Good morning, and welcome to the Nuvve Holding Corporation Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Eduardo Royes, Managing Director, ICR. 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 fourth quarter and full year 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 these filings with the SEC and in the earnings release issued today, which are 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?

Thank you, Eduardo, and hello to everybody joining us today. We thank you for joining our fourth quarter and full year 2022 results call. The fourth quarter saw a watershed moment for school bus electrification with the awarding of grant funding as part of the EPA clean school bus program in October. As discussed at length, on our November call, we were thrilled to find out in October that Nuvve facilitated 10 of its school district customers in receiving 61 EPA clean school bus rebates as part of the first phase of this five-year program. Over the past several months, we have been working closely with the school district partners for which we were the [Grandbriters], along with other potential customers with application process we facilitated. Receiving grant, our rebate money is just step one in the process of electrification. Recall that our recipients received $20,000 in hardware and infrastructure-based money per bus. This translates into $1.22 million in funding for Nuvve high-powered chargers infrastructure and site design associated with the 61 buses, but customers have flexibility in how they spend it. Nuvve's Bidirectional chargers have sold for more than twice the rebate amount. As such, some customers may choose to pay the difference to purchase the DC chargers, but more likely, we expect most to, one, seek more grant funding in addition to the EPA funding; two, stack their EPA rebate so as to cover the full cost of DC chargers with more than one rebate per charger; or three, apply their funding for the purchase of AC chargers. Recall that DC charges are more expensive than AC charges. However, bidirectional DC chargers provide significant faster charging speed and more importantly, allow Nuvve customers the opportunity to unlock valuable V2G revenues using a proprietary platform over the life of…

Thanks, Gregory. I will start with a recap of fourth quarter 2022 results. In the fourth quarter, we generated total revenues of $1.15 million compared to $1.25 million in the fourth quarter of 2021. 1/2 of the decline is driven by lower grant revenues, falling more than 50% year-over-year and the balance of the decline is attributed to lower product and service revenues, which declined by 5%. Note that relative to the third quarter of 2022, sales more than doubled in the fourth quarter, and we have seen a continued revenue acceleration into Q1 of 2023. Margins on product and service revenues were 32.7% for the fourth quarter 2022 compared to 3% for the fourth quarter 2021. The strong improvement in margins on a year-over-year basis primarily reflects the decision in Q4 of 2021 to engage in the sale of DC chargers at a discount with a particular customer in return for the contractual rights for a larger share of future grid service revenues. In addition, margins also benefited this year from grid service revenues being a higher mix of total revenues in the fourth quarter of 2022 compared with the prior year quarter. Margins can be lumpy from quarter-to-quarter depending on mix. As a reminder, 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 a smaller fraction of the revenue of a DC charger. Grid service revenue margins generally range between 30% to 40%. Operating costs, excluding cost of sales, was $9.2 million for the fourth quarter of 2022 compared to $8.5 million in the fourth quarter of 2021. The increase was primarily attributed to increases in professional fees, rent and legal expenses, partially offset by a decrease in compensation expenses, including…

Thanks, David. To conclude, we are in close collaboration with our four district customers we have been awarded EPA clean school bus program, and we look forward to accepting orders in the coming months and shipping them in the quarters ahead. We are happy to see momentum building now that we are a few months into 2023, both on the hardware side as evidence of the LAUSD order. And on the grid service revenue side, as we seek out opportunities to layer our technology into existing infrastructure, such as through the Circle K partnership. These recently disclosed agreements as well as our pipeline point to an improvement in our business in 2023. This is what we -- what was rather flattish and disappointing 2022. And we, of course, remain optimistic about the medium and long-term growth prospects for our business as endorsed by the myriad of regulatory V2G tailwind. We thank you for your participation, and we'd like to now turn the call back to the operator to begin our Q&A. Operator?

[Operator Instructions] Our first question is from Eric Stine with Craig-Hallum.

So given us the Circle K announcement, obviously, pretty exciting. Just curious, could you maybe talk about how you expect that to play out in terms of the rollout over 2023 and into 2024. And then you did mention that you've got similar opportunities out there. Any color you can provide on those would be helpful.

I mean, I think it's going to be a gradual rollout, right? I mean we are -- there are two type of resources by their stationary storage. And then they are the charging station. The storage right now is more in one region and the charging stations are more maybe in some other regions. So though there is more that is going to be rolled out here along the year. So we need to manage those -- this rollout process. We need to also build a better understanding of -- because obviously, to do grid services. You have a charging station, but also you need to have a vehicle connected to it, right, in order to provide those grid services. And so we are in the process of gathering the very high level of data to give us a very deep understanding of the full optimization we can do of those combination. And I'm sure we're going to go through iteration, so I would expect some revenue probably in Q2, but very small, but then growing into Q3 and definitely achieving a full scale, but maybe not yet fully optimized by the end of the year for the first 40 megawatts.

Got it. And then just on the additional opportunities?

Yes, I mean, obviously, we haven't disclosed those, but obviously, there is a large amount of fast chargers that are being deployed in Europe and in the U.S. And those are with freeway type of cash in citation. Now you also have some other type of depots maybe that are vehicle depots that have maybe less supportive of a full bidirectional application, but that might be a great application for unidirectional, so I would consider those 2.

Okay. Got it. And then maybe as we think about megawatts under management, you obviously had the announcement related to stationary batteries in Japan. I'm just curious, could you talk about the stationery opportunity? I mean, I guess it's basically equal right now to the vehicle side in terms of megawatts under management now. How do you see that? If you look out three to five years, do you think -- I mean, what does the mix look like in stationary? Does it remain a meaningful percentage of the mix?

I would say that these are high priority to that vehicles will be the very -- a large proportion of the kilowatt hours that are being managed and the kilowatts that we are providing to the grid. So definitely, vehicle will be a big part, but when you look at a site, right, and you have a combination of some local generation, like solar, some local loads , some local storage and some unidirectional and bidirectional, so V1G and V2G. Now you have a lot of flexibility in how you can manage a site like that. And we've always talked about kind of both those of power that are representing this mix of local generation, local storage, local load and V1G, V2G. And the other piece is if our platform is really good at managing EVs, we are also really, really good at managing stationary storage and then managing the combination of to an optimizing the value we can extract from that combination, I think we are far ahead over the years in how we are positioning ourselves in that specific point.

Okay. And so is it better to think about this -- that stationery, it's kind of each site will have a mix of all kinds. There's going to be some stationary there as opposed to potentially opportunities where it's very heavily focused on stationary storage that you think about it.

Yes. I mean our acquisition is always, hey, our competitive edge is in the EV space. But EV combined with stationary storage is very valuable. And so -- but no, the entry point is starting with transportation, electrification starting with transportation. That's our position.

Okay. Got it. And maybe last one for me. Just curious, I guess, we're still kind of waiting on or in process in terms of the first tranche of EPA funding, but any indications about your involvement, how are things coming together as you kind of get prepared for that next stage of EPA funding?

Yes. I mean first, we are -- we're still working very closely with the school districts. It's a big step, right? I mean there was a lot of money on the school bus side in this round, but a lot of school districts were surprised by the amount of money that we have to spend on the infrastructure piece, right? And not just the charging patient, but potential grid upgrades. We expect the next round to be a lot more balanced and to have a lot more -- somebody call here, sorry, to have to be a lot more balanced and to have a lot more implementation looking. So basically, how is the project maybe a project that are more firm than what they were in the first round. And this is what you would expect because now with the first round people have been thinking about it. So we expect the next one to be something where people will have more thoughts about what they need to put in place.

The next question is from Brian Dobson with Chardan Capital Markets.

So the Circle K partnership is very positive. I suppose, as you're thinking about Europe, and growth there, can you speak a little bit to the environment and toward the business there and also the opportunity for potential subsidies coming from the European governments?

So yes, I mean, I think Europe is very interesting, right, because this is obviously with the war in Ukraine and Russia, and this have been creating a lot of volatility on the cost of energy and the cost of electric energy is being one part of it. So one volatility in the market, two markets such as what's called CRN, CRD, FFR , like the market that are helping keeping the grid balance are a lot more advanced than they are in the U.S. There is some diversity there and that brings quite a few opportunities for us to be able to provide those grid services with as minimum as possible impact to the end user. When you go through a fast charger, you don't have to discharge your car, you're not here to even wait half an hour more in order to save a little bit of money. But if you lose 30 seconds to 1 minute, it's not a big deal and that can make a big difference in the cost of that infrastructure and how that infrastructure can be deployed. So I think that's really the advantage in this case of the European market.

Yes, very good. And then also positive for next year that potential order from the Los Angeles Unified School District. As grants are paid out from the government, what kind of incentification do you think you'll see from other large school districts to enhance their EV bus orders?

I mean I think this -- that wave is happening right now, and it's not going to go back. I think the biggest hurdle is really EV, the manufacturing process, which is now we said, we expect maybe not thousands yet, no, hundreds, but not thousands. That's probably the biggest impediment to the school bus deployment. But I think the mindset has turned and the school districts we are -- ready to embrace it. They are still discovering what it takes to get there, but they are really embracing it. And essentially, I think the big school districts -- some of the [big fit owners] also. I've been clearly pointed that out. And I think that tidal wave is moving, and this is what's really exciting about us focusing about market is this is coming -- and hundreds this year, thousands next year, that's what we can expect.

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

Thank you, everybody, for joining us today. We are very excited about 2023 and we're looking forward to sharing more about the progress that we are doing into rolling out our technology with partners such as Circle K and the further wins that we are making into the school bus business. I look forward to sharing more with you at the end of the first quarter of 2023. Thank you.

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