Nuvve Holding Corp.
Q2 2021 Earnings Call Transcript

Published: 12 Aug 2021

[Operator:]

Good afternoon, and welcome to Nuvve Holding Corporation's Second Quarter 2021 Earnings Conference Call. All participants will be 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 Joe Dorame. Please go ahead.

[Joe Dorame:]

Thank you, Gary. Good afternoon, and thank you for joining us today. On the call are Gregory Poilasne, Chief Executive Officer; and David Robson, Chief Financial Officer of Nuvve. Before we begin, I’d 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 our periodic SEC filings 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'd like to turn the call over to Gregory Poilasne, Chief Executive Officer of Nuvve. Gregory?

[Gregory Poilasne:]

Thank you, Joe. Good afternoon, everyone. Thanks for joining us today to discuss our results for the second quarter. We have a lot of exciting work and partnerships underway and are making significant progress executing on our mission to accelerate the electrification of transportation through our proprietary vehicle to grid of V2G technology. We are advancing the implementation of our technology through key partnerships and customers around the world. While adoption will take time, our pipeline is robust and our future is bright. We are delivering on what we said we would do to build our momentum. Our team is hard at work, capitalizing on the resources and opportunities we have. David and I are looking forward to walking you through our second quarter results, recent developments and outlook for the remainder of the year. Before we dive into the key developments of the second quarter, I’d like to welcome investors who may be new to Nuvve and provide a brief overview of the differentiated technology we have and how it's helping us achieving our mission. Our mission is to lower the cost of electric vehicle ownership whilst supporting the integration of renewable energy for scalable and sustainable green society. Our grid is a Nuvve's vehicle platform of GIVe refuels the next generation of electric fleets. Our proprietary V2G technology allows electric vehicle batteries to store and discharge energy when parked included that from renewable sources such as solar and wind. It enables the linking of multiple electric vehicle batteries through EV charging stations into a virtual power plant or VPP, providing billion-directional services to the electric grid in a qualified and secured manner. The transition to electric mobility is among the largest microeconomic shifts in our lifetime, with tremendous opportunity to accelerate solutions to climate change. And we sit at the center of the V2G ecosystem, bringing together utilities, OEMs, hydro providers and fleet operators to streamline the adoption and to help integrate renewable energy, in essence, we are bridging the gap between transportation and energy. Since our founding in 2010, we have been successful V2G projects on five continents and are deploying commercial services worldwide by developing partnerships with utilities, automakers and electric vehicle fleets. There is a huge market opportunity for V2G totaling over $6 trillion. And Nuvve is well-positioned to capture these global opportunity. This is for a variety of reasons. First, our intellectual property includes key patents, making it difficult for competitors to get from V2G functions without dialing our IP. Our technology originated with an Academy Team Unit at the University of Delaware started in 1996 and not only have decades of development but 10s of millions of dollars in project funding invested prior to our acquisition of the IP and commercialization of that technology. Second, we are already qualified by multiple transmission system operators, which typically take anywhere from one to three years to get approval. With this qualification, it makes it easier for us to expand in other areas. Third, we have over a decade of experience. Our history and strong relationships with key customers optimize our market participation and value proposition. Four, we have collected a huge amount of data, which is a key element for rapid and accurate developments, as well as monetization. Because of these factors, Nuvve has a significant competitive advantage, which is a key differentiator for us. Further, our global experience allows us to bring the lessons we have learned into each new region, which in turn enables to bring the unique experience and incredible benefits of our V2G technology to customers at a faster rate. On our first quarter earnings call, we set out some of our key initiatives and partnerships. And I'm proud to say, we are continuing to make tremendous progress in all fronts, creating value for our customers and our shareholders in the near and long-term. Some of our recent highlights include the following

[David Robson:]

Thanks, Gregory. I'll start with an overview of our results for the quarter and our current financial position before getting into our outlook for the remainder of 2021. As a reminder, we completed the Levo Joint Venture on August 4th, and therefore the results of the second quarter and backlog as of June 30th are not reflective of the potential it presents. In the second quarter of 2021, we generated total revenues of a million dollars compared to half a million for the second quarter of 2020, an increase of 112%. We saw an acceleration of deployment and installation of our Level 2 in DC charging stations over the prior year in over the first quarter of 2021. As a note, we expect grant revenues to be a smaller portion of our future revenues as we deploy more hardware and grid services to commercial customers. Margin on products and service revenues was 53% for the second quarter, compared to 59% for the sequential first quarter. The change in, Q2, compared with Q1 as a result of DC charger sales making up a larger share of the revenues and carry a lower overall gross margin rate. SG&A expenses were $5.3 million for the second quarter 2021, as compared to $0.9 million in the year ago second quarter. The increase was primarily attributable to an increase in compensation expenses, professional fees, and other expenses associated with becoming a public company. Second quarter R&D expenses were $1.7 million, from $0.7 million in the year ago period. The increase was primarily attributable to an increase in compensation expenses, and subcontractor expenses used to advance the company's platform functionality in integration with more vehicles. Net loss for the second quarter of 2021 was $6.2 million, compared to $1.1 million in the second quarter of 2020. Now turning to our balance sheet, we had approximately $48.1 million in cash as of June 30, 2021, and remain in a strong position with the funding from the transaction and our PIPE investment. Inventory increased to $4.2 million at the end of the second quarter from $2.9 million for the sequential first quarter in conjunction with higher quarter backlog in industry-wide supply chain constraints, which has increased inventory lead times. During the quarter we capitalized $43.8 million in deferred financing costs associated with the valuation of $6 million warrants and $5 million options granted to Stonepeak partners in conjunction with the Levo transaction. During the quarter, we use $10.5 million in operating cash flows of which $5.3 million resulted from our net loss during the quarter, excluding non-cash charges and $5.5 million was used to increase inventories and for the payment of payables and accrued expenses related to our IPO. We use three million cash for financing activities during the quarter of which $2 million was for the purchase of stock from EDF associated with the IPO and $1 million was used for capitalized professional fees principally associated with the Levo transaction. And as Gregory mentioned, this quarter we are introducing one new metric backlog, which will be disclosing going forward. Backlog represents closed contracts that have not yet been installed and represent future revenues that have not yet been recognized. As of June 30, 2021, we had an order backlog of $6.4 million compared to $1.8 million at the end of the first quarter, which is comprised of orders for charging station hardware, ED buses and services. As we deliver upon the backlog, these products and services could be either sold out right to our customers or finance through Levo. If the contracts are financed through Levo then the revenue recognition period would be determined based on the terms of the financing arrangement. We are pleased with the backlog levels we have achieved to-date this year. And we are also pleased to see our pipeline growing an even faster rate. Before turning to our outlook, I'll briefly review some of the key financial terms of the Levo joint venture. First, as we announced last quarter Nuvve owned 51% of the common stock of Levo. Stonepeak owns 44.1% and Evolve owns 4.9%. Stonepeak and Evolve are committed to contribute initially up to $750 million in capital. And in return for their capital contributions, they will receive preferred stock units, which were which will earn an 8% annual dividend to be paid quarterly. In addition to their 8% preferred return, the preferred shareholders will also be entitled to receive total distributions sufficient to achieve the greater of a 12.5% IRR and a 1.55 times MOIC after which returns are allocated to the common shareholders. After completing the definitive agreement this month, the Levo Board of Directors was also formed and consists of nine members; five appointed by Nuvve, three appointed by Stonepeak and one independent member was appointed. Over the coming quarters we will be building out the Levo organization and management team to drive forward the Levo product offerings which we believe will accelerate the electrification of vehicles and accelerate the growth opportunities for Levo and Nuvve. We look forward to updating you along the way. Turning to our outlook for the remainder of the year. With the completion of our Stonepeak venture, we are demonstrating strong momentum across our business which is reflected in our increased customer backlog. And we expect this momentum to continue based on the even faster growth rate we are experienced in our pipeline. With respect to gross margins, for the current customers we have under contract and the terms of customer contracts, we are currently negotiating. Our DC charging station gross margins are still ranging between 20% to 25% on average. With respect to operating expenses as a new public company, we have made critical investments in building up our sales, technology and business development, and engineering staff, as well as additional efforts. This is critical to why we went public and these expenses are a deliberate part of the business plan we are executing. We continue to expect quarterly expenses, excluding expenses associated with Levo and excluding the cost of product and service revenues to range between $6 million to $7 million per quarter for the next several quarters, depending on the timing of new headcount we are planning to onboard. In addition, we anticipate additional spending to establish the legal entity, which we are now forming after the closing of the definitive agreement in August. We expect to consolidate expenses of Levo into Nuvve given our 51% ownership of the common stock in controlling interests. We ended the quarter with a cash position of $48.1 million on our balance sheet that we believe is sufficient to grow our business and generate additional revenues while pursuing our growth opportunities. And now I'll turn the call back to Gregory.

[Gregory Poilasne:]

Thanks, David. In summary, we are pleased to learn from we are seeing in our business, the demand from customers and exciting partnership underway. We are continuing to leverage our leading and differentiated technology that meets a pressing need to lower the cost of EV ownership that is growing rapidly. We believe the strong demand and robust pipeline will drive significant revenue and shareholder value in the near and long-term. We're excited about what's ahead and look forward to continuing to update -- to update you on our progress. Thank you for taking the time to join us today. With that I will now turn it back to the operator to begin the question-and-answer session, operator.

[Operator:]

We will now begin the question and answer session. Our first question is from Eric Stine with Craig-Hallum. Please go ahead.

[Eric Stine:]

Hi, Gregory. Hi, David

[Gregory Poilasne:]

Hi, Eric

[Eric Stine:]

Well, I appreciate you given the backlog number that's very helpful. Just any -- any color you give on the pipeline. I mean, clearly it's expanding. And really, it's expanded quite a bit with Levo. But any details around that. And what you've seen over the last two, three quarters would be very helpful.

[David Robson:]

Well I can start and Gregory can add. I think, as we said, we're seeing a pipeline and even a faster rate than our backlog. And now that we just recently announced Levo received more interest because of that. So we like the speed at which is growing, we're not in position today to give a quantitative number to what that is.

[Eric Stine:]

Okay, that's fair, but maybe then just on Stonepeak since that's going to be a big driver of it. I mean, obviously right now, you're, you're in early stages there. But you also know kind of some of the business that is out there to be had I mean, do you feel, or how far do you feel you're down the path in educating the market, that this is even an option, right to finance a school bus for the same monthly payment as a diesel. Do you feel that the market is sufficiently educated to take advantage of that, or is that something that you think will take some work here going forward?

[David Robson:]

So, let me take that. I think that we -- the market is very different from place to place. And as I said earlier, we have -- we can't be everywhere. And so we have decided to focus our attention on a handful of states. And that handful of states were selected on multiple factor some of them being the value and potential value of V2G in those states. But also the level of reception that we've seen from the different channels we've been able to expose in those territories, as well, as in the case of working with Blue Bird, the partnership we can establish with a local dealership that have the local relationships. And so I think to answer your question, there's a broad range, but we see some areas and some of -- I always get some early adopters that are ready to dive into it. And we see quite a big group of that coming to us right now. And I hope we'll be positioned to announce some of them very, very soon. And then it's a question of upkeeping dedication, which is why what we want to do is, going to the dealerships, setting up charging station buses, demonstrating to the local school districts how this all works together as well as doing this demonstration on -- in the parking lot of Blue Bird have a full-scale deployment with a large number of charging stations. We think those are the steps to demonstrate and to accelerate the adoption to show that this is real, and to demonstrate to the people that school districts that they can do that, they can switch over to electric school buses without impacting their operation, right, their number one priority is transporting the kids safely and didn't want to pay more. And that's where we believe we are putting all the bricks together to achieve that.

[Gregory Poilasne:]

One thing I would add it right, which is we just closed on so peak in I mean, we're excited to get past that. And now we're -- now that the entities formed and it's official, we're building out marketing materials. As I said, in my remarks, we're building out a management team. And so more of that now can accelerate now that we closed it. So the first step was to close on the transaction and form the entity which we've done. You're going to see more to come now that that's been completed.

[Eric Stine:]

Okay. Good. Maybe just last one, and then, I'll turn it over for someone else. But I noticed that announcement made by Boris that they're partnering with Nissan in Europe, clearly, I would expect that you'd be part of that. So maybe just kind of what you expect from that? What you're seeing from other OEMs.

[Gregory Poilasne:]

Yeah. I mean, in general, two things. One is all probably just fleets. And right now, we're going to be successful with fleets. And that's going to be the entry point. Now, we think that the reach of the technology can really help across the board. But when you talk to traditional large scale OEM, their focus is really about, how do I bring million EV's to the street, right. And we believe that our technology has a strong player in that. But we are -- as say, we are taking one step at a time. And right now our focus is on things. And even in those partnerships. Now we've worked with Nissan. Now we have Nissan e-NV200 in Denmark that has been now that has been running on a platform for nearly five years now. And so we've always been working with Nissan. We have a good relationship with Nissan. And yes, when we look at, working with Nissan across Europe, and nearly 80 charging stations that are being deployed there as well. That's all part of the same group. Today as a company, our number one focus is especially in the U.S. Europe is very important.

[Eric Stine:]

Got it, secondary, okay. Thanks a lot.

[Joe Dorame:]

Mr. Simon. as a conference operator, please continue, if you have more questions.

[Operator:]

I get to jump to another call.

[Gregory Poilasne:]

Thank you.

[Operator:]

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

[Gregory Poilasne:]

Yeah. Thank you very much. Thank you very much, everybody for being here today. What I need to emphasize and what I said is that, the fleets are very important for us in the short run, which is why we have the partnership with Bluebird. And that's because they have a much larger contribution to what we are doing. That's our number one focus. And we are so excited about the opportunity associated with those three deployments. And expect to hear a lot more on that range over the next the next few weeks, as Levo is being rolled out. And we can share some more exciting news about the progress that we are making. So thank you very much for sharing with us these updates. And we look forward to keeping on working with you over the next few months.

[Operator:]

The government is now concluded. Thank you for attending today's presentation. You may now disconnect.