Nuvve Holding Corp (NVVE) 2022 Q2 法說會逐字稿

Good afternoon and welcome to Nuvve Holding Corp's second-quarter 2022 earnings call. As a reminder, this conference is being recorded.

It is now my pleasure to introduce Eduardo Royes. Thank you. You may begin.

Thank you. On today's call are Gregory Poilasne, Chief Executive Officer; and David Robson, Chief Financial Officer of Nuvve.

Earlier today, Nuvve issued a press release announcing its second-quarter 2022 results. Following prepared remarks, we will open the call up for questions.

Before we begin, I would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Nuvve's best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking projections. These risk factors are discussed in Nuvve's filings with the SEC and in the earnings release issued today, which are available on our website. Nuvve undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances.

With that, I would like to turn the call over to Gregory Poilasne, Chief Executive Officer of Nuvve. Gregory?

Thanks, Eduardo, and good day to all. Thank you for joining us as we review our results for the second quarter of 2022.

I would like to start today's call, as I often do, by discussing some high-level secular tailwinds that underpin our enthusiasm about the outlook for vehicle-to-grid technology adoption. And now, through our platform, we believe that Nuvve is well positioned to play a key enabling role in both vehicle electrification and improving grid resiliency.

A few weeks ago, we were thrilled with the surprise news out of Washington, DC that the climate spend bill was back on as part of the Inflation Reduction Act of 2022. Included in this package are not only proposal that we extend and extend credits for EV purchasing, thus making EVs more affordable, but also clearly that should spread the continued buildout of EV charging infrastructure, which is critical to EV adoption.

EV charging is covered by what is commonly referred to as a Section 30 C tax rate, also known as the alternative fuel vehicle refueling property credit. Under the new proposal, factories that are qualifying business would receive for the cost of purchasing. And installing charging station, however, would go up significantly.

Further and critical for Nuvve, the bidirectional charging equipment that allows for V2G, specifically named as grant eligible, the new bill, which was not expected to be the case before.

Another very important tool for the potential faster adoption of V2G, and more broadly, EVs, is the increased availability of grant funding. We are pleased that the second quarter saw important progress in that front as well.

On the back of the Bipartisan Infrastructure Law of 2021, the Biden-and-Harris administration announced in May that the EPA was making [$500] million available for school districts and other eligible school bus operators to begin replacing the nation's fleet of school buses with clean, American-made, zero-emission buses over the next five years.

Our experienced grants and fundraising team has been hard at work with partners and customers to assist them in applying program through the program. As of today, we have submitted 174 grant applications on the ESBs, or the occurrence of more than 10 megawatt of capacity, with more in the works prior to the EPA's August 19 deadline.

While we don't expect all applications to receive the grants, the sheer number of partners we are working with leads us to believe that a fair share of them should be successful. By managing this process for them, we position ourselves well to receive the associated V2G charging outwork orders when they do win.

We expect EPA to announce the winner in the fourth quarter of 2022. And for the grand prize, they tend to begin to place orders for the electric school buses and associated equipment such as V2G hardware soon thereafter.

To summarize, it is no secret that the federal support can play a critical role in the speed with which electrification scales up. And political uncertainty and logjam can be the enemy of planning and decision-making for those looking to rectify.

With these developments of the past few months, the healthy profitable climate tech support over the near and long term in the US truly does feel brighter today.

Before turning to results, I would like to briefly address the rationale for our recent capital raise in light of where Nuvve stand today. Recurring capital needs are inherent to emerging growth companies, and we've mentioned before, wins typically take time to convert to revenues.

The supply chain challenges over the past 18-plus months have drastically slowed the rollouts of the necessary hardware, whether it be electric vehicles themselves or charging equipment, relative to the plan and normalized production capabilities.

Further, even once we have sold, installed, and commissioned charging station that are integrated with a Nuvve V2G software, generating revenue from any one-time sale of chargers must wait on interconnection queues and other elements of the broader V2G ecosystem to be in place before we can actually fully operate, and thus generate material revenues from V2G activities.

Despite this backdrop, we must continue to invest in and position our business for the future, whether outright through investments, in key partnerships, sales and marketing efforts, or by occasionally electing to strategically sell hardware at a discount because we see compelling multiyear recurring revenue opportunity once the entire V2G ecosystem aligns for that particular customer or project.

The equity market has not been kind, for the company is looking to raise money in 2022 as a result of various macroeconomic factors. However, we cannot risk jeopardizing our business plan and our path forward by waiting for more favorable equity market backdrop, over which we have no control to make certain critical investments.

The additional capital allowed us to expand our backlog and revenue potentials. As such in the second quarter, we enter into an at-the-market offering program or ATM program, as previously discussed, and to date, have raised $3.8 million via that program.

Further, a few weeks ago, we announced that we closed a registered direct offering that resulted in an additional $13.1 million in cash to Nuvve's balance sheet. David will touch more on these in a few minutes. But the additional -- the addition of this, approximately $17 million, is key to funding future growth.

Turning now to a summary of our major announcements in the second quarter of 2022. Accomplishments during the quarter include: one, our qualified -- a qualification to start commercial operation in the Japanese energy markets; two, our entry into an MOU with the US DOE to accelerate V2G technology, which I discussed in my opening remarks last time; three, an agreement with Power Electronics to add Nuvve V2G certified capabilities to their bidirectional chargers; four, in alliance with Cenntro to bundle Nuvve charging packages with their US commercial fleet product lineup; and five, executing a collaboration agreement with 2021.AI. We provided more color on each of these announcements during our May earnings call.

Since then, in late June, we announced another exciting partnership, this one with Switch, a leader in charging infrastructure operation and maintenance software. This is yet another example of us investing in the future to ensure that we extend our lead and further build our competitive advantage in V2G.

Switch has developed an operating system that goes inside the charging station that we believe is far more advanced than anything else in the market. The cloud platform is built on the latest open charge point protocol or OCPP which version -- which is version 2.0.1. As a result, they have the world's first and only charging platform that is native to plug and charge and vehicle to everything or V2X.

We have been working with Switch for the last three years with a goal of standardizing charging solutions and have elected not only to integrate our GIVe platform with their platform, but have also made a strategic investment in the company. We believe that getting further upstream and into the infrastructure, as we are doing here, can only help our ability to scale up faster, and by, in effect, sponsoring them. We are not only moving upstream, but we are also building a competitive moat against other V2G aspirants.

Lastly, we believe Switch is a great channel partner for us to expand our reach with OEMs and other players in the V2G value chain.

Moving along, the momentum has continued in the third quarter. As last month, we disclosed an agreement with San Diego Gas & Electric, SDG&E, that powers our V2G platform with the utility's emergency load reduction program or ELRP.

Recall back in July of last year, we disclosed that we have been chosen as the V2G platform provider for the Cajon Valley Union School District school bus program. Since then, six high-capacity charger were installed at their bus yard in San Diego.

These achievements show what can happen when we partner with utilities. Through the ELRP program, electric school bus fleets, equipped with V2G charging through our GIVe platform, are capable of -- and permission to provide energy back to the grid during emergency load reduction events, helping to avoid costly and inconvenient rotating outage and ensure service reliability for SDG&E's customers.

In return, qualifying SDG&E customers can receive $2 per kilowatt hour for verified export load/load reduction. The ELRP program represent a potential revenue opportunity per bus of $7,200 per year or $100 per kilowatt year.

For some background, the California Public Utility Commission or CPUC created the ELRP in 2021 to pilot a new demand response approach during peak summer electricity usage periods from May through October for both commercial and residential customers. Our partnership with the Cajon Valley School District marks the first school bus fleet to be integrated into the ELRP in California. With all of the infrastructure and paperwork in place, we are able to start generating great service revenues immediately, although at marginal levels, given the relatively small size of the project.

Combined with deployments underway at Cajon Valley, Ramona, and San Diego School Districts, this is about 1.7 megawatt of capacity that is planned to be available over the future months. We see a growing set of opportunities elsewhere in California and eventually across other states that are likely to implement similar programs in their efforts to combat the increased strain on the country's aging grid and reverse the worsening impact of climate change on grid operability.

Building on the momentum with San Diego Gas & Electric, we have just disclosed the partnership with Vistra Corporation, one of the largest energy generation and retailer headquartered in Dallas, Texas. This partnership aims both at trading channels, tolerability provided charging management system to the owners and drivers as well as creating access to multiple value by providing grid services focused in Texas.

As you might be aware, the energy market in Texas has been extremely volatile with peak consumption, achieving levels never reached before. Nuvve and Vistra are initially targeting school districts in the Vistra territory, and we are jointly developing programs using both EPA and local subsidies as well as financing package.

Our goal is to deploy 250 school buses over the next 18 months of 15 megawatts of power capacity, which provide us the authority to generate future fleet as a service and grid service revenues.

Finally, earlier this week, we announced entry into an MOU with the Maine Maritime Academy to collaborate on a framework of V2G across maritime applications. As part of the program, they will expand our current academy and certification programs to include delivery of workforce training in V2G-related data science, operations, cybersecurity, and artificial intelligence. We thought the grid solutions could enable ships and other vessels to store and give energy back to the grid, the airports, islands, and waterways. This builds on commentary you've made in recent quarters about continuing to build out academy partnership and consistently exploring new market opportunities for V2G.

Turning now to megawatts under management, which is, we view as an indicator of the potential revenue growth translated into our commercial wins. As of June 30 of 2022, we had 16.1 megawatts under management installed. This reflects roughly 10% increase from March 31, 2022 megawatts under management of 14.7, and a 132% increase over the 6.9 megawatts under management on June 30 of 2021.

So to wrap up, over the past several quarters, you have heard us discuss a variety of partnership types: commercial, operational, technology, et cetera. And we are incredibly excited about the long-term opportunities that each of these announcements provides as vehicle electrification and V2G adoption play out over the years ahead. Each of these agreements is additional for the growth that we believe lie ahead of Nuvve.

We continue to execute under recently and previously announced agreements and partnerships as all of the pieces of the V2G puzzle come together. At the same time, we continue to chase additional partnerships and customers that we believe will further strengthen the outlook for our business.

We look forward to working with current and prospective partners and continuing to have exciting news to disclose in the future.

I will now turn the call over to David to discuss our financial results before I wrap up with some prepared remarks and we open to Q&A.

Thanks, Gregory. I will start with a recap of second-quarter 2022 results.

In the second quarter, we generated total revenues of $1.3 million compared to $981,000 in the second quarter of 2021. Within this increase, product and service revenues increased by nearly 40% on a year-over-year basis and represented 82% of total revenues. We also experienced a 9% increase in grant revenues. Product and service revenue should continue to be the lion's share of revenues going forward.

On a sequential basis, total revenues fell by approximately 45%. As noted on our first-quarter call in May, first-quarter 2022 results were unique as they benefited from the sale of five electric school buses, which did not repeat in the second quarter.

Margins on products and service revenues were 3.1% for the second-quarter 2022 compared to 52.7% for the second quarter last year. The decline on a year-over-year basis primarily reflects a sales mix shift and our decision to engage in the sale of DC chargers at a discount in return for the contractual rights for a larger share of future grid service revenues with the particular customer.

As we have stated before, DC charger gross margins at standard pricing generally range from 20% to 25%, while AC chargers' gross margins are approximately 50%.

Total operating costs, excluding cost of sales, were $10.3 million for the second quarter of 2022 compared to $7 million in the second quarter of 2021. The increase was primarily attributable to increased cost of sales associated with being a public company, an increase in payroll costs from increased staffing, and the costs associated with Levo, which we established last year.

On a sequential basis versus the first quarter of 2022, the increase was $0.5 million, up from $9.8 million, largely due to higher payroll costs and legal costs.

Cash operating expense, excluding cost of sales, stock compensation, and depreciation and amortization, was $8.4 million in the second quarter of 2022 compared to $8.7 million for the first quarter of 2022. Levo incurred $0.7 million in operating expenses during the second quarter.

Other expense was $43.3 million in the second quarter of 2022 versus $154,000 in the year-ago quarter. The expense in the current quarter was driven by a write-off of deferred financing costs associated with the value of warrants and stock options granted to Stonepeak and Evolve last year in return for their capital commitment to fund up to $750 million in V2G-enabled EV fleet deployments of school buses through legal mobility.

We impair the deferred financing costs this quarter, primarily due to the fact that we have not entered into fleet as a service customer contracts requiring preferred capital commitments from Stonepeak and Evolve in excess of $43.6 million within one year of the deferred financing costs being capitalized. This impairment charge does not impact the existing capital commitment we have from Stonepeak and Evolve or our pursuit of customer deployments funded by this capital commitment.

Net loss attributable to newly common stockholders for the second quarter of 2022 was $51.5 million compared to $6.2 million for the second quarter of 2021.

Now turning to the balance sheet. We had approximately $14.9 million in cash as of June 30, 2022, excluding $0.5 million in restricted cash. During the quarter, we raised $1.9 million from our ATM program. In addition, we raised $2 million from the sale of 134,499 shares to our CEO and COO at a share price of $14.87 per share.

We also made an investment of $1 million in Switch, which Gregory discussed earlier. As Gregory also alluded to, subsequent to quarter end, we completed a registered direct offering of the following: 2.15 million shares of common stock, prefunded warrants to purchase 1.85 million shares, and warrants to purchase $4 million additional shares that are exercisable beginning six months from closing for a period of five years. The net proceeds to the company from this offering was $13.1 million.

Further, we retain the ability through our ATM program to raise additional funds up to an aggregate offering price of $25 million.

We used $8.8 million in cash during the second quarter, primarily attributed to $8 million in net cash losses, $3.7 million in higher working capital, $0.1 million in fixed asset purchases associated with our new corporate office space, a $1 million investment in Switch offset by $0.2 million in foreign currency exchange rate gains, and $4 million raised through financing activities.

Inventory increased by $1.5 million to $10.8 million at the end of the second quarter from $9.3 million at the end of first-quarter 2022. The increase was driven primarily by receipts of DC charger inventory that we ordered in 2021.

Accounts payable was marginally higher by $0.1 million, increasing to $3.3 million at the end of the second quarter from $3.2 million at the end of the first quarter of 2022.

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 V2G chargers, V1G chargers, and stationary batteries that Nuvve manages and can supply under ideal conditions.

Currently, our megawatts under management includes chargers and batteries located throughout the United States, Europe, and Japan. As Gregory mentioned, during the second quarter, we added 1.4 megawatts under management and installed capacity, increasing our total megawatts under management to 16.1 from 14.7 megawatts at the end of the first-quarter 2022.

I would like to point out that we have changed the definition of megawatts under management this quarter, and going forward, to only include those chargers that have been both installed and commissioned. Previously, our definition included some chargers that were not yet commissioned. We believe including only those charges that are both installed and commissioned is a better representation of megawatts under management. We made this change to how we track megawatts under management as we have recently experienced some delays for some of our customers in the time between when they are installed and they are commissioning.

The 16.1 megawatts under management was comprised of 2.9 megawatts from DC chargers, 5 megawatts from AC chargers, and 8.2 megawatts from stationary batteries. And as we create future V2G hubs, we will further expand our megawatts under management.

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.

On track and grid service revenues results from negotiated revenues per kilowatt year to be paid by the utilities. Merchant-exposed grid service revenues is projected based on a number of factors and inputs, including the types of vehicles connected to our network, the expected use pattern for those vehicles, the length of term in the customer agreements, and the geographies of the deployments.

Depending on the geographic regions of our deployments, the grid service revenue opportunities will vary. And we are currently seeing grid service revenues generally ranging between $85 per kilowatt year up to $300 per kilowatt year. 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 June 30, our hardware and service backlog was $3.9 million, consistent with the backlog at March 31.

And with that, let me turn it back to Gregory for some closing thoughts before we go to Q&A.

Thanks, David. To summarize, we continue to plant seeds for additional growth and to retain our competitive edge as demonstrated by the various commercial and technical partnerships we disclosed during the second quarter and in recent weeks.

All the while, we continue to experience healthy growth in in our megawatts under management. We are particularly pleased to see federal support over the past several months, both with the DOE grant program progressing towards realization and with the climate spend package recently announced as part of the Inflation Reduction Act of 2022.

We continue to forge ahead and build towards the future despite the uncertain macro backdrop and a pace of revenue conversion and project startup that remains subject to slippage. We look forward to speaking with you again on our third-quarter 2022 earnings call.

With that, we'll now turn the call over to the operator to begin our Q&A. Operator?

(Operator Instructions) Eric Stine.

Hi, Gregory. Hi, David.

Hi.

Hey.

Hey, so maybe first thing. I know in the past you've talked about an overall pipeline. I believe if you go back a few quarters, you sized it at $225 million. Curious if you could provide an update on that. And then I'd love to know how it breaks down high level between various applications, whether it's school bus, fleets, et cetera.

Yes. I think that, Eric, that's a good range for where it is, probably a little bit higher now.

Gregory, you want to talk about the mix?

So the mix includes some school buses. And I mean, some example -- for example, related to the Tri-School District where we are preferred now -- where Levo has a first right of refusal on buses that will be deployed there. But it also includes the -- for example, the other project that we've talked about, the deployment of the charging station in the parking lot outside of the Blue Bird facility in Georgia.

So there's a mix of facility that are deployed through that, significant amount of school bus either being produced or being actually used and some commercial fleets as well that we have not announced yet.

Yeah. And, Eric, I might add, when I think about it, maybe four or five buckets. One of which is we have kind of our day-to-day school district, small and large, that our salespeople are in the market every day that consists of our pipeline. Then we have some very large, sizable proposals in our pipeline through Levo. And then as you know, like Gregory mentioned, we've talked about several hubs that we're engaged with that make up a balance of the pipeline. Then last is we have our fleet customers.

So that's probably the four buckets to think about. Some are larger than others. I think we have a broad channel that we're going to market with.

All right. That helps. And maybe good segue to Levo. I don't know if you would characterize the -- maybe not the activity, but just the fleets that have gone that route, whether that's a little bit behind schedule or on schedule. But just maybe talk about the outlook there.

And just curious, are some of the fleets there waiting on the EPA funding, waiting to see if they get grant funding before pulling the trigger on something with Levo, or are there other limiting factors?

I think that the one that I work with the EPA, usually the school districts. And there, the EPA is a great starting point usually, but then that creates a broader discussion around hey, how do we convert your old seats?

Now there are also opportunities with what I would call fleet owner and operator or just operators, for which Levo is a great fit as a partner in helping those fleet operator and owner-operator to convert their fleets into electric. And we see some of the -- some of those opportunities through this channel.

And what's great about it is yes, you can do it with the support from some of the subsidies that are coming. But it's very often also a commercial piece that is important and that doesn't have to go to the complexity that you have to deal with when you work with the school districts.

Right, got it. No, that makes sense. Gosh, a lot of things to cover. But I guess maybe on the deal you tie up. You've got the MOU that you signed, anything that we need to look for in terms of next steps or kind of what the timing may be for that playing out?

So nothing that I can share -- that we can share at this point. But as soon as we get more resolution into that, we will be able to share more.

Okay. Worth the try. I'll stay tuned on that.

I guess last one. I saw this -- I think it was earlier this week or late fall or the previous week, but I saw that Rhombus Energy and I know that they've been one of your charging Partners acquired by BorgWarner. Just thoughts on the impact there, and is that a good thing? Is that a bad thing? How should we think about it?

It's a great thing. I mean, when you have a vendor that is a smaller player that get acquired by known -- and we're honestly -- their product is a -- this is a product that we are commercializing right now and we have some exposure on that. The other product is a -- probably [try-next] products will come later.

And so for them to be acquired by such a large organization that has been around for some time, but it also has started to work on the EV space as well, I know this is a great outcome for our relationship with Rhombus.

Okay. Thank you.

Thanks, Eric.

Thanks, Eric.

And we have no further questions in queue. At this time, I'll turn it back over to our host.

Thank you very much, everybody, and we are looking forward to have our next call in about two months. Have a great day.

That concludes today's conference. Thank you for joining. Have a pleasant day.