan. Please go ahead.

Operator: Thank you. And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Gregory Poilasne for any closing remarks.

Gregory Poilasne: Thank you very much everybody. And we are looking forward to seeing you in 90 days for some very, hopefully very exciting news at a time. So, thank you very much. Bye-bye.

Operator: Thank you, sir. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.