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spk00: Greetings and welcome to Alago's fourth quarter and fiscal year 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Fleury Schwartz with ICR. Thank you. You may begin.
spk01: Good afternoon. I want to welcome everyone to Alago's fourth quarter and full year 2022 earnings call. Today's speakers are Matthew Bonnet, Chief Executive Officer, along with Ton Mowers, Chief Financial Officer. During today's call, we may make certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties. Many factors could cause actual events to differ materially from the forward-looking statements made on this call. For more information about these risks and uncertainties, please refer to the risk factors in today's press release and the company's filings with the Securities and Exchange Commission. Readers are cautioned not to put any undue reliance on forward-looking statements, and the company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call. During our call today, we will also reference certain non-IFRS financial information. We use non-IFRS measures in some of our financial discussions as we believe they represent our operational performance and underlying results of our business. The presentation of this non-IFRS financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with IFRS guidelines. as issued by the IASB. And our non-IFRS measures may be different from non-IFRS measures used by other companies. Reconciliations of IFRS to non-IFRS measures, as well as the description, limitations, and rationale for using each measure can be found in our filings with the SEC. I'll now turn the call over to Matthew Bonnet, CEO.
spk04: Thank you, Felice. Good afternoon to everyone, and welcome to our fourth quarter and full year 2022 earnings call. I will begin today with a brief overview of our results, followed by an update on the progress we have made since speaking with you last time. I will then turn the call over to Tom Lowers, our CFO, for a closer look at the numbers. But first, an overview of the company for those who may be new on the call, and I hope they are many. Aligo is a pioneer in driving and enabling the electric vehicle revolution by building the largest public EV fast and ultra-fast infrastructure across Europe. Aligo boasts a vast network of over 34,000 charging points, both public and private, at almost 23,000 diverse locations across 16 countries. This positioning has solidified Aligo's market leader status in Europe and we are expanding quickly. With a focus on growth, Aligo is shifting rapidly from slow and fast public charging to fast and ultra-fast public charging that we fully own and operate with already a portfolio of more than 1500 fast and ultra-fast charging points that are poised to benefit from the growing demand for full battery EVs and that consequently accelerate the adoption of EVs. Through its relentless efforts to expand its network, Allego is uniquely positioned to meet the evolving needs of the electric vehicle market and drive the sustainable future. Importantly, BNEF estimates that the number of full-battery electric vehicles in Europe is projected to reach approximately 14 million by 2025, underpinning our confidence in our growth trajectory. For context, as of 2022, Europe has approximately 4.7 million full battery EVs on the road. Turning now to our results and progress, I am very pleased with our developments through the end of 2022, which marked our first year as a public company, nine months exactly. While the year was filled with milestones, we worked through a very challenging microenvironment, and I am excited with the way our entire team has performed to deliver our results. We finished 2022 with revenue of €133.9 million. Our strong revenue performance was primarily the result of significant growth in charging revenue, which was our objective, while services revenue also improved meaningfully. Our charging revenue increased more than 150% while our service revenue was nearly 14%. We saw growth across all key metrics, including full year 2022 total charging session, increasing to $9.2 million, an increase of nearly 51%, a fourth quarter 2022 utilization rate of 13.4% compared to 7.4%, and full year 2022 total energy sold almost doubling to $106. 54.6 LWh. This is all in comparison to the prior year period. Our full year 2022 operational EBITDA was 2.3 million euros compared to 9.2 million euros in the prior year period. The decrease was expected as we had to cope with massive increase of 135% of energy price due to energy crisis in Europe before the kickoff of our hedge through the signing and preparation of power purchase agreements in 2022. We mitigated the situation with price increases, which took place in January, September, and October 2022, that has not triggered, as explained, a decrease in utilization rate or energy sold. We chose the strong power pricing of Aligo. With these measures, we have seen a strong recovery of our gross margin in charging revenue especially for our ultra-fast charging in Q4 2022. We reached in Q4 2022 an operational EBITDA of 7.8 million euros. We are continuing to see margin improvements through Q1 2023 with our energy hedge being implemented and a strong activity in charging. Importantly, in the fourth quarter of 2022, we executed on two strategic initiatives to buttress our development. First, in December, we increased our credit facility by 230 million euros to 400 million euros. The new facility will be used to expand our investments in our ultra-fast charging stations to be deployed to equip our significant backlog of signed contracts. All our 2023 investment needs will be largely covered. Second, last November, we contracted with the leading independent renewable producer that will provide 25 gigawatt hours of solar energy, which took effect in January 1st, 2023. It will cover a majority of our operation in Germany for 2023. This contract will provide us with a natural hedge in quality and input pricing for the next 10 years with a very attractive fixed price. Meanwhile, we signed three more PPAs agreements with renewable assets in Germany and the Netherlands beginning of this year, providing in total already more than 160 gigawatt hour in 2023 and 2024 for 10 years duration, each at very attractive price. We are on track to reach our target to cover 80% of our energy needs onward at the end of 2023. The sale of certificates of carbon credits directly generated from the sale of our green energy has been a complementary source of income that mitigated our energy cost increase in 2022. This provides a robust natural hedge against rising energy prices. The value of these certificates, available in our main markets, will provide long-term complementary revenue directly linked to the volume of our sales. During the year, the income generated from the sale of these certificates was 9.5 million euros compared to 5.4 million euros during the same period in 2021. With this strategy in place, we believe that we are now well equipped to face the volatility of energy price for our charging business line. This charging business on our own network is to be more and more important in our revenue mix compared with services and provide a stable visibility for our margin. Now, turning to some commercial developments during Q4 2022, I would like to highlight some examples. We commissioned four big ultra-fast charging hubs on highway network in France, designed, owned, and managed by Aligo. In total, we installed 16 ultra-fast chargers, each charger dispensing up to 300 kilowatts. In addition, we signed an agreement with Pate, again in France, a theater network to equip 11 prime locations with ultrafast stations. In Germany, we added two new key accounts, Patricia Retail Estate and the network of Tom, do-it-yourself retailer, representing 69 sites with hundreds of ultrafast charging ports. Germany is a key country in Europe for EVs, and Aligo is accelerating very quickly there with an increasing backlog of contract sites. Very importantly, 2022 has confirmed the execution of our plan in the acceleration of the rollout of our own ultra-fast network. We have increased by more than eight the number of ultra-fast charging points we own in 2022 to reach around 750 end of Q4 last year, and we are accelerating. It shows that we are able to execute, and despite this massive increase of chargers, we see a continuous increase of utilization rate, which shows that we are catching more traffic. We're regarding our growth ahead. Our backlog continues to grow with a higher demand for electric vehicle charging and our size and scale create additional momentum for our partners. We had a secured backlog of 1300 sites at the end of December 2022. All these sites are signed up for lease terms of an average of 15 years and include approximately 8,600 fast and ultra-fast charging ports, which translates into growth of more than 90% from December 2021. Our ability to offer 20 solutions with strong core technological competencies bringing high uptime continues to be a unique value proposition and advantage in the market. As Don will discuss in greater detail, we are pleased to provide Outlook for this year, 2023. We expect revenue in the range of 180 to 220 million euros and operational EBITDA in the range of 30 to 40 million euros. From a top-line perspective, we will continue to benefit from the growth of the market, an increased utilization rate, and additional site deployments all over Europe focused on ultra-fast charging. We are observing strong utilization rates through the early part of 2023 and expect that trend to continue. From a margin standpoint, the actions we took throughout 2022, including the price increase, the control of our energy price, and the rigorous management of our resources, will go on in 2023 in order to increase our margin and operational EBITDA. Before I conclude, I would like to reiterate our confidence in our business strategy. It is supported by a demand environment that is conducive to our model. The European Union's confirmation on banning the sale of internal combustion engines by 2035 marks a significant milestone towards the goal of replacing over 200 million passenger vehicles with electric ones in a short period, given the current base of 4.7 million vehicles. We are indeed in a comprehensive mobility revolution that will require us to expand our capacity to meet the demand for ultra-fast charging, a key component to provide the required energy to EVs. With that, I will turn it over to Ton Lauers, our CFO, for an overview of our financials.
spk07: Ton? Thanks, Mathieu, and welcome, everyone. I will begin by summarizing our financial results for the year ended December 31st, 2022, followed by a review of our balance sheet, cash flow metrics, and capital structure, before closing with our guidance for the full year 2023. Starting with a brief summary of our fourth quarter 22 results. Total revenue for the fourth quarter of 2022 was up 10.7% to €60.9 million, compared to €55 million in the fourth quarter of 2021. This improvement was driven by a sharp growth in charging revenue. Charging revenue grew 228% to €26.9 million, with charging sessions climbing 29.6% to €2.6 million from €2 million. In addition, we benefited from the price increase that we implemented in 2022 to offset higher input costs. Service revenue decreased 27.6% to 33.9 million euro compared to 46.8 million euro for the three months ended December 31st, 2021. Service revenue decrease was largely on the account of an anticipated decrease in revenue on the Carrefour project which was weighted toward the second half and the fourth quarter of 2022. Net loss for the fourth quarter was €40 million, largely driven by non-recurring, non-cash items compared to a loss of €95.9 million during the fourth quarter of 2021. Fourth quarter operational EBITDA was €7.8 million compared to €14.8 million for the three months ended December 31, 2021. This decrease is the result of an increase in SD&A of 6.3 million and a decrease in other income of 3.4 million, partly compensated by an increase in gross profit of 2.6 million euro. The increase in SD&A is mainly the consequence of expansion and increased revenue. The decrease in other income follows a decrease in the price of our CO2 tickets and fewer in government grants. The increase in gross profit is the combined effect of a decrease of revenues on the CAFU project, more than compensated by a sharp increase in gross profit on charging revenues. Now moving to our full year 2022 numbers. Total revenues for the year ended December 31, 2022, increased 55.2% to €133.9 million, compared to €86.3 million in the prior year. Our strong revenue performance was mainly due to significant growth in charging revenue, while services revenue also improved meaningfully. Specifically, charging revenues were up almost 2.5 times to €65.3 million, largely on account of the 50% growth in total charging sessions to €9.2 million and the price increases to offset higher input costs. We raised prices three times in 2022. The first was 70% price increase in January, followed by an additional 10% price increase later in the year in September. We continuously monitor the energy markets and proactively implement measures to minimize its impact on our margins as part of our overall business strategy, in line with which we raised prices again by around 50% on average on October 7th. We are pleased to note that our utilization rate has remained robust, notwithstanding these price increases. Indeed, our average utilization rate jumped to 13.4% in the fourth quarter of 2022, from 7.4% in the prior year period. The average utilization rate for the full year 2022 was 10.4%, up from 5.9% in 2021. We remain vigilant and will continue to take steps as and when needed to protect our margins. Including MegaE, we sold 154.6 gigawatt hours of total energy in 2022, almost double the amount of 82.7 gigawatt hours we sold in 2021. We would like to reiterate here that our energy sold was 100% green energy. Full year 2022 services revenue rose 13.9% to 68.6 million compared to 60.2 million in 2021. As expected and noted on previous earnings calls, revenue from the Carrefour project was weighted towards the second half of 2022 and accelerated during the fourth quarter of that same year. The Carrefour project is making rapid progress and we installed more than 310 new ultra-fast charging ports in the second phase of development. We anticipate installing more new ultra-fast charging ports in the currently ongoing third phase of the development process, which we expect to complete in the course of 2023. We remain on track to install the more than 2,000 fast and ultra-fast EV charging ports across 200 charging locations in France by the end of 2023. Our contract includes operating and maintaining the network for over 12 years. Gross profit for the full year 2022 was €7.2 million, down 57.8% from €17.2 million in 2021. The decline in gross profit in 2022 was attributable to the impact of commodity price inflation, some of which was mitigated by our proactive price increases. Higher energy input costs impacted our gross margin by €17 million, offset by €16.5 million due to the increase in charging prices. In addition, we changed the accounting for depreciation on our charges and have now included that in the cost of sales to be more in line with our US peers. As a consequence, our gross profit decreased with €12.2 million compared to 2021. The impact to our gross margin was however somewhat moderated by income of €9.5 million generated from the sale of CO2 tickets. General and administrative expenses were 1.8% lower at €323.3 million in 2022 versus €329.4 million in 2021. The improvement in these expenses includes a decrease in non-cash stock-based payment expenses of €33.8 million. Now moving to the financing. 2022 finance income was 10.3 million euro compared to a finance cost of 15.4 million in 2021. The change was mainly as a result of the recognition of 27.1 million of mark-to-market adjustment income from the warrant liability. Net loss for the full year 2022 was €305.3 million versus a loss of €319.7 million in 2021, with higher input cost being the major contributor. Cost of sales was up 77.3% year-over-year in 2022. 2022 operational EBITDA was €2.3 million compared to €9.2 million in the year ago, and the decrease was mostly on the account of commodity price inflation. we were impacted by €17 million of higher electricity costs in 2022 relative to 2021. I'll be moving now to our key balance sheet figures. PP&E for 2022 was higher because of additional investments in our network and the first-time consolidation of the MegaE assets worth €19.7 million. Intangible assets and other financial assets in 2022 climbed on the account of the first-time consolidation of both MoMA and MegaE. Non-current borrowings were higher due to the net impact of the conversion of shareholder loans into equity and additional drawdowns for the expansion of our credit facility to €400 million. Related to working capital, we've seen an increase in inventory and payables, mainly to anticipate the increased investment in our network. The short-term provision liability in our balance sheet reflects the fair value of the current portion of an agreement with a former advisor. Our cash and cash equivalents as of December 31st, 2022 were 83 million euro. We had a secured backlog of 1,314 sites as of December 31st, 2022. All these sites are signed up for lease agreements of an average of 15 years and include approximately 8,600 fast and ultra-fast charging ports, which translates into growth of more than 90% from December 31st, 2021. Moving to capital structure and guidance. As said before, we expanded our credit facility by €230 million to a total of €400 million at the end of 2022. The new facility expires in December 27 and is available to finance green investments in compliance with the green loan principles. Following the expansion of the credit facility and our ability to access the green infrastructure financing market at attractive cost of capital and other terms, we are fully funded to execute and support the development of our secure backlog of 1,314 sites. Moving to guidance. We expect to generate revenue between 180 million euro and 200 million euro, and expect our operational EBITDA to end between 30 and 40 million euro. Total energy sold is anticipated to be between 215 and 225 gigawatt hour for the full year. We expect services revenue growth to be driven by the Carrefour project, which should be running at scale in the second half of 2023. Charging revenue is also anticipated to grow further as we expand our network and the transformation of Europe's EV charging infrastructure continues at pace. I wanted to briefly highlight the role of the Power Purchase Agreements, or PPAs, before turning to margins. We have signed three long-term PPAs with leading independent power producers to supply renewable and reliable energy for 10 years at lower costs. These PPAs are effective beginning January 1, 2023. Such agreements are key to our cost strategy because they help mitigate volatility across our most significant input cost, the cost of electricity, by locking in a low price for 10 years, thereby stabilizing our overall input cost base. We expect to sign additional PPAs to cover more than 80% of our operations by the end of this year. In terms of margins, we believe there is significant upside potential. Our gross margin improved meaningfully during the fourth quarter of 2022, as we realized the full impact of the price increases throughout the year. We are pleased to note that our gross margin trajectory has maintained its momentum through the first quarter of this year. In 2023, we anticipate gross margin to improve beyond current levels as we benefit from the combined impact of the 2022 price increases, the lower input cost base from the PPAs, the shift in revenue mix towards services, and the operation of the Carrefour project at scale. Our guidance assumes that energy prices are expected to remain high and or around current levels, for the foreseeable future and excludes the impact of any potential future sites, assets, and acquisitions. In summary, 2022 had its challenges, but our resiliency and solid execution helped us realize growth opportunities, expand our business and position as well for the future. We look forward to the remainder of this year as we generate growth and deliver returns for all our stakeholders. With that, I'd like to hand back to my chair.
spk04: Thank you, Tom. In closing, I am indeed pleased with our progress in 2022. We have continued this positive momentum into 2023 and are excited to drive long-term shareholder value as we execute on our growth strategy. Aligo has a very robust pipeline of fast and ultra-fast chargers that ensure revenues visibility until 2024 and beyond. Our technological edge and extensive network combined with reliable service has helped us establish a loyal customer base. As planned, we have made progress in realigning our cost base to reduce exposure to commodity price fluctuations, and our pricing power has been validated with a recurring high gross margin going forward with our charging business. We are confident that the current high demand for electric vehicles in Europe will continue to grow, driving the acceleration of the e-mobility revolution. Lastly, I would like to express my gratitude to all our Allegro team members for their unwavering commitment.
spk03: With that operator, we're ready for questions. Thank you.
spk00: Ladies and gentlemen, at this time, we'll be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Matt Somerville with DA Davidson. Please proceed with your question.
spk06: Thanks. A couple questions. You guys mentioned in your prepared remarks that utilization rates have continued to move higher, given that we're sitting here in mid-May, and we have the 13.4% from Q4, which is great. I was wondering if you could give a more up-to-date reading on where the utilization rate is today and what is baked into the revenue guidance for the year as far as utilization, and then I have a follow-up.
spk04: Thank you, Matt, for your questions. We will issue next week's Q1, but to give you a flavor, we are already at this level, and you know that we see the level of Q4 2022 for this year already, 2023, and we have some patterns with always strong utilization rates, handoffs the year, and with less beginning of the year, but we see that the trend, the upward trend is continuing. So that's a good thing. So that's the reason why we can support our guidance with this utilization rate.
spk06: I just want to make sure I'm clear on kind of the The credit facility and your ability to finance. So did I understand you, Tom, properly that you're able to fund the entire $1,300 with the credit facility you now have in place? And can you remind me over what time period you would expect to convert that $1,300 into an actual installation? Thank you.
spk07: Yeah. No, Matt, I think what we tried to say is that with the access to the green loan market, we are confident that we can fund the entire 13, 14 sites. So the facility in itself has been upsized with 230 million euro, of which 200 million capex facility and a 30 million guarantee line that we need for the PPAs. and the 200 million euros will bring us into, let's say, mid-24, which will cover an ample part here, around 600, so let's say half of the locations that are currently secured. And it, I mean, maybe the second part, yeah, I think you were asking about the duration, so it It's a bullet structure, and the duration is five years, so it expires in 27. Okay.
spk06: And then just with – I'll sneak one more in. Just with respect to electricity pricing, what do you anticipate as far as pricing in 23 relative to 22? Do you expect to maintain your 22 exit rate? Do you expect to capture more price or have to give price?
spk04: So with what we see now, we have reduced, and what is important, dramatically our cost base with what we have achieved in terms of hedge. So we will be able either, and the price is still decreasing for us, we'll be either trying to capture or to increase the margin. So it will be a bit of choice we have given the market and the trend. So we see with the last quarter, The last result continues data we get if we want to increase our market share or if we want to increase the margin. That's the possibility and the two directions we have, which is, I think, good for us. But so far, even with the price we had, we are in the range of the market.
spk03: Got it. Thank you, guys.
spk00: Our next question comes from the line of Channy Chalapa with Credit Suisse. Please proceed with your question.
spk02: Hey, hi. Thank you for taking the question. I just wanted to understand from your results, it looks like the third-party public charging ports reduced by 36% almost, and so could you provide some context on this particular aspect?
spk03: Tom, do you want to take it? Yeah, no, sure.
spk07: I think during the year, you were referring to the third-party locations?
spk02: Yes, that's correct. I think that reduced from almost 6,000 in 2021 to about 3,800 in 2022.
spk04: Yes, so I can jump on this. So, yes, because the choice, what happened here is that, first of all, we focus on our own network now to build our own assets. So that's really the input. And some of these assets have been taken back by end of contract we had. And instead of renewing, we were preferring to... to develop our own site. So that's the reason why you see a change of this number. That's one. Another one is that we acquired last year the program Megai, which was before in 2021 considered as the third party. And when we acquired it, all the chargers, fast and ultra-fast, began our own.
spk03: So they moved our category of own chargers as well.
spk02: Got it. Thank you. Another question I have around, I know 2022, you replaced some of your fast chargers with the ultra-fast charging sites. So could you talk through, you know, what that looks like for the year 2023 and, you know, if, you know, your current sort of financing facilities will cover that as well?
spk04: Yes, sure. So, indeed, we are moving from from fast to ultra-fast, and for us, fast, to remind you, it's 50 kilowatts, so older chargers, and ultra-fast, it begins for us at 150 kilowatts up to 300 kilowatts. So, we are shifting on some places these old chargers with new ones, so bigger ones, in order to provide more power and quicker for the customer, and basically that's what they prefer that's what we can see on our market trend so this capex facility will be used for a small part in grading these sites but for the majority of it it will be used for new sites and for the new sites we only well most of the time I would say 90% of the time put ultra fast chargers since we can complement big sites with fast chargers, one or two, to accommodate everyone. But the strategy for us is really to place and to install ultra-fast chargers as much as possible.
spk02: Thank you so much. I'll pass it on. Thank you so much.
spk00: As a reminder to start one and ask a question, our next question comes from the line of Doug Becker with Capital One. Please proceed with your question.
spk05: Thank you. I was hoping you'd provide a little more color on the expectations for the quarterly progression that's embedded in the annual guidance for this year.
spk03: So go ahead. Okay.
spk07: Yeah. So I think the point here is that it's not evenly skewed over the year, right? We have the Carrefour project, which is really a project And as we currently see it, it's going to be, let's say, a bit more into Q2, Q3 and Q4 mainly, rather than Q1. So rather than just dividing it by four, it's probably, let's say, progressing. So, you know, we're building up the network as well. We're going to add a substantial amount of high power chargers for Q23 to the network. So expect H2 to be, let's say, more weighted than H1.
spk03: That's helpful.
spk05: Thinking about the site backlog, shown some ability to accelerate installations. Is there a scenario where you might actually see site backlog decline year over year at the end of the year?
spk04: Well, that's a good question. And I think that it depends upon the dynamics. But what we see right now is that even though we increase the installation rate, we see an increase as well of the backlog because of the trend we see and the momentum we got. And what is interesting for us is that actually with a bigger network, we catch bigger contracts from land owners Because what they see and what they want is to be sure that the parties they work with and they deliver the site to is able to execute and roll out many chargers and many sites when they provide us. So we can provide this with the technology and the high uptime. So that's the reason why, as a matter of fact, The more we build, the more interest we receive from some big partners. So far, we see growth, still growth on our backlog, and given the fact that we need to chart all these new cars that are hitting the road, and again, I want to highlight the ban of fuel car sales in 2035, We have many cars to charge, so I think that the backlog will stay high for some years.
spk03: Thank you very much. There are no further questions in the queue.
spk00: I'd like to hand the call back to management for closing remarks.
spk05: Thank you.
spk04: Well, a few words about this year 2022 and the fourth quarter. I think This year, as highlighted in the presentation, confirmed the strategy to focus on our own chargers and ultra-fast chargers. Definitely, the market is here. The number of cars sold is growing dramatically in Europe. We can see it on a daily basis and a monthly basis with new figures. So we need to provide this energy. And the best way, and that's what we see in the trend between slow public chargers and fast and ultra-fast PV charger, we see that the trend is ready to provide quick charge, very powerful quick charge. So the ultra-fast charging is really a key to provide all the energy needed. So in 2021, we have split of our revenue between services and charging business, 70, 30%. In 2022, we see the trend increase to 50 50 and uh well the expectation is that the charging uh business uh will um overrun i would say the service revenue on our own network would give us some high visibility in the months and years to come so with that i would like to thank you for the question and i give you the operator
spk00: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
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