Allego NV
NYSE:ALLG
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Earnings Call Analysis
Summary
Q3-2023
In Q3 2023, the company's total revenue surged by 28.2% year-over-year, reaching EUR 28.6 million, fueled by expanding charging sessions. Gross profit also saw a significant turnaround, increasing to EUR 5.4 million against last year's loss of EUR 4.6 million, and operational EBITDA markedly improved to EUR 2.6 million compared to a previous loss, reflecting business resilience. Expectations for full-year revenue narrowed to EUR 180-185 million, with anticipations of higher service revenue from three major projects. Operational EBITDA projections are set between EUR 30-35 million, as the company capitalizes on growing market utilization and propelling the total energy sold projection to 215–220 gigawatt hours, indicating a strategic adherence to expansion and bolstering of revenue and margins.
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Hello, and welcome to the Allego Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this conference 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 Allego's earnings call for the 9 months ended September 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 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 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 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 Ton 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 EUR 28.6 million compared to EUR 22.3 million in the same period of 2022, driven by strong charging revenue growth. For the 9 months ended September 30, 2023, revenue was EUR 96.8 million, a 33% increase over the prior-year period of EUR 73 million. Our charging revenue increased 53% to EUR 22 million [ compared to EUR 14.4 million ] during the same period in 2022 due to increased charging sessions, better pricing sessions 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 sessions to EUR 2.6 million from EUR 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 ultrafast charging points, we see these rates steadily climb. But even with these delayed stabilization effect 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 ultrafast charging ports installed before January 2023 compared with 12.1% for Q3 2022. While our new ultrafast 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 sessions in a single month, which occurred in October. During the last month, the global utilization rate was 13.4% for our ultrafast chargers with a major charger utilization rate of 16.3% and new charger utilization rate of 10.6%. Importantly, the new ultrafast charging points installed in 2023 represent 65.7% of the total number of ultrafast charging points operational as of Q3 2023. We are incredibly pleased with this milestone and it speaks to the strength of the network we are building and underpins the pace of our future growth plans with our ultrafast network.
Moving to sales and services. Revenue for the third quarter of 2023 was EUR 6.6 million compared to EUR 7.9 million [ free of debt ]. The decrease in services revenue was primarily the result of lower Carrefour project work. In the fourth quarter, we expect services revenue to be significantly higher as a result of 3 big projects. Overall, we saw growth across all our key metrics. Total energy sold for the 9 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 hour. Overall, I am quite pleased with our execution through this third quarter. We are continuing to expand rapidly our charging network with more than doubling our ultrafast charging points compared with the installed base end of Q3 2022. We minimized 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 ultrafast 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 2 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 Allego's commitment to advancing sustainable mobility. As a pure player of charge point 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 own 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 Go'on, a leading fueling company to enhance the accessibility of electric charging services for drivers in Denmark. This collaboration secured exclusive access to the fueling company to 168 stations across the country. Notably, the first 7 charging stations are projected to be operational between Q4 2023 and beginning of next year with the expectation of -- to commission an additional 60 stations by the end of 2024. We have been awarded an important contract for 48 locations in Germany with a program, Deutschlandnetz, with a deployment of 216 ultrafast 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 Ton will discuss in more detail, we are enhancing our 2023 guidance. We expect annual revenue in the range of EUR 180 million to EUR 185 million and operational EBITDA to be between EUR 30 million and EUR 35 million. We are narrowing our energy sold 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 ultrafast charging. Utilization rates through the first 9 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 1 million charging sessions 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's translated near term with significant operational EBITDA growth. We have executed on control energy input costs through our PPAs and meticulous resource oversight. We anticipate both margin expansion and growth and operational EBITDA going forward.
Before handing it over to Ton, I would like to highlight that we are operating from a position of strength, and 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 buildup of our own public ultrafast charging network. The European market is strong and has already over 18% fully battery electric vehicle penetration in Q3 2023. The European EV fleet is to expand dramatically in the next 2 years from a base of 6.5 million EVs today to 12.6 million EVs in 2025 according to the EAMA, meaning a very robust need of more chargers already in the very short term. With that, I will turn it over to Ton for an overview of our financials. Ton?
Thanks, Mathieu, and welcome, everyone. I will begin by summarizing our financial results for the 3 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 3 months ended September 30, 2023. In the third quarter of 2023, total revenue increased notably by 28.2% to EUR 28.6 million compared to EUR 22.3 million in the same period of 2022, attributable to the strong expansion of charging revenue. Charging revenue increased to EUR 22 million compared to EUR 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 EUR 2.6 million from EUR 2.2 million in the prior year period.
Services revenue declined by EUR 1.3 million to EUR 6.6 million from EUR 7.9 million during the second quarter of 2022. This decline in service revenue was mainly caused by lower revenue from the Carrefour 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 3 projects, including Carrefour, and an unnamed leading auto manufacturer based in Germany.
Gross profit increased to EUR 5.4 million in this period compared to a loss of EUR 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 EUR 36.7 million compared to EUR 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 noncash share-based payment expenses.
Operational EBITDA improved by EUR 5.7 million to EUR 2.6 million for the third quarter of 2023 compared to a loss of EUR 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 EUR 9.9 million in the 3 months ended September 30, 2023, compared to EUR 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 EUR 43.1 million, while net loss for the same period in 2022 was EUR 22.1 million. The increase in net loss was a result of a nonoperational noncash increase in SG&A cost, an increase in finance cost, 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 EUR 28.8 million compared to EUR 83 million as of September 30, 2022. This decrease in cash is mainly due to a CapEx spend of EUR 48 million. PP&E was EUR 157.5 million in the third quarter of 2023 compared to EUR 134.7 million in the prior year period as we continue to invest in our ultrafast network throughout Europe. As of September 30, 2023, we had a secured backlog of 1,571 sites with an average term of 15 years and exclusivity on the sites. On October 3, 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-to-market the warrants.
Moving to our guidance. We are narrowing our guidance range for revenue and operational EBITDA. We expect to generate revenue between EUR 180 million and EUR 185 million, from our previous range of EUR 180 million to EUR 200 million. 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 EUR 30 million and EUR 35 million. 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, operational EBITDA. 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.
Thank you, Ton. In summary, I am quite pleased with the continued progress throughout the third quarter and through the first 9 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 enhanced our cost base and maintained 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 seamless charging experience demand is rising. Charge 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 sessions 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 Allego 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.
[Operator Instructions] The first question comes from Matt Summerville of D.A. Davidson.
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? And then I have a follow up.
Yes, I'm going to take it. Matt, so regarding the fourth quarter, indeed, it will be a big push on service revenue. Actually, we have begun big projects, big like Carrefour in Germany and where the recognition and -- will be happening in this quarter. So the work has already begun, but it will be commissioned 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 [ E-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 already said that in the service revenue, it is not a linear exercise. So that's the reason why as last year, it was pulled back in the fourth quarter. That's one reason.
Regarding the big increase, and regarding your second question, actually, there is 2 things. First of all, there is -- regarding the Carrefour project, there are some delays. We wanted to have some charging stations more in the -- in 2023. So there will be an uptake of the project in 2024. That's mainly the reasons what we see that, that's the principal reason and the second 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 end of our energy linked with this installation a bit later on in this year. And so as well regarding the revenue and the EBITDA for the charging on network.
Got it. And then just as a follow-up. Obviously, over the course of '22, you 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?
We have -- actually, it was pretty much effective during H1 2023. And we went in order to increase our market share as well and that was a question last time from you, Matt, but this price -- 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. And that's, by the way, what we see now is very high one. And the breakdown of mature and new charger can help you to assess this. So we went through a decrease of the price as of July, it was around 15% globally on our network.
[Operator Instructions] This concludes the question-and-answer session. I would like to turn the conference back over to Mathieu Bonnet for any closing remarks.
Thank you. As Concluding word here, I would like to highlight 2 points. The first one is that, we see a very strong market in Europe, and maybe it's a different in other regions, but we see EV is a strong market right now. We still have a lot of sales in EVs, with a higher penetration the year before prior 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 in regarding the guidance.
The second point is that we have installed more charging ports. And in the future, in our own ultrafast network, we will add many more, and we will 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 would 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 reached a positive operational EBITDA. And with this recurring revenue of charging on our own network, it will be still and even more the case. With that, operator, I thank everybody.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.