Nuvve Holding Corp.

Good afternoon, and welcome to the Nuvee Holding Corporation third quarter 2024 earnings conference call. Please note this event is being recorded. On today's call, we have Gregory Hoyen, Chief Executive Officer, and David Robson, Chief Financial Officer of Nuvee. Earlier today, Nuvee issued a press release announcing its third quarter 2024 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 Nuvee'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 Nuvi's filings with the SEC and in the earnings release issued today, which are available on our website. Nuvi 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 Poyan, Chief Executive Officer of Nuvi. Gregory?

Thank you, and good afternoon to everyone here today. Welcome to our third quarter 2024 results call. This quarter has been a very active one and has been very active in many ways, and we are excited to share more details with you today. Though this third quarter has remained challenging for Nuvi, we are seeing that the fruit of multiple efforts we have been carrying out during this period is now paying off. We have been able to reduce our expenses with minimum impact to our operational capabilities, we have been increasing our margins while our top-line sales are finally picking up, some of it driven by the kickoff of our hub project with the Fresno Economic Opportunity Commission. In the meantime, we have been working with new investors on a convertible loan that we have closed post-end of the quarter. Through that period, David and myself have provided a bridge loan to the company, showing our engagement and support to Nubis' business. Sales in our school bus business are finally picking up after an extremely sluggish start of the year, driven by a slower-than-expected process from the EPA notifying school districts that they are approved for funding. The new progress is based on EPA Round 2 and Round 3 releases. Though we will see some benefits in our Q4 revenue, we also expect revenue will slide into 2025. And we are now working on our EPA Round 4. Q3 also allowed us to finally recognize some revenue from the project with the Fresno EOC Commission in the Fresno County. This key project has been for a long time in the making. It does not only bring us some critical cash through a project management fee, it's also securing a strong baseline revenue for 2025. As a reminder, NuviGive software platform will be connected to a variety of resources such as solar generation, storage, charging stations, electric vehicle, and a microgrid manager, providing the ability to manage and optimize site energy consumption and to aggregate resources across multiple sites to participate into ancillary services and other grid services markets. The platform is acting as a true grid modernization platform, allowing fleet operators to save money, transition to EV fleet faster, and optimize capital asset life. Concerning our collaboration with Tai Power Corporation, we have now signed a contract with our partner e-Formula, and a breaking ground event will most likely happen mid-February after the Chinese New Year. We are in the process of finalizing the date. As a reminder, this project includes a total deployment of 90-plus charging stations and a stationary storage, and is using the same technology being deployed in our Fresno EOC project. This Taiwanese project has a 20-year life, and the scaling of the deployment will be adjusted based on local demand. The first phase is targeting a small fleet of equal-to-grid compatible shuttles, providing transportation services to employees for local companies in Hsinchu, going from the train station to the company buildings. Other projects are coming up on the island of Taiwan, and we hope to share more with you soon. Concerning our joint work with WISE EV LLC addressing public infrastructure, multiple sites have now signed up with us, and the TEP application are in the process of being submitted to NV Energy. In parallel, we are negotiating with different parties to provide debt financing to these SPVs supporting these deployments. As a reminder, these SPVs are allowing us to accelerate new technology deployments, save money for EV drivers by providing attractive energy cost pricing and reliable equipment, and bring non-dilutive cash to Nuvi in the form of prepaid services. The first SPV will be financed through debt provided to the SPV for a whole project cost of $1.2 million. We believe the SPV structure we have adopted makes our future revenue more forecastable and provides cash upfront. Revenue recognition might be delayed in some cases, But again, this will make our future revenue more forecastable. As a short update on our engagement with Capital Global, working on key strategic investments, we are still making progress, and we hope to share with you some updates very soon. Finally, a couple remarks on the outcome of the election. At this point, I want to emphasize that Nuvi is not just a new company. The Give platform creates a bridge between the needs from the grid and assets such as stationary storage, local energy generation, EV, and other significant loads. For the first time since 1990, the load in the United States grid is increasing, and energy volatility is getting larger and larger. The GIF platform capabilities allows us to drastically reduce the peaks on the grid and is ideal for grid modernization. Without such a platform, the cost of energy will be prohibitive. The need for a platform exists with or without federal EV mandates. Less regulation can offer the opportunity to scale our business faster. And now, I will have David take you through the details of our financials. David?

Thanks, Gregory. I will start with a recap of third quarter 2024 results. In the third quarter, we generated total revenues of 1.9 million compared to .8 million in the second quarter of 2024 and 2.7 million in the third quarter of 2023. The $1.1 million quarter-over-quarter revenue increase this year was driven by a $0.9 million increase in service revenues and a $0.2 million increase in hardware revenues. $0.6 million of the service revenue earned this quarter relates to our hub project in Fresno, California, which we kicked off earlier this year. When compared to last year, the third quarter decrease in revenues of 0.8 million was impacted by the non-recurring EV school bus sales sold last year of 0.9 million, offset by higher service revenues. Year-to-date revenues through September 30, 2024, were 3.5 million compared to 6.7 million for the prior year period, or a decline of 3.2 million. The 3.2 million decline was impacted by a reduction in charger hardware sales of 2.4 million and the non-recurring EV bus sales of 0.9 million. This year, we have seen delays in EPA funding awards when compared to last year, which has negatively impacted the pace of hardware sales this year. Despite the reduction in revenues over last year, we have improved our gross margins. Gross margins for the third quarter 2024 were $1 million compared to $0.3 million for the third quarter last year. Year-to-date gross margins through September 30, 2024 were $1.5 million compared to $0.9 million for the same period last year. The increase in gross margins is primarily due to improved pricing on hardware sales and a higher mix of service revenues compared with last year. As a reminder, margins can be lumpy from quarter to quarter depending on the mix. DC charger gross margins at standard pricing generally range from 15% to 25%, while AC charger gross margins are approximately 50%. But in dollar terms are a small fraction of the revenue of the DC charger. Grid service revenue margins are generally 30%, while software and engineering service margins are as high as 100%. Operating costs excluding cost of sales were $2.8 million for the third quarter of 2024 compared to $6 million for the second quarter of 2024 and $8.8 million for the third quarter of 2023. The $3.2 million decrease over last quarter was primarily due to lower payroll and consulting expenses. We continue to focus our efforts on improving operating efficiencies which has resulted in lower overhead costs. Cash operating expenses, excluding cost of sales, stock compensation, and depreciation and amortization expense, declined to $2.2 million in the third quarter of 2024 versus $5.4 million in the second quarter of 2024 and $7.6 million in the third quarter of 2023. Other income was $187,000 in the third quarter of 2024, up from $130,000 in the year-ago quarter. The current period benefited from non-cash gains from the change in fair value of warrants offset by interest expense. Net loss attributed to newly common stockholders decreased in the third quarter of 2024 to $1.6 million from a net loss of $8.6 million in the third quarter of 2023. The $6.9 million improvement was a result of higher gross mortgages of $0.7 million, lower operating expenses of $5.9 million, and increased other income of $0.3 million. Now, turning to our balance sheet, we had approximately 0.3 million in cash as of September 30, 2024, excluding 0.5 million in restricted cash, which represents a decrease of 1.1 million from June 30, 2024. The 1.1 million decrease in cash was a result of cash operating losses of 1 million, negative working capital of 2.6 million, offset by 2.5 million in cash received, from the issuance of short-term promissory notes. Subsequent to the quarter ended September 30, 2024, we received an additional $3.1 million in proceeds from the issuance of convertible notes this October, which will be paid off in monthly payments with interest in either cash or equity beginning in February 2025 through April 2026. During the quarter, inventories decreased by $0.3 million to $5.7 million at September 30, 2024, as we continue to reduce inventory levels. Accounts payables at the end of the third quarter of 2024 was $2.2 million, an increase of $0.3 million compared to the second quarter of $1.9 million. Accrued expenses at the end of the third quarter of 2024 was $3.3 million. a decrease of $1.7 million compared to the second quarter of $4.9 million. The reduction in accrued expenses was principally due to lower accruals for payroll and consulting expenses. Regarding our joint venture with Stone Peak and Evolve, their conditional capital contribution commitments in our subsidiary Levo Mobility expired on August 4, 2024, as defined in our LLC agreement. Along with the expiration of their capital commitment, during the third quarter, we purchased from Stone Peak and Evolve their interest in Levo Mobility for a nominal amount, which resulted in a reduction in our mezzanine equity to zero, as well as the cancellation of $5.1 million of liabilities associated with the joint venture, including the derivative liability for the non-controlling interest and dividend liability due to Stone Peak and Evolve. 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 V1G and V2G chargers, which are primarily deployed in the electric school bus market in the U.S. and in the light duty fleet deployments in Europe, in addition to stationary batteries. Currently, these chargers and batteries are located throughout the United States, Europe, and Japan. Megawatts under management in the third quarter increased 7.7% over the second quarter of 2024 to 29.2 megawatts from 27.1 megawatts, a 37.3% increase compared to the third quarter of 2023. In terms of its composition, 7.1 megawatts were from stationary batteries and 22.1 megawatts were from EV chargers. We continue to expect further growth in our megawatts under management as we go through the remainder of the year and continue to commission our backlog of customer orders we have earned. In addition to new business, we anticipate winning, which we have visibility to in our pipeline for both EV chargers and stationary batteries. Now, turning to backlog, on September 30th, our hardware and service backlog decreased by 0.7 million to 17.5 million from 18.2 million reported at June 30th, 2024. Year-to-date backlog this year has increased by 13.6 million from 3.9 million at December 31st, 2023, which is primarily related to the large hub project in Fresno, California, which was closed during Q1 of this year and revenue has begun to be recognized this quarter. As we look out to the next several quarters, we expect to see more activity on the Fresno Hub opportunity as this project gets built out. We also anticipate improvements in our cash burn resulting from the benefits of lower operating costs and improved gross margins compared with last year. This concludes my portion of the prepared remarks.

Gregory, back to you to conclude. Thank you, David.

Though this third quarter of 2024 has remained challenging, we see it as a turning point. We have finally been able to close on some of our big projects, not only securing short-term cash, but also solidifying our 2025 revenue. We have been managing our cash tightly, personally supporting the company when required. We still see the expansion of our reach within segments where we can bring significant value and where government support is essential, just diversifying our resource of revenue and bringing more quarter-to-quarter stability. These are also deployments where we feel like we have a better control on the timing. Mandates for renewable generation, storage, and in some cases, EV deployments are being implemented in many places in the U.S. and in Europe. With such mandates, we see NuviGIF platform as a key grid modernization tool. Finally, we hope to share the progress we are making in our strategic path very soon with you.

Thank you very much.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Seeing no questions, this concludes our question and answer session. I would like to turn the conference back over to Gregory Pullian for any closing remarks.

Thank you for listening to us today, and we are looking to be able to share more with you soon. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.