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spk04: 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.
spk00: 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.
spk02: 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?
spk01: Thanks, Mathieu, and welcome, everyone. I will begin by summarizing our financial results for the three months ended September 30, 2023, followed by a review of our balance sheet and cash flow metrics before closing with our full year 2023 guidance. Starting with a summary of our results for the three months ended September 30, 2023. In the third quarter of 2023, total revenue increased notably by 28.2% to €28.6 million, compared to €22.3 million in the same period of 2022, attributable to the strong expansion of charging revenue. Charging revenue increased to €22 million compared to €14.4 million, largely due to an increase in energy sold, which was driven by an increase in charging sessions at both new and existing chargers. Charging sessions increased to 2.6 million from 2.2 million in the prior year period. Services revenue declined by 1.3 million euro to 6.6 million euro from 7.9 million euro during the second quarter of 2022. This decline in service revenue was mainly caused by lower revenue from the CAFU project as we transition away from the build-out phase of the project and enter into the operating phase. In the fourth quarter, we expect service revenue to be significantly higher as a result of three projects, including Carrefour and an unnamed leading auto manufacturer based in Germany. Gross profit increased to €5.4 million in this period, compared to a loss of €4.6 million in the prior year period. This notable increase was driven by a reduction in energy prices, which was supported by a positive impact of secured power purchase agreements, and higher prices levied on customers. General and administrative expenses were €36.7 million, compared to €16 million in the third quarter of 2022, resulting from an increase in employee benefit expenses as well as legal, accounting and consulting fees. This increase is almost completely due to non-cash share-based payment expenses. Operational EBITDA improved by €5.7 million to €2.6 million for the third quarter of 2023, compared to a loss of €3.1 million in the prior year period. This increase was driven by the improvement of gross profit, again indicating that the SG&A cost level of the company is stable compared to prior period level. It is also the fourth quarter in a row that we generated a positive operational EBITDA, showing the robustness of our business model. Moving to finance income. Finance costs were €9.9 million in the three months ended September 30, 2023, compared to €4.4 million in the prior year period. This increase was attributable to fair value shifts in derivatives and warrant liabilities, along with heightened interest expenses on senior debt from our 2022 refinancing. Net loss for the quarter was €43.1 million, while net loss for the same period in 2022 was €22.1 million. The increase in net loss was a result of a non-operational, non-cash increase in SG&A costs, an increase in finance costs, partially offset by an increase in gross profit. Moving to our key balance sheet figures and the main movements. As of September 30, 2023, the company's cash and cash equivalents totaled 28.8 million euros compared to 83 million euros as of September 30, 2022. This decrease in cash is mainly due to a cap expense of 48 million euros. BP&E was 157.5 million in the third quarter of 2023 compared to 134.7 million in the prior year period as we continue to invest in our ultra-fast network throughout Europe. As of September 30, 2023, we had a secure backlog of 1,571 sites with an average term of 15 years and exclusivity on the sites. On October 3rd, 2023, we completed the exchange and redemption offer of all outstanding warrants, streamlining our capital structure. This is the final quarter in which the company is required to mark the market the warrants. Moving to our guidance. We are narrowing our guidance range for revenue and operational EBITDA. We expect to generate revenue between 180 and 185 million euro from our previous range of 180 to 200 million euro. We are confident that the expected increase in charging revenue, driven by our expanding network and seasonality, coupled with a significant contribution from services in the quarter, will leave us well-positioned to meet these expectations. We're also narrowing down our operational EBITDA to be between 30 and 35 million euro. As the utilization rate continues to expand, reflecting market growth and with it our company's expansion, we have confidence in achieving further enhancements to our gross profit in charging revenue and consequently operationally the data. Total energy sold is anticipated to be between 215 and 220 gigawatt hours for the full year. Lastly, I'd like to highlight that we are still in the midst of our growth phase and closely adhering to our expansion plan and strategy. We expect our revenues and margins to not only stabilize, but also progress further as we continue to implement our strategy. And with that, I'd like to hand it back to Mathieu.
spk02: Thank you, Ton. In summary, I am quite pleased with the continued progress throughout the third quarter and through the first nine months of the year. our positive momentum continues to gain traction as we accelerate the development of our network, a key component of our growth strategy. Throughout the quarter, we successfully enhance our cost base and maintain robust profit margins. Our cutting-edge technologies enable us to efficiently handle an increasing number of sessions while bolstering our uptime. Last quarter, I highlighted the fact that the CMS charging experience demand is rising. App time will be indeed critical as our EV drivers want to be sure they can charge without any default. The sharp increase in our charging session shows that we have the technology and the people to offer the best experience to our customers. And here, I would like again to express my thanks to all the members of our Aligo team for their unwavering commitment and hard work over the last quarter. With them, we are committed to the extensive rollout of our network, leveraging our substantial pipeline of sites. With that, operator, we are ready for questions.
spk04: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're 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.
spk05: The first question comes from Matt Somerville of D.A.
spk04: Davidson. Please go ahead. Thanks.
spk03: Good morning. Maybe just talk. I mean, you've certainly had big fourth quarters in the past, but obviously the guide for the year implies a really big kind of Q4. And you mentioned service revenue is going to be up pretty materially. Maybe if you can just put a little more detail behind that, and then also comment on why the full-year guide migrates to the lower end of the range.
spk02: Yeah, I'm going to take it. Hi, Matt. So, regarding the fourth quarter, indeed, it could be a big push on service revenue. Actually, we have begun a big project a bit like Carrefour in Germany, and where the recognition will be happening in this quarter. So the work has already begun, but it will be shown in this quarter. So that's the reason why. And it's a big element we will talk about once it is here. But that's the main reason. And we have another one we are closing as well in services. and as well with an OEM, and it will be disclosed at that time. So that's really a question of timing, and again, we have always said that in the service revenue, it is not a linear exercise, so that's the reason why, as last year, it was pushed back in the fourth quarter. That's one reason regarding the big increase. And regarding your second question, actually there is uh two things first of all there is uh regarding uh the careful project there are some uh some delays and we wanted to have some some starting stations more in the uh in 2023 so there will be a state of the project in 2024 that's mainly the reasons uh what we we see that uh that the principal reason and the second uh reason as well is that Some of our grid connection came a bit late during Q3, and so the charger will be installed on our own network in Q4, so that's the reason why we see the lower hand of our energy linked with this installation a bit later on in this year, and so as well regaining the revenue and the EBITDA for the charging on network.
spk03: Got it. And then just as a follow-up, obviously over the course of 22, you've pushed through some pretty substantial price increases, I think in aggregate, amounting to something like 40%. I'm curious as to how much of that is still sticking today and what degree of price fade you may be experiencing. Thank you.
spk02: We have... Actually, it was pretty much effective during H1 2023, and we went in order to... To increase our market share, that was the question last time from you, Matt, about this non-price elasticity of market share. So we decided in H2, beginning of H2, to decrease the price in order to have a higher market share in terms of higher utilization rate. That, by the way, what we see now is a very high one. And the breakdown of mature and new chargers can help you to asset this. So we went through a decrease of the price as of July. It was around 15% globally on our network.
spk05: Got it. Thank you. Appreciate the call. Again, if you have a question, please press star, then 1.
spk04: This concludes the question and answer session. I would like to turn the conference back over to Mathieu Bonnet for any closing remarks.
spk02: Thank you. I would like to highlight two points. The first one is that we see a very strong market in Europe. and maybe it's different in other regions, but we see in EVs a strong market right now. We see a lot of sales in EVs with a higher penetration as the year before pre-year period. And we can actually notice that with our growth in utilization rates, which is quite, I guess, impressive when we compare with last year and the figures of October. brings us confidence in the figures we have just given regarding the guidance. The second point is that we have installed more charging poles, and in the future, in our own ultra-fast network, we'll have many more, and we'll see this in Q4, and that's really the big push we are doing right now. That's the reason why we are lining up all the resources in order to increase this charging revenue. And you have seen in our figures of Q3, and it will be even more the case in Q4, that this own network is getting full speed ahead right now. So for me, that's a very important topic, because with this recurring revenue, we have a company, and that's the fourth quarter in a row where we reach a positive operation EBITDA, and with this recurring revenue of charging on our own network, it will be still and even more the case.
spk05: With that, operator, I thank everybody.
spk04: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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