Q3 2022 Nuvve Holding Corp Earnings Call
[music].
Good day.
Welcome to the New Z Holdings Corp, third quarter 2022 earnings call.
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Now I'd like to turn the conference over to Eduardo. Please go ahead.
Thank you.
<unk> call are Gregory <unk>, Chief Executive Officer, and David Robson, Chief Financial Officer.
Earlier today <unk> issued a press release announcing its third quarter 2022 result.
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 wildly.
While these forward looking statements reflect <unk> 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 the movie silence.
And in the earnings release issued today, which are both available on our website.
<unk> 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.
<unk> Executive officer.
Gregory.
Thanks, Eduardo and as well we appreciate you joining our third quarter of 2022 rigs at school.
Last time, we focused on several favorable legislative developments and in the third quarter. This momentum continues to build.
In September the bite and Harris administration announced that it would be doubling EPS clean school bus rebate Ord to nearly $1 billion as part of the first round of funding for this program.
In October we were thrilled to see the first allocation concentration with your word of $913 million in grants to 389 school districts.
These grant funding will support a purchase of nearly 2000 Fireeye at school buses and provides rebates on charging and hardware infrastructure.
<unk> is proud to have somebody who were presented and school districts and Dr. Grant application process.
I knew you guys. The only charging station providers have been granted a testament, we believe the strength of our technology strong track record and EV infrastructure project execution and expertise in grant writing.
Our was associated with new the expected to translate to $22 $9 million in funding for 61 Electric school buses manufactured by <unk> partners and $1 million to $2 million in funding for movies. The high powered by directional Chargers and associated charging infrastructure site design and development.
Please note that this revenue figure translates to 20000 in the hardware and infrastructure rebate money per bus, which is the maximum allowed per vehicle to this program.
Do you see charterers to proceed costs more than twice that figure and so maybe its potential charging station sales, although a daughter should ultimately be more than double the size of the grant money awarded.
Additionally, once deployed.
Electric school bus could earn potential recurring future grid services over their estimated useful life of 10 to 12 years.
Critically the potential benefits annuity for the EPA Clean School bus program go Beyond award, we help secure directly on Friday.
Another two school districts that secured funding for 28 school buses, where we were not named as the grant rider, but for which we played an instrumental role in the process.
With a list of China and Asia in districts published and through our existing relationships. We're confident that we will be able to partner with a larger number of grant recipients and the 10 districts that were presented in the grant writing process and the additional to that we did.
It remains early days, but our team is hard at work leveraging relationships to ensure that the movie is in prime position to secure secure charging outerwear and associated infrastructure purchase order with all their graduate students.
We expect purchase orders for the hardware associated with the 61 basis on which we were a crime grant rider and incremental customers, we expect to win could be finalized in the coming quarters.
Looking further out the EPS School bus program is starting to provide a total of $5 billion in funding by 2026, meaning an additional amount of approximately $12 million in grants and rebate money as yet to be awarded.
We would expect the next round of grant collection and funding to occur in 2023, and probably be to aggressively participate.
As evidenced by the program electrification and electrification of school buses market particular continues to benefit from huge secular tailwind.
However, it is not lost on us that progress. The next refining the school bus market has been much much slower to come about and we and our shareholders would have expected.
This is without a doubt disappointing.
And Unfortunately, this was particularly evident in our third quarter results, which were not as we would expected as David will elaborate on.
In particular, we believe the slowdown in our business was due to the customer is going through the paperwork process and awaiting the issuance of grant awards prior to making commitments in other words, the clean plus program created a bit of a dichotomy in FX and we expect there to be some pent up demand in the next few quarters.
However, we believe the slowdown and also reflects the continued impact of supply chain issues impacting the school bus market, which is drastically waiting on the vehicle rollout as well as inflation and general economic conditions.
Supply chain issues I've, no doubt, becoming crazy tiresome and just about anyone can relate to these from day to day life. Unfortunately, there remains very much a reality.
Just prior to the beginning of earnings season, we're reminded of this when one of our large U S automakers.
It was waiting on parts on tens of thousands of vehicles.
Strategies can vary from the very small mundane parts to be a componentry.
Ultimately that's not matter if a vehicle is 99, 9% completed it is 100% of any company.
It may seem there at 99, 9% of completion for many many months.
As it relates to maybe the first step in being able to turn on BTG project is the availability of the <unk>.
Vehicle themselves and the charging infrastructure.
Newbie manage invest very well and we are generally not slow down the process when it comes to being in a position to provide the charging infrastructure.
Or is it a bunch of Oems and especially electric school bus makers, however seems to have been and remain particularly hard hit.
We see when we visit our partners facility and we need from them on are there any conversations.
Read through these just about one year ago, we had an entire first is did you have at the Bluebird production facility in Fort Valley, Georgia.
Upon close for up to 200, <unk> charging expansion to the south.
Bluebird atrium buses coming off the production line.
Given the significant shuffle Electric school bus production really fair expectation there simply are no buses to go into those levels.
Roll up the manufacturing line that typically straight off to their customer.
We remain constructive about the long term potential of this project and additional programs to bluebird, but given the rise of bus rollout and overall environment, where demand outstripped the supply of electric school buses and shifting priorities of the company. We are unable to predict the timing of getting <unk> up and running.
In addition to supply chain issues cost creep has been a real issue with the price of a school bus climbing to well north of $400000. In fact, we have even heard that Nick best of dealers attempting to transact figures not about $500000.
For perspective. This compares to the mid $300000 range, one to two years ago, an expectation about price tags with declines of 300.
$1000, but at this point in the cycle.
We remain confident that electric school bus adoption is coming and coming in a big way in the U S.
As such we are dedicated to and is well positioned.
However, with our <unk> technology to play a key role in the multiyear rollout.
But when you layer in the recessionary concerns on top of the factory just discussed it is clear that the pace of electric school bus adoption simply going to continue to move at a more sluggish space than we had previously envisioned for the foreseeable future.
Given this backdrop, we have been distinctly focused on diversifying our new terms focus towards market that appear to be more nimble, which can move more quickly.
Over the past several quarters you have heard me speak about our pursuit of a variety of use case.
Markets and partnership types.
Feel particularly optimistic about a couple opportunities that appear to be evolving more quickly than the U S School bus market. This includes with large names in the international markets, where we already have longstanding presents to briefly expand on it on these one of these involves working with other charging station OEM to interface with that you need to actually in process.
<unk> already in place to layer in their Vitucci platform.
These startup program can accelerate the growth of grid services route grid service revenue and tend to be a big asset to us since he is without reliance on large scale of hardware and vehicle rollout.
The other part the other opportunity is in the consumer space, we hope to have some exciting announcements in this end market in the coming quarters that could add significantly to our megawatts under management, which David will speak more about.
Do you think the macro and industry specific challenges just laid out.
And as we remain focused on diversifying our business, we have implemented steps to reduce costs in order to maximize our liquidity.
<unk> include one electing to not restart select up in roles, which resulted in a decrease in head count in the quarter was.
Restructuring and better integrating levo.
Shifting a greater portion of executive leadership compensation to equity.
Reducing legal expenses.
And reducing the size of the board of directors.
I'm happy to say that in the third quarter, we saw some of those early impacts on both the seasons.
In the third quarter operating expenses, excluding cost of sales declined by $1 4 million to $8 9 million compared to $10 3 million in the second quarter.
Maybe we'll get into more detail on this original themselves, but first let me briefly recap our major enhancement in the third quarter 2022, and a few other recent developments.
Our accomplishment during the quarter included one finalizing a partnership with San Diego gas and electric is the journey to pair our BTG pad problem with the emergency load reduction program.
RFP and picking up a pilot program with Cowen bodies School district in San Diego.
To securing another critical energy company partnership this one with disrupt to help school districts excess available grant funding from both federal and state agencies.
Mm three entry entered into an Mou with the main maritime Academy to collaborate framework of EQT across maritime applications.
We provided more color on each of these announced during our August earnings call.
Since then.
We built on the momentum with SD Janney encountered by school district by announcing the deployment of eight BTG enable Bluebird Electric school buses in the San Diego County, there's runway not unified School district.
<unk> any Jack connection activities were completed with the journey and the buses that are ready to produce valuable grid services revenue streams through the ERP program.
These programs represent Bluebird largest commercial BTG project for school district to date.
And on the vitro partnership were already saying its benefit.
This trial was actually instrumental in securing our EPA clean School bus program wins in Texas across to School District <unk>.
Our largest win of all presenting 19 buses for the sudden Philippe the radio School district.
All sorts of all of the 61 basis, especially if they did.
In securing funding for 'twenty, two words, the excess would be spread out.
To wrap up.
Can you put a governor Newsome said in September Press conference on the climate protecting legislation called the state vehicle to grid capacity is a game changer.
Technology remains the best in class and we continue to believe we are the go to provider for those who are looking to maximize the benefits of electrification and we continue to evolve our platform through partnerships such as our JV with 2021 about AI, which is allowing us to further improve forecasting generating and through resource standardization via partnerships.
As the one we switch both of which were discussed earlier this year.
Market timing as not being on our side, but we are controlling what we can control and remain incredibly confident in and excited about the potential that lies ahead.
An expanding set of market.
Finally, before turning to David I spoke about our capital raising initiatives last time, so I will not to be busy per action to our rational but at one point of clarification.
It was not raised any pumps into reduced the diet offering announced in late July . However, we believe a large shareholder drastically reduces position for one specific consideration during the past couple of months, which has put particular pressure on our shares during the already challenging market.
Again, Unfortunately timing, but to look ahead and focus on what is best for our business to manage the near term and build for the long term and.
And with that I will now turn the call over to David to discuss that with them.
Thanks, Craig I'll start with a recap of third quarter 2022 results in the third quarter, we generated revenues of $554000 compared to $1 2 million in the third quarter of 2021.
Revenues represented 68% of the total decline with the balance of the decline primarily attributed to lower hardware revenues.
As Gregory stated hardware revenues in the third quarter were negatively impacted by our customers' anticipation of teacher Grant awards, thereby delaying their decisions to place orders for hardware in the third quarter.
As we have noted in the past, we expect grant revenues to be a smaller part of our business compared to last year, which is why grant sales declined in the third quarter compared to the third quarter of 2021.
Margins on product and service revenues were 43, 3% for the third quarter of 2022 in line with 43, 2% for the third quarter last year.
This is a marked improvement from the low to mid single digit percent margins reported over the past three quarters the.
The improvement was driven by a greater contribution from AC charter sales that carry higher margins compared to DC Chargers and a greater proportion of revenues coming from service revenues.
On a sequential basis versus the second quarter gross profit dollars for similar despite the revenue decline.
As we have stated before DC charger gross margins had standard pricing generally range from 20% to 25% while AC charger gross margins are approximately 50%.
But in dollar terms or a smaller fraction of revenue of the DC charger.
Operating costs, excluding cost of sales was $8 $9 million in the third quarter of 2022 compared to $8 2 million in the third quarter of 2021. The increase was primarily attributed to higher rent payroll and consulting expenses.
Set by lower lower board related stock compensation expense.
On a sequential basis versus the second quarter of 2022, we had a $1 $4 million decrease from $10 3 million Gregory alluded to some of the steps we have taken to reduce costs and these include payroll.
Travel and board member stock compensation expense.
Cash operating expenses, excluding cost of sales stock compensation, and depreciation and amortization was $7 7 million in the third quarter compared to $8 3 million for the second quarter of 2022 again, reflecting the steps we've taken to reduce costs levo.
<unk> incurred $6 million in operating expenses during the third quarter.
Other income was 258000 in the third quarter of 2022 versus 478000 in the year ago quarter.
Net loss attributed to newly common stockholders for the third quarter 2022 was $8 4 million compared to $7 million for the third quarter of 2021.
Now turning to our balance sheet, we had approximately $21 6 million in cash as of September 32022, excluding $5 million in restricted cash.
Queen our registered direct offering or RVO and aftermarket program, we raised approximately $15 million in the third quarter.
To reiterate what Gregory said, we did not raise any additional capital after the RVO.
Total cash increased by $6 7 million during the third quarter, primarily attributed to the $15 million raised through financing activities offset by $7 9 million in cash losses, and $9 million of cash used for working capital.
We expect cash operating expenses, excluding cost of sales in the fourth quarter to trend in line with the current quarter is not lower that being said, we have levers we can pull if necessary to lower our operating expenses, even further based on business performance.
Inventory increased by 1 million to $11 8 million at the end of the third quarter from $10 8 million at the end of the second quarter 2022.
Driven by the receipt of additional DC charter inventory.
Future quarters, we expect inventory to decline as we sell through the higher than normal levels of inventory, we are carrying on our balance sheet.
In the latter part of last year through this year, we purposely built up our inventory to ensure sufficient product on hand to meet customer demand given the industry wide supply constraints and longer lead times required to receive product.
Accounts payable was reduced by approximately 50% to $1 7 million at the end of the third quarter from $3 3 million at the end of the second quarter, primarily due to legal and professional fees paid during the quarter.
Now turning to our 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 <unk> Chargers, which are primarily deployed in the electric school bus market.
The U S D. One gene Chargers, which primarily reflect light duty fleet deployments in Europe .
As well as to some extent in the U S School bus market.
<unk> stationary batteries currently these chargers and batteries are located throughout the United States Europe and Japan.
What's under management in installed capacity increased five 2% to $16 three at the end of the third quarter 2022 from $16. One at the end of the second quarter. This was comprised of eight two megawatts from stationary batteries five four megawatts from AC.
Chargers and $2 seven megawatts from DC Chargers.
We see significant opportunities ahead to increase our megawatts under management based on the commercial proposals we are working on.
In both North America and Europe .
This brings me to estimated future grid service revenues associated with our megawatts under management.
And megawatts to be deployed which is based upon a combination of contracted grid service revenues and merchant exposed revenues, depending on the geographic regions of our deployments are grid service revenue opportunities will vary. We are currently seeing grid service revenue opportunities ranging between $85.
Per kilowatt year up to $300 per kilowatt year in key markets, we are focusing on.
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 over a period of 10 to 12 years.
At September 30, our hardware and services backlog was $4 2 million from $3 9 million on June 30.
Lastly, before turning the call back to Gregory recall that in October we approved the appointment of Deloitte <unk> Touche.
As our company's new independent registered public accounting firm, we are proud to have them on board and with that let me turn it back to Gregory for some closing thoughts before we go to Q&A Gregory overdue.
Thanks, David to conclude we're disappointed by this slowdown have you done the third quarter results, but we are taking steps to adjust for what is proving to be a much slower ramp up in the school bus market given it's still that much supply chain Nbn economic backdrop.
This includes improving our cost structure and maximize efficiencies in our business in the near term and progressing on opportunities outside the school bus market and outside the United States. We expect to have some exciting announcements on the ladder in the coming months.
Our pipeline of potential awards remain exciting and we look forward to continuing to evolve our business in a bidding you in future quarters.
Thank you for your attention and we would like to now turn the call back to the operator to begin our Q&A operator.
Thank you.
We will now begin the question and answer session.
I'll ask a question you May press Star then one of your telephone keypad.
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To withdraw your question. Please press Star then two.
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Cause momentarily to assemble our roster.
First question comes from Eric Stine with Craig Hallum. Please go ahead.
Hi, Greg Hi, David.
Hi, Eric.
Hey.
So I'm curious commentary in the consumer space.
Just looking for some more details there.
Also notice recently.
San Diego gas and electric program Gms involved.
I know this is a program a program that you are also involved in seeing the small details and maybe how that flows into your consumer outlook.
So I mean, you've got developed program might peak.
For example, which we have been doing with the school buses. It's an aggregation program. So really you can do it with any type of resources.
Vehicle.
And and you can basically you know a mix for example school buses with consumer vehicles that would be.
This house.
The other pieces PGN <unk> for example has announced do you could you tell me.
Which basically are.
Cost.
Bringing kilowatt hour inside on the meter but also.
Revenue you can generate by pushing back to the grid, depending and those will obviously depend on the moment so.
There are many programs now.
As I said from the beginning we're not just doing business in the U S. We also doing business in Europe .
In Europe , it's a different set of <unk>.
Services that can be performed but you've been doing <unk> doing frequency regulation in Denmark, we have done it in.
In the Netherlands.
We've also done quite a bit of distribution grid services in the U K.
And we see that across the different countries in Europe , where we can where we can do business the combination of.
For example, a self consumption.
With some type of market access.
But obviously the best way to do those things is to partner with some Oems that are going to bring all their horsepower to that.
Right.
I would assume and maybe when youre alluding to some announcements in this space.
Near term.
Assume that essentially what you are referring to.
Yeah, you bet.
Your line.
Right now.
Yeah.
Gotcha, Okay, maybe.
Just talk about the pipeline a little bit.
Talking about megawatts under management, you talked a lot in the backlog, but I. Thank you Bob.
The pipeline.
I'm just curious what youre seeing there maybe.
Good day.
Just trends you're seeing here near term in June 2023.
Yes.
So I think if you look at our existing no matter, what the new management, you get a mix of things that get.
Some light duty vehicles that we had launched in Europe .
Maybe maybe duty school bus is a combination of bidirectional implementation and sub unit action only penetration and then you've got the stationary storage.
Those were kind of the three sets of the stationary storage services UCSD.
Japan.
Now the way we are also expanding now AIDS.
Scott earlier.
One is with combining with companies that have infrastructure, that's already out and back on the scale that infrastructure.
I know think about high power charging stations.
Sure.
Bus depots these type of implementation and again, it's not just the U S vision here.
Usu attribution.
And then the other piece is the consumer piece.
Where we deal so adding those resources and we can do that because of how we've been integrating our platform.
That's true.
For them.
To work on the broadcasting and establishing the capacity that back and will be available through that.
So that's really the way we are expanding year re leveraging partners.
Infrastructure that either already out about the AD willing out right now and it's not a it's a new idea. It's just that people have to come to the realization that hey, it's actually not that easy to do and I'm better off working with movie about I'm trying to do it on my own and lose a lot more value.
I think this has that mindset is changing that we see now.
And that is putting us into the position of integrating our platform with those resources to accelerate the performance.
Got it.
Maybe I know in the past classroom pipeline I think.
Around $225 million and given not necessarily a new pump and spud an expanded focus.
Is there a way to quantify that pipeline and maybe how it expanded as a result.
Yeah, Eric This is Dave we have given out that in the past.
Pipeline is strong.
<unk>.
Although the timing is always difficult to predict and as Greg we spoke.
Both in the deployment of hardware in North America and increased services on top of that and in addition, we're not deploying the hardware.
Going directly where existing hardware.
So.
I think youre right.
I said our.
Pipeline is just as robust as it was.
But we haven't been giving out that number as of last night.
And let me add one more thing just right.
What <unk> seen is that the.
Q3 was very slow on the school bus because everybody was expecting the outcome of the EPA.
The outcome of the EPA is 1 billion, which is between 20 503000 school buses, which orders are going to be placed over the next few months.
Each of these buses, obviously youre going to need some infrastructure, we've done our own applications, which is tiny right 61 buses plus 28, it's like 80 989 buses that we have.
Sure.
On that but what we see is also a lot of people that are reaching out to us.
So.
Okay.
Any number out of it.
The numbers we know.
Compared to what you've done so far.
But any numbers on top of that it makes a huge difference if you combine that with some other school districts that are in the process of making decisions.
Again, as David said, we see a very very solid pipeline, that's going to be firming up.
Into backlog in Q4 in Q1.
Okay. That's helpful.
Maybe last one for me can you provide more color you mentioned structuring levo.
Would just love to hear more details.
Yes.
We will live in a world with constraints right.
And so when you have constraints you look at what.
Is the best use of all the resources that you have around you.
So.
No.
As you.
We are working with legal and looking at working on a few deployments.
We clearly saw that it was still a similar cycles available and the team.
And we.
No. So so for example, Maggie.
Reserve.
Chief commercial officer at Levo.
That was also a step into b.
In charter well to sales and that's because.
She has the skills such as divisions of <unk>.
Together.
And Rita <unk> level.
<unk>.
Value proposition.
It's pretty close right either levo, that's providing the financing or no.
Value generative through Degreed services goes to.
On the buses.
<unk> position is very similar it's about reducing the total cost of ownership of the Cvs.
And so thats really what <unk> been doing bringing more professionally I'm indifferent.
<unk> of the organization by leveraging the skill set of before Keith remember that we have.
In the Levo team.
And that focus on the key aspect of what we are doing the sales.
Of the charging stations into services.
Addressing all the revenue of clustering on the grid side.
Our procurement strategy procurements and relationships with the Oems as.
As well as the project financing, which are the core competencies that were associated with the default members.
Closer to movie in this process.
We reported it pretty much every quarter, we spend about five to 600000 and supporting in vivo and like Gregg said fantastic leadership on that team as well as resources. So how do we leverage that with the movie.
Just really one company and that's what we did over the quarter. So part of the way you see our expense structure coming down.
We're leveraging our resources more efficiently.
Okay. Thank you.
Thanks, Greg.
If you'd like to ask a question. Please press Star then one at this time. Our next question comes from Brian Dobson with Chardan capital markets. Please go ahead.
Hi, Thanks, so much for taking my question.
Good evening.
Relative weakness in the school bus market as Youre looking forward do you contemplate more software licensing deals like the one that you have a ballpark.
Or other kind of charging providers.
I mean so.
We.
Our core business is really to provide a degree of services because there is some complexity behind that right.
And that is looking at how we are sharing the revenue with our partners.
Now the way this gets rolled out you've got the licensing or.
Our service.
I think that can be very close but.
I mean, we are looking.
Looking at all the opportunities to grow and accelerate that.
The growth of our business.
But we think that the complexity of the grid.
Constipation grid service participation combined with the uncertainty associated with the vehicle.
Requires quite a bit of our involvement at this point.
Is that answering your question.
Yes, it does.
Much.
Hey, Brian .
One thing to add to that and Gregory alluded to earlier, which is what we believe as we've gone into the North American market.
Deploy the hardware and then on top of that comes good service revenues, we're seeing more and more opportunities where customers are coming to us to utilize our platform based Gregory said they have the hardware already.
No.
It's almost as you've asked your question, which is so you will see.
More opportunities for us to deploy our platform faster with not necessarily having to play the hardware to go with it so that enables the ability to scale at a faster pace.
Thanks very much.
This concludes our question and answer session I would like to turn the conference back over to Craig <unk> for any closing remarks.
Great.
Thank you everybody and we.
We're looking forward to sharing more of the progress we are making in these other areas new areas of focus that we shared with you.
Very exciting developments, we'd be EPS funding.
The school bus market.
And again this is the first round.
$4 billion, that's going to be rolled out over the next three or four years and then just give us an idea of the scale of the business as opposed to the category. So I want to thank everybody and looking forward to sharing more with you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.