Nuvve Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 9, 2023

There are 4 speakers on the call.

Operator

Good afternoon, and welcome to the Nuvi Holding Corp. 3rd Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Eduardo Royas. Thank you.

Operator

You may begin.

Speaker 1

Thank you. On today's call are Gregory Paulan, Chief Executive Officer and David Robson, Chief Financial Officer of Nuvi. Earlier today, Nuvi issued a press Announcing Its Q3 2023 Results. Following prepared remarks, we will open the call up for questions. Before we begin, I'd like to remind you that this call may contain forward looking statements.

Speaker 1

While these forward looking statements reflect Nuvi'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 Nuvi's filings with the SEC and in the earnings release issued today, which are available on our website. Nuvi undertakes no obligation to revise or update any forward looking statements to reflect future events or circumstances. With that, I'd like to turn the call over to Gregory Paulin, Gregory?

Speaker 2

Thanks, Eduardo, and good evening to all. Thank you for joining our Q3 2023 results call. We came into 2023 with optimism that we were going to experience a well overdue inflection in growth in our business. In the first half of the year, we began laying the foundation of these to play out with record orders and much higher sales than in 2022. Momentum continued to build in the Q3 and so far in Q4.

Speaker 2

As discussed on our August call, we continue to evolve our AI capabilities by integrating Astray AI into Nuvi's FleetBox Charge Management app in July. The enhanced functionality helps us maintain our differentiated edge and comes at a critical time as we accelerate deployments of our software equipped hardware. With a 97% accuracy rate, Astraya is set to maximize revenue generation and bolster our V2G technology globally, Revolutionizing EV usage and preparation. In October, we deployed a record number of 38 AC and BC bidirectional charging While growing our megawatt under management does not immediately correlate to revenue dollars, It is critical to our growth strategy as 1, it increases our pipeline of potential future grid service revenue And 2, with more and more people benefiting from the value of our V2G software, market awareness expands, which in turn accelerates demand for our products These deployments were carried out by Newdy K-twelve, which was only launched in June of this year in order to provide a full range of services in order to support fleet electrification for North American Civil Transportation. We expect for our record deployments in Q4 as the supply chain challenges that have plagued the last 2 years continue to abate.

Speaker 2

Last month, we were proud to hit a big milestone by launching in Texas. With EPF funding, BBK 5 Nuvi Level 2 chargers and our innovative AI powered Nuvi FleetBox 2 dollars charge management software. With these deployments, we understand that IRIS score among applicants of a proposed award of $1,900,000 from the California Energy Commission for our revolutionary We School V2G Project. This recognition underscores our commitment to leveraging bidirectionally V School buses to enhance California's power grid resiliency, marking not just a milestone for Nuvi, but a leap for the state's energy ecosystem. In Q3, we continue to see steady growth in grid revenues, which came in at 3.4 times the level recorded during corresponding period last year.

Speaker 2

We're also pleased to tell the 5 buses we have been carrying on our balance sheet for some time, which helped sustain the revenue growth trend for the first half of the year. While margin dilutive, we freed up working capital through these bus sales. Altogether, this puts us on As stated before, however, growth can be lumpy, especially when there are substantial government dollars for Atrix Cool Bus Fleet customers to Go Chase, which can and does impact the timing of orders and sales. Further, we are no doubt operating against the capital market backdrop that has seen a continued deterioration in sentiment towards cleantech, A sentiment that seems to have only worsened in recent weeks due to the results and commentary from FinTech Companies and about the EV landscape. With our cash run where we felt this backdrop gave us no choice but to continue raising capital piecemeal fashion at depressed equity prices as we did last month.

Speaker 2

Moving forward, we'll continue to evaluate all options, semantically and incrementally finance our business while we await for an improvement This may include additional liquidity financing and or debt financing. For example, we may continue to work towards putting in place an asset backed lending facility, which David will expand upon. We have also been working on reducing our cost structure yet again to optimize our cash runway. Specifically, we are working towards lowering our cash expense rate to at or below $5,000,000 per quarter as we get into 2024. This is the result of reducing our cost across administrative and legal functions.

Speaker 2

We are still investing into our platform in a manner that is commensurate with our focus priorities. In October, we issued a press release discussing our patent. The messaging behind putting out this release should be clear. We have been at this for a long time, investing significant resources into growing our B2G patent portfolio and developing a comprehensive B2G solution. With IT and expertise around areas such as a power flow control, charge management and power capacity, and as we push our technology further ahead with We have a market leading offering and remain the only pure play public company today with a proven track record in deploying commercially available And scalable vehicle to grid technology worldwide.

Speaker 2

Our belief in and commitment to our role in the oil transition It is unwavering and we expect both the macro and capital market backdrop to get back on track after the current rough patch. We expect for Nuvi to be there throughout as we to be formed a critical piece of the energy transition and as we march towards a critical inflection point in EV adoption in the second half of this decade. The 2022 edition of the EPA Clean School Bus was a big tailwind for our increased orders and sales in the first half of twenty twenty three, and we are excited about the subsequent round. To update on this, in August, the next installment of $400,000,000 competitive grant funding round closed its application process. Notice of our award is expected to start trickling out later this month and run into January with awards to be issued later in Q1 2024.

Speaker 2

Since our last call, the EPA has also opened up a subsequent $500,000,000 funding round. This installment will look more similar to our round 1 in 2022 as it will be a rebate process. The application window for this round is expected to be open until the end of January. Rebate recipients are expected to be notified in April 2024, We look forward to hopefully having even more success In this round, as we did in 2022, with our new DK12 unit, we are confident we are even better positioned. Before I turn it over to David to discuss our financial results, we spoke a lot earlier in the year about our CircleCare partnership in the Nordics As it forms part of our strategic initiative to accelerate growth in megawatts under management through deployment of our gift platform on 3rd party ChargePoint Operator Hardware.

Speaker 2

As of today, we have largely completely integrated our software with our hardware. We expect to begin participating in the market and generating revenue prior the end of the year. More importantly, we are paving the way for more material revenue generation starting in 2024 and for exponential growth in megawatts under management in the region and beyond over the long term. David, over to you.

Speaker 3

Thanks, Gregory. I will start with a recap of Q3 2022 results. In the Q3, we generated total revenues of $2,700,000 compared to $600,000 in the Q3 of 2022. The increase was primarily driven by a large increase in charger hardware sales, higher grid service revenues and the sale of 5 buses. Grid service revenues of $600,000 represented 21% of total revenues this quarter and A 3.4 times increase from the prior year quarter.

Speaker 3

Year to date through September 30, 2023, Grid service revenues were $800,000 which compares with $300,000 for the prior year period, representing approximately a threefold increase. Margins on product and service revenues were 9% for the Q3 2023 compared to 43.3% in the year ago period. Margins were heavily impacted by the aforementioned sale of 5 buses. As a reminder, margins can be lumpy from quarter to quarter depending on the 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%.

Speaker 3

Operating costs, excluding cost of sales, was $8,800,000 for the Q3 of 2023 compared to $8,900,000 in the Q3 of 2022, Declining mainly due to lower payroll and public company fees, offset by higher consulting and legal expenses. Cash operating expenses, excluding cost of sales, stock compensation and depreciation and amortization It was $7,600,000 in the Q3 of 2023 versus $7,700,000 in the Q3 of 2022 and $7,300,000 in the Q2 of 2023. Other income was $130,000 in the Q3 The year ago period benefited from a $1,850,000 non cash gain from the change in the value of warrants. Net loss attributable to Nuvi common stockholders increased in the Q3 of 2023 to 8,300,000 From a net loss of $6,700,000 in Q3 of 2022. The increase was also primarily a result of the just mentioned non cash gain in the year ago quarter.

Speaker 3

Now turning to our balance sheet. We had approximately $13,900,000 in cash as of September 30, 2023, excluding $500,000 in restricted cash. Included in our cash balance was approximately $9,800,000 of EPA funds received. We expect to remit these funds to customers during the Q4. Net cash generated from operating activities was 2,800,000 for the Q3 of 2023.

Speaker 3

Excluding the benefit from the incremental EPA funds received in Q3 At $6,300,000 net cash used in operating activities was $4,000,000 for the 3rd quarter. During the Q3, inventories declined by $2,100,000 driven by improvement in inventory turnover of charging stations along with the benefit of selling 5 buses we held in inventory. As we had previously discussed, the improvement in inventory turnover to mitigate industry wide supply chain constraints. During the Q3, we raised net cash of $100,000 through our at the market, our ATM facility. Subsequent to quarter end, we raised an additional $3,200,000 in gross proceeds through 2 separate offerings in October as previously disclosed.

Speaker 3

As we said last time, we remain focused on Optimizing our ability to raise capital, we continue to work on putting in place a long term asset based lending facility or ABL, This can provide additional liquidity. The borrowing capacity of the ABL is based upon our underlying inventories and accounts receivables. We believe this type of debt facility aligns well with our business model given the ongoing inventory and accounts receivable amounts we carry on our balance sheet. Now turning over to megawatts under management and estimated future grid service revenues. As a reminder, megawatts under management is a metric We use to quantify the aggregated amount of electrical capacity from the deployment of our V1 gs and V2 gs chargers, which are primarily deployed in the electric school bus market in the U.

Speaker 3

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 in the 3rd quarter increased 6.1% over the Q2 of 2023 to 21.2 from 2020. In terms of its composition, 8.2 Megawatts were from stationary batteries and 13 Megawatts were from EV chargers.

Speaker 3

On a year over year basis, megawatts under management increased by 30%. We continue to expect an acceleration in our megawatts under management as we go through the second half of the year. This is evidenced in the press release we issued last week in which we noted that the following record installations in the 3rd quarter Megawatts under management as of October end increased to 22.7% or 7.1% in only the 1st month of Q4. Depending on the geographic regions of our deployments, our grid service revenue opportunities will vary. We are currently seeing grid service revenue opportunities from vehicle to grid services ranging between $85 Management Services in Europe, we are seeing further grid service revenue opportunities.

Speaker 3

These revenues include a Combination of contracted services and merchant exposed 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 to backlog. On September 30, Our hardware and service backlog was $5,600,000 down from $6,100,000 on June 30. Order activity slowed in Q3 relative to elevated levels in the first half of the year, which benefited from EPA funding.

Speaker 3

Looking out to the Q4, we expect full year revenues for 2023 to exceed $8,000,000 and we expect operating Excluding cost of sales, for the full year to be under $34,000,000 As Gregory mentioned, we have also implemented Several cost reduction initiatives, which will reduce our cash operating expenses further, which we expect to trend at This concludes my portion of the prepared remarks. Gregory, Back to you to wrap up.

Speaker 2

To finish up, I would like to discuss the big picture and provide a high level view of the main revenue drivers of our business as we look ahead. 1, mitigate well, which I briefly touched earlier on. Our value proposition here relies on vehicle readiness, energy management and battery life extension. This offering Fortify has a strong position As a service provider in the space, with more than 5 school buses connected to our platform today, we are confident we'll keep on leading in this segment. 2, stationary storage, where our growth is accelerating in 2023.

Speaker 2

Our core business is to provide grid services with highly As a result, it should not come as a surprise that we can also manage stationary storage. And with our advanced platform, we believe that we can extract more value for these batteries than any other player in the space. Such Such batteries are included into our deployments today with Circle K, the University of California San Diego and the University of Delaware. More and more developers and battery manufacturers are coming to us to manage battery deployments that are underway. We see this as a pathway to accelerate growth As we are forecasting capabilities for cash flow operators or CPOs and utilities, our fundamental work on predictive analytics, is based on our partnership with 2021.ai has led us to developing very advanced features that allow us to predict With a very high level of confidence, when an electric vehicle is going to be connected to a charging station and the amount of kilowatt hour It will need to onboard during the session.

Speaker 2

This allows us to offer energy services to CPO companies and provide grid usage forecast to utilities. The ability to predict where EV charging bottlenecks seems likely to happen over subsequent 2 or 3 days is a very valuable service for utilities. While we go through the EV adoption curve. Beyond this, we also continue to explore opportunities in the microgrid and consumer AV space. And with that, we thank all of you not only for joining us today, but for sticking with us during what have been challenging times.

Speaker 2

Your trust in our vision and technology continues to propel us forward and we remain grateful. Operator, please open up the line for any questions.

Operator

And you will be placed into the queue in the order received. Please be prepared to ask your question when prompted. At this time, there appears to be no questions. I would turn the call back over to Gregory for closing remarks.

Speaker 2

Thank you very much for listening to us today. We're again very excited by the opportunities that are in front of us and remain available at any time if Any of our shareholders have any question for us. So thank you very much and have a good evening.

Operator

This concludes today's conference call. Thank you for attending.

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Key Takeaways

  • Q3 total revenues rose to $2.7 M from $0.6 M in Q3 2022, driven by stronger hardware sales, a 3.4× increase in grid service revenues to $600 k and the sale of five buses to free up working capital.
  • Integrated Astraya AI into the FleetBox Charge Management app in July, achieving a 97% accuracy rate to maximize V2G revenue generation and bolster competitive differentiation.
  • Achieved a record deployment of 38 bidirectional AC and DC chargers in October, lifting megawatts under management to 22.7 MW and expanding the future grid service revenue pipeline.
  • Secured strategic grant recognitions including EPF-funded Level 2 charger deployments in Texas and a top IRIS score for a proposed $1.9 M award from the California Energy Commission for the We School V2G project.
  • Reduced cash operating expenses with a target below $5 M per quarter for 2024 while pursuing an asset-backed lending facility and other financing options to extend cash runway.
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Earnings Conference Call
Nuvve Q3 2023
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