Nuvve Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2023

There are 7 speakers on the call.

Operator

Good afternoon, and welcome to Nuvi Holding Corporation's Second Quarter 2023 Earnings Conference Call.

Speaker 1

All participants will be

Operator

in listen only mode. After today's presentation, there will be an opportunity to ask questions. As a reminder, this conference is being recorded. It is now my pleasure to introduce Eduardo Royas, Managing Director, ICR. Please go ahead.

Speaker 2

Thank you. On today's call are Gregory Poulin, Chief Executive Officer and David Robson, Chief Financial Officer of Nuvi. Earlier today, Nuvi issued a press release announcing its Q2 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.

Speaker 2

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. Nuvia 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 Polan, Chief Executive Officer of Nuvi. Gregory?

Speaker 1

Thank you, Eduardo, and hello to all. We thank you for joining our Q2 2023 results call. We are proud to have yet again achieved a record order quarter in Q2 2023, Topping the record set in Q1 and delivering yet another quarter of strong year over year growth across key metrics including revenue, Megawatts under management and backlog. We came into 2023 discussing our optimism that we were finally hitting an overdue inflection point In both interest in and adoption of vehicle to grid technology and specifically our differentiated Nuvia offering, Our results in the first half of the year evidenced this and we are pleased to have increased visibility in our business. Our conviction and optimism, however, are funded on much more than just the improvement in orders and activity in the first half of the year.

Speaker 1

Nuvia remains the only public company today with a proven track record in deploying commercially available and scalable V2G technology worldwide And players across the EV charging and grid infrastructure landscape are taking notice. As we sit here today, the interest from companies looking to explore ways in which Industry participants are increasingly recognizing 1, the value of our technology and IP across areas such as power flow control and EV charging management The work we are doing with AI and 2, the importance of our experience and relationship networks in being able to provide a holistic fleet electrification solution. The same cannot be said, we believe, about all aspiring B2G providers. We look forward to building on this momentum as we go through the second half of twenty twenty three and beyond. Now to summarize our key accomplishments in the quarter and since last call.

Speaker 1

As we did last time, we won't go into specifics on orders Other than to point out that our DC fast chargers orders in Q2 saw a more than 15% sequential improvement over the prior quarters Dan Rickard and more than 75% increase over the Q2 of 2022. The big driver of this increase was the 25 unit order, Our largest single order to date that we discussed on our May call. At the time, we noted that this was for a school district that was awarded funds via the EPA program, but was not one of the districts we supported in the grant procurement process. We have since disclosed that this order was for member of the Beacon Mobility family of companies in Massachusetts, Beacon is a large fleet provider comprised of several independent companies to the U. S.

Speaker 1

And operating over 11,000 vehicles. We also received orders associated with rebates for the 2022 EPIA awards across multiple school districts in line with our previously communicated expectations. While we have shipped some of the DC charges associated with the EPF funding, A significant majority remained in the backlog and are likely to be shipped and recognized as revenue over the second half of the year. Looking ahead, we look forward to supporting additional school districts as part of the 2023 installment of this massive program, which has an application deadline that is less than Further, we continue to see an ever expanding pipeline of potential orders beyond this. During the quarter and so far in Q3, we continued to make progress on our strategic initiatives as well.

Speaker 1

In Q2, We launched New V K-twelve, a new dedicated division to provide a full range of service in order to support fleet electrification for North America And importantly, we announced the hiring of David Bersik, an experienced student transportation and automotive sales and marketing executives from Bluebird Corporation to build out a program. At Bluebird, Verstica oversaw significant growth in the EV bus sales, develop the supporting And enhanced relationships with their network of dealers. As touched on during our May call and alluded to in my earlier remarks, Street electrification is a process. It is not a simple yes or no decision. As future customers come up the learning curve, they may well decide that is in their best interest, but it can take time for them to convince Filo's stakeholders or they may hesitate to commit without a better understanding Our plan for how to optimize the transition to EV.

Speaker 1

People with relationships and an ability to walk through the electrification process on a step by step basis I invaluable and this is exactly what we have gained by bringing on David. As I just alluded to, orders can be lumpy, But the lumps appear to be getting bigger and more frequent and so NaviKit will be critical to ensure we maximize our opportunities as School District will look to scale up their electrification journey. In the Q2, we're also proud to advance commercialization of our AI capabilities. We have long held the view that leveraging and developing AI technology has the potential to be a tremendous differentiator and a sales enabler for us, which is why In early 2022, we entered into a JV called Astrea AI to explore AI integration into our V2G platform. The fruit of this work is now paying off and we have announced both our strong capabilities in forecasting energy market values, EV schedule and energy requirements.

Speaker 1

The forecasting power harnessed by AI is in our view indispensable and invaluable in terms of the service it provides to the end customers. The more we maximize forecasting capabilities, the better we are able to optimize our address challenges related to vehicle readiness, energy management and battery health. With the combined power of AI and V2G, we can thus eliminate the various pain points of owning an electric vehicle and ultimately make V2G a strong selling point in the consumer market. Today, we are seeing our AI capability put into practice starting with the enhanced Our AI integration is enabling for us in the Nordics. With Astrea AI, our platform is able to continuously forecast price And capacity from Nordic Primary Reserve to optimize energy market bids and therefore optimize revenue for us and our customers.

Speaker 1

This technology leveraged Nuvi's 6 plus years of experience providing frequency regulation services in the energy market And it's just one example of the benefits that AI integration can deliver to our customers. In July, we continue to evolve our AI capabilities by integrating It is by integrating S3AI into our newbie's FleetBox charge management app. Our customers on the FleetBox app can now use the enhanced functionalities to better manage their battery state of charge, charging status, charging equipment and reports. In other words, our customers Optimize all of these activities and therefore truly maximize revenue generation, thanks to the power of our Astra AI technology. Lastly, on the strategic initiative front, as we have discussed on the last few calls, integrating Nuvi's gift platform into established 3rd party hardware network is a critical part of our strategy and our partnership with Circle K announced in the Q1 is a great example of how Nuvi is executing on its We continue to work closely with CircleCI on integrating and we are in the process of rolling out the technology across the different sites Our AI platform is also providing advanced services.

Speaker 1

Before turning the call to David, a quick update on the California Senate Bill or SB 233, which I have discussed on the last few calls. SB233 intends to make bidirectional charging a requirement for consumer Electric vehicles and electric school buses sold in California by 2,030. We think this is a recognition of the societal benefit, Energy cost equity that B2G can unlock as more and more vehicles electrify. At the end of May, we were pleased to see that the Senate approved the bill with a vote of 29 to 9. It is expected that by the end of this month, the bill will go through appropriation In the state assembly and if successful would go for the assembly vote thereafter.

Speaker 1

I continue to have good dialogue with the legislators on this topic I'm optimistic on a favorable outcome for SB-two thirty three. With that, over to David to discuss our financial results.

Speaker 3

Thanks, Gregory. I will start with a recap of Q2 2022 results. In the Q2, we generated total revenues of $2,100,000 compared to $1,300,000 in the Q2 of 2022. Further, as Gregory alluded to, Unit orders of our DC fast chargers remained at elevated levels in Q2 2023, growing over 15% from Q1 and over 75% higher than Q2 of 2022, supporting an increase in backlog in excess of $6,000,000 which in turn will support solid revenue generation in the back half of twenty twenty three. Margins on product and service revenues were 4.8 For the Q2 2023, which was lower than the Q1 of 2023 of 17.9% Due to the impact of the timing of expenses associated with the customer sale through a long term lease arrangement and installation costs for 2 other long term projects.

Speaker 3

Under the lease accounting rules, the sale, Hardware and installation costs were recognized as an expense upfront, while a large portion of the associated revenues will be recognized over future periods. As a reminder, margins can be lumpy from quarter to quarter depending on the mix. Do you see charger gross margins as standard pricing Generally range from 15% to 25%, while AC charger gross margins are approximately 50%, But in dollar terms are smaller fraction of the revenue of a DC charger. Grid surface revenue margins are generally 30%. Operating costs excluding cost of sales was $8,500,000 for the Q2 of 2023 compared to $10,300,000 in the Q2 of 2022.

Speaker 3

The decrease was primarily attributable to lower public company fees. Cash operating expenses excluding cost of sales, stock compensation and depreciation and amortization expense was $7,300,000 in the Q2 of 2023 declining from $8,300,000 in the Q2 Our Q2 2023 results were in line with expectations set on our May earnings call for quarterly cash operating to run at approximately $7,000,000 Other income was $300,000 in the Q2 of 2023, down from $4,600,000 in the year ago quarter. The year ago period benefited from a $4,600,000 non cash Q2 of 2023 to $8,200,000 from a net loss of $5,500,000 in Q2 of 2022. The increase was also primarily a result of the just mentioned non cash gain in the year ago quarter. Now turning to our balance sheet, we had approximately $11,100,000 in cash As of June 30, 2023, excluding $500,000 in restricted cash, included in our cash balance was $3,000,000 of EPA funds received.

Speaker 3

We expect to deliver these funds to customers during the Q3 of 2023. Total cash decreased by $800,000 during the Q2 of 2023. Net cash used in operating activities was $3,200,000 in the Q2 of 2023, improving from the Q1 of $5,800,000 Excluding the benefit of EPA funds, net cash used in operating activities was $6,100,000 for the 2nd During the Q2, we raised a net $2,500,000 in capital, including $1,800,000 through registered direct offerings or RDOs and approximately $700,000 through our at the market or ATM facility. We remain focused on optimizing our ability to raise capital. As we've demonstrated over the past few quarters, Our ATM facility and the RDO structure have allowed us to raise incremental funds to support the business.

Speaker 3

Additionally, we are currently working to put in place a long term asset based lending facility or ABL, which 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. Rounding out our conversation on cash usage, inventory decreased by $1,100,000 during the quarter to $8,900,000 compared to $10,000,000 at the end of the Q1 of 2023. This is consistent with on our prior commentary regarding anticipated declines in inventory as charger shipments pick up, a trend we expect to continue in the near term.

Speaker 3

Now turning to megawatts under management and estimated future grid service revenues. As a reminder, megawatts under management is a metric we use to quantify the aggregate 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. S. And in the 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.

Speaker 3

Megawatts under management in the 2nd quarter increased 9% over the Q1 2023 to 20 Megawatts from 18.3. In terms of its composition, 8.2 Megawatts were from stationary batteries And 11.8 Megawatts were from EV chargers. On a year over year basis, Megawatts Under Management increased by 24%. We continue to expect an acceleration in our megawatts under management in the second half of twenty twenty three as we deploy more charging stations in North America and as Circle K ramps up. Depending on the geographic regions of our deployments, Our grid service revenue opportunities will vary.

Speaker 3

We are currently seeing grid service revenue opportunities for vehicles For grid services ranging between $85 per kilowatt year 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. 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 our backlog, On June 30, our hardware and services backlog was $6,100,000 up 47% from $4,200,000 on March 31, reflecting an acceleration of EV adoption.

Speaker 3

Before turning the call back to Gregory, I would like to note that in First half of twenty twenty three, we have delivered on the optimism we came into the year with regarding an improvement across operating metrics. For example, through the 1st 6 months of the year, we recorded 2.5 times more DC fast charger unit orders compared to the 1st 6 months of 2022. And we realized a 2.4 times year over year increase in grid service revenues, while managing costs to maximize our liquidity. Additionally, our elevated backlog has set us up for a strong performance in the back half 2023. When looking at the underlying customer delivery dates within our existing backlog, We anticipate approximately 50% of this backlog or $3,000,000 will be recognized as revenue in the back half of 2023, while the remaining balance of the backlog is expected to be recognized in future periods after 2023.

Speaker 3

Taking into account the future revenue generation from our existing backlog, in addition to potential future revenues from our existing proposal pipeline, We believe we are in a very good position for solid expansion in megawatts under management and revenues during the balance of 2023. Of course, as we have said on previous earnings calls, revenues can be lumpy and customers may request at any time to push out their delivery dates, which could negatively impact this revenue forecast. We have not previously provided any sort of visibility into revenue expectations, But we are optimistic that as our backlog builds, more EV programs come online and the supply chain issues that have plagued much of the early days of the Our revenues will become more and more predictable such that we can regularly provide more clarity on our outlook for revenues. And with that, Gregory, back to you to conclude on our prepared remarks.

Speaker 1

Thanks, David. To conclude, myself and the team are pleased with the progress we have seen in our business so far in 2023. The EPA Clean School Bus program has underpinned strong growth. And in Q2, we continue to enhance our offering with the formation of Nuvi K12 And further evolving Astra AI, while progressing on getting our CircleCare program up and running. Interest in V2G and Nuvi and its technology specifically continue to increase as the role of V2G will play in the energy transition becomes increasingly apparent.

Speaker 1

We thank you for joining us today and look forward to updating you on our November call. With that said, I would like to now turn the call back to the operator to begin our Q

Operator

Our first question is from Eric Stine with Craig Hallum. Please go ahead.

Speaker 4

Hi, Gregory. Hi, David.

Speaker 5

Hi.

Speaker 4

Hey, Eric. Hey. Maybe just starting out, I know that your Primary focus or a big part of the focus is on the school bus industry, but a lot of OEMs making more and more noise about Hi, bidirectional charging, bidirectional capabilities. So just curious how do you view those offerings? I mean, potentially, would love to hear if there's any interest coming out of the auto OEM world, in partnering with Nuvi.

Speaker 4

Just any thoughts along those lines

Speaker 5

I mean, I think we are definitely perceived as the leader in the subject and Not just in the U. S, but also in Europe and in Japan. And so I would say there is always interest. I think the big question for the OEMs in general is always, do I do it myself or do I do it with a partner? And the other piece, the next question are really what are the features and functionalities that are that my customers kind of care about.

Speaker 5

And you see that Ford with the F-one hundred and fifty and powering basically vehicle to home. That's what they are pushing. Now the truth is once you have that functionality in place and it's a And it's what we call the charge management piece is really how do we make life easier if somebody who is choosing to get an entry car. And that's definitely an area where we spend a lot of time today and we see that not just applicable to fleets, but also applicable to consumers.

Speaker 4

Is this something as this gets out into the market and people realize the potential of that and how it could be Expanded, is this an area where we would expect Nuvi to play at some point?

Speaker 5

Yes. We are very focused on fleet today because one, this is where we see the volume today. This is also the school bus It's a killer for V2G, but we are involved in different areas. One is CircleCare, which is really addressing the consumers and how do we extract more value with infrastructure That is being rolled out to support the consumers, but then interface we got a platform to provide certain grid services.

Speaker 4

Got it. And then I guess sticking with Circle K, you I think your plan was That you would start generating grid service revenue in the second half. I might have missed it earlier in the call, but curious if you've kind of started those Or that rollout and is it still the plan that you would expect revenues here in the second half?

Speaker 5

Yes. We have a few sites connected to our platform now And we definitely expect revenue to happen in the second half of the year.

Speaker 4

Got it. Well, maybe last one for me. Just on megawatts under management, I know you've got the 2 buckets, stationary and EV. I mean, is it fair to say that the EV side is going to be the majority? Or is station An area where there actually is an opportunity beyond what you've got in Japan.

Speaker 4

And maybe I'm just curious, could you remind me how the economics might Differ between both of those applications?

Speaker 5

Yes. So I mean, I think that what we see in general is that on a site, You might have some stationary storage that is deployed the same time as the EV. And so we want to be able to provide your unidirectional, bidirectional and EVs and Storage, so we definitely want to be providing extract value from all those resources. But what we see very often is that the storage Very rapidly, is dwarfed compared to the size of the capacity of the EV deployments and is really there to provide more resiliency. Now, Ideally, what we have done, like in Japan, where we have some quite a bit of storage, we also like to look at multipurpose storage, right?

Speaker 5

Not just one thing you can do with that storage, but how do you provide multiple services, which is what we are doing with EVs, right? EVs, The primary purpose is to drive around, but then we are doing a variety of grid services depending on the region where the vehicle is connected. So we really look at the stationery storage in the same way as we are looking at EVs and developing multiple purposes.

Speaker 4

Got it. But you would say that, I mean, not surprisingly, EVs, that's the real growth driver. That will be the vast majority of Under management as we look at it a couple of years. Okay. All right.

Speaker 4

I appreciate it. Thanks.

Speaker 3

Thanks,

Operator

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

Speaker 3

Hey, how are you? Hi, Brian. Hey.

Speaker 6

So looking at your order momentum in 2Q, those are impressive stats. I guess, how do you expect that to continue through the back half of the year? And with the EPA rebate deadline moving later this month, would you expect that to also potentially spur demand in the back half?

Speaker 5

I think I can start and then David I'll let you follow-up. But I think this makes orders lumpy, Right. So that's and we saw that last year. So on the one hand, it's great we have this backlog that we are delivering on to. This new round of EPA is ready to build next year's deployments and we are very excited about It's a different rule, it's a different way of deploying it, it's more larger projects.

Speaker 5

But we are very excited about the opportunity associated with those.

Speaker 3

Yes. And I'd add to that, Brian. Just to reiterate what Gregory said, our backlog is up about 50% because we're seeing such strong order activity, Really helps us think about our revenue generation for the balance of the year that we already once you get the contract locked in, Just a matter of timing. And as we said in the prepared remarks, roughly $3,000,000 of that's likely

Speaker 6

Yes, very good. I guess just turning to your AI initiatives, why did you Roll those out in the Nordic countries and should we expect to see that technology further integrated into the United States in the near future?

Speaker 5

For sure, question 2 for sure is going to be it's being rolled out everywhere, right. The reason why we started Novartis is because it's a combination of 2 things, right. 1 is the fact that we are bidding in markets there. And so forecasting the market is something that is important In our demonstration here of the rollout of the AI platform, combined with the forecasting of the vehicles, and so that's why we like there. But Think about if we are capable of forecasting when the vehicle is going to be there, when they're going to be leaving, the amount of energy they're going to need to recharge And we feel able to forecast energy prices, sorry.

Speaker 5

We are able to basically procure energy very early For our customers, I mean, 72 hours in advance for potentially, so that we avoid being exposed to potential volatility on the energy costs.

Speaker 6

And finally for me, regarding the California school bus market, it's very likely that California leads the way in electrification for school buses. I know that you have some good relationships with school districts In that region, do you think you could quantify the potential size of that market for us?

Speaker 5

So I mean, we look at it in different ways. What you look at it as, first of all, as you might know, there is 480,000 school bus On the roads in the U. S, they usually have a life of 12 years, a replacement rate of about 40,000 per year, those are average, right, because there is volatility. So it's a very large number, 24,000,000 kids that are transported by school bus Now there is a variety of how those buses are being run. You've got 3 large fleet owners, First of them being an address and owning about 50,000 scopuses, but you got a bench of medium operators That are running fleets of 10 to 300 School Bus, but the bulk of the market in terms of who owns the buses are the school districts.

Speaker 5

The bulk of That market is the smaller school districts that are very distributed. It's 274 1,000 school buses that are owned by small school districts. So it's a very, very, very smart market and how you're It's important. At the end of the day, it's really about how do you make the transition from internal compression engine to electric As easy as possible for those either fleet operators or school districts. And that's why we are in the process of producing Our next we'll be raising in September next generation platform that is really integrating a lot of what we call the charge managements, Helping the school districts understand where the bus are going to be ready, if there is a problem, how do we how do they deal with it?

Speaker 5

And the V2G piece is fully integrated into that and help reducing the cost of owning those vehicles. But the priority for our school districts is number 1, making sure the bus is ready for the driver, so that driver can be on time. Number 2, if there is a Problem, it needs to be fixed as soon as possible, so that they can go back on schedule.

Speaker 6

All right, very good. Thank you. Thanks, Brian.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Gregory Pellon for any closing remarks.

Speaker 5

Thank you everybody for listening to us today and we are looking forward for our next call in Qumor Solana. Thank you.

Operator

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

Powered by Quartr
Earnings Conference Call
Nuvve Q2 2023
00:00 / 00:00