Nuvve Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 11, 2023

There are 5 speakers on the call.

Operator

Good afternoon, and welcome to Nuvi Holding Corp. 1st Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Eduardo Royes. Thank you.

Operator

You may begin the call. Thank you. On today's call are Gregory Paulain, Chief Executive Officer and David Robson, Chief Financial Officer of Nuvi. Earlier today, Nuvi issued a press release announcing its Q1 2023 results. Following prepared remarks, we will open the call up for questions.

Operator

Before we begin, I would like to remind you that this call may contain forward looking statements. While these forward looking statements reflect Nuvi's best current judgment, they are subject 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 would like to turn the call over to Gregory Paulain, Chief Executive Officer of Newby. Gregory?

Speaker 1

Thanks, Eduardo, and good day to all listening in. We thank you for joining our Q1 2023 results call. We are extremely encouraged by the improvement in the fundamentals of our business in Q1. 20 2/83 is so far delivering the green shoots and grid 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'll Note the following.

Speaker 1

On the order front, we saw a 4 fold increase in orders for DC chargers versus the Q4 2022 And so another increase for more than 3.5x on a year over year basis. In terms of deliveries, We more than doubled our 4th quarter DC charge shipments sequentially and more than tripled shipments related to Q1 2022. One big driver of the increase in both orders and shipments in the Q1 was the previously discussed record size order for 24 units From the Saint Gershuni Pied School District. Only a small portion of orders recognized in Q1 are affiliated with rebates to customers that we directly supported in the 2022 inaugural funding round of the 5 year EPA Clean School Bus Program. We're also thrilled to report that our strategic initiatives aimed at quickly growing and scaling up our megawatt under management By integrating into established third party hardware networks led to the partnership we announced with CircleCare in February.

Speaker 1

In summary, our agreement with Circle K is initially expected to yield an additional 40 megawatts under management from EV fast chargers Importantly, CircleCare has more than 5 60 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 perspective, if all 5 60 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 CircleCare has an estimated 17,000 locations worldwide. We have been working closely with our colleagues at CircleCare on integration.

Speaker 1

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 in generating grid services revenue from this partnership in the back half of the year. Turning to recent developments since our last call that underpinned our optimism about 2023 showing a marked improvement in results for Nuvi over 2022. We are pleased to disclose today that in April, we secured a new record order from a large fleet operator We understand it's hard to be for a 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 role during the application process, so it is incremental.

Speaker 1

Looking ahead, we expect to receive the majority of the purchase orders for hardware associated with the EPA rebates during the Q2. As we discussed on 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, our words should translate to approximately 1,100,000 Inuvia Hardware sales affiliated with the Penn School District 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 opened up the 2nd round of funding for the clean school bus program.

Speaker 1

At least initially, they will be awarding $400,000,000 as part of the 2023 round. Applications are due this August with orders expected between November 2023 January 2024. This is an elongated timeline for approval and reflects a change in the structure of the program related to the 2022 round. RAN1 last year awarded nearly $1,000,000,000 in rebates through a lottery system. With our spreading out over nearly 400 school districts, the average number of buses per recipient was in the order of a single digit.

Speaker 1

Round 2, however, will be a competitive grant based program and awards will be for larger scale programs. Grants will allow a minimum of 15 and up to 50 buses for applicant school districts. And unlike last year, 3rd 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 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 strengths.

Speaker 1

Nuvi differentiates itself not only through its tech, but also Via's 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 NUI's assistance, we can lead not only the grant writing initiatives, but also advise on design, implementation strategy, financing and project management as we interface with a variety of stakeholders involved in the process. We look forward to partnering with our applicants in the months ahead to build the pipeline for these award wins 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 months ahead.

Speaker 1

Putting together our solid improvement in Q1 with the continued momentum we are seeing so far in Q2 Support our 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 Sokoke. 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'll 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 the norm and which, if passed, could facilitate widespread D2G adoption in the years ahead. In April, I testified before the California Senate Energy, Utility and Communication Committee in support of this proposed legislation.

Speaker 1

The cost of a bidirectional capability is close to 0 hope the politician that will recognize the transformative impact that B2G 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.

Speaker 2

Thanks, Gregory. I will start with a recap of Q1 2023 results. In the Q1, we generated total revenues of $1,900,000 compared to $2,400,000 in the Q1 of 2022. Recall that last year's Q1 results We're 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 2 40% year over year given the record high number of charger shipments that Gregory alluded to.

Speaker 2

Margins on product and service revenues were 18% for the Q1 2023 compared to 5% for the Q1 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 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 8,300,000 for the Q1 of 2023 compared to $9,800,000 in the Q1 of 2022.

Speaker 2

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 $7,200,000 in the Q1 of 2023, declining from $8,200,000 in the Q1 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 $7,000,000 or lower per quarter in the near term. Other income was $200,000 in the Q1 2023 versus income of $4,800,000 in the year ago quarter. The decline primarily reflects A $4,800,000 non cash gain from the change in the fair value of warrants in the year ago quarter.

Speaker 2

Net loss attributable to Nuvi common stockholders increased in the Q1 of 2023 to $7,900,000 from a net loss of $4,900,000 in Q1 of 2022. The increase And net loss was also primarily a result of the just mentioned non cash gain in the year ago quarter, offset by a 17% improvement in operating losses of 1,700,000 Turning to our balance sheet, we had approximately $11,800,000 in cash as of March 31, 2023, excluding $500,000 in restricted cash. On our last call, we provided an update on our capital raising initiatives, but I'll 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.

Speaker 2

This resulted in $1,300,000 in new cash proceeds received near the end of the first quarter. We generated a 30% return on this investment in less than 12 months span, yet we were 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 $1,000,000 through our registered direct offering of common stock in April. We continue to remain focused on securing capital in the market from Hawaii's amidst turbulent market conditions. This includes using our ATM facility and other potential equity offerings.

Speaker 2

Total cash decreased by 3,900,000 During the Q1, primarily attributed to net cash used in operating activities ex working capital of $6,500,000 offset by the sale of our investment in Switch of $1,900,000 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 $1,500,000 during the quarter to $10,000,000 compared to $11,600,000 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 $1,400,000 during the quarter to $2,600,000 compared to $1,100,000 at the end of 2022. The increase is attributable to higher sales activities late in the Q1 of 2023 compared to last quarter.

Speaker 2

Now turning to our megawatts out of electrical capacity from the deployment of our V1 gs and V2 gs chargers, which are primarily deployed in the electric Currently, these chargers and batteries are located throughout the United States, Europe and Japan. Megawatts under management increased by 5.7% over the Q4 of 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 were from stationary batteries And 10.1 Megawatts were from EV chargers. On a year over year basis, Megawatts under management increased by 24.8%. While the sequential increase in megawatts under management from Q4 'twenty two levels may seem low relative to the aforementioned improvement in charger deployments, This simply reflects the timing issue as many chargers shipped late in the Q1 have yet to be commissioned.

Speaker 2

As such, we would expect to report an acceleration in growth in megawatts under management with our Q2 2023 results and in the back half of the year driven by the Circle K ramp. As we noted in March, we expect grid service revenue growth Regions of our deployments, our grid service revenue opportunities will vary. We are currently seeing grid service revenue opportunities for vehicle The grid services range between $85 per kilowatt year up to $300 per kilowatt year in certain key markets we are focusing on. And with our planned expansion of B1 gs charging management services in Europe, we are seeing further grid service revenue opportunities. These revenues include a combination of contracted services and merchant exposed services.

Speaker 2

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 March 31, our hardware and services backlog was $4,200,000 up from $4,100,000 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 $5,700,000 by the end of April. Before turning the call back to Gregory, I would like to reiterate that we believe Nuvia is on track to deliver strong growth in its key operating metrics in 2023 compared to 2022, including acceleration of megawatts under management, Increased charging station revenues and higher grid service revenues, while lowering our operating expense structure.

Speaker 2

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 in Nuvi's history recognized in April and a 27% increase And hardware and services backlog through April compared to the end of Q1. While our charging station deployments and megawatts under management continue to increase, At the same time, our operating costs have come down as we materially scale up the business and demonstrate our ability to And with that, Gregory, back to you to conclude our prepared remarks.

Speaker 1

Thanks, David. To wrap up, we had record orders and deliveries for our DC Key chargers in Q1 and Q2 is poised to be another strong quarter given the large award we've already won. Others we are working on and the EPF funded 2022 awards coming in. We are making good progress getting our CircleCare partnership up and running and look forward to revenue generation later this year and to more materially showcase the benefits of this partnership to CircleCare, Our customers and ultimately others who we think stand to benefit from such agreements over the balance of the year. At the same time, we continue to work on other similar opportunities with charge point operators that we hope to announce in the coming quarters.

Speaker 1

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 and A. Operator?

Operator

Thank you. We will now begin our question and answer session. And the first question will be from Eric Stine from Craig Hallum. Please go ahead.

Speaker 3

Hi, everyone. Thanks for taking the questions.

Operator

Hey, Eric.

Speaker 3

Hey. So I've been jumping between calls this afternoon, so I apologize if I ask anything that you discussed at the beginning of the call. But maybe I'll start just taking a step back. It's a question I think I've asked you over time. There's always a lot of noise about vehicle to grid and I guess not all vehicle to grid is created equally.

Speaker 3

And I know it's still early, but As the market develops, as the EPA program starts rolling out and things move Forward, do you sense that customers are starting to get a better sense of new use capabilities, Your V2G solution versus others who may call it that, but where it just doesn't have the same functionality?

Speaker 1

I think in the segments where we are very present such as our school bus, for example, here in the U. S, it is clear and we see that because More and more people are coming and reaching out to us. Initially, we've been mostly working with school districts, But we also see now fleet operators coming in and wanting to work with us. So yes, I think there is a key understanding in that space That we are our key leader. Similarly, I would say that the CPOs such as Circle K, the reason why they chose us is because they know That our platform is the most important platform in order to aggregate those charging stations that they have and to control them at a very fast pace, which is where there is the highest value in providing those grid services.

Speaker 1

So the good news is the awareness is building up, right? This This is why, for example, SB 233, the bill here in the Senate in California is going through And would mean that by 2027, each and every vehicle, electric vehicles sold in California would have bidirectional capabilities. And that's obviously very, very important for the growth of our business and that shows that now it's not just Us, the fleet managers in the SCOR bus business, but also at the political level, the understanding of how critical BTG is building up rapidly.

Speaker 3

Got it. That's helpful. And you brought up Circle K. I mean, I know that in that industry, People watch what others are doing. I mean, I guess I'd love to hear kind of next steps for Circle K.

Speaker 3

But beyond that, just thinking about Do you think that this is something you could replicate? And have others reached out upon seeing this announcement just to at least Start to think about going that same route or how should we think about that?

Speaker 1

So first on where we are on Circle K, there is some integration work that needs to happen and rolling out Certain potential hardware in some cases on some of the sites in order to create the communication link between our platform and the Infrastructure that is already deployed today. And so we are right in the middle of this. And so on plan With our expectations in terms of this integration and targeting 50 sites to integrate with them. Now how is this refigable? I think, first of all, Circle It's headquartered in Norway, and so they are very exposed to the EV rollout.

Speaker 1

That's why they understood it so well. But also for us, it's an essential demonstration because Once we demonstrate the value that we can bring to such an infrastructure rollout, then it will become a no brainer for the others to come and work with So yes, it's definitely applicable with other players in the space. Now you have different type of infrastructure, right? This is Fast charger in gas stations. You might have also some charging infrastructure, for example, for Bus depots where B2G might not be the most suitable, but the B1G can be very valuable in charging those vehicles at the lowest cost and potentially reducing the low cost of ownership of the infrastructure that goes with them.

Speaker 1

So It's a question of use case on the type of CPO implementation, but we are very confident that this is going to be rolled out across a variety of CPOs over time.

Speaker 3

Got it. Evan, do you think that the demonstration project with Circle K needs to run for a bit before You really see interest coming your way? Or is it something that you've already seen some inquiries just based on the announcement to start?

Speaker 1

I mean, we have not announced any of those things. So it's I can't disclose things. But On the overall, I think from my perspective at least, what I really am looking forward is and we're going to see that there rapidly is the value we can bring to such an infrastructure. And putting a number on that is going to be a very important outcome of this rollout.

Speaker 3

Okay. Thanks a lot.

Speaker 1

Thanks,

Operator

The next question is from Brian Dobson from Chardan. Please go ahead.

Speaker 4

Hey, it's Greg Pendy in for Brian Dobson. Thanks for taking my questions. Can you just share with us any color on what you're seeing in the School bus market in terms of pricing, I think in 2022, prices were pretty elevated given a lot of the supply chain issues that were going on and also buses. We're never even at places like Bluebird spending any time on the lot. They were just leaving right away.

Speaker 4

So Are prices normalizing at all in EVs, cobusses?

Speaker 1

I don't know. Normalizing, I don't know if this is the term I would use yet. I think things are still pretty tight, but I think the trend is going to be to go back where you would think they would go, which is price going down over time. I think what we see also is battery size are increasing in those school buses. Initially, we had a lot of them that were maybe in the other of Maybe prices are stabilizing, but the capabilities of those vehicles are increasing at the same time.

Speaker 4

That's helpful. And then can you share any color on what you're seeing, I guess, with your wallbox relationship with the Quasar? Anything on that

Speaker 1

on the residential front? Not anything

Speaker 4

that we can

Speaker 1

Not anything that we can share at this point. Okay.

Speaker 4

I understand. Thank you.

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 Florent for any closing remarks.

Speaker 1

Thank you very much, everybody, and we are looking forward to seeing you in 90 days for Hopefully, very exciting news at the time. So thank you very much. Bye bye.

Operator

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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