Allego N.V.

Hello and welcome to the Allegro third quarter 2023 earnings conference 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 touchtone phone. Please note, this event is being recorded. I would like now to turn the conference over to Rachel Richardson, Director of Investor Relations and Corporate Communications. Please go ahead.

Good morning, everyone. I want to welcome you to Allegro's earnings call for the nine-month end of September 30th, 2023. Today's speakers are Mathieu Bonnet, Chief Executive Officer, and Tom Lowers, 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 factors referenced in today's press release and the risk factors and other disclosures in 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, except as may be required by law. During our call today, we'll also reference certain non-IFRS financial information. We use non-IFRS measures in some of our financial discussions as we believe they provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. We believe that the use of these non-IFRS financial measures provides an additional tool for investors to use in evaluating projected operating results and trends and in comparing our financial measures with other similar companies, many of which present similar non-IFRS financial measures to investors. 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. as issued by the IASB. Reconciliations of IFRS and non-IFRS measures, as well as the descriptions, limitations, and rationale for using each measure can be found in our files with the FDC. I'll now turn the call over to Mathieu Bonnet, CEO.

Thank you, Rachel. Good morning, everyone, and welcome to our third quarter 2023 earnings call. I will begin with a brief overview of our results, followed by an update on some recent milestones, before turning the call over to Don for a closer look at the numbers. I want first to highlight the following. In the third quarter of 2023, our total revenue increased by 28.2% to 28.6 million euros, compared to 22.3 million euros in the same period of 2022, driven by strong charging revenue growth. For the nine months ended September 30, 2023, revenue was 96.8 million euros, a 33% increase over the prior year period of 73 million euros. Our charging revenue increased 53% to 22 million euros during the quarter. compared to 14.4 million euros during the same period in 2022, due to increased charging stations, better pricing stations, and utilization rates that grew 11.3% from Q3 2022 to Q3 2023. We also observed a 21% jump in the global number of charging stations to 2.6 million from 2.2 million in the prior year period. Our strategy to shift from sales and service revenue to charging revenue is in full swing, and we are pleased with the results we are observing thus far. I want to spend a minute discussing our utilization rates, which are a very important KPI to track the growth of our business. Last quarter, we began breaking out our utilization rate to show the strength of our major network, and how new sites have an incremental ramp-up period. As more drivers familiarize themselves with the new locations and ultra-fast charging points, we see these rates steadily climb. But even with these delayed stabilization effects from new chargers, our global utilization rate has increased sharply compared with the same period in 2022, which highlights the premium site location selection process of our Alamo technology. For the third quarter of 2023, our major charging network utilization rate was 15% for ultra-fast charging ports installed before January 2023, compared with 12.1% for Q3 2022, While our new ultra-fast charging ports installed in calendar 2023 had a utilization rate of 10.2% for the same period. I want to highlight as well something we are very excited about. For the first time, we reached over 1 million charging stations in a single month, which occurred in October. During the last month, The global utilization rate was 13.4% for our ultra-fast chargers with a major charger utilization rate of 16.3% and new charger utilization rate of 10.6%. Importantly, the new ultra-fast charging points installed in 2023 represent 65.7% of the total number of ultra-fast charging points operational and of Q3 2023. We are incredibly pleased with this milestone, and it speaks to the sense of the network we are building and underpins the pace of our future growth plans with our ultra-fast network. Moving to sales and services, revenue for the third quarter of 2023 was 6.6 million euros compared to 7.9 million euros prior to that. The decrease in services revenue was primarily the result of lower CARE4 projects' work. In the fourth quarter, we expect services revenue to be significantly higher as a result of three big projects. Overall, we saw growth across all our key metrics. Total energy sold for the nine months of 2023 declined to more than 144.2 gigawatt-hours on our own network, while the third quarter was 47.8 gigawatt-hours compared to the prior year period of 37 gigawatt-hours. Overall, I am quite pleased with our executions through this third quarter. We are continuing to expand rapidly our charging network, with more than doubling our ultra-fast charging points compared with the install base end of Q3 2022. We minimize the cost of energy, which has a very important impact on margins and operational EBITDA. Our gross profit performance continues to improve significantly, particularly as our fast and ultra-fast chargers become a larger mix of our charging portfolio. Lastly, it is now the fourth consecutive quarter we are positive operational EBITDA. Now, I will turn to some of the recent commercial developments during the quarter. In October, we signed two new 10-year power purchase agreements, securing a steady supply of 100 gigawatt hours of energy annually. These long-term agreements not only offer a low, stable energy price, but also mark a key step in Aligot's commitment to advancing sustainable mobility. As a pure player of ChargePoint operator and as our own energy provider, we can leverage these PPAs to optimize competitively priced local energy procured from renewable sources, which is then directly supplied to electric vehicles. The PPAs involve renewable energy from a nearly completed solar park, which is expected to be operational in January 2024, and a wind farm set to be completed in January 2025. I remind that we have developed an integrated ecosystem within the organization, encompassing energy procurement, monitoring, and distribution, supported by our on-demand and supply optimization software and platform. This unique framework provides us with greater control over the energy we deliver to our network. We also established a strategic partnership with GoOn, a leading fueling company, to enhance the accessibility of electric charging services for drivers in Denmark. This collaboration secures exclusive access to the fueling company's 168 stations across the country. Notably, the first seven charging stations are projected to be operational between Q4 2023 and beginning of next year, with the expectation to commission an additional 60 stations by the end of 2024. We have been awarded an important contract for 48 locations in Germany with the program Dutchlandsnet, with the deployment of 216 ultra-fast chargers. Our operations throughout 16 European countries have seen substantial commercial activity with signed contracts and a backlog of 1,571 sites at the end of third quarter 2023. Moving to our outlook, as Tom will discuss in more detail, we are enhancing our 2023 guidance. We expect annual revenue in the range of €180 million to €185 million and operational EBITDA to be between 30 million euros and 35 million euros. We are narrowing our energy source between 215 and 220 gigawatt hour. From a top-line perspective, we will continue to benefit from the strong charging market in Europe, robust utilization rates, and accelerating additional site deployments in the region with a single focus on fast and ultra-fast charging. Utilization rates through the first nine months of 2023 have been very solid, and we expect that trend to continue. Giving us further confidence in our guidance, as said, October marked the first time we have achieved one million charging stations in a month. As we think about our profitability, we have implemented several measures to accelerate our pathway to becoming free cash flow positive in the future, and we will see that translated near-term with significant operational EBITDA growth. We have executed on controlled energy input costs through our PPAs and meticulous resource oversight. We anticipate both margin expansion and growth in operational EBITDA going forward. Before handing it over to Tom, I would like to highlight that we are operating from a position of strength as we are focused on growing our charging network in a very strong market. Our charging network brings recurring revenues that will grow naturally with the build-up of our own public ultra-fast charging network. The European market is strong and has already over 18% fully battery electric vehicle penetration in Q3 2023. The European EVs fleet is to expand dramatically in the next two years, from a base of 6.5 million EVs today to 12.6 million EVs in 2025, according to the NEF, meaning a very robust need of more charging, always in the very short term. With that, I will turn it over to Tom for an overview of our financials. Tom?