Good day, and welcome to the Nuvve Holding Corp. Third Quarter 2022 Earnings Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Eduardo Royes. Please go ahead..

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 third 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 both 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?.

one, finalizing our partnership with San Diego Gas & Electric, SDG&E, to pair our V2G platform with their Emergency Load Reduction Program, or ELRP, and picking up a pilot program with Cajon Valley school district in San Diego; two, securing another critical energy company partnership Vistra to help school district access available grant funding from both federal and state agencies; and three, entry entered into an MOU with the Maine Maritime Academy to collaborate on the framework of V2G across maritime application.

We provided more color on each of this announcement during our August earnings call. Since then, in early October, we built on the momentum with SDG&E in Cajon Valley school district by announcing the deployment of 8 V2G enabled Blue Bird electric school buses in the San Diego county's Ramona Unified school district.

Commissioning and interconnection activities were completed with SDG&E, and the buses are ready to produce valuable grid services revenue streams to the ELRP program. This program represents Blue Bird's largest commercial V2G project for our school district today. And on the Vistra partnership, we are already seeing its benefit.

Vistra was actually instrumental in securing our EPA clean school bus program wins in Texas across 2 school districts, including our largest win of all representing 19 buses for the San Felipe Del Rio School District. All total of the 61 buses we facilitated in securing funding for, 22 were in Texas with Vistra dev.

To wrap up, as California Governor, Gavin Newsom said in September press conference on the climate-protecting legislation for the state, vehicle-to-grid capacity is a game changer.

Our 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.AI, which is allowing us to further improve forecasting capabilities, and through resource standardization via partnerships such as the one we switched, both of which were discussed earlier this year.

Market timing has not been on our side, but we are controlling what we can control and we remain incredibly confident in and excited about the potential that lies ahead of Nuvve across an expanding set of markets.

Finally, before turning to David, as part of our direct capital raise initiatives last time, so I will not revisit our action or our rationale, but I have one point of clarification. Nuvve has not raised any forms since the registered direct offering announced in late July.

However, we believe a large shareholder drastically reduced its position for one specific consideration during the past couple of months, which has put particular pressure on our shares during the already challenging time in the market.

Again, unfortunate timing, but we must look ahead and focus on what is best for our business to manage the near term and build for the long term. And with that, I will now turn on the call over to David to discuss our financial results..

Thanks, Gregory. I will start with a recap of third quarter 2022 results. In the third quarter, we generated revenues of $554,000 compared to $1.2 million in the third quarter of 2021. Grant 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 future 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 3 quarters. The improvement was driven by a greater contribution from AC charger sales to 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 were similar despite the revenue decline. As we have stated before, DC charger gross margins at standard pricing generally range from 20% to 25%, while AC charger gross margins are approximately 50%, but in dollar terms, are smaller fraction of revenue of a 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, offset by 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 incurred $0.6 million in operating expenses during the third quarter.

Other income was $258,000 in the third quarter of 2022 versus $478,000 in the year ago quarter. Net loss attributed to Nuvve 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 30, 2022, excluding $0.5 million in restricted cash. Between our registered direct offering, or RDO, and at the market program, we raised approximately $15 million in the third quarter. To reiterate what Gregory said, we did not raise any additional capital after the RDO.

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 $0.9 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, if 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 of 2022, driven by the receipt of additional DC charger 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 V2G chargers, which are primarily deployed in the electric school bus market in the U.S. V1G chargers, which primarily reflect light-duty fleet deployments in Europe, as well as, to some extent, in the U.S.

school bus market, and stationary batteries. Currently, these chargers and batteries are located throughout the United States, Europe and Japan. Megawatts under management in installed capacity increased by 0.2 megawatts to 16.3 megawatts at the end of the third quarter 2022, from 16.1 megawatts at the end of the second quarter.

This was comprised of 8.2 megawatts from stationary batteries, 5.4 megawatts from AC chargers and 2.7 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, our 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, up 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 & 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, over to you..

Thanks, David. To conclude, we're disappointed by the slowdown evidenced in the third quarter results, but we are taking steps to adjust for what is proving to be a much slower EV ramp up in the school bus market, given a still damaged supply chain and the economic backdrop.

This includes improving our cost structure and maximizing 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 latter in the coming months.

Our pipeline of potential awards remain exciting, and we look forward to continuing to evolve our business and bidding new in future quarters. We thank you for your attention, and we'd like to now turn the call back to the operator to begin our Q&A.

Operator?.

[Operator Instructions]. First question comes from Eric Stine with Craig-Hallum..

So I'm curious, commentary on the consumer space. Just looking for some more details there. And I also noticed recently, San Diego Gas & Electric program, GM is involved. I know this is a program -- a DOE program that you're also involved in.

So I would just love more details and maybe how that flows into your consumer outlook?.

So I mean, you've got a different program, right? ELRP, 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 that are available. And we can basically mix, for example, school buses with consumer vehicles that would be at.

The other piece is PG&E, for example, has announced V2G tariffs, which basically are cost of bringing kilowatt hour inside on the meter, but also the revenue you can generate by pushing kilowatt hour back to the grid, depending -- and those will obviously depend on the government. So there are many programs now.

As we said from the beginning, we are not just doing business here in the U.S. We're also doing business in Europe. In Europe, it's a different set of services that can be performed, like we've been doing V2G, doing integration in Denmark. We have done it 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 do business. A combination of, for example, set consumption with some type of market access. But obviously, the best part with those things is to partner with some OEMs that are going to bring all their horse power into that..

Right.

And I mean, I would assume, and maybe when you're alluding to some announcements in this space here in the relative near term, I don't assume that this is potentially what you are referring to?.

Yes. I mean clearly, that's not the only line of what was described now..

Got you. Okay. Maybe just talk about the pipeline a little bit. You talked about megawatts under management. You talked about your backlog, but I think you have discussed the pipeline in the past.

I'm just curious what you're seeing there, maybe where it stands today, and the trends you see here near term in 2023?.

Yes. So I think if you look at our existing megawatts under management, you've got a mix of things. You've got some light-duty vehicles that we had launched in Europe. You had some medium and heavy-duty school buses, a combination of bidirectional implementation and some unidirectional implementation. And then you've got stationary storage.

Those were kind of the 3 steps in the stationary storage. This is UCSD or this is Japan. Now the way we are also expanding now is, as I described earlier, one is with combining with companies that have infrastructure that's already out and back on the scale that infrastructure, think about high-power charging stations or this type of implementation.

And again, it's not just a U.S. vision here, it's a U.S., Europe vision. And then the other piece is the consumer piece where we'd be also adding those resources.

And we can do that because of how we've been integrating our platform with [indiscernible] platform in order to work on the forecasting and establishing the capacity that might not be available through that. So that's really the way we are expanding here.

It's really leveraging partners that have infrastructure that either already out or that they are rolling out right now. And it's not that 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 Nuvve than trying to do it on my own and lose a lot more value.

And I think this is that mindset that is changing that we see now and that is putting us into the position of integrating our platform with those resources in order to accelerate the performance..

Got it. Maybe -- I know in the past, your pipeline, I think you [indiscernible].

Around $225 million, and given -- not necessarily a new focus, but an expanded focus, is there a way to quantify that pipeline and maybe how it's expanded as we move?.

Yes, Eric, this is David. We did -- we have given that in the past. And I would say our pipeline is as strong, if not stronger, although the timing is always difficult to predict.

And as Gregory spoke, both in the deployment of hardware in North America and in grid services on top of that, and in addition, where we're not deploying the hardware, we're going directly for existing hardware to deploy on our platform.

So I think you're right that as I said, our pipeline is just as robust as it was, but we haven't been giving out that number as of the last couple quarters..

And let me add 1 more thing on it, right? What we've seen is that -- 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 2,500 and 3,000 school buses, which orders are going to be placed over the next few months.

And with each of these buses, obviously, you're going to need some infrastructure. We've done our own applications, which is tiny, right? 61 buses plus 28, now it's like 89 buses that we have on that. But what we see is also a lot of people that are reaching out to us.

And so I mean, any number out of just the numbers we know are pretty big compared to what we've done so far, but any numbers on top of that makes a huge difference.

If you combine that with some other school districts that are in the process of taking decisions, again, as David said, we see a very, very solid pipeline that's going to be firming up into backlog in Q4 and Q1..

Okay. That's helpful. Maybe last 1 for me. Can you provide more color? You mentioned restructuring at Levo, I would just love to hear more details..

Yes. I mean we are living 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. And so as we are working with Levo and looking at working on a few deployments, we clearly thought that there were still some more cycles available in the team.

And we -- so for example, Maggie, who is our Chief Commercial Officer at Levo, now has also stepped in to the -- in charge of all the sales. And that's because she has the skill set, she has the vision, she understands how these are coming together.

And really, the Nuvve-Levo value proposition is pretty close, right? Either it's Levo that's providing the financing, or that value generic to the grid services goes to the owner of the buses. The value proposition is very similar. It's about reducing the total cost of ownership of those EVs.

And so that's really what we've been doing, bringing more professionalism in different areas of the organization by leveraging the skill set of the core team members that we have in the Levo team.

And that focus on the key aspects of what we are doing, the sales of the charging stations and the services addressing all the revenue opportunity on the grid side, the procurement, strategic procurement and relationships with the OEMs as well as the project financing, which are the core competencies that were associated with the 4 members that we've brought closer to Nuvve in this process..

And Eric, to add to that, we've reported it pretty much every quarter. We spend about $500,000 to $600,000 supporting Levo. And like Gregory said, fantastic leadership on that team as well as resources. So how do we leverage that within Nuvve, because we're really 1 company, and that's what we did over the quarter.

So part of the way you see our expense structure coming down is we're leveraging our resources more efficiently..

[Operator Instructions]. Our next question comes from Brian Dobson with Chardan Capital Markets..

Given relative weakness in the school bus market, as you're looking forward, would you contemplate more software licensing deals like the one that you have with Wallbox or other kind of charging providers?.

I mean -- so we -- our core business is really to provide grid services because there is some complexity behind that, right? And that is looking at also how we are sharing the revenue with our partners. Now the way this gets rolled out, you've got the licensing or service, I think that can be very close.

But I mean we are looking at all the opportunities to grow and accelerate the growth of our business. But we think that the complexity of the grid participation -- 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..

And Brian, 1 thing to add to that, and Gregory alluded to it earlier, which is, one, we've always -- as we've gone into the North American market, we've always deployed the hardware, and then on top of that comes grid service revenues. We're seeing more and more opportunities where customers are coming to us to utilize our platform.

But as Gregory said, they have the hardware already. So it's almost, as you've asked your question, which is you'll see more opportunities for us to deploy our platform faster with not necessarily having to deploy the hardware to go with it. So that enables the ability to scale at a faster pace..

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

Great. We -- I want to thank everybody, and we are looking forward to sharing more progress that we are making in these other areas, new areas of focus that we shared with you as well as very exciting developments with the EPA funding across the school bus market.

And again, this is the first round, and there's another $12 billion that's going to be rolled out over the next 3 or 4 years. And that just give us an idea of the scale of the business approach in that 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..