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Operator
And welcome to the Newby Holding Corp Third Quarter 2022 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Eduardo Ruiz. Please go ahead.
Eduardo Ruiz
Thank you. On today's call are Gregory Paulan, Chief Executive Officer, and David Rothson, Chief Financial Officer of MUBI. Earlier today, MUBI 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 MUBI'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 MUBI's filings of the NTC and in the earnings release issued today, which are both available on our website. MUBI 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 Paulan, Chief Executive Officer of MUBI.
Gregory Paulan
Gregory? Thanks, Eduardo, and everyone.
Eduardo
We appreciate you joining our third quarter 2022 results call. Last time, we focused on several favorable legislative developments, and in the third quarter, this momentum continued to build. In September, the Biden-Harris administration announced that it would be doubling the EPA's Clean School Bus rebate award to nearly $1 billion as part of the first round of funding for this program. In October, we are thrilled to see the first allocation come to fruition with the award of $913 million in grants to 389 school districts applicants. This grant funding will support the purchase of nearly 2,000 FireRide school buses and provide rebates on charging and hardware infrastructure. NURI was proud to have formally represented 10 school districts in their grant application process. In fact, NURI was the only charging station provider to submit grants A testament, we believe, to the strength of our technology, strong track record in EV infrastructure projects execution, and expertise in grant writing. Our efforts associated with Nuvi are expected to translate to $22.9 million in funding for 61 electric school buses manufactured by Nuvi's partners, and $1.22 million in funding for Nuvi's high-powered bidirectional chargers and associated charging infrastructure projects. site design, and development services. Please note that this revenue figure translates to $20,000 in hardware and infrastructure rebate money per bus, which is the maximum allowed per vehicle through this program. Nuvi's DC chargers typically cost more than twice that figure, and so Nuvi's potential charging station sales for those orders should ultimately be more than double the size of the grant money awarded. Additionally, once deployed, These electric school bus could earn potential recurring future grid services over their estimated useful life of 10 to 12 years. Critically, the potential benefits to the EPA Clean School Bus Program go beyond awards we helped secure via direct grant writing. There were actually another two school districts that secured funding for 28 school buses where we were not named as the grant writer, but for which we played an instrumental role in the process. With a list of 399 districts published and through our existing relationships, we are confident that we will be able to partner with a larger number of grant recipients than the 10 districts that we represented in the grant writing process and the additional two that we assisted. It remains early days, but our team is hard at work leveraging relationships to ensure that NUBI is in prime position to secure charging outward and associated infrastructure purchase order with other grant recipients. We expect purchase orders for the hardware associated with the 61 buses on which we were a grant writer, and incremental customers we expect to win to be finalized in the coming quarters. Looking further out, the EPA school bus program is planning to provide a total of $5 billion in funding by 2026, meaning an additional amount of approximately $4 billion in grant and rebate money has yet to be awarded. We would expect the next round of grant collection and funding to occur in 2023 and for newbies to aggressively participate. As evidenced by the program, electrification and the electrification of school buses market in particular continues to benefit from huge secular tailwinds. However, it is not lost on us that progress in electrifying the school bus market has been much, much slower to come about than 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 have expected, as David would elaborate on. In particular, we believe the slowdown in our business was due to the customers going through the EPDI paperwork process and awaiting the issuance of grant awards prior to making commitments. In other words, the Clean Bus program created a bit of an accordion effect, and we expect there to be some pent-up demand in the next few quarters. However, We believe the slowdown also reflects the continued severe impact of supply chain issues impacting the school bus market, which is drastically weighing on the vehicle rollout as well as inflation and general economic conditions. Supply chain issues have no doubt become incredibly tiresome, and just about anyone can relate to this from day to day life. Unfortunately, they remain very much a reality. Just prior to the beginning of earnings seasons, we're reminded of this when one of our large US automakers announced that it was waiting on parts on tens of thousands of vehicles. Strategies can vary from the very small mundane parts to bigger componentry, but it ultimately does not matter. If a vehicle is 99.9% complete, it is 100% incomplete. And it may sit there at 99.9% completion for many, many months. As it relates to Nuvi, The first step in being able to turn on V2G projects is the availability of the electric vehicle themselves and the charging infrastructure. At Nuvi, we have managed inventory well, and we have generally not slowed down the process when it comes to being in the position to provide the charging infrastructure. All automotive OEMs, and especially electric school bus makers, however, seem to have been and remain particularly hard hit. We see it when we visit our partners' facility and we hear it from them on our daily conversations. Related to this, just about one year ago, we announced our first V2G hub at the Bluebird production facility in Fall Valley, Georgia. The plan calls for up to 200 V2G DC charging stations to charge and discharge Bluebird electric buses coming off the production line. Given the significant shuffle in electric school bus production related to our expectations, There simply are no buses to go into those lots. As buses roll off the manufacturing line, they are typically straight off to their customer. We remain constructive about the long-term potential of this project and additional programs at Bluebird, but given delays of bus rollouts and overrun garments where demand outstrips the supply of electric school buses and shifting priorities of the company, we are unable to predict the timing of getting our V2G hub 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 $400,000. In fact, we have even heard anecdotes of dealers attempting to transact at figures north of $500,000. From our perspective, this compares to the mid-$300,000 range one to two years ago, and expectations that price tag would decline to below $300,000 by 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 as well positioned as ever with our V2G technology to play a key role in the multi-year rollout. But when you layer in the recessionary concerns on top of the factor we just discussed, it is clear that the pace of electric school bus adoption is simply going to continue to move at a more sluggish pace than we had previously envisioned for the foreseeable future. Given this backdrop, we have been distinctly focused on diversifying our new terms focused towards markets 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 cases and markets and partnership types. I feel particularly optimistic about a couple of opportunities that appear to be evolving more quickly than the U.S. corpus market. This includes with large names in the international market where we already have longstanding presence. To briefly expand on these, one of these involves working with other charging station OEMs to interface with their unidirectional infrastructure already in place to layer in our V2G platforms. This sort of program can accelerate the growth of grid service revenue and can be a big asset to us since it is not reliant on large-scale hardware and vehicle rollout. The other opportunity is in the consumer space. We hope to have some exciting announcements in these end markets in the coming quarters that could add significantly to our megawatts under management, which David will speak more about. Given 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. These steps include, one, electing to not restaff select open roles, which resulted in a decrease in headcount in the quarter, 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 those decisions. 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 those results themselves, but first let me briefly recap our major announcement in the third quarter 2022 and a few other recent developments. Accomplishment during the quarter included One, finalizing our partnership with San Diego Gas and Electric, SDG&E, to pair our B2G platform with their Emergency Load Reduction Program, or ELRP, and kicking off a pilot program with Calum Valley School Districts in San Diego. Two, securing another critical energy company partnership, this one with DSTRAP, to help school districts access available grant funding from both federal and state agencies. And three, Entry and enter into an MOU with the Maine Maritime Academy to collaborate on framework of V2G across maritime applications. We provided more color on each of these announcements during our August earning call. Since then, in early October, we built on the momentum with SDG&E in Calhoun Valley School District by announcing the deployment of eight V2G-enabled Bluebird 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 through the ELRP program. This program represents Bluebird's largest commercial V2G project for our school district to date. And on the Vistra partnership, we are already seeing its benefits. Vistra was actually instrumental in securing our EPA Clean School Bus Program wins in Texas across two school districts, including our largest win of all presenting 19 buses for the San Felipe del Rio school district.
Gregory Paulan
All total of the 61 buses we facilitated in securing funding for, 22 were in Texas with Bistradel.
Eduardo
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 with Switch, 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 remain incredibly confident in and excited about the potential that lies ahead of Ruby across an expanding set of markets. Finally, before turning to David, I spoke about our capital raise initiative last time, so I will not revisit our action or our rationale, but I have one point of clarification. UV has not raised any funds since the registered direct offering announced in late July. However, we believe a large shareholder drastically reduced its position for fund-specific consideration during the past couple months, which has put particular pressure on our shares during an 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.
Gregory Paulan
And with that, I will now turn on the call over to David to discuss our financial results. Thanks Gregory.
David
I will start with recap with 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 three quarters. The improvement was driven by a greater contribution from AC charger 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 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 a 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. a sequential basis versus the second quarter of 2022 we had a 1.4 million dollar 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 Nuvi 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 30th, 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 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 to 16.3 at the end of the third quarter 2022 from 16.1 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 30th, our hardware and services backlog was $4.2 million, up from $3.9 million on June 30th. 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.
Gregory Paulan
Thanks, David.
Eduardo
To conclude, we're disappointed by the slowdown evidence in the third quarter results, but we are taking steps to adjust for what is proving to be a much slower year 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 ladder in the coming months. Our pipeline of potential awards remain exciting, and we look forward to continuing to evolve our business and updating you 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.
Gregory Paulan
Operator?
Operator
Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Eric Stein with Craig Hallam. Please go ahead.
Eric Stein
Hi, Gregory. Hi, David. Hi. Eric. Hi. So curious commentary on the consumer space. So, you know, just looking for some more details there. And, you know, I also noticed recently San Diego gets an electric program, GM's involved. I know this is a program, a DOE program that you're also involved in.
Gregory Paulan
So I just love more details and maybe how that flows into your consumer outlets. So, I mean, you've got different programs.
V2 G
The 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 you can basically mix, for example, school buses with consumer vehicles that would be at somebody's house.
Eduardo
The other piece is PG&E, for example, has announced V2G tariffs. which basically are, you know, cost of bringing kilowatt hour inside on the meter, but also the revenue you can generate by pushing kilowatt hour back to the grid, and those obviously depend on the moment.
V2 G
So, you know, there are many programs. Now, as I said from the beginning, we are not just doing business here in the U.S.
Eduardo
We are also doing business in Europe. In Europe, it's a different set of programs services that can be performed. We've been doing V2G, doing frequency regulation in Denmark. We have done it in the Netherlands. We've also done quite a bit of distribution grid services in the UK. And we see that across the different countries in Europe where we can do business, a combination of, for example, self-consumption with some type of market access.
V2 G
But obviously, The best way to do those things is to partner with some OEMs that are going to bring all their horsepower into that.
Eric Stein
Right. And, I mean, I would assume maybe when you're alluding to some announcements in this space here in the relative near term, I would assume that this is potentially what you are referring to.
Gregory Paulan
Yeah. I mean, clearly that's not the only line of what I just described now.
Eric Stein
Gotcha. Um, okay. Maybe just talk about the pipeline a little bit. Uh, you know, you talk about megawatts under management, uh, you talk about your backlog, but I think you have discussed the pipeline, um, in the past and just curious what you're seeing there, maybe where it stands today and, um, you know, just friends you see here in your turn in 2023. Yeah.
V2 G
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 have some medium-heavy-duty school buses, a combination of bidirectional implementation and some unidirectional implementation.
Eduardo
And then you've got stationary storage. Those were kind of the three sets. And 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 bus depots this type of implementation and again it's not just a US vision here it's a US 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 Astraea, our AI 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 is really leveraging partners that have infrastructure that is 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 NuViva 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 that position of integrating our platform with those resources in order to accelerate the performance.
Eric Stein
Got it. Maybe I know in the past, faster pipeline, I think you probably did it 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 a result?
David
Yeah, Eric, this is David. We have given that in the past, and I would say our pipeline is 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 or existing hardware to point 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 in the last couple And let me add one more thing on this right what we what we've seen is that the
V2 G
Q3 was very slow on the school bus because everybody was expecting the outcome of the EPA.
Eduardo
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, so it's like 89 buses that we have.
V2 G
But what we see is also a lot of people that are reaching out to us.
Eduardo
And so, you know, I mean, any number out of just the numbers we know are fairly 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 making decisions, again, as David said, we see a very, very solid pipeline that's going to be summing up into backlog in Q4 and Q1.
Eric Stein
Okay, that's helpful. Maybe last one for me. Can you provide more color? You mentioned the structuring in Evo. I would just love to hear more details.
Eduardo
Yeah, you know, I mean, we all live in a world with constraints, right?
V2 G
And so when you have constraints, you look at what is the best use of all the resources that you have around you.
Eduardo
And so, you know, as we are working with Levo and looking at working on a few deployments, we clearly saw that there were still some more cycles available in the team. And we now, so for example, Maggie, who is our chief commercial officer at Levo, now has also stepped in to be in charge of all the sales And that's because, you know, she has the skill set, she has the vision, she understands how all those things are coming together. And really the NUVI-LEVO, you know, value proposition is pretty close, right? Either it's LEVO that's providing the financing or, you know, that value generally 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 the ZVs. 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 four key members that we have in the LIVO team and that focus on the key aspect of what we are doing, the sales of the charging stations and the services, addressing all the revenue opportunity on the grid side, the procurements, strategy procurement and relationships with the OEM, as well as the project financing, which are the four core competencies that were associated with the four members that we've brought closer to Nuvi in this process.
Maggie
And Eric, to add to that, we've reported it pretty much every quarter.
David
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 Nuvi? because we're really one 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.
Gregory Paulan
Okay, thank you. Thanks, Eric.
Operator
Again, if you'd like to ask a question, please press stars and one at this time. Our next question comes from Brian Dobson with Triton Capital Markets. Please go ahead.
Brian Dobson
Hi, thanks so much for taking my question. You know, 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?
Eduardo
I mean, so, you know, our core business is really to provide the great 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 know, you've got the licensing or, you know, or service, you know, 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, quick service participation, combined with the uncertainty associated with the vehicle requires quite a bit of our involvement at this point.
Brian Dobson
Is that answering your question? Yes, it does. Thanks very much.
David
One 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 both 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.
spk08
Thanks very much.
spk07
This concludes our question and answer session.
Operator
I would like to turn the conference back over to Gregory for any closing remarks.
V2 G
Great.
Eduardo
I want to thank everybody, and we are looking forward to sharing more of the progress that we are making in these other areas, in new areas of workers that we shared with you, as well as very exciting developments with the APF funding across the school bus market.
V2 G
And again, this is the first round, And there's another $4 billion that's going to be rolled out over the next three or four years.
Eduardo
And that just gives 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.
spk07
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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