Good day, and welcome to the Nuvve Holding Corp. Third Quarter 2022 Earnings Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Eduardo Royes. Please go ahead.

Thank you. On today's call are Gregory Poilasne, Chief Executive Officer; and David Robson, Chief Financial Officer of Nuvve. Earlier today, Nuvve 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 Nuvve'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 Nuvve's filings with the SEC and in the earnings release issued today, which are both available on our website. Nuvve 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 Poilasne, Chief Executive Officer of Nuvve. Gregory?

Thanks, Eduardo, and hello to all. 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 were thrilled to see the first allocation come to fruition with the award of $913 million in grants to 389 school district applicants. This grant funding will support a purchase of nearly school buses and provide rebates on charging and hardware infrastructure. Nuvve was proud to have formally represented 10 school districts in their grant application process. In fact, Nuvve is the only charging station provider to submit grant, a testament, we believe, the strength of our technology, strong track record in EV infrastructure projects execution and expertise in grant writing -- associated with Nuvve are expected to translate to $22.9 million in funding for 61 electric school buses manufactured by Nuvve's partners, and in funding for Nuvve's high-powered bidirectional chargers and associated charging infrastructure, 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 to this program. The DC chargers typically costs more than twice that figure, and so Nuvve's potential charging station sales for those orders should ultimately be more than double the size of the grant money awarded. Additionally, once deployed, this electric school bus could earn potential recurring future grid services over their estimated useful life of 10 to 12 years. Critically, the potential benefit to Nuvve for the EPA's clean school bus program would be…

Thanks, Gregory. I will start with a recap of 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 3 quarters. The improvement was driven by a greater contribution from AC charger sales to 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 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. On a sequential…

Thanks, David. To conclude, we're disappointed by the slowdown evidenced in the third quarter results, but we are taking steps to adjust for what is proving to be a much slower EV ramp up 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 latter in the coming months. Our pipeline of potential awards remain exciting, and we look forward to continuing to evolve our business and bidding new 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. Operator?

[Operator Instructions]. First question comes from Eric Stine with Craig-Hallum.

So I'm curious, commentary on the consumer space. Just looking for some more details there. And I also noticed recently, San Diego Gas & Electric program, GM is involved. I know this is a program -- a DOE program that you're also involved in. So I would just love more details and maybe how that flows into your consumer outlook?

So I mean, you've got a different program, right? 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 we can basically mix, for example, school buses with consumer vehicles that would be at . The other piece is PG&E, for example, has announced V2G tariffs, which basically are cost of bringing kilowatt hour inside on the meter, but also the revenue you can generate by pushing kilowatt hour back to the grid, depending -- and those will obviously depend on the government. So there are many programs now. As we said from the beginning, we are not just doing business here in the U.S. We're also doing business in Europe. In Europe, it's a different set of services that can be performed, like we've been doing V2G, doing integration in Denmark. We have done it in the Netherlands. We've also done quite a bit of distribution grid services in the U.K. And we see that across the different countries in Europe, where we can do business. A combination of, for example, set consumption with some type of market access. But obviously, the best part with those things is to partner with some OEMs that are going to bring all their horse power into that.

Right. And I mean, I would assume, and maybe when you're alluding to some announcements in this space here in the relative near term, I don't assume that this is potentially what you are referring to?

Yes. I mean clearly, that's not the only line of what was described now.

Got you. Okay. Maybe just talk about the pipeline a little bit. You talked about megawatts under management. You talked about your backlog, but I think you have discussed the pipeline in the past. I'm just curious what you're seeing there, maybe where it stands today, and the trends you see here near term in 2023?

Yes. 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 had some medium and heavy-duty school buses, a combination of bidirectional implementation and some unidirectional implementation. And then you've got stationary storage. Those were kind of the 3 steps in 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 this type of implementation. And again, it's not just a U.S. vision here, it's a U.S., 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 [indiscernible] 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. It's really leveraging partners that have infrastructure that 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 Nuvve 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 the position of integrating our platform with those resources in order to accelerate the performance.

Got it. Maybe -- I know in the past, your pipeline, I think you [indiscernible]. 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 we move?

Yes, Eric, this is David. We did -- we have given that in the past. And I would say our pipeline is as strong, if 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 for existing hardware to deploy on 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 of the last couple quarters.

And let me add 1 more thing on it, right? What we've seen is that -- Q3 was very slow on the school bus because everybody was expecting the outcome of the EPA. 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, now it's like 89 buses that we have on that. But what we see is also a lot of people that are reaching out to us. And so I mean, any number out of just the numbers we know are pretty 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 taking decisions, again, as David said, we see a very, very solid pipeline that's going to be firming up into backlog in Q4 and Q1.

Okay. That's helpful. Maybe last 1 for me. Can you provide more color? You mentioned restructuring at Levo, I would just love to hear more details.

Yes. I mean we are living in a world with constraints, right? And so when you have constraints, you look at what is the best use of all the resources that you have around you. And so as we are working with Levo and looking at working on a few deployments, we clearly thought that there were still some more cycles available in the team. And we -- so for example, Maggie, who is our Chief Commercial Officer at Levo, now has also stepped in to the -- in charge of all the sales. And that's because she has the skill set, she has the vision, she understands how these are coming together. And really, the Nuvve-Levo value proposition is pretty close, right? Either it's Levo that's providing the financing, or that value generic 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 those EVs. 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 core team members that we have in the Levo team. And that focus on the key aspects of what we are doing, the sales of the charging stations and the services addressing all the revenue opportunity on the grid side, the procurement, strategic procurement and relationships with the OEMs as well as the project financing, which are the core competencies that were associated with the 4 members that we've brought closer to Nuvve in this process.

And Eric, to add to that, we've reported it pretty much every quarter. 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 Nuvve, because we're really 1 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.

[Operator Instructions]. Our next question comes from Brian Dobson with Chardan Capital Markets.

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?

I mean -- so we -- our core business is really to provide grid 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've got the licensing or service, 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 -- grid service participation, combined with the uncertainty associated with the vehicle, requires quite a bit of our involvement at this point. Is that answering your question?

Yes, it does.

And Brian, 1 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 always 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.

This concludes our question-and-answer session. I would like to turn the conference back over to Gregory for any closing remarks.

Great. We -- I want to thank everybody, and we are looking forward to sharing more progress that we are making in these other areas, new areas of focus that we shared with you as well as very exciting developments with the EPA funding across the school bus market. And again, this is the first round, and there's another $12 billion that's going to be rolled out over the next 3 or 4 years. And that just give 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.

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