Allego NV
NYSE:ALLG
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
0.57
3.44
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Greetings. Welcome to Allego First Half 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.
I will now turn the conference over to Rachel Richardson, Director of Investor Relations and Corporate Communications. Thank you. You may begin.
Good morning. I want to welcome everyone to Allego’s earnings call for the six months ended June 30, 2023. Today’s speakers are Mathieu Bonnet, Chief Executive Officer; and Ton Louwers, Chief Financial Officer.
During today’s call, we may make certain forward-looking statements within 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 risks 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 maybe required by law.
During our call today, we may 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 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 Mathieu Bonnet, CEO.
Thank you, Rachel. Good morning, everyone, and welcome to our earnings call for the first half of 2023. I will begin with a brief overview of our results followed by an update on some recent milestones before turning the call over to Ton for a closer look at the numbers. In the first half of 2023, our total revenue increased by 34.5% to €68.2 million, compared to €50.7 million in the same period of 2022, driven by strong charging revenue growth in Q2.
Charging revenue more than doubled to €51.1 million compared to €24 million during the same period 2022 due to robust prices from the hikes we implemented in 2022, which remain in place through Q2, utilization rates that grew 51% from H1 2022 to H1 2023 and a 17.2% jump in the global number of charging sessions to €5.2 million from €4.4 million in the prior year period.
Consequently, our charging revenue grew substantially with an increase of more than 112% as a result of the uptake in energy sold. Our strategy to shift from sales and services revenue to charging revenue is in full swing even though due to seasonality we see usually lower sales and services revenue in first half year compared with second half year.
Sales and services revenue declined to €17.1 million from €26.7 million during the first half of 2023. The decrease in services revenue was primarily the results of the expected slower deployment of stations for the Carrefour project in Q2 and the later pickup of new contracts in the second half of the year, and mainly in Q4 2023.
As such, I want to spend a minute discussing our utilization rates. The period is characterized by a steep increase in the number of our ultrafast charging ports as it is our main strategy focus. We grew this number by more than 42% in the first half of 2023 and by 20% in the last quarter. The new charging stations have a ramp up in terms of utilization compared with more major stations. As more drivers familiarize themselves with the new locations, we see that the rates steadily climb, but even with this delayed stabilization effect, our global utilization rate has increased sharply compared with the same period in 2022, which highlights the premium sites location selection process of our Allamo technology.
In order to better explain dynamics in place, we will be providing utilization rates for both new and mature chargers going forward. Through the first half of 2023, our mature charging network utilization rate was 13.4% for ultrafast charging ports installed before January 2023, while our new ultrafast charging ports installed in H1 2023 at a utilization rate of 8.9%.
Overall, we saw growth across all our key metrics. First half 2023, total energy sold climbed to more than 96.4 gigawatt hours and total charging sessions amounted again to 5.2 million at the end of the period, an increase of 17.2%. Our operational EBITDA was a gain of €11.7 million for H1 2023 compared to the prior year period loss of minus €1.5 million showing the strong increase in our charging revenue margin that stems from strong management of our input costs, and the kicking effect of our power purchase agreement PPA contracts during the period.
During the first half of 2023, the net loss was minus €38.9 million compared to the prior year period of €247.1 million. Looking at these results, I am pleased with our performance through the first half of 2023. We are rapidly expanding our ultrafast charging network with growing energy sold while minimizing input cost volatility through our execution of PPAs. The results of these measures are reflected in our solid gross profit and operational EBITDA performance.
We have made remarkable strides in moving towards our goal of fulfilling 80% of our energy needs through renewable sources PPAs by the end of 2023. These achievement underscores our unwavering dedication to sustainable practices and solidifies our position as a pioneer in adopting clean and eco-friendly energy solutions.
With this robust strategy in place, we believe we have the flexibility to deal with potential energy price fluctuations within our charging business line. We have sharply increased our number of chargers, which contributes to a growing share of our charging revenue, and this trend will continue in the next quarters. We are fully committed to equip our backlog sites with higher installation rate.
Now turning to some of the commercial developments during the second quarter of 2023, I would like to highlight most recently Allego and OIL! Tank & Go have joined forces in Denmark establishing the first collaboration of this kind between a gas station brand and an external charging provider to introduce a network of ultrafast charging infrastructure in the country.
Allego is developing the first 14 sites that are expected to be operational in Q1 2024 with the potential to install in all 80 stations in Denmark. In June, we announced a long-term agreement to sell compliance credits due to tickets generated via our public charging stations in Germany to also Dutch land.
The agreement has been signed through the end of 2028 and has a potential total value of up to €185 million. With this contract, we secure complementary revenue from our charging activity in Germany as each kilowatt hour is remunerated through this contract at a fixed price. It’ll significantly increase our margin of charging activity going forward.
We have signed, for instance, a partnership in France as well with real estate owner parties to equip more than 40 locations with ultra-fast chargers, which will significantly grow our footprint in the country. In all our 16 countries of operations with thesubstantial commercial activity, we signed contracts and backlog of 1,350 sites at the end of H1 2023.
As Ton will discuss in more detail, we are refining our outlook for 2023. We expect annual revenue in the range of €180 million to €200 million. We are maintaining our operational EBITDA range as our charging revenue margin has increased and we are maintaining our green energy sold.
From a top line perspective, we’ll continue to benefit from the booming market in Europe for EVs, robust utilization rates and additional site deployments all over Europe with a focus on fast and ultra-fast charging. Utilization rates through the first half of 2023 have been studied and we expect that trend to continue.
Before handing over to Ton, I would like to highlight that we are in a position of strength as we benefit from our business strategy of recurring usage and the buildup of our own public ultra-fast charging network. Public ultra-fast charging will continue to play a pivotal role and even more so in supplying the required energy to sustain the projected 20-fold growth in the number of EVs by 2035.
With that, I will turn it over to Ton for an overview of our financials. Ton?
Thanks, Mathieu, and welcome, everyone. I’ll begin by summarizing our financial results for the six months ended June 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 brief summary of our results for six months ended June 30, 2023.
In the first half of 2023, total revenue increased notably by 34.5% to €68.2 million compared to €50.7 million in the same period of 2022, mainly as a result of the ongoing and robust growth of charging revenue. Charging revenue more than doubled to €51.1 million compared to €24 million largely due to the three price hikes we implemented in 2022 and the 17.2% jump in the number of charging sessions to €5.2 million from €4.4 million in the prior year period.
Services revenue declined by 35.8% to €17.1 million from €26.7 million during the first half of 2023. The decrease in services revenue was primarily on account of an expected lower deployment of stations for the Carrefour project in Q2 and certain other contracts beginning second half and Q4 2023.
Operational EBITDA demonstrated a meaningful year-over-year improvement moving to a gain of €11.7 million during the first half of this year from a loss of €1.5 million in the first half of 2022. The sizable shift was in line with our expectations as we have moved into the growth phase of our expansion plan and strategy. While this change was mostly because of expanding leverage and solid advances in gross margins from charging revenue, particularly from our ultra-fast charging service and the stable path of our SG&A, we do expect these underlying positive trends to continue and aid us going forward.
Gross profit was up to €20.5 million in this period compared to €2.3 million during the first six months of 2022. The significant expansion was driven by the combination of our pricing actions from last year, the implementation of the PPAs and the sale of carbon credits.
General and administrative expenses were €48.3 million compared to €271.7 million during the same period in 2022, owing to a decrease in share-based payment expenses of €231.3 million during the first half of 2023 as compared to the same period in 2022.
Moving on to finance income. Finance costs were €14.8 million in the six months ended June 30, 2023 versus finance income of €15.2 million during the same period in the prior year. The uptick was mainly due to the recognition of €29.9 million of mark to market adjustment income from the warrant liability in the first half of 2022, as well as higher interest expenses on senior debt as a consequence of the refinancing that occurred at the end of last year.
Net loss for the six months ended June 30, 2023 was €38.9 million while net loss for the six months and the June 30, 2022 was €247.1 million. The improvement in net loss was mainly a consequence of the drop off €231.3 million in stock-based payment expenses, which was partly offset by higher finance costs.
Moving on to our key balance sheet figures and the main movements. As of June 30, 2023, our cash and cash equivalents stood at €65.2 million compared to €29.8 million as of June 30, 2022. This increase in cash is a combined effect of our CapEx spend in the first six months of this year and a second drawdown we made in June. This drawdown was planned under our CapEx facility and we expect to have our next drawdown in December of this year as we continue to fund our CapEx needs for the coming 12 to 15 months.
PP&E was €156.3 million as of June 30, 2023 versus PP&E of €134.7 million as of December 31, 2022, as we began making investments in the European ultra-fast network this year. As of June 30, 2023, we had a secured backlog of 1,350 sites, all of which have signed lease agreements for an average term of 15 years and consist of approximately 10,800 fast and ultra-fast charging ports representing more than 60% year-over-year growth.
Moving on to our guidance. We are narrowing our guidance range for revenue. We now expect to generate revenue between €180 million and €200 million, while reaffirming our guidance for operational EBITDA to be between €30 million and €40 million. Total energy sold is anticipated to be between 215 and 225 gigawatt hours for the full year.
The updated guidance reflects two main factors, services revenue and utilization rate. First, we have reduced our upper internal projections for services revenue in the second half of 2023 as some service revenue will shift to 2024, and we focus more on the build out of our ultra-fast charging network. So we now expect services revenue to grow at a slightly slower pace compared to our previous guidance. Second, with overall utilization rates growing, we continue to anticipate further improvements in gross profit in charging revenue, enhance operational EBITDA.
Finally, I will conclude by noting that we are in the midst of our growth phase and are currently very much in line with our expansion plan and strategy. We anticipate our revenue and margins to stabilize and only advance from here as we execute on our strategy.
With that, I’d like to hand it back to Mathieu.
Thank you, Ton. In conclusion, I am very pleased with the progress we have made during the first half in Q2 of 2023. Our positive momentum continues to accelerate and we are gaining more speed in the buildup of our own network, which is the main objective of our strategy. During the last period, we confirmed and demonstrated the improvement of our cost base and maintain high margins.
Our technologies enable us to manage an increasing number of sessions while increasing our uptime. With more EV drivers hitting the road, they expect the seamless driving experience, so KPIs like these would be more and more critical to retain and expand our customer base.
In the coming periods, industrial and operational excellence will become even more valuable. We are fully dedicated to rolling out our network, thanks to our impressive pipeline of size, which create high visibility and value. Lastly, I would like to express my continued gratitude to all the members of our Allego team for their unwavering commitment and hard work that translates into these operational results we have shared with you today.
With that operator, we are ready for questions.
Thank you. [Operator Instructions] Our first question is from Matt Summerville with D.A. Davidson. Please proceed.
Thanks. Good morning, guys. Maybe first, can you talk – maybe just get a little bit more granular on the revenue cadence as we think about first half, first to second half and why, again, you’re migrating towards the lower end of your prior revenue guide. You mentioned some shifting around with maybe some service revenue. Can you just be a little bit more detailed on that and then have follow-up?
Yes, I can take that. Are you taking it, Mathieu? Okay, good. Now, you take it. Yes.
Yes, I take it. I take it. Yes, we expected some contracts to pick up earlier. So you mean in Q4 2024 and we believe that it’ll be shifted at beginning of next year. And we have as well some few delays in the Carrefour project to finish this with the complex sites. And that’s the reason why some of the sites that should have been finished in 2024 will be shifted in 2025. So that’s the reason why we have the shift, but it’s in the service – sales and service activities.
Got it. And then as a follow-up, I’m curious, Mathieu, how are you thinking about or how has your thinking maybe evolved over the last six to 12 months with respect to whether or not you anticipate entering the North American charging market? Thank you.
That’s a subject we are looking at to be honest. But we have, as you know, a lot of to do in the in Europe, because again the market is more mature and we need more and more chargers over there right now given the number of cars hitting the road. So that’s the reason why we really need to dedicate it forces, but the way we would do it if we – if ever we do it in the U.S. would be to – I think to partner in order to be quite efficient with the way we work here in Europe. Meaning that, we would like to have number of sites, not few of them trickle of them, but a bunch of sites in order for us to deploy our industrial method that are very powerful with our Allamo technology in order to find out the premium sites, but that the way we would like to do it.
Understood. Thank you guys.
[Operator Instructions] Our next question is from Gabe Daoud with TD Cowen. Please proceed.
Hey thank you and hey everybody. Thanks for taking my question. Just maybe, Ton, could you give us a little bit of maybe more detail around your capital spend and the trajectory there as you continue to obviously focus and build out the ultra-fast network?
Yes, sure. I think in line with what we discussed before Gabe, the – so we are tapping from the existing debt facility from the refi loss here. We made a second drawdown following the first initial drawdown in the last year. So like always said, we anticipate to be okay funding all of this, including the operational cash flows that we generate ourselves to somewhere mid-next year, which also means that we are working on the next trench of funding and I think, like we always said, we’re – we have actually all options on the table. We’re looking at a potential extension of our debt facility. There’s the no recourse structure on the table and we’re also of course looking at potential equity raises, although that is a bit more challenging, I would say, in today’s market.
But at a certain moment in time, it needs to happen. We’re not there yet. We’re not need of that. I think we see enough room to maneuver with the on the debt side. But the equity, the capital raise will surface somewhere in the next 12 to 18 months I would say as a follow-on on the second financial funding following the one that’s up for the next 12 to 18 months.
Got it. Got it. Okay. Thanks, Tom. That’s helpful. Then just as a follow-up, if I just try to back into some of your 2Q results I think maybe margin on the charging side decrease relative to 1Q, is that right? And is there anything you can talk to about near-term margin on the charging front as well? Thanks.
Yes. I think that you are right. The margin did increase and it’s also because of the utilization rates going up, and I think this has been the storyline from almost day one with the utilization rates going up, the margins go up and I just want to mention one more time, it does include depreciation now as we restated our accounts last year.
So if we were to exclude that, it’s north of 50%, which is actually the one that we were always targeting and looking for. So with the utilization rates kind of stabilizing Q2, but we see a further increase in early Q3. We also expect the margins to develop accordingly.
Got it. Okay. Very helpful.
Yes. And just to add on that – maybe Gabe, just to add on that, what we see and because we had the H1 last year, we wanted to compare with the H1, it was easier maybe to read where we see some seasonality in the utilization rate, globally speaking, a global trend of increase, but seasonality between the different quarters with stronger quarters in I would say end of Q1, Q3 and end of Q4. It is linked with a – I think driving pattern in Europe with more EV drivers hitting longer journeys and that’s what we see and already with some pickup in July as expected as the last years.
Thanks, Mathieu. So would you guys comment then on what utilization is currently either as of July or as of I guess August or early 3Q?
Well, we’ll give the figures for Q3. Of course, it’s a bit [indiscernible] July, but we are just to give you the pattern, we are more than 30%, 35% in July, globally speaking and work is important.
Okay. Very helpful.
And another point which is I would like to highlight is that we began to and you have seen that in the press release, we began to make a split between the older mature station compared with the new ones that I think, and I hope helps you to understand the way the utilization rate build up with well, the younger one needs to be of course to climb and to catch up the history trend.
Yes. Understood. And that, that was very helpful disclosure. Thanks, everyone.
[Operator Instructions] There are no further questions at this time. I would like to turn the conference back over to Mathieu Bonnet for closing comments.
Well, thanks. Thank you very much. I wanted to highlight for this H1, the continuous growth on our own network. And we have just discussed this – with these questions and as well, which is quite important for us. The acceleration of the deployment of new charger at the end of Q2, and this trends will continue this year with of course the backlog, very strong we have, and the organization we have set in place.
Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.